The UAW strikes are costing GM hundreds of millions, Trump’s tariffs are costing Michigan jobs, and Europe is pivoting away from airline travel. All that and more in The Morning Shift for Thursday, Sept. 26, 2019.
Earlier this week, it wasn’t clear which side would be the first to back down in the contract fight between the United Auto Workers and General Motors, which blew up earlier this month when workers went on strike. Workers are striking over plant closings and weaker healthcare proposals, among many other issues. Meanwhile, the UAW itself is ensnared in a nasty corruption scandal isn’t helping things.
But it’s starting to look like GM might be the first to blink. At the very least, the shut down of 55 of its American plants and distribution sites has the automaker hemorrhaging cash.
After missing out on more than $500 million of profit due to a strike, General Motors Co. has reached a potential turning point in its contract negotiations with the United Auto Workers.
Proposals regarding all unsettled issues have been presented to the automaker, and the union is awaiting a response, Terry Dittes, the vice president of the UAW’s GM department, wrote in a letter to the labor group’s leaders Wednesday.
The strike has cost GM output of more than 8,000 vehicles a day, according to analysts at IHS Markit. With each vehicle averaging about $8,000 in earnings before interest and taxes, and the walkout affecting nearly nine production days, GM has missed out on as much as $544 million in profit, based on calculations Credit Suisse analyst Dan Levy made in a report last week. The total would reach $700 million by Sunday if no settlement is reached this week.
That’s a lot of money for GM, which was already struggling to meet truck sales targets and other promising profit goals before its workers threw all of the shit directly into the fan.
A contract settlement may come soon, ultimately due to the golden rule of American business: time is money.
President Trump’s promise that tariffs on foreign steel would boost American jobs isn’t really working out, and now some of the Michigan steelworkers that supported the tariff are suffering from layoffs anyway.
Some steelworkers who cheered U.S. President Donald Trump’s tariffs on foreign steel last year are now being laid off, an unintended consequence of his America First policy as United States Steel Corp reacts to sagging demand from automakers reeling from higher steel prices.
Steel prices peaked in May 2018 and have retreated to pre-tariff levels after American factories boosted production and demand weakened.
In June, U.S. Steel idled a blast furnace at the local Great Lakes Works plant in the cities of Ecorse and River Rouge Michigan, an electoral swing state. Two months later, the company decided to temporarily let go of 48 of employees and warned of up to 200 more layoffs by the end of September.
The latest layoffs are a blow to employees and families. A laid-off worker from the Great Lakes works said the unemployment benefits of up to $362 a week were not enough to pay her bills.
“You can’t survive on that,” Perry agreed.
Local leaders in Wayne County say that the layoffs might have been much more severe without the tariff on foreign steel, which leaders credit for keeping the local plant open after claiming the steel plant has been on the verge of closing since 2002 with little support until now. But that counterfactual will probably always be an unknown.
California’s push to double down on Obama-era emissions regulations, which would force automakers to reach an average fuel economy of 54.5 mpg by 2025 was amended in a compromise agreement with four automakers earlier this year to push that goal back to 2026. Now, two more states are joining Cali in the push for stricter standards.
From Automotive News:
Two Democratic governors have lined their up states to join the 13 others in adopting California’s rules to curb automobile greenhouse gas emissions, even after the Trump administration moved to nullify state authority on fuel-efficiency rules.
Minnesota Gov. Tim Walz on Wednesday directed his state’s environmental agency to begin drafting rules to cut tailpipe emission and bolster sales of electric cars, policies patterned on those set by California regulators. On Tuesday, New Mexico Gov. Michelle Lujan Grisham said her state would also adopt new tailpipe greenhouse gas and zero-emission vehicle requirements starting in the 2022 model year.
Adding Minnesota and New Mexico would expand the reach of California’s vehicle greenhouse gas rules, which between California and the 13 others that have already adopted them already account for more than a third of U.S. auto sales.
While both Minnesota and New Mexico are both already signed onto a lawsuit in support of California, it appears the two states are taking that support further by drafting their own emissions regulations modeled after California’s in an attempt to directly challenge the federal government’s claimed authority over all emissions requirements.
The last thing automakers would want is even more slightly different regulations in specific state markets to sift through when determining exactly how they need to build their cars.
Ideally, one federal standard would be best, but most automakers (at least this close to 2025, after billions of R&D) supported the Obama rules and would prefer to stick to California’s standards, as it’s easier to comply to the strictest of the various requirements rather than build multiple versions.
Earlier this week, it was not looking good for NIO—a once-promising electric automaker startup some considered (or rather hoped) would be the “Tesla of China.” The company is losing a bunch of cash, the electric car market in the region is extremely competitive right now, the Chinese car market and economy as a whole is slipping for the first time in decades.
And NIO continues to slip, via Bloomberg’s wire service sent to Jalopnik (or via Yahoo Finance):
Shares of NIO Inc. plunged to record lows for a second consecutive day after the Chinese electric-vehicle maker failed to assuage fears that it’s running short on cash.
NIO’s U.S.-listed stock fell as much as 6.9% to $2.02 on Wednesday. The shares have plummeted more than 30% this week as the automaker plagued by cost overruns, vehicle recalls and a pullback in state subsidies for electric-car purchases posted a worse-than-expected loss.
“If a company’s liquidity is measured in weeks, it is definitely very dangerous,” Robin Zhu, an analyst at Sanford C. Bernstein, said by phone. NIO may need to seek government support, which will be difficult to get, he said.
The Chinese government is already heavily involved and invested in its electric car industry, but as the general car market over there starts to slip, the aid is going to start to get harder and harder to come by as the government seeks to stimulate the economy through whatever means necessary (despite a heavy push to motivate buyers to switch to EVs to curb emissions).
NIO is pretty cool, if somewhat standard for electric vehicles. But they do the whole drive-thru “battery-swap” thing, which is pretty cool if possibly unsuccessful and ill-fated! Still, it’s cool tech and it is one of the more notable, interesting players.
Planes and ships are huge emissions nightmares, and doing anything to curb broader travel emissions beyond just targeting car tailpipes will go a long way in avoiding a calm, relaxing climate apocalypse.
Some companies in Europe are aware of this, and are curbing their airline travel and having an notable impact on airlines. From Bloomberg:
[C]ompanies across Europe are reconsidering travel policies, and individuals are asking whether jetting off to sunny spots for holidays is worth the environmental cost. The Swedes even have a name for it: flygskam, or flight shame, and it’s a growing threat to airlines in Europe and beyond.
SAS AB says its traffic fell 2% in the nine months ended July 30 from the year-earlier period, and Sweden’s airport operator has handled 9% fewer passengers for domestic flights this year than last. Both say flygskam has played a role in declining traffic. “Unchallenged, this antiflying sentiment will grow and spread,” says Alexandre de Juniac, head of the International Air Transport Association. “Politicians aren’t sticking up for us.”
Airlines have few options as even the newest aircraft emit far more CO₂ than trains, and electric or hybrid jets won’t likely enter commercial service for almost two decades.
To be fair, it’s much easier for European companies to switch to train and bus alternatives as their networks are far more extensive than what you’d find in the U.S. Partly down to geography, partly to a longer history of infrastructure development, and partly because they’re all a little more woke about the whole “climate catching fire” thing than we are here in the U.S.
Good for them, you love to see it.
I’ve pretty much resigned\ myself to never taking a luxury cruise again in my lifetime (after a couple of family cruises as a child), and I always feel guilty when I hop on a plane for work, knowing I’m spewing ungodly amount of emissions through the sky, just so I can go play in a car and report back to you all.
Have you started feeling pressure to avoid ships or planes in recent years? Or do you prefer unlimited Shirley Temples and buffet french fries laid out between the rock-climbing wall and salt-water deck pool floating your way down to the Bahamas?