Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.
Your hardworking Jalopnik staff is mostly off for the President’s Day holiday today. But don’t worry—we’ll be back in full swing tomorrow, and in addition to the Morning Shift, we have a day’s worth of new stories for you that, in my opinion, are very not bad.
1st Gear: World Domination Is Overrated And Also Logistically Difficult
It seems like just a few years ago (because it was, actually) that General Motors was attempting to push the Chevrolet brand in Europe in addition to Vauxhall and Opel as part of its efforts to own every market on Earth.
But that was then and this is now. Automotive News’ Nick Bunkley has a good story you should read in full about how GM’s attempts to dump Opel on the French is the biggest sign yet of how differently the company thinks than it used to.
None of GM’s recent cutbacks was as significant to its bottom line and global market share as selling Opel would be. The automaker confirmed last week that it was talking with PSA Group about options for Opel while cautioning that a deal was not certain.
“A sale of GM Europe would represent the next logical step in GM’s strategy to be the best rather than the biggest, properly focused on return on capital and return of capital,” J.P. Morgan analyst Ryan Brinkman wrote in a note to clients last week.
GM came close before to offloading Opel, an albatross that has hemorrhaged more than $20 billion since last turning a profit in 1999. But months after then-CEO Fritz Henderson struck a deal with Magna International in 2009, GM’s board backed out.
This time around, GM’s interest in a sale appears to be less about monetizing a profit-sapping asset than a determination that Europe promises, at best, mediocre returns on significant investment. Had the Magna deal gone through, GM planned to remain in Europe with a big expansion of Chevrolet that it later gave up on, so giving up Opel and sister brand Vauxhall today would be a far more significant step, effectively amounting to an exit from the market.
The fact is Opel has been bleeding money for years now, and GM didn’t see that changing anytime soon. The story doesn’t mention this but GM must also see China, now the world’s largest car market, as a far more lucrative cash cow than perpetually sagging Europe.
GM cut its losses in Europe by two-thirds in 2016 and had said it could break even there as soon as 2018. But amid costly emissions regulations and fallout from the United Kingdom voting last year to leave the European Union, executives see profitability in the region as becoming only more challenging, a person briefed on the discussions told Automotive News.
“Making sustainable returns is going to be very difficult indeed for Opel,” LMC Automotive said in an analysis of the potential sale. “After persisting in these efforts over a significant period of time, the conclusion has clearly been drawn that Europe will not be profitable for GM and the argument for Europe’s continued inclusion in the global operation must be from a nonfinancial viewpoint.”
2nd Gear: But What About Buick?
But what about Buick? GM always has some other brand whose turn it is to have the Opels pawned off on them, and lately that’s been Buick. Or so people think. It turns out Buick doesn’t need Opel as much as it used to, because China. Via Automotive News again:
The most successful Opel-Buick for the U.S. has been the five-passenger Encore, sold in Europe as the Mokka. The South Korean-built vehicle blew past company and analyst expectations, with GM having trouble keeping up with demand. U.S. sales last year increased 16 percent to more than 78,500 vehicles, making the Encore Buick’s top-selling nameplate by more than 26,000 units.
The Encore’s success is validation of a gamble by GM four years ago to be among the first automakers to introduce a subcompact crossover to the U.S. It led the brand’s ongoing charge to crossovers, which accounted for nearly two-thirds of Buick’s 229,631 U.S. sales in 2016.
That share is expected to continue growing with the arrival of the Chinese-built Envision last year, a freshened 2017 Encore and a redesigned Enclave expected to arrive in mid-2017 as a 2018 model.
The next-gen Buick Regal/Opel Insignia could be affected by the PSA deal, but that car’s such a done deal now I expect it will proceed as normal and then whatever changes will truly impact the next one. If sedans even exist then at all.
3rd Gear: Theresa May Weighs In
One last thing on Opel/Vauxhall: by all accounts Brexit has exacerbated this situation and caused GM to decide to get the hell out while the getting is ostensibly good. But British PM Theresa May will meet with the heads of PSA Peugeot-Citroën in a talk about protecting British auto jobs, something no global automaker seems especially inclined to do post-Brexit. Via Reuters:
“It’s going to be a private conversation. There’s been a request for a meeting and we will try to make that meeting happen, but I am not going to go into what the nature of that conversation will be,” the spokesman told reporters, adding that the timing of the meeting depended on “diary compatibility”.
Vauxhall has a couple of major manufacturing facilities in England.
4th Gear: Meet The New NAFTA, Maybe
Moving to our side of the pond, two Democratic U.S. reps, including one from Michigan, are drafting a plan for President Trump on how to potentially replace or revise NAFTA. Via The Detroit News:
U.S. Rep. Debbie Dingell is partnering with a Democratic colleague on a resolution with a “blueprint for America’s new trade policy” to guide President Donald Trump as he presses for changes to the North American Free Trade Agreement.
The Dearborn Democrat, along with U.S. Rep. Peter DeFazio, D-Ore., said Thursday that the new resolution will outline “principles that must be included in any replacement of the North American Free Trade Agreement.
“Michigan is the heart and soul of the American auto industry, and since NAFTA passed, we’ve seen factories shuttered and jobs lost, we’ve seen real income drop for too many workers, and we’ve seen too many families lose hope,” Dingell said in a statement.
“We now have a real opportunity to renegotiate this failed trade agreement in a way that puts working families first. President Trump said this would be one of his top priorities. This resolution provides a road map to level the playing field for the American worker and bring jobs back to this country.”
5th Gear: More Aston Martins? Yes Please
Want some good news today? Aston Martin, previously on the brink of death as British automakers always seem to be every so often, is planning a major product offensive in the coming years. And no, they won’t be ditching the manual gearbox. Via The Detroit Free Press:
Aston Martin has the most secure financing and detailed strategy in company history, thanks to a handful of investors who bought the company when Ford broke up its Premier Auto Group in 2007. Funded largely by Kuwaiti and Italian investors, Aston will invest $1 billion in a product plan that takes it to the end of the decade. Aston also has access to engine and electronic technologies it can’t develop on its own through an alliance with Mercedes-Benz.
Stuff in the pipeline include the AM-RB 001 hypercar, big Lagonda sedans to compete with BMW and the other Germans, a “sporty and luxurious SUV” (hey, gotta pay the bills somehow), an electric vehicle based on the Rapide S, and a DB11 Volante convertible. Bring it on!
Reverse: The Pothole
Neutral: Would You Dump Opel?
Pretend you’re Mary Barra and the GM board. Do you dump Opel and call it a day, or can the European market be salvaged?