GM Prepares to Get Dunked On at the Democratic Debates in Detroit

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The Democratic debates in Detroit promise to take on problems in the auto industry, car sales might still be plummeting, and the world is still a tough place for low-emissions and autonomous vehicles. All this and more in The Morning Shift for Tuesday, July 30, 2019.

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1st: Democrats Fight to Take Michigan Back

With two Democratic debates taking place in Detroit this week, you can expect to hear a lot about potential solutions to Michigan’s problems. After losing the state to the Republican party in the 2016 election after Hillary Clinton didn’t even campaign there, Democrats are likely keen to avoid repeating that mistake. But automakers are gearing up to give them a good challenge.

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Reuters reports that GM has released two fact sheets about its U.S. operations and its status since the 2009 bailout. After Trump’s campaign promises to protect blue-collar workers, it’s very likely that huge job cuts from companies like GM will feature prominently at this week’s debate. The fact sheets seem designed to shield the company from potential attacks.

More from the article:

In May, Trump praised GM’s disclosure that it was in talks to sell an idled northeastern Ohio plant to cash-strapped electric truck-building Workhorse Group Inc (WKHS.O) and a new entity. The United Auto Workers has criticized that decision and some lawmakers have raised concerns about the plan.

In March, GM removed a Mexican-made Chevrolet Blazer from a display at Comerica Park, where the Detroit Tigers play, after some workers objected.

“GM’s operations in Mexico are not a threat to U.S. jobs,” one company fact sheets states, noting GM has invested $23 billion in U.S. operations since 2009 compared with $5 billion in Mexico.

The other fact sheet says GM “repaid our debts, and we have invested tens of billions of dollars back into the United States since then.”

Democrats are pushing hard to make a positive impression in the state it left behind almost entirely in the 2016 election. In addition to the debates, Democratic National Committee Chairman Tom Perez and Representative Dan Kildee will be hosting a press conference with auto workers across the street from the closed Warren Transmission plant later today—“to highlight Trump’s broken promises on the economy,” the DNC said.

Will a belated campaign effort be enough to salve the wounds of plant workers who have lost their jobs? It’s tough to tell—but GM is certainly trying to get a conversation started.

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2nd: Nobody Wants the Beautiful Cars

This year has not been a particularly promising year for the automotive industry—and it doesn’t look like it’ll be getting better any time soon. After six consecutive months of sales declines, the U.S. car industry is poised to drop yet again in July, Automotive News reports. Ouch.

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We won’t know the actual numbers for sure until Thursday, but you shouldn’t get your hopes up. Here’s more from the article:

TrueCar/ALG and J.D. Power/LMC predict light-vehicle deliveries will decline 2.9 percent and 1.8 percent, respectively. Cox Automotive and Edmunds, however, call for modest gains around 0.5 percent.

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While there’s a slim, slim chance that the industry would have a marginal gain this month, it seems pretty doubtful. July isn’t a particularly strong selling month. Everyone is going on vacations and finding ways to beat the heat—they’re usually not looking to invest in a vehicle.

Some automakers might come out a little better than others, though. Per Automotive News:

Edmunds forecasts declines for all but two automakers: General Motors, which it says will post a 5.6 percent gain, and Hyundai/Kia, which it says will have a 9.9 percent gain.

Cox is more optimistic, predicting sales increases at GM (3 percent), Nissan (1.1 percent), Hyundai/Kia (4.9 percent), Volkswagen (2.3 percent) and Subaru (2.6 percent). If the prediction comes true, it would be Subaru’s 92nd consecutive monthly gain.

ALG, which splits Hyundai and Kia, forecasts gains for BMW (up 0.6 percent), Daimler (1.7 percent), Hyundai (6.2 percent) and Kia (3.4 percent). It also forecasts a 67.5 percent gain for Tesla, although other forecasters do not include the electric-vehicle maker in their estimates.

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We won’t know for sure how things look until the actual report comes out—but I wouldn’t get your hopes up.

3rd: Yearly Taxes for Tesla’s China Plant Will Be $323 Million

Lease agreements can prove to be pretty wild sometimes in terms of their demands, but the agreements that were arranged for Tesla’s Shanghai plant have now come to light—and it looks pretty costly.

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We’ll let Bloomberg give you the run-down:

Tesla Inc. agreed to pay China 2.23 billion yuan ($323 million) in tax every year as part of a deal with local authorities to build an electric-vehicle factory on the outskirts of Shanghai.

Under the terms of the lease with the Shanghai government, Tesla must start generating the annual tax revenues at the end of 2023 — or hand the land back, the company’s latest quarterly filing shows.

The U.S. company must also spend 14.08 billion yuan ($2 billion) in capital expenditure on the plant over the next five years, according to the lease. Tesla’s first overseas plant is aimed at avoiding tariffs and keeping prices down in the world’s largest electric-vehicle market.

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That’s a lot of pressure on Tesla. Make a few hundred million a year or give the land back to the government? That sounds stressful as hell.

However, the move is honestly pretty well aligned with Tesla’s targets. A few hundred million is nothing compared to the billions Tesla aims to funnel into the Shanghai facility to ensure that half a million cars are produced within the next year. Basically, if all goes according to plan, Tesla should be just fine.

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4th: Ford Acquires a Defense Contractor for Its AV Program

Ford only has two more years to meet its self-imposed deadline to have robotaxis and autonomous delivery vehicles on the road. In terms of technology development, that’s nothing. What do you do when you get a little too ahead of yourself? In Ford’s case, you hire a defense contractor.

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Here’s more from Automotive News:

This month, Ford paid an undisclosed sum to acquire Quantum Signal AI, a 40-member team of roboticists operating out of a decommissioned 1930s-era high school in Saline, Mich., just up the road from the University of Michigan in Ann Arbor. The 20-year-old firm has experience working with the U.S. military on sniper simulations and remote-controlled sentinel robots.

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Basically, there’s a lot that could go wrong when it comes to trying to develop a totally automated driving system to be implemented in multiple cities across the U.S. Hiring Quantum Signal AI should hopefully speed up the development process and avoid some of the pitfalls other automakers have run into.

So, why Quantum? Automotive News has the answer:

For example, Quantum remotely operated robots that acted as sentries for U.S. military bases in remote locations, such as Alaska. The robots would respond to intruder alerts, which in Alaska were often wandering moose, and could deploy lights and sounds to scare off the interlopers. That technology could be used to remotely operate a driverless delivery van navigating a loading dock or a robot carrying a package to the front porch.

[...]

Quantum also is well known for its ANVEL simulation software, which was used by the military’s robotics programs to explore the performance of autonomous systems. Tools like that and Quantum’s sniper target simulation can be used to create richly detailed virtual environments to show how robot rides will share the road with unpredictable human drivers, [Randy] Visintainer said.

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Quantum was already utilizing autonomous software for military purposes, and Ford sees how it can easily be translated into their robotaxis and delivery vehicles.

This isn’t Ford’s first rodeo in terms of company acquisition, though—and it’s been a pretty mixed bag lately in terms of success. From Automotive News:

Ford turbocharged its autonomous ambitions earlier this month by forming a new alliance with Volkswagen Group, the world’s largest automaker, to develop self-driving cars. VW agreed to contribute $2.6 billion to Argo, giving that autonomous startup a $7 billion valuation. The move has vaulted Ford and VW into the pantheon of self-driving leaders along with Waymo and GM Cruise.

Yet, Ford’s track record with tech acquisitions is mixed. Last week, Ford wrote down nearly the entire $182 million investment it made in Pivotal Software, a cloud computing startup, and earlier this year it shut down Chariot, a ride-hailing shuttle service it acquired in 2016 for $65 million.

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Quantum has opted to drop all contracted governmental defense work in favor of this deal with Ford.

5th: Another State Opts for Zero Emissions

After California decided to resist the Trump administration’s rollback of Obama-era fuel economy and emissions laws by pushing even harder to require zero-emissions vehicles, it was only a matter of time before other states started following suit. Now, Colorado has joined the party, becoming the eleventh state to adopt ZEV measures, Reuters reports.

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Here’s more from the article:

The state, which plans to join the California program starting in the 2023 model year, has agreed to allow automakers to earn credits for selling electric vehicles in the two model years prior and use other transitional credits available in other states.

[...]

California has led the way in challenging the Trump administration’s plans to roll back Obama-era environmental regulations. Last week, California struck a deal with four major automakers to tighten emissions rules, bypassing the Trump administration’s effort to strip the state of the right to fight climate change by setting its own standards.

The Colorado agreement must be approved by the state’s Air Quality Control Commission at a meeting later this month.

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So, while things aren’t totally settled yet, it’s looking pretty likely that Colorado will actually do the thing.

The state’s decision comes after automakers declined to voluntarily attempt to boost EV sales in June. Governor Jared Polis sought to avoid any strict state laws in exchange for manufacturers willingly adopting their own push to become more emissions-friendly. It didn’t work out.

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If the Air Quality Control Commission adopts California’s ZEV standards, Colorado will join Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Vermont in the push to encourage automakers to more heavily focus on the environment.

Reverse: The End of an Era

On this day in 2003, the very last classic Volkswagen Beetle rolled off the production line as the world shed a collective tear.

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Neutral: How Bad Will Auto Sales Actually Be This Month?

Do you believe the hype that sales could actually be up for the first time this year? Or are you remaining as skeptical as just about everyone else?

Weekends at Jalopnik. Lead IndyCar writer and assistant editor at Frontstretch. Freelancer. Novelist. Motorsport fanatic.

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DISCUSSION

actualrootwyrm
Spamfeller Loves Nazi Clicks

Neutral:

Everybody is worrying about the wrong thing, as per usual. Monthly sales don’t matter at this point, because the pit is already dug far too deep. All sales are doing is making the rich richer.

Look at the default rates and default terms on loans. Everybody’s defaulting to 72 month terms, and you can even get 96 month terms. Ford is offering a literal Adjustable Rate Mortgage on their cars. And the default rate on auto loans continues to increase unabated.

And people who think that it’s the return of 0% and 1.9% financing? Guess again. You missed the fine print. Honda will sell you a brand new Ridgeline with a 1.9% APR... on a 36 month term with 10% down. 2.9% if you go to 60 months. All of them are only offering 0% on extremely short terms, or balloon terms (0% 1-36, 2.9% 37-60 and similar.) Ford’s plan appears to be ‘make it up on the backend’ with offering 0% on the F150 for 72 months. They’re ALL anticipating a Fed cut though.

Which is correct. The Fed is gearing up to slash rates in a futile attempt to stave off economic collapse. You can only cut rates so much to juice a house of cards. And there is no ‘quantitive easing’ faucet this time. Rate is currently at 2.25-2.50; half of what it was before the 2008 collapse, where they had to slash it to ZERO (which fueled even more redistribution to the rich.) That won’t help this time. 

The pit that has been dug is similar to Mitsubishi’s disastrous 2004, except now it’s every automaker and every loan originator. Instead of gambling with other people’s money, the banks have been ... gambling with other people’s money. Again.

Look not at the white line (subprime and sub-subprime) but the blue and red lines. Those are the bulk of consumers.

The AVERAGE score in the US is 673 (Vantage) or 695 (FICO,) depending on your metric. Those red and blue lines represent the majority of Americans in other words. And they have been climbing steadily since 2016. And here’s some pictures of what’s driving that.

Student loan delinquency rates? Have not recovered, at all. They’re still at ‘great recession’ levels. Couldn’t have anything to do with college being made unaffordable and mandatory at the same time, right?

Here’s a better picture. Student loans spiked in 2012. And keep getting worse. Credit card delinquency rate, on the rise again. Auto delinquency rate, steady climb since 2014. This is what we call an obvious fucking case of foreshadowing. These are delinquencies NOT repos. Means payments are at least 90 days behind. They may be keeping up payments (and staving off repossession) but they’re still behind in payments. They skipped 90 days worth or more.

Also note these charts. More consumers are classified as PRIME than before the recession. Read that again, read it three more times, read it six more times. There are FEWER SUBPRIME LOANS THAN BEFORE.

Gee, NO TICKING TIME BOMBS HERE.

Forget recession; this is going to be depression. Especially exacerbated by the no-deal Brexit. And there is no ‘cutting’ their way out of it this time.

But hey, on the plus side, I should be able to refinance my Porsche way cheaper. And I think I can fit the dull guillotine blades in the frunk.