VW boss Herbert Diess publicly defends Tesla, Tesla wants to build its wacky Cybertruck in the midwest, Coronavirus is having major effects on the auto industry, and much more in The Morning Shift for Wednesday, March 11, 2020.
1st Gear: Volkswagen Boss Welcomes The Competition
Volkswagen and Tesla are direct competitors. Not only does Germany’s biggest automaker’s Audi brand play in the same luxury sedan and SUV space as Tesla’s vehicles, but VW is also rolling out an entire fleet of electric cars to go head-to-head with the California carmaker. And yet, despite Tesla being his rival, VW Chairman of the Board Herbert Diess has Tesla’s back after the American automaker went through struggles to build a plant in Germany—struggles including protests against cutting down parts of a forest to build its new plant.
Diess wrote on his LinkedIn (Translated via Google. I’ve added the bold for emphasis):
In Germany, there is an increasingly industry-critical attitude towards the car industry. What used to be a “settlement success” is now considered a “lump risk”. But in Brandenburg things are noticeably different. They want to establish Tesla. And progress is being made quickly and concretely. It is hardly conceivable that the number one car nation will benefit. From battery cells and electric vehicles to the digitization of cars and autonomous driving, Tesla is an important driving force. The Volkswagen AG welcomes the new neighborhood.
His post goes on:
This is because it makes it easier for us to create the German ecosystem for the automotive industry of the future. In the government of Brandenburg, the Greens also jump over their shadows and sacrifice trees for technology. This shows what is possible if you want to. Volkswagen takes this as an incentive. We, too, have left the comfort zone of old certainties and set out to become a tech company. Bureaucratic obstacles are not supposed to decide the race between Tesla and Volkswagen. But instead, it’s the question of who has the better ideas and builds more fascinating cars. This sporting competition makes Germany better and more innovative overall. #shapingmobility
I bet there are some good PR motives behind his post—after all, Tesla just sold its millionth car, and by now it’s just a bad look to criticize the automaker without also acknowledging its successes and significance to the EV movement. Still, it seems like a generous post here from VW’s boss, whose company, of course, would also like Germany’s red tape to be cut away.
And that’s apparently what’s happening, per a story from the Detroit News, which describes Germany’s legendarily stifling rules, writing:
Eager to host Tesla Inc.’s first European plant near Berlin – a potential 4 billion-euro ($4.5 billion) development – German officials assured the electric-car maker’s chief executive officer fast-track navigation through the country’s notorious bureaucracy. In recent years, onerous regulations have held up projects from a large train station in Stuttgart to Berlin’s first new airport since the end of the Cold War.
Administrative red tape can cause the process of sorting out building permission to take as long as four years. Even something as simple as a mobile-phone mast can drag out for two years.
The story goes on to describe how the Tesla project, once stalled by red tape, but now back underway, could lead Germany to move away from its overly bureaucratic ways:
The near miss, which could have delayed the factory by months, prompted Economy Minister Peter Altmaier to pledge legislation to reduce red tape, and on Friday, he proposed setting up mobile planning task forces to expedite key projects. Important investments like Tesla’s “only have a chance if we make decisions on time,” Altmaier said.
German business is watching Tesla’s project closely, hoping the high profile of the investment will help remove hurdles holding up hundreds of projects up and down the country, from 5G wireless equipment to rail tracks and upgrades to the aging power grid.
“Germany just can’t and won’t let this project snag on bureaucracy and litigation,” said Hubertus Bardt, managing director of the IW Cologne economic institute. “Too much investment reputation is staked on it.”
Anyone who has lived or worked in Germany will know that bureaucracy, red tape, this is how the whole country functions and operates, from the smallest level to the biggest. And much as people like to joke about stern Germans, it’s an emotional country, and little things, particularly when it comes to the environment, can have a big effect there.
2nd Gear: Tesla Is Looking To Build The Cybertruck Plant In The American Midwest
You remember the Tesla Cybertruck? Of course you do. The world has been obsessed with that origami-shaped, stainless steel pickup truck ever since Elon Musk debuted the thing with a failed demonstration that resulted in two shattered windows.
Well, now it’s time for Tesla to find a place to build the thing, and per Musk’s tweet yesterday, it looks like the likely location will be “central USA.” In other words, it’s going to Trucktopia.
Seems like a smart move to me. Ram has its main truck plants in Warren, Michigan and Sterling Heights, Michigan; Ford has truck plants in Dearborn, Michigan, Claycomo, Missouri, Wayne, Michigan, and Avon Lake, Ohio; Toyota builds Tundras and Tacomas in Texas; and GM builds Chevy Silverados and GMC Sierras in Indiana and Flint.
All of these are in “central USA,” home of the truck-buying public. I can dig Tesla’s move.
3rd Gear: FCA Is Halting Production In Italy
You’ve probably read how plants shut down in China amid the coronavirus outbreak there, slowly and tentatively coming back online at the moment.
https://jalopnik.com/the-coronavirus-epidemic-is-quickly-re-shaping-chinas-a-1841830865
You also may have read that Italy is on lockdown as the country battles thousands of coronavirus infections and hundreds of fatalities from Coronavirus. The nation has placed strict travel restrictions in place, and barred large public gatherings. It should then be no surprise, then, that FCA is, at least briefly, halting production at plants in Italy.
From Reuters:
“...the company will, where necessary, make temporary closures of its plants across Italy,” [Fiat Chrysler] said.
The spokesman said affected plants were Pomigliano, Melfi, Atessa and Cassino, each of them halted for two or three days between Wednesday and Saturday.
Those short production stoppages, the automaker told Reuters, are apparently a result of measures the automaker is taking to keep employees from spreading or contracting Coronavirus. From Reuters:
FCA said in a statement it had stepped up measures across its facilities, including intensive sanitization of all work and rest areas, to support the government’s directives to curb the spread of the infectious disease.
[...]
FCA said that to allow greater spacing of employees at their workstations, “daily production rates will be lowered to accommodate the adapted manufacturing processes”.
Reuters was told that it’s not parts supply that’s causing these stoppages, and FCA does still expect “overall production rates” to remain unchanged.
4th Gear: Coronavirus May Be Causing Supply Troubles For Automakers, But People Refraining From Buying Cars Might Be A Bigger Deal For The Industry
Speaking of Coronavirus—a topic you’re all probably tired of reading about, but whose effects are so significant, we have to keep mentioning it—Bloomberg has an interesting story detailing some of the ways in which the virus could have significant effects on the car industry.
It’s not just about production capability and supply shortages, as alluded to in the previous gear about Fiat Chrysler in Italy. No, automakers’ potential struggles could come, in large part, from changes in demand. Bloomberg discusses automobile demand in the context of the recent stock market drop:
“The real fear and concern is if we end up with a demand crunch in the U.S.,” said Kristin Dziczek, vice president of the labor and economics group at the Center for Automotive Research. “Are people going to be buying, or be nervous because their 401(k) will just have taken a huge hit?”
Among the few automotive stocks that rose Monday in New York were O’Reilly Automotive Inc. and AutoZone Inc., two retailers of replacement parts, which may see demand grow if car owners delay purchases of new vehicles.
The story goes on to emphasize how changes in consumer spending could be a much bigger deal than supply-side deficiencies, writing:
Automakers are racing to keep production lines running as virus fears threaten to crimp supplies of key parts. But if car buyers steer clear of showrooms — either out of fear of being infected or concern about their personal finances — that could have a more lasting negative impact.
“Demand can go to nothing in a hurry, as China has proven,” Michael Dunne, chief executive officer of consultant ZoZo Go, said in a newsletter Monday, referring to the approximately 80% sales plunge the world’s biggest market saw last month. “People are simply not thinking about big-ticket items.”
It continues that people are more worried about the consumer side of the car world than the production side:
Alex Calderone, managing director at the financial advisory firm and litigation consultant Calderone Advisory Group, spent last week canvassing his auto-supplier clients to gauge the risk of production shutdowns because of parts shortages in China. Reassured by their logistical expertise, he walked away less concerned about supply-chain risks than of what the virus could mean for consumer sentiment.
“If there’s going to be an economic shock that roils the auto industry, it’s going to come from changes to consumer psychology and confidence and spending patterns,” he said. “It’s the social-distancing measures that have the potential to be the most dangerous to the economy.”
5th Gear: VP Joe Biden Wins Michigan Primary After Getting Into It With Auto Worker. His Role In The Bailout Likely Helped
I get that many Jalopnik readers prefer to stay away from politics, but sometimes it and the auto industry intersect, and when that happens, you’re just going to have to deal with it.
Vice President Joe Biden is projected to win the Michigan primary after campaigning (and getting into a dicey exchange) at a Fiat Chrysler auto plant. Key to his appeal in trying to win Michigan was the fact that he and President Obama played key roles in the auto industry bailout (which was initiated by George Bush, and ultimately considered by many a success) that saw Chrysler and GM rise out of bankruptcy. From Automotive News:
“In 2009, when GM and Chrysler were on the verge of bankruptcy, it was Barack Obama and Joe Biden who believed in us,” Detroit Mayor Mike Duggan said Monday night at a rally with Biden at Detroit’s Renaissance High School.
[...]
[Biden’s] allies in the Democratic Party establishment were happy to oblige, drawing on the playbook Democrats have used for the past five cycles by touting the Obama-Biden administration’s use of billions in taxpayer dollars to bail out General Motors and the former Chrysler Group LLC.
Biden’s primary opponent, Senator Bernie Sanders, has a more complex relationship with the auto industry bailout. Though Automotive News’ headline reads “Biden wins Michigan primary after betting on auto bailout,” it should be pretty obvious that he didn’t just win because of this issue from a decade ago, but it’s at least worth pointing out the messaging surrounding his campaign, especially as it relates to the industry that dominates Michigan’s economy.
Reverse: Man Builds An Epic Model Of A Pierce Arrow
This is very random, but also quite cool, since it involves Pierce Arrows and miniature model-building. From the Milford Daily News out of Milford Massachusetts:
Leon C. Hinkle, Kansas City, Mo., musician on March 11, 1950, turned his fondness for the luxurious Pierce Arrow of the ’20s into a model that he can perpetually admire. He thought it a thing of unsurpassed beauty when he first saw the car at a Kansas City auto show in 1929. For 20 years he worked in his spare time to build this scale model of the car, finally completing it last year. Powered by an electric motor which moves the car forward and reverse, the model is minute perfect in every detail. Only the tires were purchased in their finished state. Here Hinkle loads with luggage compartment. The open doors show the gearshift, dashboard, and the lap robe, an important accessory to the old touring model. (AP Photo/William P. Straeter)
Neutral: How Is Coronavirus Going To Affect The Industry Long-Term?
Obviously, there are people dying here. Nobody is weighing them against car sales. But the auto industry is worth talking about, and it’s an interesting look into how health and industry intersect on a global scale. What do you think we’ll learn from coronavirus and what will be the long term effects, in your estimation?