A new NAFTA deal, more battles over fuel-economy regulations, a jailed CEO with the chance for a big payday, and the sedan that keeps on dying. All of this and more in The Morning Shift for Monday, Oct. 1, 2018.
1st Gear: New NAFTA, New Rules
The North American Free Trade Agreement is about to be no longer a thing, and neither are its former rules on cars. The U.S., Canada and Mexico have finally agreed on the “United States-Mexico-Canada Agreement,” and in addition to its creative and compelling name, there are also some new rules on how to make cars.
The Washington Post reports that most of the key parts of the new agreement, “USMCA,” won’t start until 2020 because of all of the signatures and approvals the deal needs from leaders and legislators. That includes the new rules on cars, and given the amount of vehicles produced in all three countries, it is a very big deal.
But when those car rules do go into effect, there will be some big changes on how to avoid tariffs on vehicle production. Here’s a quick summary, from the Washington Post:
Starting in 2020, to qualify for zero tariffs, a car or truck must have 75 percent of its components manufactured in Canada, Mexico or the United States, a substantial boost from the current 62.5 percent requirement.
There’s also a new rule that a significant percentage of the work done on the car must be completed by workers earning at least $16 an hour, or about three times what the typical Mexican autoworker makes. Starting in 2020, cars and trucks should have at least 30 percent of the work on the vehicle done by worker earning $16 an hour. That gradually moves up to 40 percent for cars by 2023.
[...] Trump’s steel tariffs stay in place (for now). Canada wanted Trump to stop his 25 percent tariffs on Canadian steel. That didn’t happen — yet. The two countries are still discussing lifting those tariffs, but a senior White House official said Sunday that process is on a “completely separate track.” Trudeau has called the steel tariffs “insulting and unacceptable” because the two nations are such close allies.
Improved labor and environmental rights. The USMCA makes a number of significant upgrades to environmental and labor regulations, especially regarding Mexico. For example, the USMCA stipulates that Mexican trucks that cross the border into the United States must meet higher safety regulations and that Mexican workers must have more ability to organize and form unions. Some of these provisions might be difficult to enforce, but the Trump administration says it is committed to ensuring these happen — a reason U.S. labor unions and some Democrats are cheering the new rules.
Also, on that name:
New name: Goodbye NAFTA. The new deal will be known as the United States-Mexico-Canada Agreement or USMCA. Trump, who had long disdained NAFTA, had suggested he might call it the “USMC,” in honor of the U.S. Marine Corps, but in the end, USMCA won out.
The Post reports that a lot of economists think the new rules will help some North American workers, but that this agreement can also drive some car production away. There are some good changes here, including for Mexican workers, whose wages have historically been drastically lower than their counterparts in the U.S. and Canada and are often just getting by even as their auto industry grows and grows.
The possible downside is automakers may not make as many cars in North America—particularly small cars—because of the costs, looking to places like China instead.
Anyway! We’ll see how this works out.
2nd Gear: California Isn’t Backing Down on This Emissions Thing
The Trump administration said last week that it thinks there will be a seven-degree rise in temperatures by the year 2100, yet it’s still trucking along with rolling back the Obama-era fuel-economy standards aimed at making cars a little less bad for the environment. Who cares if we’re already doomed, right?
California, still, isn’t having any of that mindset.
California and the Trump administration have been at war over emissions standards since the thought of a Trump administration has been a thing, and nobody’s giving up yet. CNBC reports that on Friday, California regulators voted to stick with the Obama-era regulations for new vehicles sold within the state—regardless of what the current administration does.
The Obama administration set a rule for a national average of more than 54 mpg by 2025. The Trump administration wants to freeze those regulations at 2020 levels through the year 2026. California wants everyone to leave it alone and let it set its own, stricter standards. From CNBC:
California has long been allowed under a U.S. Environmental Protection Agency waiver to set its own, stricter vehicle emissions rules to fight heavy smog in Los Angeles and other urban areas. The Trump administration has proposed revoking that authority, something that could cast doubt on the state’s powers to sidestep federal standards.
In a statement, CARB Chair Mary Nichols said the state would “continue to work to keep a single national program,” but that the vote ensures that California and 12 other states will not fall victim to the Trump administrations rollback of vehicle standards should its proposal be finalized.
Automakers have urged California and the administration to reach agreement, rather than face years of uncertainty.
It looks like they’ll agree to disagree on this one, automakers.
3rd Gear: Making the Big Bucks in Jail
Audi CEO Rupert Stadler is in jail because of all of that pesky “emissions” stuff, first found out about in the Volkswagen Group camp. Stadler’s arrest was for “concerns over potential evidence tampering,” specifically, but being in jail won’t stop him from raking in some cash.
After the Volkswagen board discussed Stadler’s future as CEO just a couple of weeks ago, Automotive News Europe reports that he could make millions if he steps down from his position with years left on his contract. The supervisory boards of Audi and parent company Volkswagen are expected to try to make a deal with Stadler Tuesday, with Stadler potentially making millions and taking a severance package, a source told Automotive News Europe.
From the story:
“There are things that still need to be negotiated,” said one person familiar with the board’s thinking. “But if I were him, I would deposit the money into an escrow account. The cost of his legal defense will not be cheap, and if the charges prove in any way true it, it’s likely that Volkswagen will consider whether it should sue for damages.” [...]
VW Group’s board postponed a decision on Stadler’s future on Friday. Sales executive Bram Schot remains Stadler’s interim replacement as Audi CEO.
Both VW and Audi have said that Stadler is presumed innocent unless proved otherwise but he is unlikely to return to his post even if he clears his name because he is now seen as damaged goods.
Why don’t Audi and Volkswagen just fire Stadler, you wonder? Automotive News Europe reports that the two companies basically can’t as long as the allegations aren’t proven to be true, because Stadler could sue for wrongful dismissal.
4th Gear: Aston Martin Thinks Its DBX Crossover Will Become Its Best Seller
Did you know that people like crossovers? Perhaps it was the fact that sedans and small cars are dying more quickly than you can properly mourn them, or the fact that all you can read about is how quickly these ballooned passenger vehicles fly off of the dealer lots. Either way, it’s not hard to tell.
People like crossovers so much, in fact, that Aston Martin thinks its new-ish (it debuted in 2015) DBX crossover will become the company’s best-selling vehicle after it launches next year. The DBX is more like one of those weird crossover-sedan things, but, you know, details.
From Automotive News’ recent story on it:
The U.K. ultraluxury brand expects DBX sales to reach 3,850 a year, compared with an estimated 3,250 for the newly launched Vantage entry-level sports car.
The predictions were made in Aston Martin Lagonda’s share prospectus in which it outlined the company’s plans to potential investors before the brand’s flotation this week on the London stock market.
Aston also said it expected the DBX to be powered by the same twin-turbo 4.0-liter V-8 engine as in the Vantage and DB11 coupe, rather than a V-12. The AMG engine is supplied by Daimler and makes 496 hp in the DB11. The V-12 is supplied by Ford in an agreement that runs out in 2021, putting its future use in question.
Aston has said the DBX will help it reach new customers, including women.
Crossovers! Women! The future!
5th Gear: Nissan and Others Will Be Able to Use the Sedan to Their Advantage
The sedan, currently, is on its way out. But if gas prices soar and people have to reel in their crossover and SUV use because of it, Bloomberg reports that some companies may be better prepared to whip the sedans back out than others.
Not only are foreign automakers selling the most sedans since most American companies have all but given up on them, but foreign carmakers—including Nissan, Honda and Toyota—are also better prepared to shift from crossover to sedan production, and back, than American companies are.
That’s because their flexible factories can shift more easily from cars to crossovers — and perhaps back again if rising oil prices spark a sedan revival, he said.
The new Altima, for example, shares mechanical underpinnings with the Leaf electric sedan, the Murano crossover and the Pathfinder SUV. And even though Ford last month sold the most F-Series pickups in any August since 2005, Baum called Detroit’s car surrender a self-inflicted strategic weakness.
“The Nissan Altima, Honda Accord and Toyota Camry weren’t always big sellers,” Baum said. “They became big sellers as Detroit walked away from cars.”
Long live the sedans, even if they’re just a fallback for when gas is too high.
Reverse: The Unveiling of the Model T
Ford Motor Company unveiled the first production Model T on Oct. 1, 1908, according to History. Go celebrate by tweeting about how the magical date has rolled over on the calendar and it’s basically Halloween now, like everyone else will.
Neutral: Would You Buy an Aston Crossover?
If you were just drowning in your own money and didn’t know what else to do with it, would you succumb to the Aston Martin Practical Vehicle life?