Dealerships just got the green light to sell cars in Michigan, EV startup Rivian presses the pause button, VW furloughs workers, Renault asks for a lot of money. All that and more in The Morning Shift for April 10, 2020.
In mid March, a trade group representing thousands of dealerships across the U.S.—the National Automobile Dealers Association—joined forces with the Alliance for Automotive Innovation (a trade group representing dozens of automakers) to pen a letter to president Trump asking him to ensure that car dealerships remain open during then-looming coronavirus shutdowns.
“Motor vehicles, both new and old, are critical to ensure that the public can get food and other necessities of life, as well as to continue to interact with one another in a manner consistent with public health officials’ recommendations,” that letter read. “To that end, it is vital that vehicle repair, maintenance, and sales facilities be considered essential operations when federal, state, and local officials impose certain requirements due to the coronavirus outbreak,” the document continued.
Shortly thereafter Michigan governor Gretchen Whitmer issued a stay-at-home order mandating that “No person or entity shall operate a business or conduct operations that require workers to leave their homes or places of residence except to the extent that those workers are necessary to sustain or protect life or to conduct minimum basic operations.”
That executive order 2020-21 then went on to define “workers who are necessary to sustain or protect life” as “critical infrastructure workers,” and listed a number of examples. Dealerships were not included.
Yesterday governor Whitmer extended the stay-at-home order to last until April 30. The new executive order 2020-42 includes verbiage that considers dealership sales employees as “critical infrastructure workers,” though showrooms have to stay closed. From the new executive order:
For purposes of this order, critical infrastructure workers also include:
Workers at motor vehicle dealerships who are necessary to facilitate remote and electronic sales or leases, or to deliver motor vehicles to customers, provided that showrooms remain closed to in-person traffic.
The Michigan Automotive Dealers Association was pleased. From Automotive News:
“We thank Governor Whitmer for understanding the needs of the residents of Michigan,” the Michigan Automobile Dealers Association said in a statement detailing the new order on the group’s website. “New vehicle dealers sell ‘mobility’ and that is what Michiganders need today in order to get to work, procure food, medicine and health care. This will allow us to help meet those needs.”
The Detroit Free Press recently penned a headline asserting that “car buying may never be the same,” saying buyers may actually prefer the online-intensive experience that dealerships are now being forced to offer. From the news site:
“This is going to fundamentally change how people view buying a car,” said Rhett Ricart, CEO of Ricart Automotive Group in Columbus, Ohio, and chairman of the National Auto Dealers Association.
“By the end of this year, you’re going to see 80%-90% of U.S. new car dealers with full e-commerce capability in their shops” to handle everything online but the test drive and — maybe — the final signature, he said.
Germany, too, has a big car lobby asking to receive relief from the country’s strict stay-at-home orders. From the Bloomberg:
Germany’s automotive lobby group and the country’s largest union called on Chancellor Angela Merkel to allow car sales in the country to resume as soon as possible.
High inventory that can’t be sold is risking the bankruptcy of many companies in the industry, the VDA and IG Metall labor union said in a letter to the chancellor on Thursday that was also released as a statement.
Factory shutdowns triggered by the coronavirus crisis resulted in lost production of 1.47 million vehicles so far, European auto industry lobby group ACEA said in a separate statement.
The Rivan R1T pickup—designed by the Michigan-based electric vehicle startup that’s seen a huge influx of investments from the like of Amazon and Ford, and a vehicle capable of doing absurd “Tank Turn” donuts about its central axis—was set to be delivered to customers along with its R1S SUV sibling later this year.
But that’s not happening anymore due to the coronavirus, and that is not surprising at all. Startups delay initial launches all the time, pandemic or not. Still, these Rivians are such exciting vehicles that it’s still worth mentioning that the world will have to wait even longer for them. From the Chicago Tribune:
Rivian, the electric truck startup looking to bring vehicle manufacturing back to downstate Normal, will have to wait until next year to begin production. The nascent automaker’s inaugural offerings — a pricey, high-performance electric truck and SUV — were slated to roll off the line at a converted Mitsubishi plant later this year, but the massive retooling project has ground to a halt amid the coronavirus outbreak.Rivian had planned to make the first deliveries of preordered trucks and SUVs this year. The temporary shutdown of the facility has delayed construction at the plant, and the launch date.
“It will be 2021,” Rivian spokeswoman Amy Mast said Monday.
Automotive News quotes a letter the company sent to its customers:
The company planned to begin deliveries in late 2020 and now says customer shipments will begin in 2021.
“The world has changed a lot in these last few weeks,” the company said in a letter April 1 to customers. “This evolving new reality is not without impact on our program timing. While we expect some level of delay, we are working to minimize the disruption to our launch schedule.”
Rivian spokeswoman Amy Mast said the company can’t provide more guidance on the sales launch beyond the 2021 window.
The coronavirus pandemic and the associated reduction in vehicle demand/production, along with the inability of dealers to sell cars amid stay-at-home orders, have forced automakers to tighten their belts.
We’ve covered contract worker layoffs at FCA, pay reductions/deferments at GM and FCA, and furloughs at Honda and Nissan. Now, to keep itself in good financial standing, Volkswagen is joining in on the furloughs, specifically at its Tennessee assembly plant. From Reuters:
Volkswagen AG (VOWG_p.DE) said Thursday it will furlough 1,500 workers at its U.S. assembly plant in Tennessee starting April 11 as the industry grapples with the ongoing coronavirus pandemic.
The German automaker said the temporary emergency furloughs for its production and maintenance workforce are expected to last no more than four weeks.
The automaker said its “primary objective is to protect the financial health of Volkswagen for the benefit of our team as we address the emerging and ongoing impacts of the COVID-19.”
Standard and Poor’s recently downgraded French automaker Renault’s credit rating to “junk,” implying that the agency has little faith in the company’s future financial standing, particularly its ability to repay loans. Reuters writes about the affect the coronavirus has had on Renault’s rating:
S&P downgraded Renault to ‘BB+/B’ from ‘BBB-/A-3’, meaning it had ascribed a “junk bond” status to those Renault corporate bonds.
“French automaker Renault has an ample liquidity cushion and can, in our view, count on guarantees from the French state,” S&P wrote in a research note.
“We nevertheless expect Renault’s earnings, free cash flow generation (FOCF), and financial position to weaken materially in 2020, following an already challenging 2019,” added S&P.
But the good news is that, per the S&P research note mentioned above, the French government is there to provide support. Possibly $5 billion worth of support, with Reuters describing the figures in a more recent article:
Chairman Jean-Dominique Senard said on Friday that the carmaker could seek bank loans worth 4-5 billion euros ($4.4-$5.4 billion).
“It could be in that sort of region,” Senard told RTL radio, who also reiterated that Renault was not currently envisaging a scenario whereby the French state would nationalise the company.
People around the world have been succumbing to COVID-19, so it comes as no surprise that the enormous auto industry has lost some of its employees to the disease. Still, if we’re going to cover the effect of the coronavirus on the auto industry, it’s important to mention not just how automakers are taking a financial hit and how employees are being furloughed and laid off, but also how the industry is losing expertise to this horrible pandemic.
The Detroit Free Press has been diligently covering auto industry deaths, confirming on Wednesday that a seventh Ford UAW worker died from complications associated with the coronavirus. Now the news site writes about another death, this time involving an employee from Fiat Chrysler’s Chelsea Proving Grounds. From the Detroit Free Press:
A Fiat Chrysler Automobiles worker based at the Chelsea Proving Grounds and diagnosed with the novel coronavirus died Thursday morning, the UAW said.
This is the 12th confirmed death of an FCA employee stricken by the respiratory illness and the 19th confirmed death for the Detroit Three automakers since March 22.
“The UAW mourns the loss of another since the pandemic began,” said UAW spokesman Brian Rothenberg.
From the Automotive Hall Of Fame:
When General Motors introduced the 1927 Cadillac LaSalle, it not only marked a new brand of automobiles, it also marked the first production car to be styled by a professional designer.
The designer was Harley Earl, a man who would change the way automobiles were designed forever.
Until then, most cars’ appearance was determined by engineering-based dimensions, the limitations of contemporary metal forming and costs. Styling was not a major concern. As a result, most cars looked alike.
If a buyer wanted a car that stood out, they would order a chassis from one of the prestigious carmakers, like Cadillac, then send it to a coach builder to have their custom vehicle created.
If one were in Hollywood and wanted a bespoke car, chances are they would go to Don Lee, the exclusive Cadillac distributor in California.
Lee, recognizing that his client demand for custom-bodied cars had purchased Earl Automobile Works in 1919. Founded by Jacob Earl, he first built custom carriages for the wealthy. But by 1908, Earl saw the future was in automobiles, turning away from carriages to create Earl Automobile Works. In time, his son, Harley Earl joined the firm.
The achievements during Harley Earl’s tenure as GM’s head of design could fill a book. He introduced clay modeling to the design studios. The concept of the annual model change, called “Dynamic Obsolescence” was pioneered. Concept cars, like the Buick Y-Job were introduced. A review of noteworthy cars created during his tenure fills... a book on its own.
Obviously, car dealership lobbies are powerful, especially in Michigan. And the people who work at dealerships are struggling like many Americans. With that said, do you think it was the right move for Michigan to allow dealership personnel to go to work to support online sales?