General Motors’ Lordstown plant closure is more bad news for auto workers, BMW faces tariff headaches, Elon Musk’s newfound affinity for weed may soon bite him in the ass and more for The Morning Shift of Friday, March 8, 2019.
1st Gear: GM Lordstown’s Closure Leaves Workers Behind
The last Chevrolet Cruze rolled off the assembly line at GM’s Lordstown, Ohio plant on Wednesday, a plant that will be “unallocated” as production of that car—the plant’s sole model—comes to an end and takes about 1,500 jobs with it. Ohio’s Mahoning Valley has had its share of troubles for decades beginning with the closure of its steel mills, but now the region loses one of its last and most important big employers.
CNN has a deep dive into how this affects the workers and their families in that area, and it’s not a pretty picture. It’s also another example of how American automaking jobs are in serious decline—after all, GM is laying off workers and closing plants not as it’s mired in a recession or in need of a bailout, but when the economy is healthy and the company itself is profitable. So why is this happening?
A few reasons. Automation is a huge one—it takes fewer humans to build a car than it did in the 1970s and ’80s. GM says it needs to invest in electric vehicles and autonomy to face the future. Americans aren’t buying sedans like the Cruze anymore. It’s cheaper to ship jobs overseas to save costs when maximizing shareholder returns matters above everything else. (And keep in mind those savings often go to stock buybacks, rather than investing in workers at home.)
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But this is shitty news for American workers in a field that used to be a path to a decent middle-class life, as CNN reports:
For workers, the transition means uncertainty, dislocation and immersion in a labor market with far fewer opportunities for those without training beyond a high school degree.
As recently as the early 2000s, a job in an auto plant could be a launchpad to the middle class, but those jobs are increasingly rare. During the Lordstown plant’s heyday in the 1970s, GM was one of the biggest private sector employers in the United States, with more than 618,000 employees. That number is now down to about 103,000. And the jobs that remain are not all what they once were. Since 1990, wages for US auto workers have declined 18%, adjusted for inflation. Retirement benefits have declined as well. As of 2017, only 8% of factories offered pensions.
Those trends are especially pronounced in the Youngstown, Ohio region, an area about halfway between Cleveland and Pittsburgh in which Lordstown sits. Thirty years ago, about 1 out of 4 local workers were employed by the manufacturing industry. Now, less than half that many are. Since the beginning of the Great Recession, real hourly earnings have dropped by 8% in the area, while rising 11% in the rest of the country.
[...] Unlike during the Great Recession, GM is cutting these jobs — along with about 1,400 more hourly positions at US plants elsewhere — at a time when it’s profitable and the national economy is strong. That’s an indication that GM sees its future as one with fewer factory-floor workers, not more of them.
The Cruze plant closure comes despite an aggressive campaign by workers, their families, the United Auto Workers union and local officials, who say they want to get another company in the plant or another GM vehicle to build. This part’s interesting, and sad:
But to the local union workers, getting another GM product is far preferable to getting another company. These are their jobs, and they’ll likely still have more protections and higher wages than any other employer.
“We don’t want Elon Musk coming in. We don’t want Amazon building a distribution center,” said David Green, who’s been president of UAW Local 1112 since last May. He led another local within the plant in 2007 when the company asked to pay new workers lower wages.
“I supported that because the promise was product and job security,” Green said. “Do what we had to do to keep working, keep our communities and our families alive and thriving. It feels like they betrayed us a little bit.”
It’s not totally doom and gloom for American workers, and I don’t really agree with CNN’s thesis that this is a profession that “nears extinction.” Detroit is getting a big Jeep plant soon, Volvo just opened a new plant in South Carolina and Toyota and Mazda have a joint one coming to Alabama.
But the times are changing, and when that happens it’s people like these that get left behind without much to show for the decades they spent doing what they were asked to do.
2nd Gear: Cadillac XT6 Priced, It’s Fine
As for GM cars that will be built in America, Cadillac released pricing details on the new XT6 large crossover, a vehicle met with a deeply tepid reception upon its Detroit Auto Show debut in January. As Automotive News reports, it’ll start at $53,690.
The General Motors luxury brand on Thursday announced the Premium Luxury model of the three-row crossover will start at $53,690, while the Sport model, which features standard all-wheel drive, will begin at $58,090. Pricing includes destination.
The vehicle is the first in Cadillac’s “Y” trim strategy — luxury and sport — to only offer two models. The model debuted last year with the Cadillac XT4 compact crossover — however, it has a third standard entry.
It’s still undercut by the Volvo XC90, one of the best cars in that segment, and Lexus and Acura:
Competitors in the large premium crossover segment include the Volvo XC90 (starting at $47,700), Audi Q7 ($54,545), BMW X7 ($75,540) and coming Lincoln Aviator ($52,195). Midsize premium crossovers with three rows of seating include the Lexus RX L ($49,920) and Acura MDX ($45,295). All prices include shipping.
It’s fine! I’m sure it’ll have the look, the feel, the brand of Cadillac, whatever that means now.
3rd Gear: Tariff Headaches
Like pretty much all the luxury automakers, BMW is trying to go big on EVs, driven largely in part by the importance of those cars to the lucrative Chinese market. It’s also why BMW wanted to establish China as its global EV production hub, one place to build out the economy of scale needed for mass manufacturing of battery vehicles.
But the current trade war between the U.S. and China has put export plans on hold for now, so the German automaker is in wait-and-see mode until that gets resolved. If it does. Via Reuters:
BMW has factories in Europe, China and the United States and plans to establish China, the world’s largest market for electric cars, as an export hub for such vehicles, given its lower labor costs and support for zero-emission cars.
But Washington and Beijing are locked in a trade dispute, with U.S. President Donald Trump threatening to increase tariffs to 25 percent from 10 percent on $200 billion of Chinese goods if the two sides can’t reach a deal.
The uncertainty is making it hard for BMW to take a decision about exports, chief executive Harald Krueger said.
“We have no basis for taking a decision at the moment. Whether this is financially viable and whether it makes sense needs to be evaluated,” Krueger told journalists at the Geneva car show.
There’s a global balancing act at work here, especially with Mini in the mix:
China’s size and government regulations favoring locally produced electric cars make it worthwhile for BMW to pursue the alliance with Great Wall to build a Mini in China.
But BMW is still undecided where to have Mini’s export hub for electric cars. It has the option of building electric Mini’s in Oxford, England, Born in the Netherlands and in China, Schwarzenbauer said.
“If China export is something that can be done easily, we could export much more out of China. If this becomes difficult, we have to balance it with Oxford and Born.”
4th Gear: Nothing Good Happens On The Joe Rogan Podcast
Elon Musk’s 2018 was an insane whirlwind year that included dating Grimes, getting sued by the Securities and Exchange Commission over a tweet, calling a guy a pedophile and then smoking a giant blunt on a podcast.
It’s fun to be a tech billionaire!
Except now the Pentagon is very mad about the weed-smoking incident, and Musk’s security clearance—needed for his work with SpaceX—is under further review, reports Bloomberg:
Musk has refiled his SF-86 security form, which requires a federal employee or contractor seeking a clearance to acknowledge any illegal drug use over the previous seven years, according to the official, who asked not to be identified. The entrepreneur has a secret-level clearance because of his role as founder and CEO of Space Exploration Technologies Corp., which is certified to launch military spy satellites.
A SpaceX official, who asked not to be identified, said the review hasn’t had an impact on the company. SpaceX’s day-to-day operations are run by President and COO Gwynne Shotwell. The company has won contracts for national security space launches since Musk’s podcast incident, including one for three launches on Feb. 19 for $297 million.
But the refiling and review underscore the continuing ramifications from the chief executive officer’s decision last year to smoke marijuana on the podcast, which quickly went viral. And it highlights the legal discrepancies between federal and state policy on marijuana use: While about three dozen states have taken steps to decriminalize pot, its use remains a federal crime.
It “totally would make sense” for the Defense Security Service to ask Musk to update his application and to investigate the situation further, said Mark Zaid, a Washington attorney who specializes in federal whistle-blower cases and representing clients facing clearance challenges. Zaid doesn’t represent Musk and isn’t aware of the details of his case.
Musk is ridiculous, but come on! It’s just weed. Let the man live.
5th Gear: Nissan’s CEO Decides Not To Leave
Nissan CEO Hiroto Saikawa made it seem like effectively bringing down embattled former Nissan-Renault-Mitusbishi megaboss Carlos Ghosn—currently facing criminal charges in Japan for alleged financial misconduct—would be his exit act from the automaker. Now he says, nah, he’s changed his mind and is gonna stick around for a few years. Via Bloomberg:
Nissan Motor Co CEO Hiroto Saikawa, who replaced ousted Carlos Ghosn and publicly accused him of financial misconduct, has said he has no intention of resigning anytime soon, despite signaling in January he would step down shortly, according to people familiar with the matter.
Saikawa told executives during an internal meeting he plans to stay at least three more years to help the automaker recover from the aftermath of the Ghosn scandal, one of the people said, asking not to be named discussing a private matter.
Nissan’s top executive made the comments about the length of his tenure to senior executives, soon after indicating at a Jan. 24 press conference that he’d give up the top job “as soon as possible,” according to the person.
A Nissan spokesman, Nicholas Maxfield, declined to comment beyond what Saikawa said at that press conference.
Good luck, and make sure everything’s on the up-and-up.
Reverse: Viva La Bus
Neutral: What Is The Future Of American Auto Jobs?
And is GM to blame here, or is this just The Way It Goes?