Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.
1st Gear: Canada And Mexico Aren’t Holding Back On What They Think Of The United States’ NAFTA Demands
Canada and Mexico aren’t expected to make a counterproposal to the United States’ demands to tweak NAFTA’s automotive content rules today, according to people close to the talks who spoke with Reuters. Rather, they’re going to offer rebuttals and ask technical questions of the American negotiators, as the proposal is simply too out there to even counter-propose.
The United States wants more of each automobile to be produced in the United States, as Reuters explains:
The Trump administration last month stunned its NAFTA partners by unveiling demands that half of the value content of all North American-built autos be produced in the United States and that the regional vehicle content requirement be sharply increased to 85 percent from the current 62.5 percent.
The demands are aimed at meeting U.S. President Donald Trump’s NAFTA goals of stemming the flow of U.S. carmaking jobs to low-wage Mexico and reversing a $64 billion U.S. trade deficit with its southern neighbor.
However, our NAFTA partners say that this is too much.
Canada’s presentation will explain that the U.S.’s demands would be extremely harmful to everybody in NAFTA, including the U.S. itself, as a source close to the Canadian negotiators told Reuters:
If you move the content requirement to 80 percent, or even to a number lower than that, it will hit the supply chains. You would then have to deal with potentially ill-equipped suppliers that are maybe more expensive.
A Mexican automotive industry representative was even less charitable about what the Trump administration wants when speaking to Reuters:
In terms of the automotive sector, the United States´ proposal is insane. You cannot counter-propose such madness.
The biggest fear is that by forcing more parts to be made in the United States—where the cost of production is higher—North America will lose jobs as companies would rather pay the 2.5 percent U.S. import tariff on the components to use lower-cost labor overseas.
A study by the U.S. Motor and Equipment Manufacturers Association cited by Reuters backs Canada and Mexico’s fears up. The study estimates that up to 24,000 automotive parts manufacturing jobs will be lost if NAFTA requires more automotive content to be made in the United States, and as many as 50,000 to be lost if NAFTA is terminated.
2nd Gear: Volkswagen’s Future Looks Bright Thanks To SUVs and More Cash
The world’s largest automaker by sales now expects group revenue to exceed last year’s record of 217 billion euros ($255.69 billion) by more than a quarter by 2020, after saying in March it expected it to increase by more than a fifth.
“We have a slightly more positive outlook now than in the spring,” group sales chief Fred Kappler said on Monday during a call with analysts.
But growing spending on electric cars, the first generation of which will be less profitable, and persistent investment in combustion engines required by tightening emissions rules has caused VW to keep its operating profit guidance broadly unchanged, finance chief Frank Witter said.
VW said group operating profit (EBIT) could rise by 25 percent or more by 2020 from the 7.1 billion euros reached in 2016. In March, the carmaker had expected group EBIT to exceed year-ago levels by 25 percent.
While some of what Volkswagen is being forced to spend on—namely, the costly development of electric vehicles—won’t be as profitable as cranking out SUVs for emerging markets, overall, Volkswagen’s future looks pretty solid. They have more money coming in than expected, which is allowing them to make big investments in EVs, which they need to develop now or they’ll be late when other competitors have them.
Volkswagen announced an $82.5 billion plan Friday to invest in electric vehicle development. The company plans to invest $26.9 billion alone in its namesake Volkswagen marque over the next five years, Reuters reports. $16.4 billion of that will stay in Germany, with $1.1 billion going towards reworking its Zwickau plant to focus solely on e-mobility.
The company hopes to use its main brand’s new focus on EVs and other future tech as a PR offensive to make everyone forgive them for Dieselgate.
3rd Gear: Nissan May Build Another U.S. Plant In The Next Five Years
If demand for Nissans keeps growing, their already maxed-out American plants won’t be able to keep up anymore, and they’ll be on the hunt for another American plant, Bloomberg reports. It’s a move that is likely to happen in the next five years and likely to have at least one elderly orange cheerleader in the White House:
“At some point, we may need it,” Jose Munoz, the chairman of Nissan North America, said Friday in reference to more U.S. production capacity. The addition would have to be a standalone new factory because the company’s existing plants in Tennessee and Mississippi are “maxed out,” Munoz said during an interview in Detroit.
Building another factory in the U.S. would likely appease President Donald Trump, who has pressured Japanese car manufacturers to make more vehicles in America. While Nissan already has the most productive auto plant in all of North America in Smyrna, Tennessee, the company also imports several models from Japan and is the top car producer in Mexico.
Trump prodded Japanese automakers during a visit to Tokyo earlier this month to “try building your cars in the United States instead of shipping them over.” He praised Toyota Motor Corp. and Mazda Motor Corp.’s plan to build a $1.6 billion joint car factory at a still-undecided U.S. site, an investment that Trump called “big stuff.”
Nissan’s Smyrna, Tennessee, plant already produces 647,000 vehicles per year—running three shifts and employing 8,000 workers makes it the most productive auto plant in the United States by a considerable margin. Its Mississippi operations are no slouch, either, employing 6,400 people.
But its U.S. sales have increased by 70 percent over the past six years, and the time is coming to beef up production to meet demand. Nissan’s strategic plan through 2022 calls for expansion. Congratulations, America—we’re likely it!
4th Gear: Please Don’t Leave Us Even Though We’re Leaving Everyone Else, Britain Begs
The Great British Dong-Shooting-Off known as Brexit marches on with an indeterminate future that has many automakers and even racing series concerned about their continued ability to function in the country. So, U.K. Prime Minister Teresa May announced an investment of £4 billion (or $5.2 billion) on research and development as well as regional growth, reports Reuters.
Amid stiff international competition, Britain is looking to carve out a new global role as a leader in “industries of the future” such as artificial intelligence and driverless cars after it exits the European Union in March 2019.
Badly damaged by a botched snap election and with Brexit talks running behind schedule, May is looking to stir up some economic optimism to help her fragile minority government through Britain’s most uncertain period since World War Two.
On Monday, as part of the run-up to finance minister Philip Hammond’s budget on Wednesday, she announced a 1.7 billion pound fund to help regenerate cities and a 2.3 billion pound boost to research and development spending, due in 2021/22. Further details of the funding were not yet available.
This extra chunk of budget is aimed at increasing Britain’s productivity, which lags behind that of its rival countries and is seen as a big factor limiting Britain’s economic growth. It’s all linked to an industrial strategy that seeks to boost high-paying skilled jobs in Britain. One part in particular is specifically aimed at transportation solutions, Reuters notes:
The transport-focused “Transforming Cities Fund” will try to better link up Britain’s cities in search of productivity improvements and foster greater collaboration and innovation.
“This will help make sure people across the country have better options to combine different modes of transport - supporting projects which will improve connectivity, reduce congestion and introduce new mobility services and technology,” said business minister Greg Clark, who is leading the Industrial Strategy initiative.
It might sound like a band-aid on Brexit’s bleeding, but the biggest issue with Brexit right now is the uncertainty. With no details on this funding available at a time when entities like Formula E aren’t sure if they can keep operating out of the U.K. because there aren’t solid details worked out in regards to taxes and employment, May’s plan sounds about like sticking a finger-sized band-aid on a severed limb.
5th Gear: PSA Gives Up On Car Sharing In Berlin
The PSA Group—the people behind unobtanium-to-Americans brands Peugeot and Citroën—is giving up on its Multicity car-sharing business in Berlin, Automotive News reports. It had been in operation for 5 years.
Multicity had 200 Citroën electric C Zero and C1 supermini cars in Berlin, but it wasn’t enough to keep up with the already strong, Daimler-led Car2Go program there. Customers complained of having to walk a kilometer at times just to find a car as there were not enough vehicles available, and PSA disliked sharing control over the platform with partner Deutsche Bahn.
This doesn’t look particularly great when PSA is looking to expand into America through a car-sharing program, however, PSA senior vice president for mobility Brigitte Courtehoux told Automotive News that the Berlin program’s failure has been an eye-opening experience. They need more cars on the ground, and more control over their software.
Still, can we just get cool French cars without them being part of some complicated car-sharing plan? We just want the Cactuses. Send us the Cactuses already.
Reverse: Traffic Signals As We Know It Get Patented
Neutral: Do you really care about how much of a U.S.-made car comes from the U.S.?
My dad was always a staunch supporter of “buying American,” but the definition has become pretty muddled over the years thanks to foreign automakers like Nissan setting up shop here, and American cars being made from parts abroad. Does this actually matter to you as a consumers, or not? How deep do you look into this before you head off to purchase an “American car?”