A glut of unsold cars sitting on dealer lots, penalties for Fiat Chrysler, reimbursements for a tacky wedding and more await you in The Morning Shift for Friday, Feb. 8, 2019.
1st Gear: So Many Cars
Yes, yes auto sales were strong last year in the U.S. But like all markets, what goes up must also come down. The easiest place to look for evidence? Probably the number of cars sitting, unsold, on dealer lots.
Dealerships are kicking off 2019 with a lot more unsold cars on their lots, which could result in pressure back towards automakers to reduce factory output, according to the Wall Street Journal.
From the story:
There were 3.95 million vehicles on dealership lots at the end of January, a 4% increase from December and up nearly 3% from the prior-year January, according to data released Monday by WardsAuto.
While January is typically a slower month for new-vehicle sales, analysts say the rising stock levels are becoming problematic because car companies will start this year with more unsold inventory than they had three years ago when U.S. auto sales peaked at 17.55 million for the year. Industry forecasters and some auto executives predict sales this year will fall well below that figure, dropping to under 17 million vehicles for the first time since 2014.
U.S. auto sales in January, however, were down 1% over the prior-year month, according to industry trade publication Automotive News. Passenger-car sales, which include sedans, dropped 4% last month, underscoring a continued shift in consumer preference toward larger, more versatile crossovers and SUVs.
Part of the reason why car sales were stronger than predicted last year was because automakers relied pretty heavily on rental car sales, which helps increase numbers but for less money. Yet, about 48 new models are planned to launch this year, the outlet continues, which is “up from 42 last year and 36 five years ago.”
We’ll see if sales figures can keep up with projected falling demand.
2nd Gear: Fined!
Stricter emissions regulations put in place during the Obama Administration challenge automakers to build cars that are better and more efficient. This is a good thing for the environment, but sometimes not the easiest to pull off for companies like Fiat Chrysler.
Last year, FCA paid a $77 million in civil penalties because it couldn’t meet 2016 model year fuel economy requirements, reports Reuters, which points out that this is “the first significant sign the industry is facing hurdles meeting rising emissions rules.”
Of course, it’s not like FCA hasn’t been actively pushing against these regulations. From the story:
The Italian-American automaker has been lobbying the Trump administration to revise fuel economy requirements and last year regulators proposed freezing requirements at 2020 model-year levels through 2026.
Shane Karr, head of external affairs for Fiat Chrysler in North America, said in a statement the fuel economy program should be reformed rather than “requiring companies to make large compliance payments because assumptions made in 2011 turned out to be wrong.”
Karr added that the automaker is “committed to improving the fuel efficiency of our fleet and expanding our U.S. manufacturing footprint.”
Hilariously, the outlet also reports that FCA reasoned the failure was because in 2011, some front-wheel drive utility vehicles that used to be classed as trucks were re-classified as cars. For 2016, these vehicles were the Dodge Journey, Jeep Cherokee, Jeep Compass and Jeep Patriot, which FCA noted, “are taller and require more energy than sedans.”
It kind of feels like FCA brought these fines upon itself.
3rd Gear: French Reimbursement
Yesterday, we published a report that alleged that Renault, under Carlos Ghosn, contributed about $57,000 “under a charitable donation agreement signed with the Château de Versailles” which possibly went toward his Marie Antoinette-themed wedding. That money is now getting reimbursed.
Ghosn has plans to pay that money back to the chateau, according to Bloomberg:
Ghosn will reimburse the palace, which will in turn compensate the French carmaker, a spokeswoman for his family, Devon Spurgeon, said by phone Friday. Meanwhile, Les Echos newspaper reported the jailed executive hosted another party at Versailles two years earlier on his 60th birthday.
The outlet also points out:
Ghosn’s quick move to pay back the chateau contrasts with his stance in Japan, where he has rejected prosecutor claims of financial wrongdoing related to his time at the helm of Renault partner Nissan Motor Co. In his first Tokyo court appearance last month, he said he was “wrongly accused and unfairly detained based on meritless and unsubstantiated accusations.” He painted the picture of a loyal company man who wouldn’t dream of harming the firm.
While there is much to speculate on here, I’m just stuck on the Marie Antoinette-themed wedding. Because it sounds really effing tacky. And, oh God, when you see the photos... yeah, it was super tacky.
I would have spent $57,000 elsewhere. But that’s none of my business.
4th Gear: Curb That Trade Authority
Last year, Donald Trump likened the effects of import cars and car parts on the American domestic economy to a threat on “America’s national security” in order to justify trade restrictions. These are big, scary words that are extremely worthy of an authority-check.
In short, members of Congress want to check Trump’s authority to use “national security” as a means of justifying his tariffs, according to Automotive News.
From the story:
On Wednesday, Sen. Robert Portman, R-Ohio, introduced bipartisan legislation to reform the process for determining national security threats from imports. It is supported by four other Republicans and three Democrats, including Doug Jones, D-Ala., and Lamar Alexander, R-Tenn., both of whom have large auto assembly plants in their states. A companion bill sponsored by two Democrats and two Republicans was introduced in the House.
Section 232 in the Trade Expansion Act of 1962 was intended to give the president power to adjust imports during a crisis, such as war, and there is widespread criticism that using the rule violates global trade laws, encourages retaliation against U.S. products and is an abuse of power.
“We must hold countries that violate our trade laws accountable, but we must do so in a way that protects American jobs and strengthens the U.S. economy,” Portman, a former U.S. trade representative under George W. Bush, said in a statement. “I have repeatedly expressed concerns about the misuse of the Section 232 statute to impose tariffs on automobiles and auto parts, and its impact on Ohio jobs and the U.S. economy as a whole.”
The U.S. Chamber of Commerce, Business Roundtable and dozens of other trade associations have stepped up efforts to derail Trump’s attempts to impose duties on light vehicles and other goods.
Abuse of power? Trump? No way.
5th Gear: Ford Giveth After Ford Taketh Away
Just this past Tuesday, we reported that Ford is laying off over 1,000 employees at its Flat Rock Assembly Plant but “all full-time workers will be offered jobs at other plants, with about half being transferred to the Livonia Transmission Plant.” Now it seems like Chicago is getting the love.
Ford said yesterday that it’s putting over $1 billion toward its Chicago operations, which will result in 500 new jobs, reports Reuters. This, apparently, is all in preparation for the three new SUVs it plans to launch this year.
From the story:
Ford said it is building a new body shop and paint shop at its Chicago Assembly plant, and making major modifications to the final assembly area. At Chicago Stamping, Ford is adding stamping lines, the company added.
The Chicago assembly plant will stop building the Ford Taurus at this end of this month as it boosts SUV production. Ford said last year it was ending North American production of cars like the Focus, Fusion, Fiesta and C-Max.
Yes, because if you’ll kindly recall, Ford announced last year that it will phase out all of its small cars and sedans in North America. The trucks, SUVs and Mustang are sticking around, though.
We’ll always have the Mustang.
Reverse: The Father of Jaguar
Neutral: Are You Buying a Car This Year?
What are you planning on?