Renault Thinks It Can Work It Out

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News on Renault and Nissan’s contentious relationship, labor costs are expected to go up for the “Big Three” as a result of UAW contracts, automakers are investing in flying taxis and electric vans, and exciting 2019 sales results for Europe. All of this and more in The Morning Shift for Thursday, Jan. 16, 2020.

1st Gear: Embattled Besties Renault And Nissan Are Apparently Trying To Work It Out

The longtime alliance between Japanese automaker Nissan and French carmaker Renault has been going through serious turmoil, especially after Carlos Ghosn, former Chairman of Nissan and Mitsubishi, was arrested in 2018. But we have some good news today from Reuters, which writes that, according to Renault Chairman Jean-Dominique Senard, things aren’t really that bad, and the two teams are working to fix what’s broken. From the story:

“We have a board overseeing the alliance which is made up of people who are all extremely in favor of the alliance,” Senard told a briefing with reporters, defending the changes he has made since joining Renault after Ghosn’s arrest.

“There is a common desire to associate our strategic plans and a real desire to make this alliance a success,” he said, describing reports that Nissan was working on scenarios for a possible future outside of the alliance as “fake news.”

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The news site says that Senard thinks other partners could join Nissan and Renault “once the partnership had been stabilized,” so clearly there are still problems. Both companies have a huge incentive to solve those problems and to continue working together, because reducing complexity by working together is the key to success days, especially as the auto industry shifts towards EVs. From Reuters:

Analysts view Renault-Nissan’s cost-saving alliance as vital to both companies’ fortunes as the car industry battles a slowdown in demand and huge investments in cleaner vehicles and automated driving, particularly as rivals PSA Group and Fiat Chrysler Automobiles are merging to help meet these challenges.

This all comes after lots of controversy between Renault and Nissan. “Things Aren’t Going Well for Renault And Nissan” we wrote back in December of 2018, pointing out an Automotive News story about investigations into strange shell companies within Nissan and also pointing to a Reuters story about how the two companies’ boards were not getting along.

Then in June, we wrote “Renault-Nissan Tensions Somehow Got Even Worse,” highlighting Bloomberg and Reuters reports on how Renault refused to pass Nissan’s proposed post-Ghosn governance reforms because the French automaker felt it was underrepresented. Plus, we mention in that story the theory that Nissan may have played a role in Renault’s failure to merge with FCA.

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A few days later, we wrote “The Nissan-Renault Alliance Is Disintegrating: Report,” in which we noted the Financial Times’ report about how entities overseeing the Nissan-Renault-Mitsubishi alliance were being cut. Then just recently, the Financial Times said that, according to two sources, the relationship between the automakers “had become toxic” and that Nissan is making contingency plans, should it decide to split with Renault.

Of course, we don’t really know what’s happening behind the scenes, but Senard on the Renault side seems positive, and that’s better news than what we’ve heard about this alliance over the last few years.

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2nd Gear: Detroit’s Big Three Are Going To Pay More For Labor: Report

Last year, after a long strike with GM, the United Auto Workers ratified a contract with the Big Three automakers. Among the results of that contract, Automotive News attributes to the Center for Automotive Research, will be increasing labor costs over the next four years.

Last year’s contentious negotiations with the UAW will prove costly for the Detroit 3 automakers, according to a forecast from the Center for Automotive Research.

Kristin Dziczek, vice president of industry, labor and economics at CAR, said the average hourly labor cost for Ford Motor Co., Fiat Chrysler Automobiles and General Motors will “rise steadily” over the next four years, despite vows by each company heading into the talks to keep those figures in check.

Fiat Chrysler will see the sharpest rise between now and 2023, from $55 per hour to $66 per hour, CAR estimates. GM’s hourly labor cost will rise from $63 per hour to $71 per hour, while Ford’s hourly costs will jump from $61 now to $69 in four years.

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Those costs, the website points out, are weighted averages “by workforce composition” that include not just wages, but also health insurance, bonuses, and a number of other factors. The story quotes a Art Schwartz, a former GM negotiator, who points out that this rise in labor costs is kind of obvious:

“When the companies are doing well, it makes no sense to expect labor costs aren’t going to go up...Anyone who went into this thinking the labor cost would stay the same or go down was dreaming.”

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Schwartz also noted that many of the payments are one-time, lump-sum payments and not “structural,” so they shouldn’t really hit companies long-term. Plus, according to a “GM spokesman,” some of the increased labor costs are expected to be offset by improved productivity. From the story:

[A GM spokesman said in a statement]: “There was no increase to defined pension obligations or increased obligations to retirees, and we expect productivity gains to offset labor-cost increases over the contract period. We also maintained breakeven levels in the 10 million to 11 million-unit range in the U.S., preserving our ability to navigate through a downturn.”

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3rd Gear: Toyota Continues To Spend Actual Money On Flying Taxis

We’ve been writing about Toyota’s investments in flying cars/drones and flying taxis for a while now. Back in mid 2017, we wrote a few stories about how the company invested $350,000 in a company called Cartivator to help build a drone. Then in early 2018, we mentioned how Toyota, Jet Blue, Intel, and others dropped $100 million on a “flying taxi” startup out of Santa Cruz, California called Joby Aviation.

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Apparently the Japanese automaker is still at it, as Bloomberg wrote yesterday about the company’s “new $394 million” bet on Joby. From the article:

Toyota is the lead investor in Joby’s $590 million Series C funding, alongside Baillie Gifford and Global Oryx and prior backers Intel Capital, Capricorn Investment Group, JetBlue Technology Ventures,SPARX Groupand its own investment arm, Toyota AI Ventures. The deal, for now, makes the Santa Cruz, California-based Joby the best-funded “eVTOL” (electric vertical take-off and landing) startup in a booming category that must overcome significant regulatory hurdles and concerns about passenger safety and noise, bringing the total money it has raised to $720 million.

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Toyota’s CEO addressed the investment, saying:

“Air transportation has been a long-term goal for Toyota, and while we continue our work in the automobile business, this agreement sets our sights to the sky,” said Toyota President and Chief Executive Officer Akio Toyoda. “As we take up the challenge of air transportation together with Joby, an innovator in the emerging eVTOL space, we tap the potential to revolutionize future transportation and life.”

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4th Gear: Hyundai Is Investing In An Electric Van Startup

Speaking of automakers spending millions on startups, that’s what Hyundai is doing, too. Specifically, it’s dropping $110 million on a UK-based electric van startup. Here’s what Reuters has to say about that:

Founded in 2015 and based in London, Arrival has developed a boxy, futuristic-looking shuttle bus aimed at the commercial delivery market. The company said its van will have a range between charges of 300 miles.

In a statement, Arrival said it will work with Hyundai and Kia to develop a variety of electric vehicles, initially for the commercial market. Those vehicles will be built on Arrival’s modular vehicle platform or “skateboard” that bundles motor, batteries and chassis components, similar to the skateboard developed by U.S. startup Rivian.

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Automakers are partnering up with electric car startups at an incredible rate, with Ford investing hundreds of millions into Michigan-based EV company Rivian, Porsche spending money on Croatian EV-maker Rimac, and many more examples. There are no signs of this kind of thing slowing down, as automakers need as much help as they can get to be competitive in the ever more popular EV world.

5th Gear: PSA Group’s 2019 Sucked But European Sales Were OK

PSA Groupe, the French automaker that owns Peugeot, Citroen, Vauxhall, Opel, and DS—and the company that’s in the process of merging with Fiat Chrysler—had a shitty 2019 compared to 2018, according to Reuters, which writes:

French carmaker PSA Group (PEUP.PA) said on Thursday global sales fell 10% last year to 3.49 million units, compared with a record 3.88 million in 2018, as it suffered from declining volumes in China, the Middle East and Africa.

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Indeed, those sales in China, the Middle East, and Africa were pretty awful. From the story:

PSA’s sales in China fell a hefty 55.4% to 117,084 vehicles, a mere 10th of the 1 million-a-year target it had set itself a few years ago.

Sales volumes were also down 22.5% in a contracting Latin American market and 43.7% in the Middle East-Africa region - punished by the group’s forced withdrawal from Iran under threat of U.S. sanctions.

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Europe wasn’t so bad, though, with a decline of just 2.5 percent overall. Here’s a bit more on that:

In Europe, helped by an increase in sales of light commercial vehicles (LCVs), PSA said in a statement it “maintained its position by achieving a 16.8% market share in a market that was up a slight 1.3%”. In 2018, PSA’s market share had jumped 3.8 points versus 2017 to reach 17.1%.

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The company’s merger partner, Fiat Chrysler, got hit hard by a 7.3 percent drop in its European passenger car sales. I’m sure some smart consolidation will benefit both companies in that region. By the way, if you’re curious about overall sales in Europe, they actually appear to have been pretty decent in 2019, with Bloomberg reporting in its story “European Car Sales Surge to Record High”:

Fueled by an end-of-the-year buying frenzy ahead of regulation changes, car registrations rose 21% to 1.26 million vehicles, the European Automobile Manufacturers’ Association said on Thursday. The late surge helped offset a weak start to 2019 and push full-year sales 1.2% higher, reversing a slight drop in 2018.

Europe’s growth contrasts with weak demand in the world’s two biggest car markets. Car sales in China fell 3.6% in December, the 18th decline in the past 19 months as a slowing economy and trade tensions unsettle consumers. Dealers in the U.S. offered record discounts to bolster sales as demand slowed at the end of 2019. The two countries signed the first phase of broader trade pact, which could ease sentiment.

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Reverse: The U.S. Gets Its Economy Ready For WWII Production

From the Franklin D. Roosevelt Presidential Library:

On January 16, 1942, FDR established the War Production Board through Executive Order 9024. The WPB was tasked with converting civilian industry into war production. Their work included rationing of materials and the mobilization of the public through drives such as the scrap metal drive.

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Neutral: What Are You Most Excited/Concerned About In The Auto Industry?

There’s a lot going on right now—mergers, heavy investments in startups, “restructuring,” and a whole lot more. The industry is changing, but what do you think will be the result, and what are you excited for or concerned about most?

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About the author

David Tracy

Sr. Technical Editor, Jalopnik. Always interested in hearing from auto engineers—email me. Cars: Willys CJ-2A ('48), Jeep J10 ('85), Jeep Cherokee ('79, '91, '92, '00), Jeep Grand Cherokee 5spd ('94).