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: No Compensation For Takata Victims, But Thanks Anyway
Last year, as the known deaths tied to their ignition switch defect steadily started rising, General Motors established an outside compensation fund to pay victims of the defect or their families. They’ve paid out to the families of more than 120 people killed, and the fund is set to wrap up soon.
So as the number of deaths and injuries related to the explosive Takata airbags — a problem the company knew about for years, much like GM — also begins to rise, will they too establish a compensation fund? In a word: Nah. Here’s the New York Times:
At a congressional hearing last month, Senator Richard Blumenthal, Democrat of Connecticut, urged a Takata executive to create a compensation fund for victims similar to one established by General Motors after its ignition switch recall.
This week, in a letter from the company, Mr. Blumenthal got his answer: No.
“Takata believes that a national compensation fund is not currently required,” Kevin Kennedy, an executive vice president, wrote in the letter, which was provided by Mr. Blumenthal’s office. Mr. Kennedy said the company would give the matter further study and would let the senator know if it changed its mind.
A Takata spokesman added this:
Jared Levy, a spokesman for Takata, said on Thursday that the company was “committed to treating fairly anyone injured as a result of an inflater rupture.”
“For that reason,” he said, “Takata has settled a number of injury claims and will continue to do so based on the facts and circumstances of individual cases.”
Takata is said to have set aside $775 million to cover the costs of the recalls, but they’re unable to calculate the costs of settling all these lawsuits, the story says. They also obviously don’t have as much cash on hand as GM does. It’s hard to imagine they’ll survive this.
2nd Gear: The Great Chinese Wake-Up Call
Takata’s going to keep on being Takata (much to the detriment of the human race as a whole) but the big news this week was China and its drastic stock rout. And while stocks rebounded sharply yesterday morning, the country and the automakers who have treated it as their golden goose are tamping down their expectations for the rest of the year. Buyers are, too. Here’s Bloomberg:
China slashed its forecast for vehicle sales in the world’s largest market, projecting deliveries to expand at the slowest pace in four years amid a stock-market rout that threatens to dent consumer sentiment.
Total vehicle deliveries including trucks and buses will probably rise by 3 percent this year, down from the 7 percent projected in January, the China Association of Automobile Manufacturers said Friday. That would be the smallest increase since 2011, when the government unwound stimulus measures unleashed in the wake of the global financial crisis.
[...] “I don’t think you can imagine very strong growth in the market,” said Anna-Marie Baisden, London-based head of auto analysis at BMI Research. “The second half will be worse, people would’ve lost money from the markets, and the whole economic situation hasn’t been helping.”
A bit of realism where China is concerned is probably a healthy thing.
3rd Gear: Recalled Rent-A-Car Plan Under Fire
What happens when you go to rent a car that was recalled? What guarantee do you have that the problem has been fixed before you drive the car? Most companies actually won’t rent recalled cars and some states have prohibitions against that anyway, but one U.S. senator has proposed a plan to disclose recall notices to consumers. One more from Bloomberg:
Under a bill introduced Thursday by Senator John Thune, a South Dakota Republican who is chairman of the Commerce Committee, rental-car companies would be able to offer vehicles with unresolved flaws as long as they disclose the defects in writing to the renter.
Sounds fair at first glance, right? But it’s getting blasted by consumer advocates:
“This is going backward,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a safety group based in Sacramento, California. “This would be worse than existing practices for 95 percent of the industry.”
The Senate Commerce plan could cause car-rental companies such as Hertz Global Holdings Inc., Avis Budget Group Inc. and Enterprise Holdings to drop policies they adopted calling for the completion of all recall repairs before renting vehicles, Shahan said. Other companies wouldn’t have an incentive to adopt such policies, she said.
The criticism is that if they just have to disclose the recall, companies won’t be under pressure to actually fix them. How much do you trust your rental car company?
4th Gear: The New Detroit
We’re six years down the road from the auto bailouts, and this month’s contract negotiations between the American automakers and the United Auto Workers is the first one where that catastrophe won’t be looming in the background. The UAW got their fair share of blame for how things went down, much of it warranted. Can they, and the Big 2.5, show people things are different now? Via The Detroit News:
The stakes could be higher, like they were in 2008 and 2009, but the symbolism could not be. Investors and bureaucrats, customers and employees, will be looking for evidence that the bad, old days really are dead and buried. Or whether they aren’t, precursors to more pain in the next downturn.
Proof will be in what both sides do in bargaining between now and mid-September, not increasingly heated rhetoric as the deadline nears, union members grow anxious and some take to social media in ways they could not during the ‘07 talks and before.
They have a lot to sort out. This, as Howes says, will be a test of the new Detroit.
5th Gear: So Much Drama At Volkswagen
I won’t recount the ordeal behind Ferdinand Piëch’s ouster at the Volkswagen Group, but these days Volkswagen’s (the brand, not the group) chairman is a guy Piëch poached from BMW named Herbert Diess. Except now Diess is being “branded” as someone snatched up not by Piëch, but by Martin Winterkorn, whom Piëch tried and failed to get rid of last year. From Reuters:
Volkswagen (VOWG_p.DE) told employees on Thursday that new VW brand chief Herbert Diess had been lured by Chief Executive Martin Winterkorn, a political gesture designed to gloss over any signs of rivalry between the two executives as the carmaker seeks to move on from a damaging leadership crisis.
Diess and Winterkorn’s future depends on whether they can deliver on a plan to slash 5 billion euros ($5.6 billion) in annual costs from VW’s brand operations by 2017 and overcome resistance to cost cuts from unions and political leaders.
In a Q&A with Diess published on its internal website for employees, VW conveyed the impression that Diess had been poached from BMW (BMWG.DE) by Winterkorn, rather than departed chairman Ferdinand Piech. “Welcome to Volkswagen Herr Diess. With which arguments did Herr Winterkorn persuade you to move from Munich to Wolfsburg,” the interviewer asked.
History is written by the one who wins the war, I guess.
Neutral: How Long Does Takata Have?
Or will they find a way to survive this?
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