Tesla’s leasing partner unable to fund leases, Hyundai and Kia owners taking the automakers to court, General Motors’ planned electric and autonomous overhaul, continuing problems between Renault and Nissan, and more job cuts. All of this and more in The Morning Shift for Monday, Dec. 17, 2018.
1st Gear: Tesla’s Partner Might Be Having Trouble Funding Leases
Automotive News has a fascinating story on Tesla’s leasing partner this week, which is apparently having so much trouble funding leases that it hasn’t been able to do so in several months. The company, MUSA Auto Finance, is a Dallas business that began in 2016 and hooked up with Tesla over the summer to manage leases for the Model S sedan and Model X crossover. But it’s only taken a few months for the company to become overwhelmed.
MUSA told dealer customers in an October email that it couldn’t finance leases any longer after the new Tesla partnership increased its leasing volume by six between August and September, Automotive News says. Lease approvals still aren’t happening, the outlet reports, leaving dealer partners without funding for the leases and “some” customers without their leased cars.
Here’s what’s going on, according to Automotive News:
MUSA’s sudden turn of fortune created snarls that Dave Guttenberg, owner of Automotive Imports, a used-vehicle store in Denver, still is navigating. Even though dealers were told MUSA — known for its automated decision- making software — would honor all leasing contract approvals sent before the October email, Guttenberg says he is owed nearly $180,000 for three pending lease agreements secured before the announcement. He still is waiting for funding — and answers — from the company.
“We didn’t want to have to call customers up and say, ‘We’re sorry — remember that really good lease deal that you were skeptical about? Well, we can’t lease you that car,’” he said.
MUSA and Tesla officials declined requests to talk about the partnership. [...]
Until last week, Tesla listed MUSA as a partner on its leasing page. Now, the listing is gone.
Automotive News has more on the story—a story of building business a little too quickly and feeling the pain of not being able to hand it all—here.
2nd Gear: Hyundai and Kia Owners Sue Over Fires
Several hundred owners of certain Hyundai and Kia models have reported fires in the engine bay of their vehicles, with no apparent cause. The first petition for Hyundai and Kia to do something about it came in June, and most recently, the automakers were called upon to speak with the Senate Commerce Committee about things. The hearing was later postponed.
But it seems like owners have had about enough of all of this, since Bloomberg reports they’re suing the automakers over the fires. The lawsuit was filed in the U.S. District Court for the Central District of California on Dec. 14, according to the story, and said the count of complaints to the U.S. National Highway Traffic Safety Administration about the non-collision fires are now at more than 350.
The lawsuit alleges Hyundai and Kia’s “concealment of the defect,” Bloomberg reports, and said the defect itself restricts oil flow to major parts of the engine, causing it to prematurely wear, fail, seize and catch on fire. From Bloomberg:
The U.S. auto-safety regulator started probing the timeliness and scope of the carmakers’ recalls related to manufacturing errors in “Theta II” engines, while the U.S. Attorney’s Office for the Southern District of New York has opened a criminal investigation in to the matter, according to a Reuters report. Hyundai and Kia have recalled about 1.6 million vehicles in the U.S. made between 2011 and 2014 related to engine problems.
Shares of Hyundai fell as much as 3.4 percent. They were down 0.9 percent at 1:24 p.m. in Seoul, while Kia advanced 1.9 percent.
In response to Bloomberg’s request for comment about the lawsuit, Hyundai said “nothing is more important than the safety and security” of its customers, and that the automaker has “held numerous meetings with DOT and NHTSA representatives, and proactively discussed and identified possible safety items for NHTSA’s evaluation, including the engine recalls” over the past few years.
3rd Gear: GM Is About to Overhaul Itself for Autonomous and Electric Vehicles
There’s a lot going on at General Motors lately, to the point that it’s kind of hard to keep up—or want to, for that matter. The company’s closed production plants, slashed thousands of jobs and offered buyouts when business is good, and made politicians mad about tax cuts all in the span of a few weeks.
The job cuts were more about preparing for potential economic downturn, but with all of the changes going on, GM’s also using this time to overhaul itself and prepare for a future full of autonomous and electric vehicles. Automotive News reports that Mark Reuss, who leads GM’s global product group, is in charge.
Reuss has already started restructuring the 32,000 employees he oversees in research and development, engineering, design, safety, quality and product planning, Automotive News reports, and part of that restructuring involves streamlining GM’s engineers in preparation for GM’s planned launch of 20 battery-electric or fuel-cell-powered vehicles across the globe by 2023.
The changes also include the obvious in these times: moving away from cars and going with crossovers, SUVs and pickups. Automotive News reports that Reuss wants to keep traditional models updated while moving toward electricity and self-driving cars. From the story:
The product development overhaul is connected to a multibillion-dollar restructuring announced by CEO Mary Barra last month. [...]
The revamp of GM’s Global Product Group includes more integration of the Global Propulsion Systems unit — the former GM Powertrain division — with other product group divisions. It also realigns priorities and responsibilities of senior leaders.
At least five vice presidents — half of Reuss’ direct reports — will get expanded responsibility for electric and autonomous vehicles.
Automotive News has more on the restructuring here.
4th Gear: Nissan Board Fails to Pick Ghosn Successor as Alliance Relationship Gets Rockier
The Nissan-Renault-Mitsubishi alliance hasn’t been doing so well during this whole “Carlos Ghosn” thing, and the relationship just keeps getting rockier between Nissan and Renault, it seems.
Automotive News reports that the Nissan board failed to pick a successor for Ghosn at a recent meeting, instead deciding to make a committee to improve corporate governance. The committee will give recommendations in March, Automotive News reports, and the board may wait until then to pick a new chairperson. That’s not making Renault too happy.
From the story:
The decision to wait further comes as Renault, Nissan’s largest shareholder and the company that bailed out the Japanese automaker two decades back, sent a letter demanding a meeting of all shareholders to discuss Nissan’s difficulties. Ghosn’s arrest has escalated tensions between the companies, whose car alliance — the world’s largest — has been held together by Ghosn throughout its existence.
When Ghosn was arrested for alleged financial misconduct at Nissan, Renault kept him as CEO and appointed an acting CEO in his place. Both Mitsubishi and Nissan removed him as a chairperson. Renault and Nissan aren’t getting along well during all of this, either, and it began to look last week like this all could be part of a bigger scandal.
The scandal reports continue to get weirder by the day almost, showing that the Nissan-Renault-Mitsubishi alliance isn’t the big, happy family it would like us all to believe it is.
5th Gear: Jaguar Land Rover to Cut 5,000 Jobs, Report Says
Jaguar Land Rover will announce plans early on in 2019 to cut up to 5,000 jobs, according to a paywalled Financial Times report cited by the Guardian. The job cuts are part of a plan to save 2.5 billion pounds, or about $3.2 billion, to ease the threat of Brexit as well as a drop in demand in China and for diesel cars.
The company employs about 40,000 people in the UK, and has already cut 1,000 temporary contract workers at one plant as and reduced hours at another, the Guardian reports. Tata Motors, the parent company of JLR, sought out Boston Consulting Group for a turnaround plan with money losses and dropping sales. Part of the plan includes the job cuts, according to the report:
The plan to revive the fortunes of the luxury carmaker includes a reduction in annual investment from £4.5bn to £4bn this year and next, and a reduction in the stock of finished cars it holds and its working capital by £500m. It will also cut £1bn in costs. and has already introduced a freeze on recruitment and all non-essential travel, as it battles falling demand.
The union Unite said government policy on diesel and its “botched” handling of Brexit was weighing on the hard work by staff at Jaguar Land Rover, “the jewel in the UK’s manufacturing crown”.
The spokesman added: “Unite is not aware of any further job losses to those already announced and planned for early in the new year at Jaguar Land Rover, Unite also expects ongoing transparency regarding the difficult current climate the automotive sector is operating in the UK and its impact with the company. [...]”
The Guardian reports that a spokesperson for JLR said the company “notes media speculation about the potential impact of its ongoing charge and accelerate transformation programs.”
“As announced when we published our second-quarter results, these programs aim to deliver £2.5bn of cost, cash and profit improvements over the next two years,” the spokesperson said. “Jaguar Land Rover does not comment on rumors concerning any part of these plans.”
Reverse: The First Airplane Takes Flight
It’s that day of the year again—the anniversary of the first flight in history by a self-propelled aircraft that was heavier than air, flown by Orville and Wilbur Wright in North Carolina. According to History, the flight lasted 12 seconds and went 120 feet with Orville as pilot.
Neutral: What Would You Do if Your Lease Was on Hold?
If you needed a lease for your dream car but hadn’t been able to get it put through for months, would you wait around or move on?