The Auto Industry Is Cautiously Optimistic

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The auto industry thinks things ... might be getting better soon, the Fiat Chrysler-Peugeot merger is moving along, and Tesla. All that and more in The Morning Shift for June 25, 2020.


1st Gear: The Auto Industry Is Trying To Convince Itself Things Might Be All Right

New car sales for 2020 are now projected to be just under 14 million, which is well under the 17 million or so that had been projected in the Before Times, but better than the 12 million or so that had been feared.

From The New York Times:

Yet automakers and car dealers say they are feeling optimistic because sales of new cars to individuals and families, the industry’s main customer base, have rebounded strongly.

“There’s pent-up demand,” said Doug Waikem, owner of six new-car franchises in Massillon, Ohio. “There are people who were ready to buy, and then the virus hit. They put it on hold, but some are starting to come back.”

Auto manufacturers have lured buyers back to dealerships with generous financial incentives. For a time, several companies, including General Motors, Ford Motor and Fiat Chrysler, were offering zero-interest loans for 84 months on most or all of their vehicles. Most automakers have phased out those offers, but interest-free loans for up to 72 months are still available on many models.

Many consumers appear to be buying cars with the help of some of the $1,200 federal stimulus payments and money they saved when they cut other spending in March, April and May, said Pete DeLongchamps, senior vice president of manufacturer relations at Group 1 Automotive, a large dealership group based in Houston.

“It’s certainly not as bad as we feared right now,” he said. “The government put a lot of money into the market, and now people are spending money on cars.”

I will further (pettily) note that this New York Times story also contains one of the most obvious sentences ever printed.

A rebound in the auto industry would probably help the economy.

I love to see a completely needless hedge.

2nd Gear: Meanwhile, Volkswagen Isn’t So Sure

The company isn’t so sure about the US’s coronavirus efforts, as cases spike and fear of a second wave—more accurately, a continuation of the first wave—persist.


From Automotive News:

VW expects a V-shape recovery from the effects of the coronavirus pandemic lasting into 2022. “The question is how steep is that V,” [Christian Dahlheim, Volkswagen Group’s head of sales] told an online conference on Tuesday hosted by the U.K. auto association SMMT.

Dahlheim did not expand on why the U.S. recovery is difficult to forecast. Analysts have previously said momentum could be halted by a resurgence of coronavirus infections. “There is a threat of demand being impacted by another wave of the pandemic,” Cox Automotive economist Jonathan Smoke told Automotive News earlier this month.

“The U.S. is probably the same picture as Europe, but it is probably the most difficult to predict,” Dahlheim said.


What’s interesting is how VW is rating this country by country. Spoiler alert: The US has not done great.

Dahlheim was most optimistic about China, VW Group’s largest market. “In China the V has been very steep so we expect China to come back to normal levels. It’s already [there] right now and will continue to do so,” he said.

Dahlheim forecast a longer downturn for South America that could “last well into 2023.”


3rd Gear: The Peugeot-Fiat Chrysler Merger Slowly Moves Ahead

Whenever this gets finalized it will encompass quite a lot of brands! Peugeot, Citroën, DS, Jeep, Chrysler, Dodge, RAM, Fiat, Alfa Romeo, Vauxhall, Opel, and probably a few that I’m forgetting. Ferrari! That’s another one. Surely all of that redundancy means a one or a few of those marques might be dead soon. The soon-to-be merged companies are already talking about “synergies.”


From Reuters:

PARIS (Reuters) - PSA Chief Executive Carlos Tavares is confident a $50 billion merger of the maker of Peugeot vehicles with Fiat Chrysler (FCA) will proceed as planned and deliver synergies of at least 3.7 billion euros ($4.2 billion).

The deal to create the world’s fourth-largest carmaker has become even more vital because of the impact of the coronavirus crisis and to speed up cost savings, Tavares told PSA’s (PEUP.PA) annual shareholder meeting on Thursday.

“The merger with FCA (FCHA.MI) is the best among the solutions to cope with the crisis and its uncertainties.”


Tavares also played down fresh European Union antitrust scrutiny of the planned merger, adding that he was confident it would be finalised in the first quarter 2021 “at the latest”.

“The timetable of the merger with FCA is being strictly respected,” he said, adding that projected synergies of 3.7 billion euros from the deal was a “floor”.


4th Gear: Tesla Is Gearing Up Battery Production

The company has long been a proponent of doing everything in-house. Reuters says the project is called “Roadrunner,” because apparently everything at Tesla has to have a silly name. It will be at a facility in Fremont, California, where Tesla’s factory—sorry “Gigafactory”—is. It will operate 24 hours a day.

The plan signals the U.S. electric vehicle (EV) maker’s efforts to make its own automotive batteries, EVs’ most expensive components.

Tesla, which said it currently has a “small-scale” battery manufacturing operation in Fremont, applied for city government approval to build an expanded battery operation. It estimated construction of the project, including the installation of all manufacturing equipment, can be completed in around 3 months.

Workers assigned to the facility would total 470, of which 400 would “work in shifts, such that there are 100 employees working at manufacturing and production operations at any given time, all day, every day.”


5th Gear: No More Third Shift At Cadillac XT5, XT6 And GMC Acadia Plant

The Spring Hill, Tennessee plant will see 680 layoffs because of the move by GM, which GM said was because of a fall in demand attributed to coronavirus.


From Automotive News:

The layoffs won’t all come from the third shift, Mike Herron, shop chair for UAW Local 1853, which represents workers at Spring Hill, told Automotive News.

Employees with the highest seniority can move to either the first or second shift, while lower-level workers on those shifts may be laid off. The layoff process will be completed by July 31, Herron said.

“When we went down, there were three shifts of production, and demand was such that there were three shifts of demand,” Herron said. “The market just didn’t rebound quickly enough. We had hoped that it was going to be a complete rebound to our pre-coronavirus levels, and it just never materialized.”

The third shift, which has been laid off since GM closed plants in March to prevent the spread of the coronavirus, was scheduled to return to work June 21. Last week, GM delayed the return of the third shift indefinitely.


Reverse: RIP

Fun fact: Graham Kozak, formerly of Autoweek, has a truly unhealthy obsession with Packards.


Neutral: How Are You?

Someone has kept their Toyota Yaris with a flat tire parked across the street from me for the better part of three months, unmoved because New York City’s alternate side parking have also been suspended that long. The rules go back into effect next week. I’m so washed that this is pretty much the biggest drama in my life at the moment. When will this car move? I hope never.

News Editor at Jalopnik. 2008 Honda Fit Sport.


“The Auto Industry Is Cautiously Optimistic”

Really? Why?

“No More Third Shift at Cadillac”

So that optimism comes with a hefty undercurrent of realism?

See, here’s the thing: not only is the pandemic far from over, it hasn’t even really begun. People holed up for a few weeks and then started peeking out from their burrows, what really needed to happen was every hole up for a couple of months. MONTHS.

The second wave hasn’t begun because the first wave hasn’t even ended yet. There was a very brief moment when it looked like we might get a handle on it, and then Trump roused his rabble, too many people got all up in their FREEDOM and burned their face bras because they wouldn’t live in fear.

I’m telling you, I don’t live in fear of the coronavirus. I live in fear of dipshits.

So Cadillac may find itself cancelling the second shift and maybe even the first shift before this is over, that cautious optimism will look like incautious delusion and we’ll be posting stories and comments from our living room sofas before much longer...again.