The Carlos Ghosn Story Has About Ten Million Subplots

The Carlos Ghosn story is still not gone, same with Trump and GM, and BMW says they might expand operations in the U.S. All that and more in The Morning Shift for Wednesday, Nov. 28, 2018.

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In a story worth reading in full, Reuters on Wednesday detailed one of the subplots of the whole Ghosn saga: French president Emmanuel Macron's move to increase the government's stake in Renault back in 2015, in a bid to exert more control in Renault's alliance with Nissan. But all of that may have backfired spectacularly with the arrest of Ghosn, Nissan's CEO since 2001, now accused of misappropriating funds.

From Reuters:

In April 2015, as a 37 year-old economy minister with then-unknown presidential ambitions, Macron ordered a surprise government stake increase in Renault, designed to secure double voting rights for the state. The overnight move profoundly rattled the Japanese end of the Renault-Nissan alliance.

In the ensuing eight-month boardroom fight between Macron's ministry and Hiroto Saikawa – Nissan's second-in-command at the time – many now see the seeds of today's crisis.

[...]

Saikawa has since contested Renault's right to appoint executives and directors under the alliance master agreement, in correspondence seen by Reuters. Such fundamental differences now threaten the future of the partnership, which rivals Volkswagen and Toyota on the global auto industry stage.

"President Macron himself has skin in the game," Max Warburton, an analyst with New York-based asset manager AllianceBernstein, said this week.

"He must recognize that his decision in 2015 to increase the French state's holding in Renault ... likely impacted Japanese perceptions of the alliance and heightened concerns that Nissan was ultimately within the control of the French government."

This all fits in with a theory about Ghosn's arrest, that he may have simply been whacked. In any case, this is bad news for Macron, particularly if he starts looking like "guy who helped screw up the biggest auto manufacturer tied to France."

Macron, who surged to victory in elections last year to became France's youngest president, now finds himself battling street protests and record low approval ratings. The Renault-Nissan crisis may draw more attention to the risks of his bold interventionism, once seen as refreshing.

Go read the whole thing here.

President Donald Trump went after GM yesterday in tweets, threatening to cut perhaps all EV subsidies in retaliation for GM planning plant closures. Today people are beginning to consider the full weight of what he was suggesting. One upshot? If Trump were to somehow eliminate the "GM subsidies"—an apparent reference to the $7,500 tax credit for electric vehicles, which was about to be phased out for GM anyway—it would likely have the effect of helping GM.

That's because it would be difficult to design, let alone enact, legislation targeted solely at GM, and if the government got rid of the tax credit altogether, GM would be back on level terms with newer players in the electric-vehicle market who haven't yet surpassed the 200,000-vehicle threshold that begins the phaseout.

From Bloomberg:

"It's very unusual for federal policy to single out one company for different treatment than another company," said Kristin Dziczek, vice president of industry, labor and economics for the Center for Automotive Research in Ann Arbor, Mich. "So I don't know exactly how they would do that."

[...]

If Trump were able to push through a legislative repeal of the credit, it could actually end up giving GM a better competitive position, according to Jeremy Acevedo, an analyst with auto market researcher Edmunds.

"GM was the first in the market alongside Tesla, and eliminating the EV tax incentive all together would level the playing field as the competition has only started to heat up the segment," he said.

GM, Tesla Inc. and Nissan Motor Co. formed a coalition earlier this month to lobby to have the purchase subsidy extended. Tesla surpassed 200,000 cumulative EV sales in the U.S. earlier this year, and Bloomberg NEF analysts project that GM will probably exceed that mark this quarter.

Also, Trump allies are suspect.

"I don't know that's going to be a response that actually gets much traction around here," Senator John Thune, a South Dakota Republican, told reporters. "I'm not sure I know how they would go about doing that."

Just another normal one for the president.

BMW makes over 400,000 SUVs a year at its giant plant in Spartanburg, South Carolina, which it has said it wants to expand before hedging after Trump started his trade war. Now, Chief Executive Officer Harald Krueger has said that it's also considering building engines and transmissions in the U.S. as well, despite that 70 percent of the SUVs it makes in the States are exported, a situation that has grown complicated as car tariffs overseas have become a growing threat.

From Bloomberg:

BMW is considering building engine and transmission plants in the U.S., he later told reporters, without providing any details. The company has weighed such a move in the past.

Krueger is trying to navigate trade wars waged by U.S. President Donald Trump and the possibility of a chaotic Brexit, all of which has hampered supply chains for a company that depends on the free flow of goods across borders. BMW's return on sales from automaking almost halved in the third quarter, and the company cited impact from tariffs as well as pricing pressure.

Higher vehicle levies will take a 300 million-euro ($339 million) bite out of 2018 earnings, Chief Financial Officer Nicolas Peter said earlier this month.

This stands in contrast to BMW's previous response of moving some SUV production out of SC and to China. That was just about a month ago, which already feels like a year at this point.

Just kidding. One of them—the planned tunnel under Sepulveda Boulevard—is not happening anymore, after a lawsuit scuttled things, according to The Los Angeles Times. Another tunnel, between Dodger Stadium and a Metro station, is still in the works.

From the L.A. Times:

In a joint statement Tuesday, Musk's firm — Boring Co. — and the group of Westside advocates that sued over the project in May said they had "amicably settled" the lawsuit. An attorney for the groups said the settlement agreement was confidential.

[...]

The company moved briskly through the permit process at first, securing a preliminary exemption from California's stringent environmental review requirements. Officials on the Los Angeles City Council's public works committee said at the time that the project would not require an in-depth environmental review because it would not carry passengers.

But before the City Council could vote on the issue, a group of Westside advocates — the Sunset Coalition, the Brentwood Residents Coalition and its president, Wendy-Sue Rosen — sued, arguing in court that the Sepulveda tunnel would be part of a much larger planned underground transportation network.

The lawsuit cited a map that Musk had posted online that showed a web of possible tunnel routes across the Southland, with a line that appeared to trace the route of the 405 Freeway and Sepulveda Boulevard.

Musk said last year that he hoped the Sepulveda tunnel would be done "in a year or so." Sigh.

Ford, which, like GM, is in the midst of its own transition, is also trying reduce payroll costs. That means buyouts. The terms of those are apparently better than GM's, though, according to the Detroit Free Press, not nearly as sweeping as GM's plans for thousands of layoffs.

From the Detroit Free Press:

"Comparing the two packages back to back? Ford is more generous. It's a great deal," said David Kudla, CEO and chief investment strategist with Mainstay Capital Management, a Grand Blanc investment adviser who manages $2.5 billion in assets. "We work with a lot of Ford clients."

An employee taking the deal either worked half time for the last six months of the year or left Ford by Oct. 1 and took the final three months of the year off with pay.

A similar package is offered every year. This year, though, "The North American team decided to add a lump-sum payment for retirees, a payment equal to nine months of base pay," [Karen Hampton, a Ford spokeswoman] said.

Kudla, who works with hundreds of Ford clients of all ages, said, "These are sweeteners to compel them to go."

Meanwhile, GM offered its employees a buyout deal of six months' pay for workers with 12 years or more experience, the same amount of severance as if they were involuntarily terminated. Sources say those in the latter group will be escorted out in mid-January.

Fewer than 1,000 employees took the buyouts, according to the Freep.

Tightening emissions and safety regulations, increasingly global auto markets, and huge investment costs demanded by autonomous and electric vehicles have helped push car companies together over the past years. Is social sentiment, like we're seeing with the ascendancy of far-right groups to positions of power worldwide, cutting all these back?