The Feds Will Have To Pick Ford Or GM In Battery Fight

It's Ford vs GM, but not a battle about truck sales or pony car quarter-mile times. It's a battery battle, backing an electric F-150 on one side, and everything else electric from GM on the other. All that and more in The Morning Shift for February 10, 2021.

The car business is very much one of suppliers. Look at the Takata recalls if you don't believe me. Now there's a new supplier drama: LG Chem wants batteries from its rival SK Innovation banned from import to the United States, claiming that SK stole trade secrets. The complication is that SK supplies the batteries for Ford's upcoming electric F-150, maybe the most important electric vehicle since the Tesla Model S. You can't mess with the electric F-150 ... not in Biden's America!

Bloomberg lays out the drama:

The U.S. International Trade Commission is scheduled to decide Wednesday whether to ban imports of lithium-ion battery components that the South Korean battery maker SK Innovation will need to produce battery cells for the electric Ford F-150 and Volkswagen ID4 at a factory under construction in Georgia.

LG Chem, a supplier to such carmakers as General Motors and Tesla Inc., and a competitor of SK also based in South Korea, filed its claim in April 2019, alleging that SK's batteries use stolen trade secrets.

If the commission sides with LG, the decision could upend battery output and hamper EV production in the U.S. A favorable ruling for LG could complicate the green energy agenda of President Joe Biden, who has pledged to promote EV adoption. One early example was his Jan. 27 rollout of an ambitious plan to convert the federal vehicle fleet to EVs. That policy initiative, combined with targets for EV sales more broadly in the U.S. — California, for example, will phase out the sale of new gas-powered vehicles by 2035 — is expected to stoke demand for EV batteries from carmakers, including Ford, GM, and Volkswagen, over the next decade.

The right thing to do, obviously, is re-nationalize GM. All right, I don't know how that would help in this case in particular, I just feel like it would.

Speaking of GM and Ford, both companies made a profit in the rather grim 2020 and that meant that profit-sharing checks went out to employees of both mega-corporations. For GMers, that means $9,000. For Forders, that means $3,625, as the Detroit News reports:

The Detroit automaker, which made $6.4 billion last year, announced profit-sharing as part of its full-year 2020 earnings report released Wednesday. Profit-sharing is based on GM's profits in North America, which totaled $9 billion last year. For every a billion made in North America, employees get $1,000, according to GM's contract with the United Auto Workers.

[...]

Ford Motor Co.'s 2020 profit-sharing payouts will be up to $3,625, down roughly 45% from the year before. The payments will be made in March. In 2020, Ford paid up to $6,600 to 53,000 eligible employees.

Negotiate hard, fellow unionized workers!

Toyota posted its quarterly results today and made a fair chunk of change, as Automotive News reports:

Toyota showed its strong recovery from the COVID-19 pandemic after reporting that its quarterly operating profit rose to 987.9 billion yen ($9.45 billion) from 640,097 billion a year earlier.

Net income rose to 838.7 billion yen ($8 billion) from 559 billion yen in the three months ended Dec. 31, Toyota said in an earnings statement Wednesday.

The report also included a wonderful line from a Bloomberg analyst:

If dividing the auto industry into winners and losers, "clearly Toyota is winning," said Bloomberg Intelligence analyst Tatsuo Yoshida.

An ability to keep pushing out new vehicles such as the popular RAV4 crossover in major markets has been key, he said. "Toyota habitually pursues R&D and product development, therefore flowers are blooming for it even in times like these," Yoshida said.

What do Toyota flowers look like in bloom? Are they more sturdy than the other flowers in the garden? Do they have particularly uniform petals?

This is a statistic called "throughput" and it was down, real down in 2020, as Automotive News details:

The average number of new vehicles sold by U.S. dealers fell last year to its lowest level since 2012 as the COVID-19 pandemic strained consumer demand and the dealership population dropped slightly.

The figure, known as throughput, declined in 2020 by 133 vehicles to 807, according to Urban Science's annual Automotive Franchise Activity Report. Eight years earlier, the number was 812. From 2013 to 2019, throughput rose as high as 966 and as low as 874, according to the report. In 2009, the final year of the Great Recession, throughput was 564.

Last February, before the coronavirus was declared a pandemic, Urban Science had forecast a throughput decline for 2020, but only by 14 vehicles.

It is entertaining to read "the final year of the Great Recession," something that has not left my mind for a day.

Automotive News is a very dealer-oriented publication at heart, and included a rather full report on Mercedes-Benz's annual National Automobile Dealers Association meeting. The report as a whole is pretty dry, but includes this interesting tidbit:

Mercedes will take a targeted approach with its sales strategy as it rolls out its EQ subbrand in the U.S., focusing efforts initially on 20 EV-friendly major metro markets through a group of 60 to 80 pilot dealers.

"What we don't want to do is force cars onto dealers in rural settings without much opportunity," Chamberlain said. "We know that 80 percent of EV sales happen in 20 markets nationally. Let's be focused on those markets where the opportunity is, where the dealers can get a return on investment and get some sales cadence, and we can bring confidence to the EQ brand."

This makes sense but is a bit of a bummer. I keep envisioning some rich, self-made farmer in Yolo with solar panels blanketing every barn roof in the area kicking sandy clay loam hearing this news.

If EVs are good for the country, at what point do you value that over any one company in particular? What's fair?