GM’s strike could hurt Michigan’s economy if it doesn’t end soon, Ford is almost certainly building two cars based on VW’s electric car platform, Germans are protesting against SUVs after a fatal crash, and much more. Here’s what you need to know for The Morning Shift of Tuesday, Sept. 17, 2019.
1st Gear: The General Motors Strike Could Tank Michigan’s Economy: Report
Roughly 50,000 members of the United Auto Workers went on strike just before midnight on Sunday night, closing 33 manufacturing plants in nine states and 22 parts warehouses according to ClickOnDetroit. The reasons for the strike are multifaceted, including UAW members’ concerns about pay and health care, particularly at a time when GM’s profits are fat and yet assembly plants like like the ones in Lordstown and Hamtramck face a daunting future.
You might imagine that so many employees holding picket signs instead of wrenches could have far-reaching economic effects, and indeed, the Detroit News claims that, per experts on the matter, if this strike lasts more than a week, it could tank Michigan’s economy. From the news site:
With 14 manufacturing sites blocked by picket lines, Michigan is at the greatest risk of a decline in consumer purchases, drops in income and corporate tax revenues, and an increased demand on its unemployment insurance system. In addition to the UAW workers on strike, some non-union workers are being shut out of facilities, and it won’t be long before parts suppliers and other associated businesses begin laying off workers.
Then comes the talk about recession from the CEO of a Lansing-based consulting firm claiming to specialize in public policy and business:
“If we have a strike of less than a week, Michigan, Ohio and Indiana will feel it, and the rest of the country will largely absorb it,” said Patrick Anderson, CEO of Lansing’s Anderson Economic Group consulting firm. “Past 10 days, you’re starting to risk Michigan going into a one-state recession, particularly southeast Michigan.”
That CEO also mentions that the trade war with China and the recent Saudi Arabian oil field attacks have combined to create a “combustible mix of politics and economics that is quite dangerous for Michigan and the auto industry.”
But what about outside of Michigan? What about the national economy? Well, the strike could apparently have serious consequences there, too, though that’s not nearly as likely. From the story:
A strike that lasts about a week would create a “fractional drop” on national economic growth this quarter, Anderson said. A work stoppage, however, would take much longer before it could send the U.S. economy into a recession — and that’s not likely.
“Once the foothold becomes too large and no makeup is possible within a month or two, that’s lost production and lost income, which results in national implications,” said Daniil Manaenkov, a U.S. forecasting specialist at the University of Michigan’s Research Seminar in Quantitative Economics. He said that with the modest pay UAW members are receiving while on strike, the work stoppage is unlikely to last longer than a few weeks.
Let’s hope this strike ends soon.
2nd Gear: Speaking Of, Here’s The Latest:
Shifting out of first gear, you might be wondering where the strike stands after a full day, and the answer—at least, according to a story by the Detroit Free Press—seems that there’s still a long way to go. From the article:
Cooler heads prevailed and bargaining continued into the night, sources said. Most observers didn’t expect a quick resolution.
“Negotiations have resumed,” GM spokesman David Barnas said in a statement Monday afternoon. “Our goal remains to reach an agreement that builds a stronger future for our employees and our business.”
“We have many unresolved issues,” Terry Dittes, vice president of the UAW GM department, said early Monday in an interview with Bloomberg. “It’s not just a couple of things. How long will this take? I can’t say.”
According to the story, a source familiar with negotiations says GM proposed that folks in the UAW workforce increase the percentage they pay for their health care from an estimated 3 percent to 15 percent, though another person apparently told the news site that “GM’s offer preserves current health care benefits at the same cost.”
This health care thing is a big issue, and it could—at least according to folks on the UAW’s side of things—contribute to the strike lasting multiple weeks, according to the Detroit Free Press, who writes:
Those close to the UAW believe it will be a long strike, perhaps lasting two to four weeks.
“People don’t realize how angry the workers are and that the health care proposal made them nuts,” said a person familiar with both sides who insisted on not being identified to preserve those relationships.
But if you’re worried about this strike continuing on and on, just know that a labor expert and professor at University of California, Harley Shaiken, thinks this could all come to an end soon. From the Free Press:
“There are two things that make me think that this strike could be shorter rather than longer,” he said. “First, they’re back at the table at 10 a.m. Monday.”
Shaiken said often during a strike both sides stay away from the table for a few days or call in a mediator.
“Second, the letter that Terry Dittes sent saying this is the first serious proposal, otherwise we might have had a settlement,” Shaiken said. “That’s saying what you’re proposing here, we could perhaps use as the basis of a settlement.”
It’s also worth noting, as the story does, that a strike hurts both parties quite a lot, with workers only getting a $250-per-week wage, and GM feeling the financial burn, especially after its 77-day inventory runs out. The Freep Press says that, according to an analyst at investment bank Credit Suisse, GM will lose $50 million a day in production loss as the strike continues.
Read the full story at the Detroit Free Press to learn more about the remaining issues on the table, which—in addition to wage increases and health care—include things related to job security, profit sharing, wage progression, and more. And if you want to read an on-the-ground report from outside of a GM plant in Rochester, New York, you can read a story from The American Prospect (it’s a liberal/progressive website, so keep that in mind), which includes quotes from picketing UAW workers. From that article:
“On the heels of the American taxpayer bailing out the General Motors Corporation, now they are expanding in China and Mexico while closing plants in the U.S. It’s very hard to take,” says [president of UAW Local 1097] Maloney.
After years of broken promises by GM, union members at GM say they are no longer willing to take concessions.
“The sacrifice did not equate to security, so why do it,” says Maloney. “Every four years, we are a little bit weaker and a little bit smaller, so if we didn’t take them on now, you weren’t gonna be any stronger four years from now or in a better position.”
It’s a mess.
3rd Gear: Ford Is Almost Certainly Building A Second EV On Volkswagen’s MEB Platform:
We learned back in July that Ford is investing big in Volkswagen’s all-electric MEB platform, planning to sell over 600,000 MEB-based cars over six years starting in 2023. FoMoCo explained all of this in its press release, and even mentioned a second model (see bold below):
Company leaders also announced Ford will become the first additional automaker to use Volkswagen’s dedicated electric vehicle architecture and Modular Electric Toolkit – or MEB – to deliver a high-volume zero-emission vehicle in Europe starting in 2023.
Ford expects to deliver more than 600,000 European vehicles using the MEB architecture over six years, with a second all-new Ford model for European customers under discussion. This supports Ford’s European strategy, which involves continuing to play on its strengths – including commercial vehicles, compelling crossovers and imported iconic vehicles such as Mustang and Explorer.
German newspaper Handelsblatt doesn’t have a whole lot of information on this second MEB-based Ford, but the news outlet recently did speak to the president of Ford of Europe, Stuart Rowley, who all but confirmed that Ford will go in on a second MEB-based model, because not doing so would be a bad move, financially. From the article (translated from German):
“Yes, we’re talking about it,” said Ford Europe CEO Stuart Rowley in conversation with the Handelsblatt. From an economic point of view, it would not make sense at all to “produce only one MEB-based car”. Hardly any car manufacturer manufactures only a single model in a factory. As a rule, a manufacturer needs at least two vehicles to economically operate a factory at reasonable cost.
Also Volkswagen had previously confirmed that the negotiations with Ford on a second electric car on the MEB platform are active. “We are currently in talks about a completely new supply contract for a second vehicle,” said CEO Herbert Diess to Volkswagen’s own employee newspaper. This would allow VW to almost double its deliveries of MEB platforms to Ford.
Oh yes, bring on the VW-based electric Fords.
4th Gear: Germans Are Protesting Against SUVs After A Tragic Crash:
The world has been in love with SUVs in the last few years, and that’s obvious if you look at the sales figures. Even in Germany, where fuel is expensive, public transportation is plentiful, and city streets are small, SUV sales have doubled over the past five years, now making up a third of all new car purchased, the Los Angeles Times reports.
But not everyone in Germany loves SUVs. In fact, following a tragic crash in which four pedestrians were killed after being crashed into by a Porsche Macan, quite a few Germans have voiced their disdain for SUVs, with the LA Times writing:
Tensions boiled over this month when a Porsche Macan jumped a curb in central Berlin and plowed into a crowd of pedestrians, killing four people, including a 3-year-old boy and his grandmother.
Never mind the news reports — unconfirmed by police — that the 42-year-old driver may have suffered an epileptic seizure or that even a compact car could have also been deadly.
The accident unleashed long-simmering rage over vehicles that are often seen taking up two parking spaces and widely condemned for driving up carbon emissions from vehicles as it becomes clear that Germany will fail to meet its 2020 target of reducing carbon from all sources by 40% from 1990 levels.
That “long-simmering rage” came in the form of protests, with some apparently holding signs calling SUVs “motorized murder tools” (Motorsierte Mordwerzeuge, in German). Even politicians got in on the anti-SUV discussions, saying:
“There’s simply no need for cars built like tanks to be on the streets in the city,” tweeted Stephan von Dassel, mayor of the Berlin Mitte downtown district where the crash happened. “They’re not only destroying our climate but they’re also intimidating even when they’re not in accidents. Even the tiniest mistake driving them can put lives at risk.”
Oliver Krischer, the party’s deputy parliamentary floor leader, told Der Tagesspiegel newspaper that he favored “a national law that would allow towns and cities to impose whatever size limit they want.”
The story also quotes a Greenpeace employee who criticizes automakers for pushing SUVs in the middle of a climate change crisis due to SUVs’ “fat profit margins.”
It’s all just a bit weird. Yes, the Macan crash was tragic, but is protesting against SUVs (especially since the one involved wasn’t really that large) really the answer?
5th Gear: Trump Has Made Deals With Japan, But We Still Don’t Know About Car Tariffs
Looks like President Trump came to some sort of trade agreement with Japan yesterday, though he hasn’t made it clear whether the country’s automotive exports to the U.S. will have to fend off major tariffs, as the president had previously mentioned. From Reuters:
In a letter to the U.S. Congress released by the White House, Trump said that he intends to enter into the agreements on tariff barriers and digital trade “in the coming weeks” and was notifying lawmakers that the tariff deal would be made under a trade law provision allowing the U.S. president to make reciprocal tariff reductions by proclamation.
“In addition, I also will be entering into an Executive Agreement with Japan regarding digital trade,” Trump said in the letter.
But what about cars? We don’t know:
On a critical issue to Japan, Trump’s announcement left unclear whether he has agreed not to impose threatened national security tariffs on Japanese vehicles and auto parts. Avoiding the “Section 232” tariffs of up to 25% was a major motivating factor for Tokyo in negotiating with Washington on trade.
- “At the finishing stage, we plan to reconfirm that 232 won’t be imposed,” Foreign Minister Toshimitsu Motegi, Japan’s lead negotiator, told a regular news conference in Tokyo on Tuesday.
In fact, it seems like the focus of negotiations isn’t really on cars at this time. From the story:
Trump said after the G7 summit last month that he was not considering auto tariffs “at this moment”.
Over much of the past year, the scope of talks has narrowed to exclude the automotive sector, the source of most of the $67 billion U.S. trade deficit with Japan.
Instead, Trump and Prime Minister Shinzo Abe in August announced an agreement in principle of a deal that covered reductions in tariffs on agricultural and industrial goods, but not autos.
Reuters does mention that Trump’s letter says he’s not done negotiating with Japan, and the site notes that a partial deal focused on agriculture “would provide some relief to U.S. farmers who have been battered by a 14-month U.S.-China trade war and lost market share.”
So it looks like we’ll just have to wait to learn more about the U.S.-Japan car trade situation.
Reverse: Buick Is Born (Literally)
Buick was taken to the United States in 1856. His first independent business venture was a company that made plumbing equipment, started in 1884. In about 1899 he became interested in gasoline engines for agricultural and marine purposes, and in 1902 he formed the Buick Manufacturing Company with the aim of producing engines for automobiles. He built his first automobile in early 1903.
Neutral: What Are Your Thoughts On Germany’s SUV Protest?
A cursory google search shows that, in general, SUVs may not be as proficient in the area of pedestrian protection as small cars, so do the city-dwelling Germans have a point in protesting the large hatchbacks-on-stilts?