Rental car companies want in on that travel industry relief plan, more and more automakers pivoting to healthcare production, and Volkswagen hunkering down. All that and more in The Morning Shift for Monday, March 23, 2020.
1st Gear: Rental Car Companies
As the COVID-19 pandemic rages on, countless industries are experiencing disruptions. Especially the travel industry. It’s not just the airlines that want help. Rental car agencies are also coming forward with their hands out.
Hertz, Avis, and Enterprise want to be included in the Treasury Department’s plan to relieve the U.S. travel industry. CEOs from the three companies made the request via a letter addressed to Treasury Secretary Steven Mnuchin last week, pointing out that rental cars are vital to this country’s transportation infrastructure, according to Bloomberg.
From the story:
They described their industry as critical to U.S. transportation infrastructure and warned they will “sustain grave harm” as airlines pare back service amid efforts to contain the spread of Covid-19.
“We are being hit by this as hard as airlines, maybe harder,” Hertz CEO Kathy Marinello said in a phone interview. “The volume just went away. We have had the same kind of drop-off that the airlines have had.”
The letter claimed the companies’ 160,000 employees might be laid off if help doesn’t come.
Here are the assistance measures they asked for:
- Grants for liquidity problems
- The Federal Reserve to establish “a facility” that would buy term loans or for the central bank to give them zero-interest loans or guarantees
- Temporary relief from rent and the minimum-revenue sharing that they pay toward airports
- A two-year deferment on taxes they’d pay on income from the cars they’ve sold from their fleets from the past two years
- A temporary deferment on payroll taxes
With rentals down, rental companies certainly won’t be needing to buy more cars. Which, in turn, doesn’t help the auto industry overall, as Bloomberg also reported last year that rental fleets help prop up overall vehicle sales.
Whether or not the Treasury Department responds remains to be seen.
2nd Gear: Switching Gears
In this time of need and crisis, we’re seeing automakers switch from manufacturing cars to manufacturing medical equipment for those in need. General Motors is working on ventilator manufacturing and others are joining in as well.
Fiat Chrysler says it has plans to convert a Chinese plant to making face masks for donation to U.S. first responders and healthcare workers, reports the Detroit News. From the story:
Fiat Chrysler CEO Mike Manley in a letter to employees over the weekend revealed the company’s plan, indicating that conversations on converting one of the automaker’s plants to make the masks would begin Monday.
“We are working through the protocols to start production in the coming weeks and ultimately produce over a million face masks per month to donate to first responders and health care providers,” he wrote.
The company has chosen a plant in China, spokeswoman Shawn Morgan said in a statement, because “the fastest way we could get relief to U.S. first responders and health care workers was to use one of our operational plants.”
Last week, the automaker agreed to suspend production at its plants in North America following an outcry among the rank-and-file and pressure from labor unions. U.S. plants, however, could start producing the masks once they are back up and running, Morgan indicated.
The face mask effort is big, as there’s currently a face mask shortage here. Terrifying stuff.
Similarly, the German government has requested its automakers to also think about medical equipment production, reports Bloomberg. Per the outlet:
Volkswagen Chief Executive Officer Herbert Diess said Saturday the manufacturer started building up production capacity for protective masks in China, and is supporting German authorities with temperature measuring devices, masks, disinfectants and diagnostic equipment.
Daimler AG has received requests from authorities and is currently exploring options, a company spokesman said by phone on Sunday. Volkswagen and Daimler have also agreed to donate more than 300,000 protective masks from their existing resources to health organizations.
I mean, what’s the alternative? Factories and workers idle as car demand plummets. As long as some factories are open, let’s have them help however they can. Obviously, it’s no easy pivot from cars to healthcare equipment, but it’s better than nothing.
We’re all in this together. Everything helps.
3rd Gear: Two Weeks Might Not Be Enough
Everywhere, I’m hearing about automakers idling plants and factories for two weeks, and I just don’t think that sounds like enough time in order for all of this to blow over to workable levels. Volkswagen seems to have grasped that, as well.
A two- to three-week factory closure that went into effect this week might not cut it, the automaker said, reports Bloomberg. Workers were told “drastic steps” are necessary to “protect liquidity” in the face of governments decreeing closures of nonessential businesses.
From the story:
The reassessment, issued by CEO Herbert Diess only days after the world’s biggest carmaker made the unprecedented move of halting production, shows how deeply the pandemic threatens even a company fortified by some 21.3 billion euros $23 billion) in cash.
“Drastic measures to protect liquidity” are required to tackle the crisis, Diess said Saturday in a message on VW’s intranet and later posted on LinkedIn. He said safeguarding the availability of spare parts and battery-cell supply are among the initiatives that are also “extremely important.”
Diess also addressed his workers’ health and safety, as the virus is affecting Europe.
“Please be careful, keep a distance and avoid direct contact to give a possible contagion no chance,” Diess said Saturday. Protecting as many people as possible “is our top priority.”
The virus unfortunately coincides with a time when Volkswagen is readying itself for a huge EV push. Still, “the all-electric ID.3 is planned for roll-out in summer, followed by the ID.4, an SUV version that will sell worldwide, later this year,” the outlet reports.
We’ll see if that actually happens.
4th Gear: Toyota’s Closing Stuff, Too
Because of a sharp decline in demand and the “market situation,” Toyota announced today via a press release of several production halts in Japan coming in the next few days.
- Takaoka Plant, #1 production line; 3 operating days from Apr. 3 to 7.
- Tsutsumi Plant, #1 and #2 production lines; 3 operating days from Apr. 3 to 7.
- Tahara Plant, #1 production line; 6 operating days from Apr. 3 to 10.
- Tahara Plant, #3 production line; 8 operating days from Apr. 3 to 14.
- Toyota Motor Kyushu (TMK), #1 production line; 9 operating days from Apr. 3 to 15.
- Hino, Hamura Plant, #1 production line; 2 operating days from Apr. 3 to 6.
Any of the production lines or plants not mentioned will maintain “operation as usual.”
According to an emailed Bloomberg story, Toyota is partially closing the Takaoka plant because:
a second worker there tested positive for the virus. The second infected worker in Japan is a man is in his twenties and was a close contact of another employee who was diagnosed with the virus on March 19, Toyota said. The company will shut a production line and the building where the two employees worked so that it can be disinfected.
It’s unclear how these closures will affect output or the rest of the company financially.
5th Gear: No More Panasonic Batteries For Now
I’m really sorry this TMS has been filled with COVID-19 stories. But those are the stories that are dominating the industry right now! This one is about Panasonic.
Over the weekend, Panasonic announced it’s suspending production at its battery joint venture with Tesla in Nevada because of the virus, reports Reuters. From the story:
The Japanese electronics company, which supplies battery cells for Tesla’s electric vehicles, will scale down operations at so-called Gigafactory 1 early next week before closing it for 14 days, Panasonic said in an emailed statement.
A Panasonic spokeswoman declined to comment on how the suspension would affect Tesla, which produces battery packs using Panasonic cells at the Nevada plant.
Panasonic said Nevada plant employees affected by the shutdown will receive full pay and benefits for the entire period. During the closure, the facility will undergo intensive cleaning, it said in the statement.
The Nevada plant employs about 3,500 people.
Last week, Tesla was deemed a nonessential business. The automaker will now comply with a shelter-in-place order and cease to make cars starting on Tuesday, instead sticking to basic operations.
Reverse: Happy Birthday Donald Campbell
On this day, British fast man and speed record breaker Donald Campbell was born. In 1964, he set both the land and water speed records, something no one was apparently able to ever do before, according to Automotive History. He died in 1967 while attempting another water speed record attempt.
Neutral: Should Rental Companies Get Federal Help?
The airlines are one thing, but do you think the rental companies should get any financial help? Why or why not?