Good morning! Welcome to The Morning Shift, your roundup of the auto news you crave, all in one place every weekday morning. Here are the important stories you need to know.
1st Gear: With New Pickups Come Discount Wars On Outgoing Trucks
The year 2019 is a big one for pickup truck fans, with Ram debuting its all new “DT” model at the Detroit Auto Show, and Chevy showing its radical new Silverado at the Texas Motor Speedway before revealing the truck with a diesel powertrain in Detroit. And while the new trucks aren’t exactly cheap, Bloomberg says there are some heavy discounts to be had on outgoing models, writing:
Average incentives on the Ram 1500 pickup reached an eye-popping $7,173 last month, up almost $900 over last year, according to dealer data compiled by J.D. Power and obtained by Bloomberg News. GM jacked up discounts on the Silverado 1500 by almost $2,200 to an average of $6,517.
Even Ford, whose F-150 was refreshed for 2018, is in on it, with the news site writing:
Ford, which is offering F-150 discounts on Facebook, increased incentives by $714 to average $4,745 in April.
These trucks, Bloomberg notes, are The Big Three’s bread-and-butter when it comes to profit margin, with analysts saying each truck sale can yield $10,000 in profit. That’s huge, and what it means is that there’s some margin for the automakers to “deal” as they work to clear inventory for the new rigs. Bloomberg describes why truck manufacturers might be offering heavy incentives, especially this summer, saying:
Pickups are such an important profit driver for the Detroit Three that they’re willing to give up some margin to protect market share.
May the pickup price wars begin.
2nd Gear: Ford Might Have To Shut Down F-150 Production Because A Supplier’s Factory Caught Fire
Ford F-150s may stop rolling off of assembly lines for a bit, as The Blue Oval faces shortages of magnesium parts from a supplier whose plant went up in flames last week, Detroit Free Press reports.
The fire broke out at the Meridian Magnesium factory in Eaton Rapids, Michigan—a site that produces a number of magnesium parts like instrument panel “cross car beams” for auto companies. The fire was so bad, the local police chief called it “one of the worst” he’s ever seen in 40 years at the fire department, according to the Lansing State Journal.
That fire is apparently causing problems for multiple car companies to which Meridian supplies components, especially Ford. According to The Detroit Free Press, F-150 production in Kansas city allegedly stopped because of the supply chain disruption, and production at the F-150's second plant is also in jeopardy, with the news site writing:
The truck side of the Ford Kansas City Assembly Plant in Missouri shut down this week because of the parts shortage caused by the fire, sending about 3,600 workers home, [a Ford spokeswoman] confirmed.
A decision is pending on when or if the Dearborn Truck Plant will shut down, which would affect another 4,000 workers.
Detroit Free Press quotes a letter sent by the chairman at the Dearborn Truck Plant, Burkie Morris, which says there are only enough parts to continue making trucks through Thursday, and further describes just how much uncertainty surrounds the situation:
“The company has informed us that we have enough parts to build vehicles through Thursday. The company is meeting continuously to find a solution to replace and manufacturer (sic) parts that were lost due to the fire at Meridian. According to the company, at some point we will have an interruption in production. At this time, the company doesn’t know for sure when or for how long we will be down.
The letter goes on:
As a result of the fire, there is a great deal of uncertainty in our production schedule at DTP. Adjustments and changes are being made hour by hour as the company is engaged in getting the parts needed to maintain our normal production schedule.”
Ford’s spokesperson told the news site that the company is working closely with Meridian to figure “next steps.” The good news is that a short shutdown may not be be that huge of a deal for Ford, since the company has sufficient inventory, though an analyst from AutoPacific told the site that a shutdown of more than a week could be an issue for the company’s performance in the second quarter. Detroit Free Press goes on to say that the fire has also affected production at Fiat Chrysler’s minivan plant in Windsor, Canada.
We’ll keep an eye on this to see if the fire and the resulting parts shortage ends up affecting other auto companies, too.
3rd Gear: GM South Korea Is Still Alive, Maybe For The Long-Haul
Things were looking bad for General Motors’ South Korean unit a few months back, when GM announced its displeasure with operations in the region, and even shuttered a plant in Gunsan. From there, things got tricky, with protests, workers destroying the CEO’s office, and the South Korean government offering The General lots of cash to stick around.
The good news for South Korea came late last month, when Reuters reported that GM South Korea decided not to enter bankruptcy thanks in part to heavy worker concessions. And then earlier this month, the news site reported that GM was pumping a $3.6 billion cash infusion into GM’s South Korean unit in the form of loans.
On top of the loan, Kim Dong-yeon, the country’s Finance Minister, said South Korea’s state-owned Korea Development Bank is allegedly planning to contribute $750 million to GM’s operations in the country. And while the deal isn’t yet finalized, Dong-yeon expects it to yield long-term GM operations in the country, with Reuters writing:
“At least 10 years will be guaranteed,” Finance Minister Kim Dong-yeon said in a radio interview, adding that one key condition of the deal will be Korea Development Bank, which owns 17 percent of GM Korea, regaining veto power over asset sales.
“We will make sure GM contributes to the South Korean economy by running normal operations for the long term,” he said.
Reuters says the agreement will be finalized this week, but that some industry analysts don’t think it will spell an end to restructuring of GM’s South Korean operations.
So who knows where this will end up.
4th Gear: Ford Quitting Cars Is Bad News For Mexico
Ford recently announced that it’s withdrawing almost entirely from the small car and sedan game in the U.S., with the Mustang and Focus Active as the only ones remaining. This shifted focus towards more lucrative SUVs and trucks is bad news for Mexico, where the company builds the Ford Fiesta, Fusion and Lincoln MKZ.
Bloomberg describes how much output has already dropped at Ford’s plants in Mexico, writing:
Production at Ford’s Mexico factories plunged 31 percent last month to the lowest for any April since at least 2009, according to data compiled by a trade group of automakers. Ford’s exports from Mexico, most of which go to the U.S., sank 36 percent.
The story goes on to describe the uncertainty surrounding these plants in Mexico, saying:
Two of the three models that Ford makes in Mexico, the Fiesta subcompact and Fusion family car, are marked for deathin the U.S. The third, the Lincoln MKZ, shares mechanical underpinnings with the Fusion and is built on the same assembly line, leaving its future in doubt.
The news site quotes a Ford spokesperson, who said: “We are constantly adjusting production to the demands of the North American market, with the goal of reducing inventory.”
5th Gear: GM CEO Marry Bara Says She Wants A Single Fuel Economy Standard In The U.S.
We learned last week from Reuters that President Trump is preparing to meet with automakers soon to discuss fuel economy standards, which the current administration wants to loosen.
California’s air quality regulatory agency, the California Air Resources Board, says it’s willing to fight back against relaxation of fuel economy regulations, and the Trump administration is not pleased.
The auto industry is also not keen on the idea of California setting a different fuel efficiency standard than the rest of the nation (it’s worth noting, over a dozen states follow CARB’s lead when it comes to car pollution requirements). Yesterday, General Motors’ CEO Mary Barra said she wants only one standard, with Detroit Free Press quoting her as saying:
General Motors supports establishing one national set of fuel efficiency requirements, with flexibilities that take into consideration recent industry developments such as vehicle sharing and self-driving electric vehicles,” Barra wrote.
“A single, national standard would allow us to focus our resources on innovations that benefit our customers and society as we pursue our vision of a world with zero crashes, zero emissions and zero congestion, instead of diffusing resources to meet different rules within the United States.”
The news site also got a statement from the Alliance of Automobile Manufactures, an advocacy group representing car companies, who describes the benefits of having only a single standard:
“[...] And, we support a negotiated agreement for One National Program because it is best for our customers, who avoid higher prices from the redundancies of three government agencies regulating the same thing. And, an agreement among the federal government, California and the auto industry is better than years of litigation.”
We’ll see if the legal battle that appears to be brewing actually happens, or if something productive actually comes from this meeting between Trump and major automakers.
Reverse: The First “Modern” Luxury Crossover Is Born
It was twenty years ago that Mercedes-Benz presented the M-Class in Tuscaloosa (Alabama/USA). Following the traces of the legendary G-Class, the precursor to today’s GLE successfully marked the brand’s entry into the Sport Utility Vehicle (SUV) segment. At the same time, both vehicles provided the basis for the present, extensive Mercedes-Benz product portfolio in this market segment, which also includes the GLA, GLC and GLS apart from the G-Class and GLE.
Neutral: Would You Consider A Last-Gen Pickup?
The new trucks for 2019 are radically different than their outgoing models, especially in the area of interior tech. But does that matter to you? If you’re in the market for a new vehicle, would you still consider an outgoing truck with a discount over a new one?