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: There’s A Management Shuffle At Toyota As It Tries To Define Its Future
What might that future include? Hydrogen fuel cell cars, for one, but also electrification and autonomous cars, like pretty much every other automaker on the planet. As such, President Akio Toyota is shaking up his leadership team.
The management shuffle is intended to push the company faster and harder in this direction, while also introducing some diversity to the ranks, in the form of a new female executive vice president at Lexus, in addition to some non-Japanese (men) filling other roles.
From Automotive News:
[President Akio Toyoda], grandson of the company’s founder, is stoking a crisis mindset at Toyota Motor in a bid to keep the giant company nimble and responsive to cataclysmic change besetting the industry, from a rush of new technologies to new competitors from Silicon Valley and China.
“Surrounded by changes of unprecedented speed and scale, TMC is aware it faces a ‘now or never’ situation in which not a moment can be spared,” the company said in a statement outlining the appointments. Toyoda echoed the alarm in his personal comments.
“Over the next 100 years, there is no guarantee that automobile manufacturers will continue to play leading roles in mobility,” Toyoda said. “A crucial battle has begun — not one about winning or losing, but one about surviving or dying.”
Gender diversity is further promoted with the appointment of engineer Chika Kako to the role of executive vice president at Lexus International Co. She was Toyota’s first female chief engineer and served in that role on the Lexus CT hybrid hatchback.
Globalization also gets a boost with the advancement of two non-Japanese.
Interesting moves over at Toyota, a huge and often conservative company that isn’t always the fastest to adapt to change.
2nd Gear: Vice President Mike Pence Met With Automakers Over NAFTA
Automakers have been understandably nervous over any changes to the agreement. President Trump has said on multiple occasions that he would look into altering the agreement’s terms or possibly pulling out altogether, which would be bad for automakers and probably the world at large as well.
Still, to assuage some of their concerns, Vice President Mike Pence met on Monday with Mary Barra, CEO of GM; Sergio Marchionne, CEO of Fiat Chrysler; and Joe Hinrichs, president of Ford’s Americas division, among others.
The meeting was held to cover “trade, commerce and manufacturing policy and how it impacts their business” and was scheduled to include National Economic Council Director Gary Cohn and U.S. Trade Representative Robert Lighthizer, Pence’s office said.
Automakers have found themselves at the center of disputes over renegotiating the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico as the administration of President Donald Trump pushes for more rules on auto imports that the American manufacturers have opposed.
Automakers have been lobbying the administration to abandon proposals that would require more parts for automobiles be made in one of the three countries so as to avoid hefty tariffs.
“We view the modernization of NAFTA as an important opportunity to update the 23-year-old agreement and set the stage for an expansion of U.S. auto exports,” Matt Blunt, the president of the American Automotive Policy Council, said after the meeting.
[U.S. Trade Representative Robert Lighthizer] is overseeing the renegotiation of NAFTA on behalf of the Trump administration. The latest round of negotiations ended last week with little progress.
That all sounds great. I would bet, I think, $3.50 on whether NAFTA is ever changed at all.
3rd Gear: Hyundai Workers Are On Strike In South Korea
Hyundai is set to launch the Kona small crossover in America this week at the Los Angeles Auto Show, but there’s trouble brewing at home, as workers at the South Korean factory where Konas are made there are on strike.
The points of contention—pay, potential job cuts, and bad communication with management—are familiar, though the union is also angry about factory windows.
The union contends that the automaker wants to introduce more automation and outsource more assembly of key sections to part makers - plans that it is vehemently opposed to. Hyundai management argues that the union is making “irrelevant demands” such as requests for extra windows in the factory as part of the production discussions.
The automaker’s decision to start production of the Kona on a new assembly line last week was made without consultation with the union and was unacceptable, union leader Ha Boo-young said in a statement, adding that a wider strike was possible “should there be another provocation by management.”
The move comes ahead of a planned unveiling of the U.S.-production version of the Kona at the Los Angeles Auto Show on Wednesday with U.S. sales slated to begin early next year. The Kona is currently sold in South Korea, where it has proven to be a popular model, as well as Europe.
The two days loss of production so far this week is equivalent to 1,230 vehicles, Hyundai said in a statement.
The Kona is popular in South Korea, and Hyundai hopes it will help reverse what has been somewhat of a slump for the automaker in the U.S. The Kona set to be sold here will also be made here.
4th Gear: Volkswagen Failed To Get A Deal For Cobalt With Suppliers
We’re going to need a lot of cobalt for our electric future, since it is a main ingredient in car batteries, as you probably know. Automakers also know this, and have been scrambling to secure cobalt sources for now and into the future. This includes Volkswagen, though, according to Reuters, they may not understand the market quite just yet.
From the wire service:
The talks last Wednesday and Thursday in Wolfsburg, Germany, where VW is headquartered, had aimed to thrash out cobalt supply deals with Glencore, China’s Huayou Cobalt, commodity trader Traxys, U.S. miner Freeport-McMoran and Eurasian Resources Group (ERG).
ERG confirmed its representatives had attended the meeting. Glencore declined to comment. No one at Huayou, Traxys and Freeport was immediately available to comment.
“They are looking for prices below the market, they have a lot to learn about cobalt,” one source said. “We didn’t get into the details of how much tonnage they would need.”
Cobalt metal prices COB-ING-LON at around $30 a lb are up from below $10 a lb in December 2015 and the highest since October 2008.
Prices surged last year as auto makers and governments around the world started to promote electric vehicles in earnest as a means of cutting noxious fumes from cars fuelled by diesel- and petrol-powered engines.
Sources were unclear about whether VW was planning to buy the cobalt directly or indirectly for chemical and battery makers.
What’s remarkable to me about this—among other things!—is that cobalt prices have tripled since October 2008. Tripled! What were you putting your money into in 2008?
5th Gear: There’s Another (Another!) Quality Assurance Cheating Scandal In Japan
This time it’s at Toray Industries, which is the world’s biggest maker of carbon fiber materials. The company said products that weren’t properly given quality assurance checks went to 13 clients, though all of the clients are said to be in Japan and South Korea. On Tuesday, it was still unclear who, exactly, the clients were, though Boeing, which buys carbon fiber from Toray for use in its 787 Dreamliner, was not one of them.
Ominously, Reuters reports that the cheating involved products “including tire-strengthening cords.”
Japanese companies are facing growing pressure to disclose quality-assurance failings after widespread data falsification was uncovered at Kobe Steel Ltd (5406.T).
Toray said its subsidiary became aware of its problems in July last year, and the group learnt of them in October. It only decided to publicly disclose the cheating after rumors appeared earlier this month in an anonymous online post.
“There were no legal violations or safety problems; this was between us and our customers, and so there was no need to disclose it,” Toray President Akihiro Nikkaku told a news conference.
Sound reasoning, that.
Reverse: The First Car Race In America!
The year was 1895. The winner was a manufacturer named Frank Duryea. The place was Chicago. There was also a blizzard involved.
The race, sponsored by the Chicago Times-Herald, was intended to drum up publicity for the nascent American car industry. It worked, especially for the Duryeas: In the year after the Times-Herald race, the brothers sold 13 of their eponymous Motor Wagons, more than any other carmaker in America.
The race course was originally supposed to loop from Chicago to Waukegan, Illinois, and back (a harrowing 92 miles) but, thanks to the sudden arrival of a spectacular blizzard, race organizers decided to abbreviate the route. (“With eight inches of snow,” one journalist wrote later, “Waukegan might as well have been Timbuktu.”) The racers would be driving just 50 miles, from Chicago to Evanston, Illinois, and back again. The other rules would remain the same: Vehicles had to have at least three wheels, all wrapped in twine to give traction in the snow, and they also had to be able to carry at least two people, the driver and a race-appointed umpire who would ride along to guard against cheating.
Because of the bad weather, only six of 89 racers made it to the starting line: the Duryea; three Benz cars, one sponsored by Macy’s in New York; and two electrics whose batteries died almost immediately after the race began.
About 10 hours after the race began, the Duryea chugged across the finish line.
Neutral: What Does Toyota Do To Prepare For The Future?
See also yesterday’s Morning Shift: GM is prepping its autonomous car plans for investors this week too. What do the big companies do to survive?