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: Meet Der Cost-Killer
It may seem typical of a German automaker for a guy like Herbert Diess to get the chief executive job at the Volkswagen Group. He was most recently the head of the Volkswagen car brand, after all. But Diess is more of an unconventional outsider choice than you might think, which is an unusual move for this incredibly insular carmaking giant. Diess only joined VW in 2015, and before that he had a two-decade career at rival BMW.
There, Diess was known as a cost-killer, CNN Money reports, and he’s bringing that reputation and skillset to VW. His goals include selling one million VW-branded electric cars by 2025 and to make the company the lead manufacturer of EVs in the world, he said, as it still seeks penance from Dieselgate.
But a big part of his job will be overhauling the VW Group’s massive brand portfolio, which includes everything from Audi, Bentley, Skoda and Porsche to Ducati motorcycles and two heavy truck divisions. Here’s The Guardian with a summary of the proposal:
VW supervisory board members are discussing the creation of a “super premium” group which would include sports car brands Porsche, Bentley, Lamborghini and Bugatti, the source said. Audi would be excluded from this group and form its own premium division.
In addition, there would be a “volume” group that includes the VW brand, Czech division Skoda and Spanish unit Seat and a “commercial vehicles” category.
Volkswagen will carve out a trucks and buses division that includes MAN and Scania heavy-truck brands, the source said, adding that Volkswagen’s MAN Turbo and Renk units would be put into a further division.
Could VW shed some brands, as many anticipated would happen in the wake of Dieselgate? One analyst quoted by Reuters believes that may finally happen:
Automotive analyst Frank Schwope at NordLB said a revamp could also prove to be a fresh trigger for deciding what the Wolfsburg-based group’s core businesses are.
“There has to be a new attempt at slimming down under the new leadership. The group has simply become too complex, firms like Ducati and Renk have only limited value for group business and would be much better placed at different owners,” Schwope, who has a ‘buy’ rating on VW said.
I can’t say that’s a job I’d want.
2nd Gear: Why This Is Happening
I’ll devote two gears to VW today because the appointment of Diess and his attempts to modernize one of the world’s biggest car companies (the biggest, depending on the sales year) is a pretty huge deal. It’s also interesting because it comes not even three years after former Porsche boss Matthias Mueller was given the reins after Dieselgate.
Mueller did a fine job steadying the ship after that scandal, all things considered, but for VW’s board change wasn’t quite fast enough and leadership untainted by recent disasters was needed. This, from Bloomberg:
Mueller’s abrupt exit after less than three years, even after a stellar improvement in Volkswagen’s earnings, stems from key stakeholders’ decision to bring in fresh leadership as the company emerges from its diesel emissions-rigging crisis. Diess will focus on making the 640,000-employee behemoth more nimble to contend with a shift to electric and autonomous cars and new digital services like ride hailing.
Diess conceded that the diesel scandal, which erupted in September 2015, will continue having effects for a few more years. Provisions for recalling or buying back cars and paying fines and other penalties have amounted to 25 billion euros, and the carmaker is still contending with lawsuits.
“We’ve lost a great deal of trust with customers,” Diess said. “It’ll be a long, rough road to gain it back.”
Volkswagen shares rose 0.5 percent to 177.42 euros as of 12:36 p.m. in Frankfurt, bringing the stock’s gain this year to 6.6 percent.
More nimble! Faster decisions! More EVs and mobility! It reminds me a lot of why Mark Fields got ousted at Ford. Anyway, welcome to the future.
3rd Gear: Maybe Tesla Doesn’t Need To Fight Everyone?
Speaking of the future, Tesla’s in a particularly bizarre spat with the the U.S. National Transportation Safety Board, of all things, which both sides accusing one another of improper disclosures following a fatal Model X crash that involved Autopilot.
While the National Highway Traffic Safety Administration is the group that actually regulates automakers, the NTSB’s investigations and rulings can affect policy. And as several outlets pointed out, it’s exceedingly rare for any group to publicly feud with the NTSB. But Elon Musk isn’t some everyday cat. From the Wall Street Journal:
Removals from NTSB party agreements are rare. The agency in 2014 revoked party status for United Parcel Service Inc. and a pilots union in the probe of a crash of one of the package-delivery company’s cargo planes after public comments were made by each side about circumstances surrounding the accident.
For Tesla, a departure from the NTSB agreement risks diminishing the car maker’s influence over and insight into an investigation that could ultimately reach critical conclusions about one of the company’s signature products.
Tesla’s pugnacity toward the NTSB reflects its iconoclastic approach to corporate communications that often involves Chief Executive Elon Musk assailing critics on Twitter, even to the point of joking about the company’s financial ruin.
Unlike other car makers, Tesla doesn’t shy from confronting government agencies. On Thursday, it repeated an earlier point Mr. Musk had tweeted, calling the NTSB an “advisory body” as opposed to a “regulatory” one and describing its own relationship with the National Highway Traffic Safety Administration, the main federal agency that oversees vehicle makers, “strong and positive.”
One day we need to make a running list of everyone Tesla and Musk are publicly beefing with. It’d be a long list.
4th Gear: Why California Could Cause Trouble For Trump
Speaking of people who think firing off unhinged, unprecedented missives and pissing everyone off all of the time qualifies as “winning,” President Donald Trump’s Environmental Protect Agency is set to take on California soon as it seeks to roll back the Obama-era fuel economy mandates. But California has said it will do its own thing, along with the dozen or so other states that follow its rules.
In the end, Bloomberg reports, the federal government would probably win out. But California’s market and regulatory strength can make it just as important:
Given California’s enduring thirst for gasoline, it shouldn’t come as a complete surprise that the most cars in the U.S. are registered there, beating out even truck-loving Texas.
So it follows that the most populous state is also the biggest market for new cars. While growth in vehicle registrations is slowing, California still logs a whopping 2 million new cars a year. That’s 12 percent of the nation’s entire auto market. So even if the rest of the country decides it doesn’t care about fuel efficiency, California caring means carmakers need to care.
“California is just too big of a market to neglect,” said Jeremy Acevedo, manager of industry analysis at Edmunds, an automobile-research firm.
So even if automakers breathe a sigh of relief at not having to meet that Obama-mandated fleet average of 54.5 miles per gallon by 2025, if they can’t meet California’s requirements, they’re kind of screwed.
5th Gear: Won’t Somebody Please Think Of The Lawyers
Thanks to Uber, the Wild West, do whatever feels good era of autonomous cars and autonomous car testing may soon be coming to an end. Between that fatal crash and the incidents we’ve seen with the semi-autonomous Autopilot, one group in particular wants clarity on who is liable for these crashes: the lawyers. Probably since they have the most to gain in the event of lawsuits.
This, from a conference for auto industry lawyers attended by Reuters:
Investigating a 2016 fatal crash, the National Transportation Safety Board last year said Autopilot lacked safeguards, giving too much leeway to the driver to divert attention. The NTSB in a statement on Thursday urged Tesla to act on the safety recommendations in that report.
Following the 2016 accident, Tesla introduced more frequent warnings to drivers to keep their hands on the wheel. After three warnings, the software now blocks Autopilot until the driver stops and restarts.
“Tesla warns, but in products liability warnings don’t protect you against design defect claims,” said University of South Carolina law professor Bryant Walker Smith, who focuses on automated driving.
Car accident litigation usually turns on a driver’s alleged negligence. By contrast, a lawsuit involving automated technology could scrutinize whether the system had a design defect.
David Cades, a human factor scientist at engineering consulting firm Exponent, said terminology matters in descriptions of these systems because people might misuse or misunderstand the technology.
Cades, who has testified in automotive cases as an expert witness, said automakers should not use the term “collision avoidance system.” Instead, he urged manufacturers to use terms such as “collision mitigation systems.”
“Even in naming and marketing these systems care needs to be taken in how they are promoted,” Cades said.
Yeah, we don’t know what the hell we’re doing here yet.
Reverse: RIP “The Bird”
On this day in 2009, former Major League Baseball all-star pitcher Mark “The Bird” Fidrych is found dead at the age of 54 following an accident at his Massachusetts farm involving a Mack truck he was working on. Fidrych, the 1976 American League Rookie of the Year, suffocated when his clothes got tangled in the truck’s power takeoff shaft.
Neutral: How Would You Overhaul Volkswagen?
The morning sun caresses your face. But suddenly you realize you are not in your home, in the bed you know, or even in your own skin. Eventually you learn that you have awoken in the body of Herbert Diess, and you are responsible for 640,000 employees and one of the world’s biggest car-making empires.
What do you do?