Ford can’t get the new Explorer right, Volvo will be making an electric XC90 in South Carolina, the United Auto Workers’ General Motors contract ratification vote is happening, and more for this most glorious Morning Shift for Monday, Oct. 21, 2019.
1st Gear: The 2020 Ford Explorer Launch Isn’t Going As Planned
Ford’s retooled Chicago plant has had a ton of problems manufacturing the new Explorer, with thousands of cars needing to be sent to Michigan for reworking. Sales have dropped as a result. There’s been issues with the screens in the SUVs, as well as personnel problems at the plant.
Supply in showrooms may indeed be building up, but a batch of about 2,500 Explorers in need of repairs arrived recently at the company’s factory in Flat Rock, Michigan, which for weeks has been fixing and finishing vehicles shipped from the Chicago plant where the SUV is built, according to people familiar with the matter.
[Mark LaNeve, the automaker’s U.S. sales chief] told analysts on Oct. 2 that the Chicago plant had started shipping Explorers directly to dealers. But most of those models also have required repairs before they can be sold, said the people, who asked not to be identified describing internal issues the company is having.
And not all problems with Chicago-built SUVs are being fixed before they reach customers’ driveways. Consumer Reports had problems with the Lincoln Aviator — a mechanically similar model built alongside the Explorer — that the magazine’s testers purchased last month for $63,400. The digital gauges that display speed, fuel consumption and other important information shake and flip, making them difficult to read.
“Ford does tend to struggle with the new introductions, especially if they’re a larger departure from the previous design,” said Jake Fisher, the magazine’s director of auto testing. “It could take a few years to get the bugs worked out.”
The Chicago factory, fined twice in the last two decades by federal workplace-harassment regulators, is riven with dissension that’s hampering productivity and quality, according to people familiar with the situation.
Roving groups of workers are intimidating other employees, creating a hostile environment, the people said. That’s driving up turnover and leaving some vehicle assembly unfinished, contributing to the company having to complete the work at the Michigan factory or at dealerships, the people said.
Those investments included $40 million to upgrade lighting and add security at the plants, where some employees have experienced sexual and racial harassment. In August 2017, the company agreed to pay as much as $10.1 million to settle claims following an investigation by the Equal Employment Opportunity Commission. Ford faced similar charges at the Chicago factories in 1999 that led to a $17.5 million settlement.
Ford offered this for comment:
Ford is unaware of any recent issues in which employees are intimidating one another, the spokeswoman said.
2nd Gear: We’ll Probably Know This Week Whether The UAW’s Deal With GM Will Be Ratified
UAW members are in the process of voting yes or no on the contract after a deal with labor leaders and GM was struck last week. UAW members will remain on strike until the contract is ratified. In the event that it isn’t, UAW negotiators and GM will have to return to the bargaining table.
It’s now up to labor leaders to sell their deal to members, which is never an easy process when both parties in labor negotiations inevitably walk away with things they wanted both didn’t get.
Per Automotive News:
UAW officials are touting the fact that the deal addresses many top priorities: wage increases, a path to permanent employment for temporary workers, no increase in health care costs and a shorter wait for new hires to earn top wages. Full-time hourly workers would receive bonuses of $11,000 and 4 percent of their annual pay shortly after ratifying the contract.
“A lot now depends on how they explain it to members and how transparent they are,” Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research in Ann Arbor, Mich., told Automotive News.
But the UAW’s failure to save Lordstown Assembly in Ohio and two transmission plants in Michigan and Maryland has put many members on edge and could complicate ratification.
This is all part of the process, though the UAW will have to do its part if it wants the deal to stick.
There was considerable negative reaction to the deal on social media immediately after details became public, with many workers confused about issues such as new pay scales and the time it takes to reach top wages.
“Right now, they’re reacting to media reports,” Dziczek said. “They’ve got to go to these educational sessions and read it themselves.”
Dziczek said there’s likely to be a bloc of voters who will reject the contract on principle, with the knowledge that the union got a better deal with FCA in 2015 after members rejected the first tentative agreement with the automaker.
The rejection in 2015, indeed, worked.
3rd Gear: Ford And Fiat Chrysler May Not Be So Generous
While GM eventually reached its breaking point in the strike—awarding hefty ratification bonuses, agreeing to raises, and agreeing to keep generous healthcare benefits the same, mostly in exchange for the ability to close three plants—Ford and Fiat Chrysler might find those terms harder to stomach.
That’s because their labor costs are already less than GM’s. GM may be used to that, but Ford and FCA aren’t. Ford and FCA aren’t also looking to close plants, so they have less incentive to pay off its unionized employees.
GM’s labor costs will rise $100 million a year just due to the increases in worker pay, which “could be an even bigger headwind” for Ford Motor Co. and Fiat Chrysler Automobiles, according to RBC Capital Markets analyst Joe Spak. And that doesn’t even account for the cost of continuing the union’s generous health care coverage — a tab Ford expects to rise above $1 billion next year.
“The economics of the deal look really attractive for the GM workers,” said Colin Lightbody, a former labor negotiator for Fiat Chrysler who’s now a consultant in Windsor, Canada. “This agreement will increase the competitive labor cost gap.”
GM’s average hourly labor costs — including wages, benefits and other expenses — were already about $13 above what international automakers such as Toyota Motor Corp. and Honda Motor Co. pay workers at their U.S. plants, according to the Center for Automotive Research. Ford’s costs are $11 an hour higher, while Fiat Chrysler pays a $5 premium.
The Bloomberg story also includes some subtle, satisfying shade thrown in GM’s direction, concluding that strikes at Ford and FCA are unlikely if only because labor is a pretty small cost when it comes to the total amount spent manufacturing a vehicle.
In the end, though, both Fiat Chrysler and Ford are likely to settle for paying a little more than planned rather than risk disrupting the flow of fresh models into a shrinking U.S. auto market. Labor only accounts for 5% of the cost of a car, Wheaton said.
“When you’re fighting over only 5% of the cost, you have to ask yourself: ‘Why are we doing this?’” [Arthur Wheaton, director of the Worker Institute at Cornell University] said. “Why risk a billion to save $100,000?”
4th Gear: Toyota Is Racing To Become Competitive With EVs
Toyota’s Prius was a genuine gamechanger when it launched in the U.S. in 2000, effectively pioneering the hybrid market. But the company since then hasn’t pushed on and made a mass-market battery electric vehicle. That is all about to change.
Via Automotive News:
Toyota has been quietly at work for three years, methodically engineering not merely an electric car, but a comprehensive plan to catch up and become competitive. Now Toyota, buoyed by its $10 billion r&d war chest, is poised to put the plan into action and make up for lost time.
“There is no turning back,” said Toyota’s global design chief, Simon Humphries, who was tasked with creating a styling language for the company’s debut lineup of full EVs.
The first fruits arrive next year with EVs for China and Japan. Those will lead off a full family of EVs and mobility spinoffs that Toyoshima and Humphries have in the works.
All of this will be on display this week at the Tokyo Motor Show, which is expected to feature a ton of EVs. This is interesting too because Japanese automakers have been pretty skeptical of EVs in recent times.
Toyota intends to spotlight its EV ambitions at this week’s Tokyo Motor Show. On display will be an autonomous electric people mover called the e-Palette, the LQ electric pod car, additional EV concepts and even a self-driving battery that can recharge other cars on the go.
The products signal that Toyota wants to do more than catch up — it wants to leapfrog rivals that had a significant lead, including General Motors, Volkswagen and newcomers from Silicon Valley and China.
5th Gear: Volvo’s Also Going Big On Electric
Volvo recently unveiled its first battery-electric car, an XC40 which has a frunk. You can expect more where that came from, including an electric XC90 which will be built at its plant in South Carolina, according to Automotive News. It will be Volvo’s first electric to be built there.
Starting as soon as the second quarter of 2022, the plant will become the global production center for the third-generation XC90 flagship crossover. It will be built on the next version of Volvo’s Scalable Product Architecture platform, referred to as SPA2. It’s not clear how much of XC90 production at the $1.1 billion South Carolina plant will be devoted to the battery-electric variant.
“There will be a huge investment necessary for the SPA2 platform,” [CEO Hakan] Samuelsson said.
Going electric is, of course, the trend these days, but I’ll be interested to see how these cars sell, especially in the U.S., which still has a charging infrastructure problem that Volvo can’t solve alone.
Niobe Day is celebrated by the Royal Canadian Navy (RCN) on the 21st day of October each year. Called Trafalgar Day by the Royal Navy, Niobe Day marks the arrival of His Majesty’s Canadian Ship (HMCS) Niobe in Halifax on October 21, 1910, the first Canadian warship to enter Canada’s territorial waters, and a landmark event in the beginnings of the Naval Service of Canada.
Neutral: When Was Peak Ford Explorer?
I want to say that it was around the time Jurassic Park came out, but it’s possible I stopped paying attention for a while.