Good morning! It’s Friday, October 25, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.
1st Gear: VW Doesn’t Know How To Save Itself Yet
The Volkswagen brand needs a turnaround rather quickly, but so far it hasn’t presented any plan for how to make itself more competitive. This is according to a staff handout from the head of the group’s work council in Germany. It also mentions that management remains keyed in on labor costs. Not great, VW. Not great. From Reuters:
The comments by Daniela Cavallo come as Europe’s top carmaker and powerful union fight over potential factory closures and job cuts as part of the group’s efforts to lower costs, with the second round of negotiations scheduled for Oct. 30, the day Volkswagen will release third-quarter results.
“The Board of Management has still not presented a coherent overall concept for how it intends to strategically lead Volkswagen into the future with the right products, processes and plans,” Cavallo said in the handout seen by Reuters.
“Instead, it continues to focus solely on issues such as labour and factory costs.”
There are growing concerns from Volkswagen workers over potential staffing cuts. The German automaker has declined to rule that out as it struggles to find ways to adjust its position in Europe following a drop in demand and a smaller market. Perhaps it could build better, more competitive, cars, but what do I know?
We should be learning more about the situation in a few days. Workers are holding meetings at several VW factories in Germany — and the automaker’s Wolfsburg headquarters — on October 28. Staff will be informed about the current situation at VW.
2nd Gear: Get Ready For Cost Cutting At Mercedes
Mercedes-Benz says it’s going to step up cost-cutting measures after earnings were halved in the third quarter. Lukewarm demand and strong competition from China were the main driving forces for this drop. Mercedes cut its full-year profit margin target twice during Q3. Not great. It’s hoping a sweeping new model rollout will help sales in 2025.
The automaker’s car division’s adjusted return on sales fell to 4.7 percent in the third quarter from 12.4 percent last year. It’s Mercedes’ worst profitability since the pandemic, while earnings in the unit were more than halved. It’s actually worse than analysts expected. From Reuters:
“The Q3 results do not meet our ambitions,” CFO Harald Wilhelm said in a statement, adding that the group will step up cost cuts.
Wilhelm declined to provide more details about the cost cuts, but warned that “it will be tighter and tougher for sure”.
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In 2020, Mercedes launched a plan to reduce costs by 20% between 2019 and 2025, 15-16% of which was already achieved, according to the finance chief.
The July-September earnings were hit as Chinese consumers continued to cut back on luxury goods in a weakening economy, which has in particular weighed on Mercedes’s lucrative high-end S-Class model sales in the country.
Model revamp costs added to the pressure, especially for new versions of the G-Class SUV, which will hit the market in the next quarter, Mercedes added.
In 2024, the company sees car sales slightly below the previous year, and fourth-quarter sales in line with the third quarter.
Nevertheless, Mercedes refuses to reduce prices and prefers to stick to its “value over volume” strategy, including in China.
Chinese automakers are really making every other car company’s life hell, aren’t they? I get it. They make some really great cars over there.
I’m just hoping this cost-cutting at MB doesn’t trickle down into the product in any super noticeable way. Mercedes is (or was) all about quality, after all.
3rd Gear: Stellantis Fires Back At Lawmakers
Stellantis isn’t caving to pressure from lawmakers in Washington, D.C. just yet. The automaker just reiterated that it hasn’t decided where the next-generation Dodge Durango will be made. It also made clear it is delaying — not canceling — its plans for the idled Belvidere Assembly Plant in Illinois.
In a statement, Stellantis said its decision to delay the reopening of the plant “is consistent with the current challenging automotive landscape and the plain language in the contract that the UAW agreed to.” The automaker said this in response to letters signed by about 80 members of Congress expressing concern about what the automaker was doing regarding its contract commitments with the United Auto Workers union. Stellantis defended its decision, pointing blame for the delay at the current vehicle market From the Detroit Free Press:
“Stellantis has repeatedly stated that it has abided by and will continue to abide by the 2023 collective bargaining agreement. It is in everyone’s best interest to have a healthy, sustainable company that can compete in a global marketplace,” according to a company statement provided by spokeswoman Jodi Tinson. “There is indisputable volatility in the market related to the transition to an electrified future, which the signers of these letters support. Over the past year, numerous companies across the industry have announced investment and product delays as well as outright product cancelations.”
On Wednesday, numerous members of Michigan’s congressional delegation joined others from across the country in calling on Stellantis to honor its commitments, pointing out that tax money is being used to support the automaker. A couple of the signers, U.S. Reps. Debbie Dingell, D-Ann Arbor, and Rashida Tlaib, D-Detroit, rallied with UAW workers and leaders, including President Shawn Fain, at a union hall in Trenton the same day.
“Taxpayers are currently funding consumer incentives for several Stellantis vehicles, and Stellantisis slated to receive $585 million under the Domestic Manufacturing Conversion Grant Program.
“Under this program, Stellantis is on track to pocket $335 million to reopen the Belvidere Assembly plant in Belvidere, Illinois,” according to the letter from U.S. House members to the Stellantis board of directors. “As stewards of taxpayer funding, we have a responsibility to ensure these investments benefit the public interest. We hope it is clear to you that the American people will not tolerate taxpayer subsidies for a company that is cutting production and slashing jobs — all the while it increases executive compensation, dividends to shareholders and stock buybacks.”
“In 2024 so far, Stellantis has paid $5 billion in dividends to shareholders and purchased $3.3 billion of its own stock. In the first half of the year, Stellantis was among the most profitable automotive companies in the world, with a 10% global profit margin. If Stellantis is performing so well that Mr. Tavares can earn 518x more than the average Stellantis worker, we are inclined to believe market conditions are positive,” according to the House members’ letter.
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The Senate letter noted that “we are deeply concerned that Stellantis is not keeping the promises it made to strengthen and expand good-paying union jobs in America,” and pointed to the company’s stated intent to shift more production to lower-cost countries.
Stellantis responded by saying, “the company remains committed to investing in the U.S. to create jobs and support our communities as evidenced by the announcement last month to invest more than $400 million in three of our Michigan facilities.”
These commitments include the production of the Ram 1500 REV (an electric pickup) at Stellantis’ Sterling Heights Assembly Plant. Some folks are concerned that the company is planning to expand its truck plant in Saltillo, Mexico.
4th Gear: Mazda Trims 2025 Outlook
Mazda is just a quarter away from a record sales year in 2024, but the automaker isn’t expecting its exponential growth to continue in 2025 as it initially expected. Its North American CEO Tom Donnelly, said there are “no shortage of headwinds.” CEOs love talking about headwinds, man. From Automotive News:
“The once in 100-year-plus transformation the industry is going through — all of us are dealing with that,” Donnelly said, noting that he does expect robust industry sales. “The core business is still going to be solid.”
While Mazda had estimated its sales would soar to 500,000 next year, Donnelly said the brand is more likely to end north of 450,000, although it remains on an “upward trajectory.” Introduction of the CX-50 hybrid next month as well as a new brand campaign called “Move and Be Moved” will be Mazda’s primary growth drivers next year, he said Oct. 23.
Mazda sees marginal growth in the U.S. EV market next year as adoption remains in flux, Donnelly said. Mazda no longer has an EV in its lineup after it cancelled the low-volume, low-range MX-30 sold only in California last year. But he said Mazda’s new hybrid compact crossover will be a boon as more consumers flock to the fuel-efficient technology as a way to save money and dabble in green.
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The launch of the CX-90 and CX-70 midsize crossovers — which both offer plug-in hybrid powertrains — as well as a production increase of the CX-50 compact crossover at the Mazda-Toyota joint-venture factory in Alabama helped spur sales. Through the first nine months of the year, CX-50 sales increased 85 percent to 58,515.
Mazda’s prioritization of building more of what’s in demand — including specific trims and powertrains — and putting those vehicles in markets with retail partners where they’re turning fastest has also yielded results, Donnelly said. And Mazda continues to work closely with its captive, Mazda Financial Services, to react quickly to market feedback on lease programs and APR incentives.
“We’re pleased with the agility we’ve shown and the results we’ve been able to achieve,” he said.
In 2024, Mazda expects to hit 400,000 sales in the U.S. It would be the highest sales number for the automaker since it entered the U.S. market in 1970. In 2023, Mazda’s sales grew 23 percent to 363,354 vehicles. The Japanese automaker is now close to surpassing that figure… through September. Sales have increased 15 percent to 313,452 compared with last year.
