Good morning! It’s Thursday, December 19, 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: Safety Regulators Back Off Efford To Recall 50 Million Air Bag Parts
The National Highway Traffic Safety Administration has backed down from forcing a recall that would hit about 50 million air bag inflators they say could explode in a crash. The move de-escalates a fight that has dragged on for years between NHTSA and impacted automakers that are looking to avoid another Takata situation.
In a new filing, the U.S. safety regulation body said that “further investigation is warranted” before it can definitively say whether or not the parts are defective. It’s a necessary step before an involuntary recall. Here’s what happened, from Bloomberg:
The agency reconsidered its stance after reviewing comments noting manufacturing differences at plants where the components were installed, according to the document posted Wednesday on a federal government website.
The suspect parts were made by Knoxville, Tennessee-based ARC Automotive Inc. and the former Delphi Automotive Systems LLC. The air bags involved have been used by at least a dozen car manufacturers, including General Motors Co., Stellantis NV, Volkswagen AG and Hyundai Motor Co.
In May 2023, GM recalled 1 million vehicles manufactured from 2014 to 2017 that were equipped with ARC inflators. That same month, regulators recommended that ARC issue a widespread recall of its inflators. The closely held company has refused to do so.
Representatives for ARC didn’t immediately reply to a request for comment on Wednesday.
It’s extremely unusual for regulators to force a recall since most manufacturers usually agree to fix defective parts. The auto industry has been eager to avoid a repeat of the Takata air bags saga from more than a decade ago. Those fixes took years to complete and wound up becoming the biggest auto recall in US history.
NHTSA said in the new filing that it’s planning to request additional information from ARC and the affected carmakers, and it will evaluate their responses before deciding how to proceed. Another lengthy comment period may also be necessary before any action is taken, pushing the decision into the Trump administration.
There are an estimated 49 million cars in the U.S. that have potentially faulty ARC airbag inflators installed in them. Listen, I know that nobody wants to do a recall, but if this shit is broken and dangerous, I feel like it’s better to get out ahead of it.
2nd Gear: Union Says Progress Is Being Made With VW
There may be hope for German Volkswagen workers yet. The automaker and labor representatives have been making progress in some areas after talking for about 50 hours. However, they’re not out of the woods yet and remain far apart in other areas. Major issues like pay cuts and plant closures still remain up in the air. From Reuters:
“Accordingly, a longer interruption or termination of the fifth round of negotiations is always among the possible scenarios for an outcome,” a spokesperson for the union said.
Talks have been ongoing since Monday in the hope of reaching a deal before Christmas to prevent massive strikes that IG Metall has warned could begin as early as next year.
Around 100,000 workers have already staged two separate strikes in the past month, the largest in the company’s history, protesting against management plans to cut wages, reduce capacity, and potentially shut German plants for the first time.
While there is a strong desire by both sides to find common ground, talks could still fail, several sources said, requesting anonymity as the negotiations were private.
“There’s still much to do,” one of them said.
Still, both sides remain far apart on key issues, such as plant closures. Workers, unsurprisingly, strongly oppose those plans, but Volkswagen claims it may be necessary to cut costs and respond to weaker demand in Europe.
Scenarios under discussion include capacity cuts, rather than full plant shutdowns, the sources said. Last week, Handelsblatt reported that one possibility could be shifting production of the core VW brand’s Golf model to Mexico from the German carmaker’s main plant in Wolfsburg.
[…]
Citing people familiar with the matter, Bloomberg reported earlier in the day that Volkswagen and labour unions were nearing an agreement to restructure the VW brand without closing factories in Germany.
Management is willing to keep plants running and restore job security agreements until 2030 in exchange for workers foregoing bonus payments, the report said.
Let’s just hope Volkswagen does right by the people who make the company all of its money. I doubt it will, but it’s still good to have hope.
3rd Gear: Ford Changes Quality Leader To Fix Warranty Costs
There’s about to be a new quality sheriff in town at Ford. They’ll be tasked with reining in an industry-leading number of recalls as well as getting warranty costs under control. The team’s current leader, Jim Baumbick, is set to oversee the entire vehicle programs team, focusing on keeping costs and timing of vehicles on track. That includes both EVs and gas-powered cars. From Reuters:
The EV programs group previously reported through the team led by Doug Field, a former Apple and Tesla executive, who still directs Ford’s advanced development of future EVs.
The move, which was announced to some Ford workers internally last week, is expected to take effect early next year.
A Ford spokesperson said the changes would allow its teams to “collaborate and work more efficiently to deliver exciting vehicles and software with the highest levels of quality for our customers.”
Ford CEO Jim Farley has made fixing the company’s quality problems one of his main priorities since taking over in 2020.
Since then, Ford has changed some of its production practices to better catch errors, and allocated more workers to identify safety concerns. It has topped the industry in number of recalls since 2021.
“After three years of hard work fixing all of our deficits … we now have everything in place to really see our quality turn for our customers and for our business,” Farley told reporters at an event last week.
When asked about his concerns for next year, Farley responded: “execution.”
This year has been particularly tough on the quality front for the Dearborn, Michigan automaker, which agreed to an up to $165 million civil penalty after a government investigation found it failed to recall vehicles with defective rearview cameras in a timely manner.
Warranty costs have hurt Ford’s overall earnings in 2024. In the second quarter, executives said warranty expenses went up $800 million in the same period compared with a year ago. Ouch. Most of those issues were caused by vehicles launched in 2021 or earlier.
4th Gear: CarMax Is Killing It Right Now
It’s a good time to be CarMax. The used vehicle retail giant said its net income was up 53 percent to $125.4 million in the third quarter when compared to the same time last year. That is a massive jump. CarMax also posted a net revenue of $6.2 billion in Q3, a 1.2 percent increase from the same time last year. From Automotive News:
Vehicle sales: 184,243 used retail vehicles, up 5.4 percent from Q3 2023; 136,013 wholesale vehicles, up 6.3 percent. Same-store used-vehicle retail sales rose 4.3 percent, CarMax said in its quarterly report issued Nov. 30.
Gross profit per vehicle: $2,306 per retail used vehicle, up $29 from a year ago; $1,015 per wholesale used vehicle, up $54.
“Our solid execution and a more stable environment for vehicle valuations enabled us to deliver robust [earnings per share] growth driven by increases in unit sales and buys, solid margins, growth in [CarMax Auto Finance] income, and ongoing management of [selling, general and administrative expenses],” CarMax CEO Bill Nash said in a statement.
There’s no denying that used cars are just about pricier than ever right now, so it makes sense that CarMax would be doing so well.
