Good morning! It’s Monday, December 23, 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: Honda, Nissan Plan To Merge In 2026
Honda and Nissan joining forces is really happening, folks. The two Japanese automakers are looking to finalize their merger agreement as soon as June of 2025, which is in about six months if you haven’t noticed. That quick turnaround means the marriage could be finalized in 2026.
Their merger will be facilitated through the creation of a holding company, and don’t worry Honda fanboys: it’ll be headed by a president picked by Honda. That means you really don’t have to freak out that Nissan will sully your precious little car company. From Bloomberg:
The presidents of Honda, Nissan and Mitsubishi Motor Corp. — Nissan’s junior partner — were seen entering and leaving Japan’s transportation ministry on Monday morning, likely to inform officials of their plans to formally kick off merger talks.
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Honda and Nissan are both facing significant challenges, with the latter in dire financial straits as a deluge of electric and hybrid vehicles from competitors in China forces legacy brands to pool resources.
Nissan is in greater need of a turnaround due to cratering sales in the US and China, which have forced it to slash jobs, cut production capacity and lower annual profit outlook by 70%.
Talks were initially complicated by Taiwanese manufacturer Hon Hai Precision Industry Co., which reportedly expressed an interest in acquiring Nissan. But the iPhone-maker known as Foxconn is pausing its pursuit for now to see how talks between the two Japanese companies unfold, a person familiar with the matter said last week.
An alliance between Honda and Nissan — which could also include Nissan’s junior partner Mitsubishi Motors — would effectively split Japan’s automobile industry down the middle, pitting the trio against Toyota Motor Corp. and its partnerships with Mazda Motor Corp., Subaru Corp. and Suzuki Motor Corp.
Honda and Nissan had already begun laying the groundwork for a technical partnership earlier this year, announcing plans with Mitsubishi Motors to co-develop batteries, software and other EV technologies.
If this deal really does go through, it’ll create the world’s third-largest automaker by sales, according to CNBC. The two companies would also combine for a value of nearly $54 billion, though to be fair, Honda’s market cap contributes about $43 billion to that number.
2nd Gear: 35,000 German VW Jobs Cut In Union Deal
Volkswagen is making massive cuts to its German operations just a few days before the new year in an effort to save itself. In the near future, over 35,000 jobs are set to be cut and capacity will be sharply reduced. Still, this is somehow better than whatever VW was initially planning. This deal, while brutal, is good enough to avert mass strikes at the automaker.
This “Christmas miracle,” as the union leaders have called it, came after 70 hours of intense negotiations to avoid a sweeping 10 percent wage reduction. Right now, there’s no exact word on when site closures or layoffs would take place. From Reuters:
Volkswagen has been in talks with union representatives since September over measures it called necessary for it to compete with cheaper Chinese rivals and handle lacklustre demand in Europe and slower-than-expected adoption of electric vehicles.
Around 100,000 workers have already staged two separate strikes in the past month, the largest in Volkswagen’s history, protesting against cost-cutting plans.
“With the package of measures that has been agreed, the company has set a decisive course for its future in terms of costs, capacities and structures,” Volkswagen Group CEO Oliver Blume said in a statement.
“We are now back in a position to successfully shape our own destiny.”
VW said the deal would allow savings of 15 billion euros ($15.6 billion) annually in the medium term and saw no significant impact on its 2024 guidance. While there were no immediate closures, VW said it was looking into options for its Dresden plant and repurposing the Osnabrueck site, including looking for a buyer. Some production would be shifted to Mexico.
Vehicle production would shut at the Dresden plant by the end of 2025. VW AG’s staff will not get raises under a collective wage agreement over the next four years, while some bonuses will be scrapped or reduced.
Production at VW’s Wolfsburg plant, its biggest, will be cut to two assembly lines from four.
“No site will be closed, no one will be laid off for operational reasons and our company wage agreement will be secured for the long term,” said works council chief Daniela Cavallo.
This fifth round of negotiations was kicked off on December 16, and continued well into the night for five nights in a row, only taking breaks to “sleep and fuel up on coffee, curried usage and fruit,” according to Reuters. Those Germans really are something, man.
Here’s more on the deal and how the two sides got here:
The 35,000 future job cuts would represent around a quarter of VW’s workforce and come in tandem with reducing the company’s network of German plants by more than 700,000 vehicles.
IG Metall chief negotiator Thorsten Groeger nevertheless said the cuts, which would not involve compulsory redundancies, were part of a solution to address overcapacity and would be done in a socially responsible manner.
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Top shareholder Porsche SE welcomed Friday’s deal as a “significant improvement in Volkswagen’s competitiveness”, adding it was now crucial to implement the cuts.
Good for the two sides for figuring this mess out. While 35,000 job cuts sound like a lot (because it is) I cannot imagine how much worse it really could have been if VW and IG Metall didn’t come to the table.
3rd Gear: Stellantis Reverses Course On Toledo Layoffs
Stellantis is shelving its plans for layoffs at its Toledo Assembly Complex in Ohio after the abrupt departure of CEO Carlos Tavares. The layoffs of about 1,100 union workers were first announced in November when the automaker said it would be cutting a shift at the plant.
Now, Stellantis is saying workers should come to work as scheduled, and that’s some damn welcome news just a few days before Christmas. From the Detroit Free Press:
In a statement provided by spokeswoman Jodi Tinson, the company said it’s reassessing its strategy:
“As Stellantis continues to reassess its strategy in North America, the company has decided to extend the WARN notice that was issued in November for the Toledo South Assembly Plant. As a result, no employees will be placed on indefinite layoff on Jan. 5, 2025, due to the previously announced shift reduction. Employees are expected to return to work as scheduled after the new year.”
Various Toledo media outlets quoted UAW Local 12 President Bruce Baumhower as citing a lower number of indefinite layoffs of 125 than originally announced, with the possibility that that number could be reduced further.
The news marks a positive change for workers from recent months, with the automaker previously making numerous job cut announcements at its facilities. The initial announcement for Toledo had been framed as part of the company’s effort to reduce its inventory levels, one of numerous issues it’s struggled with this year.
It’s a change since the resignation on Dec. 1 of CEO Carlos Tavares, who was under fire from Stellantis dealers and the UAW. In addition, the company brought Tim Kuniskis, who retired in June after 32 years with Stellantis and its Chrysler predecessor entities, back to the company and put him in charge of the popular Ram truck brand.
The Toledo Assembly Complex builds the Jeep Gladiator in its South plant and the Wrangler in its North plant. Folks, I’m just thrilled for these workers. It’s not too often stuff like this happens anymore.
4th Gear: U.S. New Vehicle Sales Will Start 2025 Strong
Sales of new vehicles in the U.S. are set to finish 2024 off strongly, and that good fortune for automakers is set to carry on into 2024. Dealers and car companies can thank replenished inventories and solid lease deals for the good fortune. There’s also some speculation that the upcoming Trump administration, and what it means for car buying, is spooking some folks into buying cars sooner rather than later. From Automotive News:
The U.S. new light-vehicle market is expected to end 2024 with sales just shy of 16 million vehicles, up from 15.6 million last year. Cox Automotive is projecting a tally of 15.8 million vehicles, while J.D. Power/GlobalData, Edmunds and AutoForecast Solutions each anticipate more than 15.9 million.
Analysts say those forecasts include a robust fourth quarter that benefited from two extra selling days and a slew of year-end discounts drawing customers into showrooms. J.D. Power and GlobalData estimate December’s seasonally adjusted annual rate will reach 17.2 million vehicles, the highest level since 2021.
Cox analysts project that General Motors retains the U.S. sales crown in 2024. Honda is expected to post the biggest market share gains and overtake Stellantis, which Cox estimated will lose 1.6 percent of market share with a 15 percent drop.
“One key question for the market is whether the recent sales gains reflect true changes in consumer vehicle demand, likely from improved vehicle affordability, or is the market looking at a Trump bump — a surge in post-election activity that will dissipate quickly? Only time will tell,” said Charlie Chesbrough, senior economist at Cox.
Rising vehicle supplies have led to increased incentives as interest rates begin to come down, helping to offset transaction prices that remain near historic highs despite some recent slight declines. Credit availability also has improved, analysts said.
Lower interest rates are also helping things along, but there’s no denying that cars are more expensive than they pretty much ever have been, and that’s hurting things.
The average new-vehicle interest rate slipped to 6.8 percent in November — the first time it has dropped below 7 percent in more than a year, said Jessica Caldwell, head of insights at Edmunds.
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Affordability, however, remains a challenge. Cox data shows the largest market-share gains this year were in subcompact utility vehicles, compact utilities and compact cars — three of the lowest-priced segments. Midsize cars, midsize utilities and full-size pickups, in contrast, lost the most market share, Chesbrough said.
Consumers may be choosing smaller versions of the vehicles they really want to avoid busting their budgets, he said, a trend that eventually could swing back toward larger vehicles as interest rates decrease.
Higher transaction prices have pushed many consumers out of the new-vehicle market, which is keeping sales in the 16 million range, said Tyson Jominy, vice president of data and analytics at J.D. Power. Most consumers gauge affordability by the monthly payment, rather than total purchase price.
“Monthly payments are now $740 a month. That’s $15 a month higher than year-ago levels, and $150-plus higher than 2019, and that’s really where consumers feel it,” Jominy said on Automotive News’ “Daily Drive” podcast. “All the money we’re spending on incentives, all the dealer discounting, is just going really to wash out the MSRP increases. And at the same time, consumers are getting less value for their trade-ins, so monthly payments continue to increase.”
Leases have helped automakers get cars out the door. Lease rates are up 19 percent from a year ago, Auto News reports. At the same time, retail purchases are down about five percent.
We’ll see how Trump’s and Elon Musk’s plans for the automaker industry shake all this up. If I had to guess, it won’t be in a good way.
