The Morning ShiftAll your daily car news in one convenient place. Isn’t your time more important? A Wall Street analyst says Ford needs more cuts despite making billions off F-Series truck sales, Daimler’s Zetsche says auf wiedersehen, and Michigan gives a big tax break to Jeep for its Detroit plant and more for The Morning Shift of Wednesday, May 22, 2019.
1st Gear: What Does Ford Need? More Layoffs
Ford is laying off 7,000 white collar workers globally in a move that’s said to save the company $600 million a year—a move executives say is necessary as sales start to fall off and huge investments are needed in autonomy and electrification. But that’s only a drop in the bucket of the multi-billion dollar restructuring led by CEO Jim Hackett as he attempts to position Ford for “the future,” whatever that looks like and however that will make money.
But if you ask Wall Street analyst Adam Jonas, what Ford needs is more layoffs—yes, even as it managed about $42 billion in in sales last year from the F-Series trucks alone. It’s not enough for the investors. From Bloomberg:
To make up for an estimated 5% drop in global revenue as China ceases to be an engine of growth, Ford would need to cut another 23,000 salaried workers, auto analyst Adam Jonas wrote in note to investors Tuesday. His analysis assumes no additional cost reductions, while Ford has said it is targeting $25.5 billion in cuts by 2022.
“It’s better that Ford execute restructuring at a time when its truck business is producing so much profitability and cash flow,” Jonas wrote. “We estimate the F-Series franchise alone would have placed Ford in the Top 40 on the 2018 Fortune 500 list.”
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To recap, that’s another 23,000 workers who need to go, per this analysis. Who will be left to do anything? Robots, I suppose.
Anyway, congrats to all those employees who helped Ford achieve “so much profitability and cash flow,” and good luck to them at their next jobs.
2nd Gear: Zetsche Out, But What Did He Accomplish?
Daimler’s ultra-recognizable top boss, Dieter Zetsche, is stepping down as CEO today. If you ask Bloomberg, he, along with his mustache, “transformed a sprawling global conglomerate into a more streamlined entity, dissolved the unhappy marriage with Chrysler and led the company back to the No. 1 slot in luxury cars.” He has had the job since 2006.
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But back home, German public broadcaster Deutsche Welle is far less generous, wondering openly what he really accomplished:
It is impossible to ignore the fact that the company is in trouble. Despite its recognizable name it can’t seem to get a grip on the future of mobility. When Zetsche took over in 2006 its stock was just over €43 ($48) a share. At the beginning of May it was at €58 a share. This may seem like a healthy increase, but when compared to the DAX index, Daimler generally performed in line with the DAX average. But since the beginning of 2016, the DAX has pulled ahead.
In 2018, the company recalled around 800,000 vehicles throughout Europe because of emissions cheating software. In the first quarter of this year, overall sales were down 4% as were revenue and profits.
In April, new emissions cheating software was found in more Mercedes. The fallout from the Dieselgate scandal is still being added up.
On top of that the company seems to have missed the direction of where mobility is headed. Daimler’s vision for autonomous driving, mobility services and battery-powered vehicles looks unclear. The company has started an austerity program and there are rumors of big job losses to come. Daimler is simply no longer a pioneer on the cutting edge of technology.
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For one I think Bloomberg is giving Zetsche way too much credit on the Daimler-Chrysler thing, a “merger of equals” that wasn’t and that people on both sides of the Atlantic are still mad about.
But Zetsche’s most spectacular failure was his handling of the Chrysler integration into Daimler. Originally labeled a “merger,” Daimler took over the American carmaker in 1998 and Zetsche personally went to Detroit to run it from 2000 until 2005.
It was a massive misfire that cost the German company much more than the $36 billion it spent in the acquisition. The Germans blamed the mess on a lack of synergies, but they themselves were to blame and walked away with nearly nothing. The fact that the US unit could be sold pretty much as an intact whole in 2007 shows that there was no effort made at real integration.
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Regardless, Zetsche will take home €42 million in his retirement package, “which puts him on track to be the best paid pensioner of a big Germany company,” DW says.
In any case, he’s free to drive BMWs now, as BMW points out:
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3rd Gear: BMW CEO Hanging On By A Thread?
Speaking of CEOs, and BMW, board members there are wondering if boss Harald Krueger is the right man to be leading that shift toward electrification and mobility (are you noticing a thread in all of this today?). And they may decide a new boss is needed in June or July.
Here’s Bloomberg on what’s up:
BMW, like other carmakers, is navigating a costly transition not only to electric cars but also new business models and deep-pocketed tech competitors encroaching via new mobility options such as ride hailing. After leading the luxury competition for a decade, BMW’s momentum petered out in 2016 and the carmaker has since struggled to regain the top spot with cautious model redesigns. Since last year, weaker global markets and trade tensions have shrunk profits.
Any new CEO will be chosen from inside the Munich-based carmaker, and production head Oliver Zipse, 55, is considered a possible successor, one of the people said. A BMW spokesman declined to comment on CEO succession plans.
“There are doubts about Kreuger’s perspectives as CEO of BMW — internally and externally,’’ Juergen Pieper, an analyst at Metzler Bank, said in an email. “Results of the past four years are mixed, profitability is turning down quite substantially,” and “there are no clear strategic signals.’’
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BMW’s board is very divided on how to face the future, with some wary of their car-sharing tie-up with Daimler and others jealous of partnerships rivals like Toyota have struck with companies like Uber and Google’s Waymo.
But any way you look at it, this has been a failure:
BMW squandered its early lead in electric cars after pausing new battery models since unveiling the slow-selling i3 in 2013. It now trails the electric SUVs of Jaguar, Audi and Mercedes already on sale.
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What must BMW do to survive?
4th Gear: Senators Criticize VW’s Union Vote Delay Push
Meanwhile in America, the United Auto Workers union is making another go at organizing Volkswagen’s Chattanooga, Tennessee plant. Earlier this month VW won a bid from the National Labor Relations Board to delay a union vote for 1,700 workers at that factory, but that move has it facing criticism from three Democratic U.S. senators.
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From Reuters:
Senators Gary Peters and Debbie Stabenow of Michigan and Sherrod Brown of Ohio wrote to Scott Keogh, president of Volkswagen Group of America, on Tuesday, expressing “deep concern with delays” to the vote.
“We urge you to immediately drop any efforts to oppose or postpone the election,” the said.
UAW spokesman Brian Rothenberg urged VW to allow a vote of its workers: “Volkswagen should stop obstructing the rights of Chattanooga workers to vote and have a union – enough is enough.”
Volkswagen spokesman Mark Clothier confirmed the company had received the letter and would respond.
“We respect the decision of our team and their right to decide on representation. We have taken a neutral position on the issue and will continue to do so,” Clothier said.
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As that story notes, workers there “narrowly voted against union representation” in 2014, which was a major blow to the UAW at a time when its membership ranks are falling across the country and as jobs increasingly get shipped overseas. It has struggled for decades to organize foreign auto plant workers.
Then again, all the recent corruption scandals aren’t helping.
5th Gear: Tax Breaks For Jeep
Speaking of American automaking jobs, the new Detroit-area Jeep plant expansion is going to be a huge deal, but as tends to happen Fiat Chrysler will be getting big tax incentives from the city and state for its trouble. Here’s the Freep:
First, Detroit City Council approved a series of land swaps and other steps for the creation of the new Jeep plant near Mack and St. Jean on the east side. Shortly afterward, the Michigan Strategic Fund approved sweeping new tax incentives for FCA to build that new plant.
Taken together, the Jeep plant and expansion of the nearby Jefferson North Assembly Plant will create an estimated 5,000 jobs and $2.5 billion in new investment. The other FCA projects in Warren and Sterling Heights will add billions more in investment.
Gov. Gretchen Whitmer and Mayor Mike Duggan both hailed the approvals as historic and a continuation of the city’s and state’s legacy of industrial might. And Jeff Mason, CEO of the Michigan Economic Development Corp., added, “As a state we stand to benefit immensely.”
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As The Detroit News notes, the plant expansion is expected to bring in some 5,000 jobs. It’s Detroit’s first new auto plant in almost 30 years.
Reverse: Spoiler Alert, We Won
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Neutral: What Do Any Of These Car Companies Do To Survive?
With sales falling and the future of the car business uncertain, everyone who’s in the know is scrambling and predicting doom and gloom, even as the economy is supposedly “great.” What’s going to happen to Ford, BMW and others in the next few years? My guess: a ton of consolidation, and probably a number of brands calling it quits entirely.
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