May the 4th be with the American auto industry, Nissan is hitting the brakes on restarting car production, Volvo is hitting the gas in Europe, and a Chinese market resurgence could provide some much-needed relief for VW. All that and more in The Morning Shift for April 17, 2020.
1st Gear: May 4th Could Be A Big Day For The Auto Industry
You know that corny Star Wars joke that everyone makes on May 4th—“May the fourth be with you”? Well, it’s actually going to be more appropriate than ever this year, as the American automobile industry could use as much good luck as it can get.
Reeling from tanked consumer demand and halted vehicle production, automakers have taken to salary reductions and furloughs to try to stay afloat. But these measures can only stem the tide for so long; ultimately, automakers—like all businesses shut down as a result of the coronavirus—are keen to get back up and running. And for many, the big restart day is May 4.
Among automakers expected to resume U.S. manufacturing operations on May 4 are Ford, Fiat Chrysler, Tesla, Toyota, and Honda. Key suppliers like Magna—a critical source for parts needed to assemble cars—are also gunning for that date.
Clearly, May 4 could be a huge day for the car world.
In a recent story on Ford’s future vehicle production, Automotive News discusses The Blue Oval’s plans for May 4 as told by the plant chairman of the Kentucky Truck Plant:
DETROIT — Ford Motor Co. is joining other automakers and suppliers by targeting May 4 to restart assembly lines in at least one U.S. plant, according to a union official.
In a letter to members, Kentucky Truck Plant chairman Allen Hughes said Ford planned to reopen its Louisville facility on a two-shift, Monday-Thursday pattern, although he noted “this is not finalized and is very tentative.”
It was unclear whether Ford was targeting a May 4 restart for all U.S. plants, or if it was specific to Kentucky Truck.
That chairman described measures that Ford plans to take to keep workers safe as FoMoCo resumes car production. From the story:
“The company’s plans are wide-ranging and have been changing daily, partly due to the changes to the coronavirus guidelines” from the Centers for Disease Control and Prevention, he said.
Those plans could include buzzing wristbands that would alert workers when they’re within 6 feet of each other. Ford this week announced it would begin face mask production at its Van Dyke Transmission plant and would provide masks to all of its factory workers.
Automotive News also wrote a story on Fiat Chrysler’s strategy to restart vehicle production in the U.S. on May 4, but only after first getting plants in Mexico running. From the article:
FCA’s head of North America supply chain planning and global inter-regional flow, said during the supplier presentation that the company will only restart operations with “safe, secure and sanitized” workplaces that “protect all of our employees and you.”
Ram Promaster production in Saltillo, Mexico, is slated to begin on Monday. Output at the Saltillo Truck Assembly plant that builds the Ram 1500 Classic and heavy duty models could follow on April 27.
The article further describes FCA’s roll-out plan, saying:
In the U.S., the estimated return date for its Detroit area plants is May 4. The resumption of Wrangler production at the Toledo North site in Ohio is also being targeted for May 4. FCA’s Brampton car plant in Canada that assembles the Dodge Challenger, Charger and Chrysler 300 is scheduled to restart on May 4 as well.
FCA’s progressive return would continue on May 18 for its Jeep Cherokee plant in Belvidere, Ill.; the Toledo South plant that produces the Jeep Gladiator; the Toluca, Mexico, factory that assembles the Dodge Journey and Jeep Compass; and the Windsor minivan plant in Canada.
Vitous said the launch cadence for the company’s powertrain and stamping plants that support the assembly operations is still being determined.
The next-generation Jeep Grand Cherokee and Grand Wagoneer are expected to see three-month delays from their previous 2021 launch dates, the article mentions.
You can learn more about various automakers’ plans to resume production in the U.S. on Automotive News’ page. A key point that many automakers make is that May 4 is a tentative deadline, which could very well be pushed back depending upon how the coronavirus situation progresses, particularly as it relates to government stay-at-home orders and social distancing guidelines.
2nd Gear: Nissan Is Hitting The Brakes
Though many are planning on May 4 to be The Big Day, embattled carmaker Nissan—who has recently furloughed roughly 10,000 employees at its plants in Tennessee and Mississippi—is pumping the brakes a bit. From Reuters:
Nissan Motor Co. said Thursday it will extend a shutdown of U.S. manufacturing plants until mid-May, citing the ongoing impact of the COVID-19 pandemic.
The automaker previously scheduled its production halt through April 27.
The story describes why there’s quite a bit of skepticism around that May 4—something that’s worth reiterating here:
Some automakers have said they hope to resume U.S. production on May 4, but other auto executives think the industry restart may be pushed to mid-May. Industry and political leaders are discussing plans to restart the U.S. and regional economies.
3rd Gear: Volvo Hits The Gas In Europe
To further drive home the point that May 4 could turn out to be a total bust, look no further than Swedish automaker Volvo, who initially planned to re-open its Ridgeville plant near Charleston, South Carolina—a facility that closed on March 26—on April 14, but then pushed that to May 4. That was then pushed back again due to “supply chain constraints and restrictions from local authorities,”a Volvo spokesperson told Automotive News Europe.
In Sweden and Belgium, though, Volvo is hoping to restart vehicle production—which came to a halt on March 26 and March 17, respectively—on April 20. Yes, that’s this upcoming Monday. Automotive News Europe quotes the company’s CEO, who describes why he thinks beginning production is so important:
“Our prime responsibility as a company is to safeguard our employees’ jobs for the future and to do the same for our suppliers and our dealers,” Volvo CEO Hakan Samuelsson told Automotive News Europe. “The best way to do this is to re-start our production.”
He added that Volvo also wants to signal that shutting everything down until a vaccine for the virus is found is irresponsible because it “would result in a disastrous downward spiral into a recession.”
The story goes on to describe the production plan:
Output at both vehicle assembly plants will resume slowly as the automaker initially will only produce vehicles that have already been ordered, a spokeswoman said. Samuelsson said Volvo expects to produce three to four days next week to meet the demand, which, particularly from China, is is returning to normal. That being said, he added that “there will be considerable reduction from the maximum capacity that we have.”
A powertrain plant in Skovde, Sweden will also continue operations on Monday. Between it, the vehicle plants in Belgium and Sweden, and a “body components” facility in Olofstrom, Sweden that began production this week, “Volvo’s European production network will be fully operational again,” Automotive News Europe points out.
It won’t just be plant workers going back to work, either. Volvo plans to have employees headed back into offices on Monday, though the company has described the safety measures it is taking to prevent spreading the coronavirus. From the news site:
Back in Europe, Volvo said that all re-opened facilities have been “cleaned extensively” and that sanitation routines have been intensified. There will also be voluntary temperature checks offered at main entrances.
In recent weeks, Volvo said it has reviewed every single working station in the Torslanda plant from a health and safety perspective. Wherever it is not possible to follow social distancing rules, employees will wear masks, the spokeswoman said.
Volvo’s office workers will also start returning on Monday. At its Swedish facilities the layouts of all meeting rooms, office spaces and restaurants have been adjusted to allow social distancing. For example, desks have been rearranged to provide more space between workers and Volvo will limit the number of people who are allowed in meeting rooms and restaurants.
4th Gear: VW Sales Are Garbage, But China May Be The Relief Valve
Yesterday, we quoted a Reuters story about how Volkswagen clearly isn’t sure how far its financial performance will fall as a result of this coronavirus pandemic. The company “withdrew its outlook for 2020 amid uncertainty related to the coronavirus outbreak which caused operating profit to drop 81% in the first quarter,” the news site wrote.
Today we have a bit more information on the Wolfsburg automaker’s performance of late, and it’s, well, awful. From Reuters:
Volkswagen Group (VOWG_p.DE) on Friday said sales of its cars dropped by 23% on the year to 2 million cars in the January to March period.
In March alone, deliveries were down 37.6% overall at 623,000 vehicles, the figures showed, reflecting the coronavirus crisis which triggered plant closures and falls in sales as consumers were tied up at home in lockdown measures across the world.
But there is light at the end of the tunnel, provided that tunnel ends in China. From Reuters’ story titled “Volkswagen China boss sees sales in China on recovery course”:
China is VW’s single biggest market accounting for a big chunk of its profits.
Sales reductions due to the virus’s spread in China had slowed in April, the head of Volkswagen’s China business Stephan Woellenstein told reporters on a call.
Referring to the country’s car market overall, Woellenstein said the decline in sales in April was estimated to be between 15% and 20% from a year earlier, while the drop in March, at the height of the pandemic, had been 40%.
“If things continue as they do now, we could have reached last year’s level again in June,” he said. “We see a normalisation with view to the summer.”
5th Gear: Unsurprisingly, March Car Sales In Europe Were Bad
Turns out, car sales drop precipitously when nobody’s driving, dealership operations are restricted, and plants no longer build cars. In Europe, March was rough, as Reuters points out via data from the European Auto Industry Association. From the story:
In March, new car registrations dropped by 51.8% to 853,077 vehicles in the European Union, Britain and the European Free Trade Association (EFTA) countries, statistics from the European Auto Industry Association (ACEA) showed.
Sales fell in all EU markets, with Italy – hit particularly hard by the pandemic – reporting the biggest drop of 85.4%, while registrations tumbled by 37.7% in Germany, 72.2% in France and 69.3% in Spain.
Registration numbers aren’t necessarily perfectly reflective of sales, since it’s possible that someone who bought a car these days would have trouble registering it given shutdown measures. But make no mistake, the big issue is lack of car sales.
According to the story, BMW’s dropped 39.7 percent year-over-year for March, while Daimler is down 40.6 percent, VW dipped 43.6 percent, Renault plummeted 63.7 percent, and PSA Group tanked by 66.9 percent.
“The decline in registrations comes as the majority of car dealerships in Europe were closed during the second half of March as part of the measures to contain the pandemic,” Reuters writes.
Reverse: 1964: The Ford Mustang Is Born
From History:
The Ford Mustang is officially unveiled by Henry Ford II at the World’s Fair in Flushing Meadows, New York, on April 17, 1964. That same day, the new car also debuted in Ford showrooms across America and almost 22,000 Mustangs were immediately snapped up by buyers. Named for a World War II fighter plane, the Mustang was the first of a type of vehicle that came to be known as a “pony car.” Ford sold more than 400,000 Mustangs within its first year of production, far exceeding sales expectations.
Neutral: What’s Going To Happen On May 4?
Nobody actually knows what’ll happen on May 4, but feel free to guess.
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