Automotive

Mary Barra Faces Heat From Congress on the GM Plant Closings but Isn’t Backing Down


Mary Barra speaks with reporters on Dec. 5 in D.C.
Photo: J. Scott Applewhite (AP)
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Mary Barra goes to Congress, Tesla’s China factory plans start to firm up, and a theory on Carlos Ghosn. All of this and more in The Morning Shift for Thursday, Dec. 6, 2018.

1st Gear: GM Tries to Explain Itself

General Motors has been taking the heat for several days now after delivering bad news that it might close four U.S. factories next year—a move that might have violated its union contract. The grand plan, in sum, also calls for slashing 15,000 workers, at a time the automaker’s doing pretty damn well.

Expectedly, of course, this pissed off a number of politicians, who demanded CEO Mary Barra come to Congress and explain why it’s happening. Barra, on Wednesday, tried.

Per Reuters, emphasis mine:

General Motors Co (GM.N) Chief Executive Mary Barra on Wednesday vowed to keep an “open mind” about the future of an Ohio plant that will lose vehicle production, but warned the Detroit automaker has excess capacity and did not suggest the company was reconsidering the plan.

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Barra deemed the talks productive, according to The Detroit Free Press:

In a statement released Wednesday evening, Barra said: “I had very constructive meetings with members of Congress from Ohio and Maryland. I share their concerns about the impact the actions we announced last week will have on our employees, their families and the communities.I had very constructive meetings with members of Congress from Ohio and Maryland. I share their concerns about the impact the actions we announced last week will have on our employees, their families and the communities.

If that comes across like a kind gesture to keep lawmakers at bay, it probably is.

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But naturally Ohio’s senators, in particular, are pissed, because of perceived betrayal of American workers not that long after the GM bailouts:

After meeting with U.S. Sens. Sherrod Brown and Rob Portman, both of Ohio, Barra, in her first public appearance since last week’s announcement, said GM is working with the UAW to determine how best to use the so-called “unallocated” plants and how to train workers to put them into positions open elsewhere.

Brown, a Democrat, and Portman, a Republican, said they both pressed Barra to get a new product in Lordstown. Knowing that GM is set to enter negotiations with the UAW for how and where its workforce will be placed, Brown said he’s looking for a solution “sooner rather than later” and that he expects GM to stand up for its workers.

“The government saved this company,” he said, referring to the rescue of General Motors in 2009 and 2010.

Portman said he spoke to President Donald Trump again on Wednesday about the GM cuts and that he “is very committed to keeping this assembly plant in Ohio.” Trump has threatened GM with tariffs and a loss of subsidies for electric vehicle sales if it follows through on the cuts.

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GM’s already gearing up for talks with the United Auto Workers next year, which could determine the fate of these plants. It’s expected that Barra would try to tamper the mood now, because 2019 is surely going to be even more heated.

2nd Gear: Tesla May Make Cars in China by Late 2019

Tesla’s plan for a new factory in China is accelerating at a rapid pace, and if you take the word of local officials in Shanghai, it could be building cars there by the third quarter of next year, reports Bloomberg.

The mayor of the city, Ying Yong, visited the project site in the Lingang development zone in southeastern Shanghai and encouraged Tesla to accelerate construction, according to a statement on the city’s WeChat social media account Thursday. The plant, dubbed Gigafactory 3, will be the biggest ever foreign-invested manufacturing project in Shanghai. A Tesla representative didn’t have an immediate comment.

The Palo Alto, California-based company has secured more than 200 acresof land for the China factory, which is expected to cost several billion dollars to build. Tesla’s first overseas plant will help the electric-car maker avoid some of the risks involved with importing vehicles, such as higher tariffs caused by the trade tensions between China and the U.S.

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Having a factory up by next year is quite an aggressive goal for a company with a history of setting aggressive goals. We’ll see.

3rd Gear: Ghosn and His Retirement

Embattled former Nissan-Renault boss Carlos Ghosn’s detainment in Japan remains ongoing, over alleged misreporting of his income from Nissan to regulators. The saga itself is strange, as a curious observer has to wonder how Nissan could’ve missed this for so long.

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Bloomberg, citing unnamed sources close o the investigation, came up with a theory, and it’s very, uh, weird?

Two weeks after Tokyo prosecutors arrested Carlos Ghosn for allegedly under-reporting his compensation, that question is still unanswered. What is certain is that Nissan Motor Co.’s own corporate governance rules gave unusual powers to its former chairman, a business celebrity who was given extraordinary deference for having once rescued the automaker from financial ruin. Those powers included near-total say over how much — and how — he was paid, according to Nissan’s own internal rules.

Several people familiar with the prosecutors’ investigation now say the probe appears to hinge on a relatively arcane point of accounting — whether retirement payments were properly booked. Whether or not Ghosn broke Japan’s securities law by feeding the wrong numbers to Nissan’s board and its accountants (at this point, the allegations are unproven), corporate governance expert Jamie Allen says the deeper question is how anyone could have gotten away with something like that.

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Compared to anyone known as a “corporate governance expert,” I’m a dumbass, and even I had the same thought as Bloomberg’s source. Retirement payments being improperly booked? Is that even illegal?

We still don’t know, and Ghosn’s still under arrest. What a wild situation.

4th Gear: Toyota Scared by Trump’s Tariffs

President Trump is still toying with the possibility of imposing tariffs on automobiles, a possibility that unsurprisingly scares the shit out of the auto industry. Toyota reemphasized its thoughts on Wednesday to a crowd in Detroit, reports Bloomberg.

Toyota Motor Corp. executives still fret that President Donald Trump’s proposed auto tariffs could come to pass and cut U.S. auto sales by about 2 million cars a year.

Jim Lentz, chief executive officer of Toyota Motor North America, told the Detroit Economic Club Wednesday that Trump’s proposed use of section 232 of the Trade Expansion Act to put 25 percent tariffs on foreign cars would jack up car prices and undercut sales. The move would especially hurt foreign carmakers like Toyota, he said.

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Lentz reportedly added that he’s trying to stay “hopeful.” What an optimistic guy.

5th Gear: VW Plans to Cut Costs

Volkswagen, in the beginning stages of a massive, ambitious push into the electric vehicle market, is planning to trim costs by some $3.4 billion, according to Reuters, a move it’s justifying as a way to increase profit margins.

Still battling to recover from a 2015 scandal over emissions test cheating, the German automaker has been cutting costs to fund an ambitious shift to electric cars and automated driving.

A key goal is to improve margins at its mass-market VW brand, its largest division by sales, but which has long lagged the profitability of rivals such as Japan’s Toyota due in part to high labor costs at its German plants.

“By 2020 we will achieve three billion euros in cost savings, and now aim for a further three billion euros by 2023,” Arno Antlitz, the board member responsible for finance at the VW brand, told a press conference in Wolfsburg, Germany.

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You have to fund a $40 billion investment in electric cars and such somehow, I suppose.

Reverse: Damn

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Neutral: GM’s ‘Open Mind’

How do you expect this to go down? Do you think GM might keep an extra plant around to appease Congress?

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