The UAW doesn’t think an early May plant restart is a good idea, tornado damage to a key supplier’s facility could put Ford, Toyota, and FCA further against the ropes, Toyota says demand is actually higher than it expected, and VW is now building its ID.3 electric car. All that and more in The Morning Shift for April 24, 2020.
1st Gear: The UAW Isn’t Ready
By now, “May 4” should be well imprinted into everyone’s minds, as it’s the approximate date that a number of automakers have circled on their calendars to restart vehicle production after coronavirus shutdowns.
Just last week, automakers planning to get the ball back rolling on that day included Ford and Fiat Chrysler. But now, per Automotive News’ updated plant closure webpage, FCA’s plants are listed to reopen “sometime after May 3″ while Ford—as well as GM—are listed as “no date for restart.”
Meanwhile, nonunionized automakers seem to be sticking with the plans for early May, and this could put pressure on The Big Three, as Bloomberg writes in its story “Toyota to Tesla Nearing Plant Reopenings, Putting Pressure on Detroit.” It reads, in part:
Toyota Motor Corp., Tesla Inc., Hyundai Motor Co. and
Volkswagen AG are among the major automakers that have said they
intend to resume production in the first week of May. Even if
they stick to that schedule, many won’t restart all their
factories at once, and the facilities that do restore output
will run assembly lines at slower rates than they did pre-
shutdown.The non-unionized carmakers’ intentions add to the urgency
of talks General Motors Co., Ford Motor Co. and Fiat Chrysler
Automobiles NV are having with the United Auto Workers that
weigh the need to get back to business against the possibility
that reopening will sicken employees. Of the three, only Fiat
Chrysler is confirming plans to progressively restart with
government approval beginning May 4, a date the union thinks is
premature.
The story goes on, quoting UAW president Rory Gamble, who voices his concerns about an early May restart:
While the UAW likely won’t want to put its companies at a
competitive disadvantage or keep its members from earning bigger
paychecks again, the union also is opposed to reopening plants
early next month after two dozen union workers at Ford, GM and
Fiat Chrysler have died of Covid-19 complications.“We strongly suggest to our companies in all sectors that
an early May date is too soon and too risky to our members,
their families and their communities.,” Rory Gamble, the union’s president, said in statement Thursday.
Reuters’ story on the UAW’s hesitance to restart in early May further describes the thought behind Gamble’s remarks, writing:
“At this point in time, the UAW does not believe the scientific data is conclusive that it is safe to have our members back in the workplace. We have not done enough testing to really understand the threat our members face,” Gamble said.
Though Automotive News’ updated webpage does seem to imply that GM and Ford don’t have a set start date, and FCA’s plans don’t seem clear, either, Reuters mentions that unionized shops GM, Ford, and FCA do all appear to have some sort of plans in place for a restart fairly soon. Reuters mentions what GM is up to, writing:
Earlier Thursday, GM began notifying front line managers to come back to work next week to get trained on new safety protocols designed to prevent the spread of the novel coronavirus as workers return to plants.
[…]
GM will not rush to ramp up production, he said. “We think it’s smart to be limited and phased in our restart,” he added, saying it “has to be metered by demand.”
[GM’s global head of manufacturing, Gerald Johnson] did not say when GM plans to restart operations. Suppliers said before Thursday they expected the automaker to begin some production work May 4.
Here’s what Reuters says Ford is up to:
Ford Motor Co (F.N) is considering asking some workers to return next week to prepare for restarting production, a person familiar with the matter said. But Ford said it has not decided on a date for resuming production.
And here’s FCA, per Reuters:
Fiat Chrysler Automobiles NV (FCHA.MI) previously said it hoped to resume North American production on May 4. But the company said in a statement Thursday “we will only restart operations with safe, secure and sanitized workplaces to protect all of our employees.”
We’ll see if unionized shops end up starting production a bit later than non-unionized workforces, or if the UAW and The Big Three can come up with some kind of agreement to get limited production started. That or if non-unionized automakers push their dates back. It’s anyone’s guess at this point.
2nd Gear: Tornado Damage To A Key Supplier Could Slow Down Ford, FCA, And Toyota Even More
Coronavirus is already causing automakers grief, but to add to that, a tornado earlier this month caused major damage to a Borgwarner facility that supplies transfer cases for high-volume Ford, Toyota, and Ram trucks.
The Detroit Free Press gives the details:
A tornado that ripped apart the roof and interior of a BorgWarner factory in Seneca, South Carolina, and killed a security guard stationed outside on April 13 has left Fiat Chrysler Automobiles, Toyota and Ford Motor Co., wondering when operations will return to normal.
The three automakers count on the Auburn Hills-based parts supplier for an essential car part used in the bestselling Ram 1500, Toyota Tundra and Ford F-150, Super Duty trucks, Expedition, Explorer, Transit van, Lincoln Navigator and Lincoln Aviator.
[…]
The item may not sound like a big deal — what’s called a transfer case — but it’s so important that Ford alerted the Securities and Exchange Commission on Friday that the “company’s assets” had been damaged at the enormous drivetrain plant.
Those are some ridiculously high-volume vehicles on that list. Ford F-150, Ram 1500, and Toyota Tundra all sell in annual volumes of well over 100,000. And though some of those are two-wheel drive machines that don’t need a transfer case, this is a critical part for some very important vehicles.
This supply issue may not be as big of a deal given that automakers have put a halt to production, but once plants get back up and running, a lack of transfer cases could be a significant problem.
Car and Driver spoke with a BorgWarner representative, who told the auto website about the company’s plans to get the facility back up and running. From the story:
Michelle Collins, a spokesperson for BorgWarner, told Car and Driver that the company is “focused on developing plans as quickly as possible to bring the site back online, which will include contingency plans in the event the rebuilding effort is estimated to take longer than the sustained closure due to COVID-19.”
3rd Gear: How Toyota Plans To Restart Production To Meet Higher-Than-Expected Car Demand
Automotive News spoke with the head of manufacturing for Toyota’s North American operations, and he provided some insight into how Toyota—whose production has been frozen since the last week of March—plans to fire things back up starting on May 4. As AN reports:
“This is more of an opening day,” cautioned Chris Reynolds, head of manufacturing for Toyota Motor North America. While the automaker has sufficient stores of parts on hand to start building vehicles once workers return to plants, Reynolds said Toyota would take time “to shake off the rust” with workers who haven’t been on the job in more than a month, and to implement and train workers in extensive new safety procedures that will both slow the run rates of assembly lines and hopefully help keep them safe.
He described some safety precautions the automaker will implement as it gets car production moving next month, saying:
“I would be surprised if a car rolls off a line anywhere on May 4,” Reynolds told reporters on a conference call Thursday. The new procedures — including staggering entrance and exit times to avoid crowding, altering workspaces to allow workers to be separate from one another, and placing physical barriers to separate workers in close proximity — “are going to take some time, and we’re going to take the time.”
What’s especially interesting is that, per Reynolds, car demand is actually higher than expected. Toyota apparently has decent inventory to hold dealers over for a little while, but this demand is all the more reason to get back to building cars. From the story:
But the company will prioritize its ramp-up on products with strong sell rates, including pickups, crossovers and SUVs, meaning those domestic factories could see a quicker return to more normalized production rates than some sedan plants.
“We are seeing that the rate of sales is about 20,000 units ahead of our plan. So that’s one of the factors that is going into our decision to try and restart on May 4,” Reynolds said. “We’re seeing a demand in particular regions of the country that, while it’s substantially off from pre-COVID levels, it’s more robust than we thought.”
4th Gear: Volkswagen’s ID.3 Is Back In Production
Volkswagen has in some ways bet the farm on its MEB platform, which presents more than one issue for the post-Dieselgate company. MEB will underpin a number of electric vehicle models that probably cost quite a bit to produce (relative to an ICE vehicle), and that probably wouldn’t sell in particularly high volumes even if the world weren’t struggling economically.
VW announced a while ago that it would spend over a billion Euro to turn its Zwickau plant in Germany into an MEB-only factory, so you can bet VW wants to sell as many of these machines as it can to recoup that investment. That’s why the plant shutdown has been such a big deal, and probably why VW has been so keen to get things back up and running.
As of yesterday, Zwickau’s vehicle production is underway, but at a slower pace than before, and with new safety measures for employees, as the Detroit News writes:
The company said the plan was “health before production numbers” as the assembly line started up after a five-week closure under new health rules agreed with worker representatives that include wearing face protection where a 1.5 meter (six-foot) distance can’t always be observed. Other measures include regular cleanings. Distancing is required in washrooms, changing rooms and lunchrooms.
At restart the plan was to make 50 cars per day, about a third of previous output.
5th Gear: Stimuli Are Coming
In a 388-5 vote, the U.S. House of Representative passed a coronavirus aid package worth $484 billion, and is shipping the bill to president Trump to be signed, Bloomberg reports. The main aim is to protect small businesses, and while this package doesn’t apply specifically to cars, it will affect the auto industry as well as countless others, so it’s worth mentioning.
Per Bloomberg:
Trump is expected to swiftly sign the bill, the fourth coronavirus-related spending measure since early March. This bill would replenish funding to the Paycheck Protection Program for small businesses and provide other spending for hospitals and virus testing.
Several trade groups, including the National Automobile Dealers Association and the American International Automobile Dealers Association, advocated more funding for the program and sent a letter to Congress last week asking it to “act expeditiously” to assure the program has the resources it needs to help the country’s small-business economy through the COVID-19 pandemic.
“This is really a very, very sad day,” said Speaker Nancy Pelosi, giving a less-than-triumphant sendoff to the bill on a day when about 4.4 million additional workers were reported to have applied for unemployment benefits last week. “Our nation faces a deadly virus, a battered economy,” and hundreds of thousands of ill people. “Some died, and millions out of work,” said Pelosi
Bloomberg describes the content of the bill, writing:
The final bill includes $320 billion to make new loans under the Paycheck Protection Program, which provides forgivable loans to small business that keep employees on the payroll for eight weeks. It sets aside $30 billion of the loans for banks and credit unions with $10 billion to $50 billion in assets, and another $30 billion for even smaller institutions.
The measure includes $60 billion in loans and grants under a separate Economic Injury Disaster Loan program, and makes farms and ranches eligible for the loans. Also, there is $75 billion for hospitals, with a significant portion aimed at those in rural areas, and $25 billion for virus testing.
The testing funds include $18 billion for states, localities, territories, and tribes to conduct COVID-19 tests, $1 billion for the Centers for Disease Control and Prevention, and $1.8 billion for the National Institutes of Health. As much as $1 billion would cover costs of testing for the uninsured.
Reverse: 1983: Legendary Endurance Racer Dies When His Wing Breaks At High Speeds And He Loses Control
From Hagerty:
GERMAN ENDURANCE DRIVER KILLED IN CRASH: Rolf Stommelen, endurance racing ace and frequent rival of the great Hurley Haywood known for his three wins for Porsche at the 24 Hours of Daytona, is killed when the wing comes off of his Porsche 935L at the Six Hours of Riverside in Riverside, Calif.
Neutral: How Do You See This Auto Industry Restart Actually Working?
The dynamics of restarting the auto industry are complex. There are so many factors in play. There’s vehicle demand, which is depressed right now. There’s a stagnant supply chain, which has to be remedied before any assembly plant can build cars. Then there’s dealerships that need to get back up and going.
There are lots of moving parts beyond just restarting an assembly line. Where do you see the major bottlenecks, and how long do you think it’ll take to get the car industry producing vehicles as quickly and efficiently as it was prior to covid?
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