New cars are expensive, Ford is retreating from South America, and Carlos Ghosn. All that and more in The Morning Shift for June 29, 2021.
1st Gear: The Markup On New Cars At The Moment Is Pretty Big
The Wall Street Journal took a look at the situation and found that dealers are marking up cars that, in a normal market, would probably not get marked up. They report that around 75 percent of new cars are being sold for the manufacturer’s suggested retail price or higher. As far as used cars go, of course, it’s also a seller’s market and has been for a while now.
“I was shocked,” said Ken Baird, a 61-year-old Boca Raton, Fla., resident who was recently shopping for a Kia Telluride. The window sticker on the particular model he was looking at read $45,000, and he said he offered to pay $3,000 over that knowing the vehicle was in high demand.
But the dealership wanted $10,000 above the original sticker. “They said, ‘I’ll get the $55,000 from someone else,’” Mr. Baird said.
He ended up buying a Toyota Highlander from another dealership, paying the manufacturer’s suggested retail price but no more.
A Kia spokesman said the company’s dealers are independent franchisees and react to market demand.
At least one dealer the WSJ talked to is capable of thinking long-term.
Some dealers say they avoid asking for more than the sticker price because it can be a turnoff for buyers and hurt existing customer relationships.
“It’s a short-term benefit for a long-term detriment,” said Earl Stewart, a Toyota dealer in Florida. “You might sell them one car today, but you won’t ever sell them another car,” he said.
It’s probably best to put off any big purchases like a new car or home for at least the next nine months or year.
2nd Gear: Carlos Ghosn’s Accomplices Have Some Regrets
The extraordinary escape of former Nissan CEO Carlos Ghosn included some help. Those accomplices were eventually extradited to Japan, where, according to Bloomberg, they now have second thoughts about the whole thing.
“I helped Carlos Ghosn escape Japan while he was on bail,” Michael Taylor said on Tuesday, his voice quavering. It was the first time he spoke at length in court. “I deeply regret my actions and sincerely apologize for causing difficulties for the judicial process and for the Japanese people.”
At a hearing two weeks ago, Michael and his son Peter agreed with assertions by prosecutors that they helped Ghosn escape the country at the end of 2019. They were extradited to Japan from the U.S. earlier this year and face a maximum of three years in prison on charges of harboring or enabling the escape of a criminal.
“After more than 400 days in jail, I have had a lot of time to reflect,” Peter Taylor said. Both stood and bowed deeply after making their statements.
The duo, dressed in dark suits and white shirts, arrived in handcuffs, flanked by guards. Michael Taylor was questioned by his attorney for about 18 minutes, followed by questioning by one of the prosecutors. He described how he came to learn that Ghosn wanted to escape, and that Ghosn’s cousin was his wife’s sister-in-law, who pressed him to help the former auto executive.
Ghosn is in Lebanon and seems unlikely to ever face consequences because of the ordeal, which may or may not have been a massive conspiracy.
3rd Gear: The UK Is Fretting Over Auto Industry Job Losses Because Of The Shift To Electric
So much of auto manufacturing has been automated and so many jobs have already been lost that it’s hard to see even more losses. Still, people have been saying for awhile now that the shift to EVs will mean fewer auto industry jobs. This is somewhat obvious when you look at a stripped down EV and compare it to an ICE car, as there are far fewer parts, and thus fewer people needed to make those parts.
Anyway, people in the UK are fretting, per the Financial Times.
More than 90,000 automotive jobs are at risk if the country does not build enough battery factories to support carmaking in the UK, the industry’s trade body has warned.
Building only one new battery plant by 2030 would push the industry into a decline, leading to lost jobs and factory closures, the Society of Motor Manufacturers and Traders said in a report on Tuesday.
High energy costs, low government incentives compared with other nations, and the friction of post-Brexit trade all mean the industry may “underperform its potential”, according to the SMMT.
The news isn’t all bad, however.
The industry will need factories capable of building 60 gigawatt hours’ worth of batteries a year — the equivalent of three new Nissan sites — by 2030 just to remain at its current size, according to the SMMT report.
Building up to 80GWh of capacity would create up to 40,000 new jobs across the industry and spur further investment, it said.
4th Gear: Ransomware
Ransomware is the new worry for pretty much every company nowadays, especially after the ransomware attack on the East Coast’s biggest oil pipeline wreaked a bunch of havoc in May. Automotive News says that automakers also have reason to be worried.
Almost half of 100 automotive manufacturers and more than 17 percent of automotive suppliers surveyed by cybersecurity ratings provider Black Kite are at high risk for a ransomware attack. That’s the latest from the provider’s new report on the topic.
If left unchecked, cyberattackers can infiltrate unsecured corporate IT systems and install malware, restricting companies’ access to crucial data and holding it for ransom. Black Kite says more attacks could exacerbate current industry headwinds, such as parts shortages and production stoppages.
“If that happened and it took [an automaker] offline and they had to make the decision — ‘Well, do we pay a $5 million ransom to get our systems back, or do we have the procedures in place to be able to restore our systems?’ — it becomes a very complicated business decision that no CEO really wants to face,” said Bob Maley, Black Kite’s chief security officer.
An estimated 71 percent of automotive chief information officers indicated they will ramp up cyber and information security investments in 2021, according to the report.
Unrelatedly, Black Kite would also like to sell you its services. Stories like this make me wonder who is holding who ransom; there are the actual ransomware hackers, of course, but then there are also cybersecurity firms who are like, “Nice business you got there, would be a shame if anything happened to it.”
5th Gear: Ford’s South America Operations Continue Their Decline
Ford is stopping production in Brazil and its auto lending department there and in Argentina is in the middle of ceasing to exist. According to Reuters, that will cost Ford a lot of money.
Ford Motor Co (F.N) said on Monday its financial services arm, Ford Credit, would wind down operations in Brazil and Argentina and take a non-cash charge of up to $375 million.
Ford said it expects most of these losses, which include $365 million related to foreign currency, to be recognized in 2021, though the timing for the completion of the shutdown is uncertain.
The company said it would pay about $10 million in cash for employee separations.
Ford has undoubtedly convinced itself this move is good long-term, and maybe it is, though retreating from a market never looks good.
Reverse: Buick Electra
Neutral: How Are You?
My car is at the dealer because of a recall. They called and left a confused voice mail yesterday morning and then I called back and was assured that someone would call me back. Of course, no one ever did, and the status of my car — possibly it’s been flipped or stripped for parts in the last 24 hours, who knows — is unclear. You know, occasionally, I’ll say something strident like “dealers are useless pieces of shit” and then I’ll feel bad about it momentarily. Then something like this will happen.