Good morning! It’s Tuesday, September 10, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.
1st Gear: GM Needs White Collar Workers To Get With The Program
General Motors wants its salaried white collar workforce to know it’s extremely serious about the transition to selling all electric vehicles in the next decade. Anyone who can’t or won’t deliver on that vision could be shown the door or should quit on their own. From the Detroit Free Press:
That’s how several industry watchers interpret a series of changes GM has made this year affecting its white-collar workforce. And that interpretation is correct, according to a person inside the company who is familiar with GM’s motivations behind the changes. The person asked to not be named because they are not authorized to share that information publicly.
GM’s changes this year include:
– An announcement to move and downsize its global headquarters.
– Changing how it evaluates salaried employees’ performance.
– Revising the metrics by which it determines bonuses.
– Revoking some more employees’ fully remote work privileges.
GM has said moving headquarters creates cost efficiency, and the other changes are meant to boost employee productivity and collaboration.
But there’s more to it, industry experts said. They see the changes as a message to salaried employees: GM is serious in its transition to an all-electric future, and these moves will winnow out those who aren’t on board or are not top-notch performers. And while the explicit goal may be to improve performance, the implicit gain could be reducing headcount while avoiding an expensive buyout program.
General Motors says it plans to cut $2 billion from its annual costs by the end of this year, and unfortunately, job cuts will be part of the savings. Last year, the automaker cut 5,000 jobs through buyouts, and this August it announced it was cutting two percent of its global IT workforce.
These hardass tactics from GM definitely come with a risk, according to experts who spoke with Freep.
The new performance plan could stifle innovation if employees are afraid to try new things for fear of failing and being graded a low performer. Also, GM runs the risk of talented employees quitting in frustration, Gordon said, but it is a risk GM is willing to take if it thinks it has too many workers.
“In any industry where profit margins go down and labor costs go up, you can predict that companies will use automation to reduce the number of production workers they need, and use AI and outsourcing to reduce the number of white-collar workers,” [Erik] Gordon [,a professor at the Ross School of Business at the University of Michigan] said.
GM says this isn’t a cost cutting move, but it could still definitely benefit GM financially.
Asked to comment for this story, GM spokesman Kevin Kelly said, “We’re committed to making sure our teams have the right skills, are working effectively and rewarded appropriately for delivering world-class vehicles to our customers.”
The person familiar with the company’s plans said the moves have less to do with cutting costs to hit the $2 billion target by year-end than making GM a high-performance company that is in line with other top-performing companies, particularly those in the technology sector. The goal is to be more nimble, efficient and collaborative with a focus on rewarding high-performing employees, this person said.
“This is not an explicit cost-cutting move, but it could benefit the company financially,” the person said, noting that if low performer quit or are let go that may result in a cost savings if the company does not replace them.
There are, of course, some pretty major pitfalls and hurdles GM will have to clear with its new policies. Similar policies in the past haven’t worked out for other automakers.
GM’s new performance plan, its new bonus metrics and other moves could backfire, however, if the details are not outlined specifically and execution of the policies is based on subjective manager judgment, said Steve Melnyk, a recently retired supply-chain management business professor from Michigan State University.
Also, GM has to allow for mistakes. That’s because more than a decade ago, Range Rover had a performance plan to cull the bottom 10% of its workforce each quarter, but it did not differentiate between “smart failures and dumb failures,” Melnyk said. A smart failure is when an employee does everything right, but something didn’t work out. A dumb failure is when the employee made careless mistakes. If anyone who fails, regardless of a dumb failure or a smart failure, is put in the bottom 5%, the result will be an end of creativity.
“Range Rover was late to a lot of new developments because people didn’t want to take risks and fail,” Melnyk said. “Successful companies let people take risks and allow for some failure.”
Melnyk also said performance measurement is one of the most important and least understood concepts, but how it is handled can impact morale.
“And If you want to create a collaborative environment, you have to be careful, you don’t want to pit people against each other,” Melnyk said. “Also, remember that we don’t all develop at the same rate.”
This only scratches the surface of what GM has planned for its workers. You should really head over to the Detroit Free Press for an even broader look at the automaker’s plans. Of course, you should do this after you finish The Morning Shift.
2nd Gear: Tesla Gets A Break On Chinese Tariffs In EU
The European Union is lowering proposed final tariffs on Tesla (and a few other automakers who are building electric vehicles in China) after taking into account “submissions” made by the companies. It’s a big break for Tesla especially because it’s getting the biggest tariff decrease out of anyone. From Reuters:
Tesla’s proposed tariff rate will drop to 7.8%, from 9%, the source said. For BYD, there was no change to its 17% tariff. For Geely, the new rate would be 18.8% from a previous 19.3%. A peak rate of 35.3% would apply to SAIC and other companies not cooperating with EU investigation, the source said.
These tariffs are on top of the EU’s standard 10% import duty for cars.
The European Commission, which is conducting the anti-subsidy investigation into EVs made in China, declined to comment. Tesla did not immediately respond to a Reuters’ request for comment.
Last month, the EU set out its initial proposal for final duties, establishing a separate rate of 9% for Tesla EVs, a sharp reduction from the higher duty that will apply to all cooperating companies – now set at 20.7%.
This tariff is due to apply to certain Chinese producers such as Chery, Great Wall Motor Co and NIO and a number of joint ventures between Chinese companies and EU automakers.
China and the impacted companies were given 10 days to submit their comments to the Commission. It then took those comments into account when establishing revised tariff rates.
Now, these proposed final rates are subject to a vote by the EU’s 27 states. They’ll end up being implemented unless a qualified majority of 15 EU members that represent 65 percent of the EU’s population votes against them.
3rd Gear: BMW Knocks Back 2024 Profit Targets
BMW trimmed its profitability guidance for 2024, blaming technical problems that led to delivery stoppages for its cars as well as sluggish demand in China.
Previously, BMW pegged its earnings before interest and taxes (EBIT) between eight and 10 percent for 2024. Now, that number is being kicked back to between six and seven percent. Not ideal. From Reuters:
BMW said the downward revision was triggered partly by headwinds in its core automotive segment resulting from delivery stops and technical actions linked to the Integrated Braking System (IBS), which is provided by Continental.
In a statement, Continental said that only a “small proportion” of the braking systems it produces and supplies to BMW will be partially replaced because of an electronic component that may be impaired.
[…]
BMW also flagged ongoing muted demand in China affecting sales in the country, joining the group of automakers facing difficulties in the world’s second-biggest economy.
The company also forecasts a slight decrease in deliveries, it said, without providing a specific figure, after having previously expected an increase.
The technical actions related to the integrated braking systems impact over 1.5 million vehicles and will result in additional warranty costs in a high three-digit million amount in the third quarter, the company added.
I’m really starting to get the vibe that non-Chinese automakers didn’t account for the fact that Chinese car buyers seem to prefer cars built in that market. I’ll be interesting to see how they adjust to win folks back in one of the most important car markets in the world.
4th Gear: GM Takes BrightDrop Up A Notch
General Motors in Canada has laid out a plan to increase production at its CAMI Assembly plant starting in the first quarter of 2025 all in an effort to get more BrightDrop electric vans out the door. The move sets a path to returning about 1,300 hourly workers to the Ontario plant to full-time. It comes following several years of up-and-down production that left most of that workforce part time. From Automotive News:
In an update to members Sept. 9, Local 88 leadership said it was “pleased and relieved” by the automaker’s commitment to a “long overdue return to a two-shift operation.”
[…]
GM Canada did not confirm or deny the plan to return the plant to two shifts, but it said the decision to merge the BrightDrop brand with Chevrolet could create the need for higher output.
“Our production schedules are based on market demand, and we see opportunity for growth potential under this new retail strategy,” company spokesperson Natalie Nankil said in an email.
The move is a big win for the Unifor union.
The two parties held the traditional handshake ceremony kick-starting talks in London, Ontario, just west of Ingersoll, on Sept. 9.
The current three-year contract between the two parties expires Sept. 17 at 10:59 p.m. Eastern time, leaving a little more than a week for negotiators to hammer out a deal before workers could walk off the job.
[…]
Along with raising wages and improving pensions, Unifor President Lana Payne said the latest round of talks will center on aligning the mismatched bargaining cycles.
“These negotiations will focus squarely on securing workers the economic stability our members deserve and that includes aligning CAMI workers with the rest of our GM membership to eliminate the historical lag in wage increases and other negotiated benefits,” she said in a release.
Since the height of the COVID-19 pandemic, CAMI workers have been faced with significant downtime and a slow ramp up of BrightDrop van production after it started in late 2022.
Battery shortages closed the Ingersoll site for nearly six months between late 2023 and early 2024. CAMI resumed production in April, but only on a single shift, leaving its hourly van production staff of about 1,100 working two-weeks-on, two-weeks-off.
The opening of a new section of the plant dedicated to building Ultium battery modules and packs early this year has been one bright spot for the plant’s workforce. About 200 Unifor members are now building batteries that will go into both CAMI’s electric vans and EVs built at other GM plants in North America on three shifts.
In August, GM said its move to tuck BrightDrop under the Chevrolet banner will allow the business unit to capitalize on Chevy’s large dealership network and help land new fleet customers. Previously, the vans were only available through a select few North American retailers, including the Toronto-area’s Roy Foss Automotive Group.
I’m very excited to see where BrightDrop will end up in the grand scheme of the automotive industry. I’ve yet to see one in person, but hopefully, that’ll change soon as more of these electric vans roll off the assembly line.