'The Danger Is Growing' For Germany's Auto Industry

Today on Speed Lines: We examine the cost of electrification on German auto industry jobs. 

Volkswagen

Welcome back to another edition of Speed Lines, The Drive's morning news roundup about the auto industry, mobility, tech, and the economy. Today we're talking almost exclusively about the changes coming to the car business related to electrification. 

I hope you are as excited as I am to discuss these things.

Warning Signs Are Here For German Carmaking Jobs

The German auto industry is a manufacturing powerhouse that sustains hundreds of thousands of jobs, not just at car plants but at suppliers and support companies as well. It's been a reliable and stable source of employment there for many decades. 

But the ongoing transition to electric vehicles—something that BMW, the Volkswagen Group and Mercedes-Benz are embracing wholeheartedly—stands to disrupt the stability of that job market. Simply put, EVs will require less assembly work than complicated internal combustion engines, which in the long term will mean fewer manufacturing jobs.

Mix that in with declining new car sales across the board globally and the recent supply chain disruption from the coronavirus outbreak and you have a recipe for a long-term employment disaster, writes Reuters in this sobering report on jobs in the German auto business:

The German auto sector is expected to cut nearly a tenth of its 830,000 jobs in the next decade, according to the VDA industry association.

Some think-tanks and government officials fear that the toll will be higher as electric cars provide less assembly work than combustion engine vehicles, simple work steps are replaced by automation and companies relocate production.

This is not yet 1970s Detroit, a U.S. car center that was plagued by urban decay as factory relocations, cheaper imports and higher fuel prices destroyed jobs.

But the danger is growing, automotive companies, workers, as well as regional and labor leaders, told Reuters.

As in America, working in the auto sector in Germany was long a path to a stable, middle-class life, as enjoyed by the young couple in the lede of that story. Now they're facing unemployment as their Michelin plant stands to close down:

A malaise in Germany’s mighty automobile industry, caused by weaker demand from abroad, stricter emission rules and electrification, is starting to leave a wider mark on Europe’s largest economy by pushing up unemployment, eroding job security and hitting pay.

“It’s a nightmare. This is pulling the rug out from under our feet,” said Kristin Schmitt, 40, of the plant closure in the Bavarian region of Bamberg, one of Germany’s auto supplier hubs.

The couple, who have three children, still hopes managers at their Michelin tire factory change their mind, but the risk of unemployment looms large - and not only for the Schmitts.

As that story notes, Germany's not in "1970s Detroit" levels of panic yet. But between the sales decline and uncertain ownership models as automakers embrace "mobility" and car-sharing, it is very possible that Germany has passed the peak of its new car production. 

Automakers and unions alike in Germany are requesting more state-backed employment programs to offset that trend. But these trends are proof that the shift to EVs won't be clean and painless for everyone. 

New Nissan CEO: 'Fire Me Immediately' If Things Don't Get Better

If you find yourself bored and uninspired at your job, as all of us sometimes do, just be thankful you are not the new CEO of Nissan.

Makoto Uchida will be responsible for a turnaround at Nissan arguably as tough as the one his now-fugitive former boss Carlos Ghosn pulled off in the early aughts. There's an aging car lineup, the fallout from the Ghosn scandal, the company's first quarterly net loss since 2009 and the need to pay for the EV shift. Job number one is fixing the sagging North American market, and so Uchida warned steep cuts are on their way.

If shareholders don't like what he's doing, he said, they're free to fire him. From Automotive News:

“We will make sure that we steer the company in an effective way so that it is visible in the eyes of viewers. I will commit to this. If the circumstances remain uncertain you can fire me immediately,” he said. “You can count on Nissan to change for the better.”

Uchida reiterated that the new blueprint will be announced in May, in order to give Nissan time to coordinate the next steps with alliance partners Renault and Mitsubishi Motors.
 
But at an extraordinary shareholders' meeting here on Tuesday south of Tokyo, some attendees voiced exasperation that the plan was not coming together earlier and already delivering results.
 
"That's a little too late, isn't it?" one shareholder complained about the May timeline.
 
Uchida pleaded for patience saying his team was focused on lasting results. Already, he noted, Nissan is reining in costs amid falling sales. The actions include a round of voluntary buyouts across Nissan's U.S. operations, but Uchida hinted more drastic cuts are on the way.

I hate to say this, but if I had to call it, I'd guess that next-generation Nissan Z is about to get the axe. That's just a prediction on my part, not anything I've heard directly or indirectly. But if the company must face steep cuts, one imagines a two-seat sports car could be on the chopping block in this market. I hope I'm wrong!

New Ford COO's Cleanup Job

Speaking of struggling automakers, let's talk about Ford, which also had a rough 2019 and instituted a surprise management shakeup to fix things. Among other issues, Ford can't convince investors and analysts that it can weather an economic downturn and make that shift to mobility and EVs. Its abysmal stock price reflects that.

So, as Automotive News reports, new COO Jim Farley's job will be to better marry the "core" operations at Ford with the "emerging" ones—you know, conventional cars and trucks with the mobility stuff—which often felt disconnected from one another or even at cross-purposes:

Farley's many responsibilities include oversight of product development, purchasing, manufacturing, marketing, sales, service and quality — in addition to his leadership of Ford Smart Mobility, Ford Autonomous Vehicles and the company's partnership with self-driving startup Argo AI.

"There will be no chasm in this relationship between all those capabilities, and that's the advantage we get with this move," Hackett said.

Farley's job will be to not only launch popular new products, but also to integrate new vehicle architectures with software that will allow Ford to collect data, offer over-the-air updates and better prepare for an autonomous future.

While that has essentially always been Ford's goal under Hackett, running the business along two parallel tracks proved troublesome, even with profit machines such as the F-series franchise.

Farley is being touted as a likely CEO contender when Jim Hackett gets ready to retire, or if the board decides he's not fixing things quickly enough. We'll see if he can get things right.

Singapore Wants To Ban Internal Combustion Vehicles By 2040

One more item today on the EV shift: Singapore joins the list of nations aiming to ban ICE vehicles entirely in the coming years. Here's Reuters

Singapore aims to phase out petrol and diesel vehicles by 2040, making a bigger bet on electric cars as part of its efforts to cut greenhouse gases and fight climate change, the finance minister said on Tuesday.

The wealthy city-state of 5.7 million, which is hiking investment in flood defenses, joins Norway, Britain and others in setting a target to cut the use of vehicles with combustion engines.

“Our vision is to phase out ICE (internal combustion engine) vehicles and have all vehicles run on cleaner energy by 2040,” Finance Minister Heng Swee Keat said in his budget speech.

Singapore is small and lacks a robust EV charging infrastructure, something that, as that story notes, Elon Musk has been critical of. But the quoted finance minister says climate change and rising sea levels "threaten our very existence," and so it has to do something to help mitigate that. 

On Our Radar

Right-Hand Drive C8 Corvette Still Happening (Motor1)

Tesla in talks to use CATL's cobalt-free batteries in China-made cars, report says (Automotive News)

Lots of Cities Set Climate Goals. These Cities Are Meeting Them (Bloomberg)

Your Turn

What's going to be the most painful part of this transition toward EVs? And who faces the worst of that?