Around two-thirds of Ford’s dealer network in the U.S. has signed up for the company’s electric-vehicle certification program, the price of batteries for electric cars is on the rise for the first time in over 10 years, and United Airlines is looking at Delta’s pilots’ contract as the template. These stories and more in The Morning Shift for Tuesday, December 6, 2022.
1st Gear: Most Ford Dealers are in on EV Certification
Ford says that nearly two-thirds of its U.S. dealer network are on board with the company’s pricy electric-vehicle certification program. The automaker’s CEO, Jim Farley, says 1,920 dealers have signed on.
He added that 1,659 went the “Certified Elite” route. That program requires investing as much as $1.2 million at the dealership. A further 261 dealers went with the cheaper “Certified” status. That program only requires dealers to spend up to $500,000 for EV enhancements. However, that level caps EV sales at 25 per year. From Automotive News:
Ford has about 3,000 dealerships in the U.S. The company said those that didn’t sign up by last week’s deadline will not be allowed to sell EVs beyond 2023 but will have another opportunity to do so in 2025.
Farley has said Ford’s retailer need to evolve to better compete with EV startups like Tesla and others that sell directly to customers.
“The future of the franchise system hangs in the balance here,” Farley said. “The No. 1 EV player in the U.S. bet against the dealers. We wanted to make the opposite choice.”
The announcement comes as opposition to the program grows. Last week, dealers in New York filed a lawsuit challenging the program as illegal, while a separate group of dealers in Illinois filed a protest with the state’s motor vehicle board. Also last week, U.S. Sen. Richard Blumenthal, D-Conn., and Connecticut state lawmakers voiced their displeasure over what they say are excessive costs that potentially violate state franchise laws.
Ford has consistently said it believes the program does not violate any state laws.
“We want to work with our dealers, but there are certain things our customers want that are nonnegotiable,” Farley said to the crowd at the Automotive News Congress in Detroit.
He added that he does not regret rolling out the program.
“There’s always a better way,” Farley continued. “But I don’t think we made, really, any big mistakes.”
2nd Gear: EV Battery Prices on the Rise
The price of lithium-ion batteries is on the rise for the first time in over 10 years. The increase comes from surging prices raw material costs, and it will ultimately have a negative impact on the automotive industry’s push for EVs to get cheaper. From Financial Times:
Soaring prices of battery metals such as lithium, cobalt and nickel and higher component costs pushed battery pack prices up to $151 per kilowatt hour, a 7 per cent rise compared with a year ago and the first increase since BloombergNEF began its annual survey in 2010.
The company expects prices to rise further to $152 per kWh next year. In 2010, prices were $1,160 per kWh on average.
That’s bad news for the automotive industry. FT reports the industry has viewed $100 per kWH battery pack as the number where EVs become competitive with ICE vehicles from a price perspective.
However, lithium prices have increased 10-fold since the start of 2021 and nickel is up 75 per cent, while cobalt prices have been more than double their 2020 average this year.
As a result, BloombergNEF forecasts that the $100 per kWh level will be reached by 2026, two years later than previously expected. This will “negatively impact the ability for automakers to produce and sell mass-market EVs in areas without subsidies”, it said.
It added that the higher costs could also be problematic for the economics of battery energy storage projects that are vital to stabilising the grid as intermittent renewable power grows.
The rise in battery pack prices would have been even higher if car companies and cell manufacturers in the Chinese market had not switched to cheaper lithium iron phosphate (LFP) batteries, which do not use cobalt and nickel but have a shorter range.
Right now, there’s a lot of uncertainty about whether or not battery material prices will actually ease. Skyrocketing demand and manufacturing issues are only exacerbating the problem for battery makers and consumers.
3rd Gear: United Looking to Delta’s Contract as a Blueprint
United Airlines’ CEO Scott Kirby says a possible deal between Delta and its pilots union could be used as a template for similar agreements. From Reuters:
“It’s a rich contract but I think the really good news is it means we’ll all get deals done essentially on the same terms and can move forward,” Kirby told Reuters on the sidelines of an event in Washington late Monday. Delta struck a tentative deal Friday to give pilots a 34% cumulative pay increase in a new four-year contract.
Kirby says the Delta agreement will push pilot wages up across carriers and be passed onto consumers in the form of higher airplane ticket prices.
“The biggest news for an investor perspective is cost convergence in the industry means that what is different now is all the low cost carriers are going to have come up to these much higher pay rates,” Kirby said. “This is going to wind up like oil prices — it’s going to be a pass through.”
Delta’s contract reportedly also offers a lump-sum one-time payment, reduced healthcare insurance premiums, better 401(k) parameters as well as improved paid time off.
Kirby added that demand is still very strong for flight tickets, which he says are cheaper today than they have been over the past 15 years.
Its union estimates the proposed deal represents more than $7.2 billion of cumulative value increases over the next four years.
American Airlines and United have promised “industry-leading” contracts to their pilots.
Reuters reports that last month American Airlines pilots turned down a proposed 19 percent pay hike over the next two years that would cost the company about $2 billion. United pilots had previously turned down an offer that would give them about a 14.5 percent wage cumulative increase.
4th Gear: Works Strike at Pennsylvania Auto Parts Supplier
About 270 workers at an Autoneum AG plant in Bloomsburg, Pennsylvania have gone on strike at the global automotive insulation supplier, and soon ripples could be felt throughout the rest of the automotive industry.
Workers walked off the job last Thursday after negotiations between the company and the union stalled after the latest contract offer was rejected by the workers. From Automotive News:
Autoneum, based in Winterthur, Switzerland, focuses on internal and external sound and heat insulation systems. The supplier works with almost every major automaker, including General Motors, Ford Motor Co. and Stellantis, according to its website.
For the Bloomsburg plant, its exact list of customers is unclear. However, the plant received awards from Toyota in 2011, Ford in 2014 and GM in 2021. Autoneum did not respond to calls from Automotive News’ seeking comment on the strike.
Brian Heverly, president of Local 1700 Workers United, told FOX 56 that the rank-and-file turned down Autoneum’s third and final contract offer.
Among worker complaints is the supplier’s insistence that workers pay 5 percent more of their healthcare costs outside of usual yearly increases.
Local 1700 Vice President Dave Schaffer, an employee at the plant 44 years, told FOX 56 that the workers didn’t want to strike, but felt compelled to given the circumstances.
The last strike at this plant was reportedly back in 1968, a year known for nothing else but that strike.
A spokesperson for General Motors told the outlet that the automaker is aware of what’s going on, but they don’t see the strike having an immediate impact on GM operations.
5th Gear: GM’s BrightDrop Starts Production in Canada
General Motors has started production of its BrightDrop electric delivery vehicle at its CAMI Assembly plant in Ontario. That makes it the first EV factory in Canada as a whole.
Last month, GM said the startup will be worth about $1 billion in revenue in 2023. The company is expected to hit $5 billion in revenue by the middle of the 2020s, and it could be as high as $10 billion by 2030.
“Starting volume production is really important; this is a very important product for GM,” Sam Abuelsamid, principal research analyst leading Guidehouse Insights, told The Detroit News. “This finally starts to get them back into a more competitive offering in the van segment and with electrification, so ... it has the potential to be a really strong business for GM.”
GM launched production this week of the larger Zevo 600 electric delivery vans at CAMI. The delivery vans were being manufactured at small scale at a Michigan supplier plant until the CAMI facility was ready for production. Production of the Zevo 400, a smaller model than the Zevo 600, will start in late 2023. BrightDrop expects to make 30,000 next year and scale to 50,000 by 2025.
[...]
GM formed BrightDrop in 2021. The business is focused on providing emissions-free products for delivery companies. Its products include the Zevo electric delivery vans, Trace eCarts for easier package delivery and the BrightDrop Core software platform.
The automaker invested more than $800 million to convert CAMI for high-volume EV production. The plant was revamped in just seven months — the quickest retooling of a GM plant ever.
[...]
BrightDrop also on Monday announced it’s entering the Canadian market with the addition of DHL Express Canada logistics company as a customer. DHL will add its first Zevo vans to its fleet early next year. The company is also piloting BrightDrop’s Trace eCarts and software platform in Toronto.
BrightDrop has also received requests for electric delivery vans from FedEx Corp., Walmart Inc., Hertz Global Holdings Inc. and Verizon Communications Inc.
All in all, BrightDrop has 25,000 production reservations and expressions of interest for its EV delivery vans. So far, the company has delivered 150 Zevo vans to FedEx out of the 2,500 the shipping company has ordered.
Reverse: Washington
Neutral: Boeing 747, Over and Out
On The Radio: Darlene Love - “Christmas (Baby Please Come Home)“
This is the best Christmas song, and I will not hear otherwise.