28 June 2019

Turmoil? Hey, it’s just another week at the office

Another week and another tumultuous week in the auto industry. Daimler’s shares hit stormy ground when the manufacturer announced provisions against ongoing governmental proceedings over its Mercedes diesel vehicles including a recall of 60,000 cars fitted with emission distorting software. Also, EU and US antitrust action against Merc, BMW and VW relating to an alleged blocking of clean emissions technology.

Meanwhile, Nissan’s Chief Executive, Hiroto Saikawa indicated he opposes a merger with Renault saying the relationship worked so far as each manufacturer retained independence. However, he said, “if the relationship becomes a win-lose one, the relationship will break up very quickly.” Saikawa has been opposing the number of Renault directors to sit on Nissan’s new governance board.

Ghosn’s lawyer, Takashi Takano, has accused Japan of reverting to “Japan Inc” by being inflexible. He compared how Ghosn and his deputy, Greg Kelly, had been treated including solitary confinement and denial of legal representation. Let’s see if any attending nation at this weekend’s G20 Summit hosted by Japan will raise the treatment of Ghosn.

President Trump’s threatenning further trade tariffs continues to send ripples of dread throughout business. Bluster before a deal in Japan? We’re see. Apart from tariffs the very functioning of the World Trade Organisation’s arbitration and court system is under threat. President Trump sees the WTO as unfair and partial in how the organisation deals with disputes; as such, he is blocking the appointment of new appellate judges to the WTO court. Three judges are needed to hear an appeal but by December there will one sitting judge. The EU wants to see WTO reform but let the machine roll pending improvements.However, President Trump foot is on the WTO’s windpipe.

The stasis and emasculation of the WTO will be potentially problematic for any world trader, including the automakers and supporting supply chain.The WTO could benefit from mediation or arbitration itself to resolve its issues.

Ironically, many Brexiters see the WTO as the panacea full back postion if on 31st October the UK leaves the EU with no trade agreement. Leavers says the UK can rely upon Article 24 of WTO rules allowing free trade to continue pending a permanent agreement. Bank of England Governor, Mark Carney, says the contrary if there is no agreement and Britain crashes out of Europe.

Brexit uncertainty is causing consternation amongst automakers with PSA announcing the Astra Ellesmere Port plant, Liverpool future depends on the Brexit outcome. The Japanese government has indicated similarly about its 1000 plus companies who have invested in the UK.

The uncertainty of Brexit is a serious distraction and a factor influencing decison making ,especially if its 50:50 whether to invest outside the UK. However, as canvassed on these pages the auto industry is confronting a seismic structural shift as the market moves away from fossil fuel.

Ford’s decision to cut 12,000 jobs across Europe including closing its Aquitaine Industries Transmission Plant in France;Naberezhnye Chelny Assembly, St Petersburg Assembly and Elabuga Engine Plant in Russia as well as the sale of the Kechnec Transmission Plant in Slovakia to Magna is primarily because of EV.

Stuart Rowley, president of Ford of Europe says “Our future is rooted in electrification.” I hope he books his ticket to our automotiveEV conference in October.

As Bob Dylan wrote: “And you better start swimmin' or you'll sink like a stone. For the times they are a-changin”

Julian Wilkins

Postscript: Apologies for coming across as a grumpy old man but despite my clarion call I remain optimistic that the auto industry is entering an exciting and long term prosperous era; it’s a question of making the right moves at the right time. Also be open to challenge and to challenge.

Read about a Dutch company Lightyear One which has its bonnet and roof made of solar cells. The car is claimed to have a range of 450 miles. Due for delivery in 2021 with a reservation fee of £106,000. One hopes that one day economies of scale truly occur.

Publisher: Shaun Hunter

Global News Editor: Trisha Chowdhury

Legal Affairs Editor: Julian Wilkins

Chief Executive: Peter Wooding

All rights reserved. No part of this publication may be reproduced or stored in a retrieval system without the written permission of the publishers. Whilst every care has been taken in compiling this publication, the publisher cannot accept responsibility for any inaccuracies or changes since going to press, or for consequential loss arising for such changes or inaccuracies, or for any other loss direct or consequential arising in connection with the information in this publication. The views expressed by the contributors are not necessarily also those of the publisher. E&EO

Main Switchboard: +44 (0) 203 325 4414