· GM reported record North American earnings yesterday, which came in at $2.8 billion for the 2nd quarter. That brings year-to-date North American earnings to $5.0 billion. That would equal $5000 in profit sharing under the current formula, but as you all know, everything is on the table in this year’s contract negotiations. Chief Financial Officer Chuck Stevens said GM expects second-half pre-tax profits to be even stronger than in the first six months of the year.
One common number being reported by the media for overall profits is $1.2 billion. This number includes writedowns of $600 million for currency devaluation in Venezuela (that is the third huge charge related to operations in Venezuela and brings the total loss to almost $1.2 billion since the beginning of 2013), increased charges related to the victims compensation fund (now estimated to be $625 million) and a $300 million loss on reduced prices for rental vehicle resales. The other number you will see is $2.9 billion overall profit, which is before all special charges and taxes. Essentially, North America and China provide all the profit while Europe inches closer to break even and South America continues to struggle. North American market share rose slightly while global market share declined slightly. The second half of the year will see the launch of the redesigned Chevy Cruze and Malibu, both expected to generate up to $1500 more profit than the models they replace.
· Even though the Trans Pacific Partnership (TPP) trade agreement has yet to pass, evidence of its impact is already appearing. According to reports out of Japan, Mitsubishi is planning to close its lone US plant in Normal Illinois and move production of the Outlander SUV back to Japan. Kyle Young, vice president of UAW Local 2488, which represents the plant's workers, said the union's contract expires in August. "We haven't heard anything," he said in a phone interview. "We're supposed to have negotiations coming up" on a new contract. In the meantime, "it's business as usual here - we're pumping out cars." The Normal plant is the only Japanese-owned U.S. auto factory whose hourly workers are represented by the UAW. The company had no comment on the reports.
· From Car and Driver: Tougher federal fuel-economy standards are coming to heavy-duty pickups, full-size vans, and other large rigs, bringing with them big changes to the nation’s truck fleet. The new proposed standards—which are not yet set into law—call for big vans and medium-/heavy-duty pickups to slash their fuel consumption by a third between now and 2027. Averaged across GM, Fiat-Chrysler, Ford, Nissan, and Daimler, the EPA wants heavy-duty pickups and vans to reach a combined 16 mpg in 2027 versus 12 mpg in 2016, the first model year the “Phase 1″ rules go into effect. That’s a whopping 33 percent increase in efficiency. It won’t be achieved through a simple engine stop-start system. For example, a 2015 Chevrolet Express 2500 passenger van that gets 12 mpg combined today will need to reach 15 mpg combined for 2027. While the agency doesn’t officially mandate any specific technology, it’s all but requiring electrification on next-gen heavy-duty trucks and vans. As the EPA sees it, manufacturers need to install full-hybrid powertrains in at least eight percent of all heavy-duty pickups and vans by 2027.
The EPA explicitly asks GM to kill the Chevrolet Express/GMC Savana and “replace it with an as-yet-to-be-designed European-style van similar to its competitor’s products.” GM is in the worst spot on fuel efficiency, the agency says, since it relies on older V-8 vans, has not introduced significant weight reduction, and has not proposed smaller turbo sixes (although it should be noted that the aluminum-body F-150 EcoBoost V-6 returns close to the same mileage as a Silverado V-8). By 2021, the EPA estimates GM will have to add $770 of new fuel-saving tech to each heavy-duty pickup and van—or about triple what Ford, Fiat-Chrysler, and Nissan will need to spend based on their total sales.
While manufacturers can still sell plenty of underperforming trucks—remember, CAFE rules let manufacturers trade credits, in addition to applying excess credits to cover five model years ahead—there won’t be enough credits to trade without significant sales of higher-efficiency models elsewhere in the line. Fortunately, automakers can go a long way toward achieving the CAFE requirements by adopting fuel-saving tech they’re already using throughout the light-duty segment: eight-speed transmissions, variable valve timing, cylinder deactivation, turbocharging, reduced friction, low-rolling-resistance tires, axle disconnects, and replacing hydraulic and engine-driven accessories with electric ones, as well as good, old-fashioned aerodynamic refinements and weight reduction. The EPA wants to give brownie points to active aerodynamics, auto stop-start systems, solar panels to power the climate-control system, and LED lighting. None of this is impossible in the near term. The EPA recognizes that automakers haven’t traditionally updated heavy-duty models with the same frequency as their other products, and that current product-planning cycles do not incorporate these new proposals. After automakers submit their comments and the EPA finalizes the ruling, we’ll see what concessions were made.
Tom Brune
UAW Communications Coordinator
Wentzville Assembly
636-327-2119
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