In the U.S., 516 publicly listed firms have filed for bankruptcy from January through September 2023. Many of these firms have survived for several years with surging debt and lagging sales.
“The share of zombie firms has been increasing over time,” said Bruno Albuquerque, an economist at the International Monetary Fund. “This has detrimental effects on healthy firms who compete in the same sector.”
“A really healthy, well-capitalized banking system and financial sector is one of the most important factors in ensuring that unhealthy firms are wound down in a timely way rather than being propped up,” said Kathryn Judge, a professor of law at Columbia University.
Economists say that zombie firms may become more prevalent when banks or governments bail out unviable firms. But the Federal Reserve says the share of firms that are zombies fell after the Covid-19 emergency stimulus measures were implemented. The Fed says banks are refusing to keep weak firms in business with favorable extensions of credit.
The Fed economists point to healthy balance sheets at U.S. firms, despite the increasing weight of interest rate hikes. The effective federal funds rate was 5.33% in October 2023, up from 0.08% in October 2021.
“The biggest implication of the rapid rise in interest rates that we’ve seen the last five or six quarters, actually, is that it reestablished cash,” said Lotfi Karoui, chief credit strategist at Goldman Sachs. “That actually puts some constraints on risk assets.”
The Fed says it thinks interest rates will remain higher for longer. “Given the fast pace of tightening, there may still be meaningful tightening in the pipeline,” Fed Chair Jerome Powell said at an Economic Club of New York speech Oct. 19.
Watch the video above to learn more about the Fed’s battle with unviable zombie firms in the U.S.
An Amazon.com Inc worker prepares an order in which the buyer asked for an item to be gift wrapped at a fulfillment center in Shakopee, Minnesota, U.S., November 12, 2020.
Amazon.com Inc | Reuters
The initial third-quarter report on gross domestic product showed consumer spending zooming higher by 4% percent a year, after inflation, the best in almost two years. September’s retail sales report showed spending climbing almost twice as fast as the average for the last year. And yet, bears like hedge-fund trader Bill Ackman argue that a recession is coming as soon as this quarter and the market has entered correction territory.
For an economy that rises or falls on the state of the consumer, third-quarter earnings data supports a view of spending that remains mostly good. S&P 500 consumer-discretionary companies that have reported through Oct. 25 saw an average profit gain of 15%, according to CFRA — the biggest revenue gain of the stock market’s 11 sectors.
“People are kind of scratching their heads and saying, ‘The consumer is holding up better than expected,’” said CFRA Research strategist Sam Stovall said. “Consumers are employed. They continue to buy goods as well as pursue experiences. And they don’t seem worried about debt levels.”
How is this possible with interest rates on everything from credit cards to cars and homes soaring?
It’s the anecdotes from bellwether companies across key industries that tell the real story: Delta Air Lines and United Airlines sharing how their most expensive seats are selling fastest. Homeowners using high-interest-rate-fighting mortgage buydowns. Amazon saying it’s hiring 250,000 seasonal workers. A Thursday report from Deckers Outdoor blew some minds — in what has been a tepid clothing sales environment — by disclosing that embedded in a 79% profit gain that sent shares up 19% was sales of Uggs, a mature line anchored by fuzzy boots, rising 28%.
The picture they paint largely matches the economic data — generally positive, but with some warts. Here is some of the key evidence from from the biggest company earnings reports across the market that help explain how companies and the American consumer are making the best of a tough rate environment.
How homebuilders are solving for mortgages rates
No industry is more central to the market’s notion that the consumer is falling from the sky than housing, because the number of existing home sales have dropped almost 40% from Covid-era peaks. But while Coldwell Banker owner Anywhere Real Estate saw profit fall by half, news from builders of new homes has been pretty good.
Most consumers have mortgages below 5%, but for new homebuyers, one reason that rates are not biting quite as sharply as they should is that builders have figured out ways around the 8% interest rates that are bedeviling existing home sellers. That helps explains why new home sales are up this year. Homebuilders are dipping into money that previously paid for other incentives to pay for offering mortgages at 5.75% rather than the 8% level other mortgages have hit. At PulteGroup, the nation’s third-biggest builder, that helped drive an 8% third-quarter profit jump and 43% climb in new home orders for delivery later, much better than the government-reported 4.5% gain in new home sales year-to-date.
“What we’ve done is simply redistribute incentives we’ve historically offered toward cabinets and countertops, and redirected those to interest rate incentives,” PulteGroup CEO Ryan Marshall said. “And that has been the most powerful thing.”
The mechanics are complex, but work out to this: Pulte sets aside about $35,000 for incentives to get each home to sell, or about 6% of its price, the company said on its earnings conference call. Part of that is paying for a mortgage buydown. About 80% to 85% of buyers are taking advantage of the buydown offer. But many are splitting the funds, mixing a smaller rate buydown and keeping some goodies for the house, the company said.
Wells Fargo economist Jackie Benson said in a report that builders may struggle to keep this strategy going if mortgage rates stay near 8%, but new-home prices have dropped 12% in the last year. In her view, incentives plus bigger price cuts than most existing homes’ owners will offer is giving builders an edge.
At auto companies, price cuts are in, and more are coming
Car sales picked up notably in September, rising 24% year-over-year, more than twice the year-to-date gain in unit sales. But they were below expectations at electric-vehicle leader Tesla, which blamed high interest rates, and at Ford.
“I just can’t emphasize this enough, that for the vast majority of people buying a car it’s about the monthly payment,” Tesla CEO Elon Musk said on its earnings call. “And as interest rates rise, the proportion of that monthly payment that is interest increases.”
Maybe, but that’s not what’s happening at General Motors, even if investor reaction to good numbers at GM was muted because of the strike by the United Auto Workers union.
GM beat earnings expectations by 40 cents a share, but shares fell 3% because of investor worries about the strike, which forced GM to withdraw its fourth-quarter earnings forecast on Oct. 24. Ford, which settled with the UAW on Oct. 25, said the next day it had a “mixed” quarter, as profit missed Wall Street targets due to the strike. Consumers came through, as unit sales rose 7.7% for the quarter, with truck and EV sales both up 15%. GM CEO Mary Barra said on GM’s analyst call that the company gained market share, posting a 21% gain in unit sales despite offering incentives below the industry average.
“While we hear reports out there in the macro that consumer sentiment might be weakening, etc., we haven’t seen that in demand for our vehicles,” GM CFO Paul Jacobson told analysts. But Ford CFO John Lawler said car prices need to decline by about $1,800 to be as affordable as they were before Covid. “We think it’s going to happen over 12 to 18 months,” he said.
Tesla’s turnaround plan turns on continuing to lower its cost of producing cars, which came down by about $2,000 per vehicle in last year, the company said. Along with federal tax credits for electric vehicles, a Model Y crossover can be had for about $36,490, or as little as $31,500 in states with local tax incentives for EVs. That’s way below the average for all cars, which Cox Automotive puts at more than $50,000. But Musk says some consumers still aren’t convincible. .
“When you look at the price reductions we’ve made in, say, the Model Y, and you compare that to how much people’s monthly payment has risen due to interest rates, the price of the Model Y is almost unchanged,” Musk said. “They can’t afford it.”
Most banks say the consumer still has cash, but not Discover
To know how consumers are doing, ask the banks, which disclose consumer balances quarterly. To know if they’re confident, ask the credit card companies (often the same companies) how much they are spending.
In most cases, financial services firms say consumers are doing well.
At Bank of America, consumer balances are still about one-third higher than before Covid, CEO Brian Moynihan said on the company’s conference call. At JPMorgan Chase, balances have eroded 3% in the last year, but consumer loan delinquencies declined during the quarter, the company said.
“Where am I seeing softness in [consumer] credit?” said chief financial officer Jeremy Barnum, repeating an analyst’s question on the earnings call. “I think the answer to that is actually nowhere.”
Among credit card companies, the “resilient” is still the main story. MasterCard, in fact, used that word or “resilience” eight times to describe U.S. consumers in its Oct. 26 call.
“I mean, the reality is, unemployment levels are [near] all-time record lows,” MasterCard chief financial officer Sachin Mehra said.
At American Express, which saw U.S. consumer spending rise 9%, the mild surprise was the company’s disclosure that young consumers are adding Amex cards faster than any other group. Millennials and Gen Zers saw their U.S. spending via Amex rise 18%, the company said.
“Guess they’re not bothered by the resumption of student loan payments,” Stovall said.
The major fly in the ointment came from Discover Financial Services, one of the few banks to make big additions to its loan loss reserves for consumer debt, driving a 33% drop in profit as Discover’s loan chargeoffs doubled.
Despite the fact that U.S. household debt burdens are almost exactly the same as in late 2019, and declined during the quarter, according to government data, Discover chief financial officer John Greene said on its call, “Our macro assumptions reflect a relatively strong labor market but also consumer headwinds from a declining savings rate and increasing debt burdens.”
At airlines, still no sign of a travel recession
It’s good to be Delta Air Lines right now, sitting on a 59% third-quarter profit gain driven by the most expensive products on their virtual shelves: First-class seats and international vacations. Also good to be United, where higher-margin international travel rose almost 25% and the company is planning to add seven first-class seats per departure by 2027. Not so good to be discounter Spirit, which saw shares fall after reporting a $157 million loss.
“With the market continuing to seemingly will a travel recession into existence despite evidence to the contrary from daily [government] data and our consumer surveys, Delta’s third-quarter beat and solid fourth-quarter guide and commentary should finally put the group at ease about a consumer “cliff,” allow them to unfasten their seatbelts and walk about the cabin,” Morgan Stanley analyst Ravi Shanker said in a note to clients.
One tangible impact: United is adding 20 planes this quarter, though it is pushing 12 more deliveries into 2024, while Spirit said it’s delaying plane deliveries, and focusing on its proposed merger with JetBlue and cost-cutting to regain competitiveness as soft demand for its product persists into the holiday season.
As has been the case throughout much of 2023, richer consumers — who contribute the greater share of spending — are doing better than moderate-income families, Sundaram said.
The goods recession is for real
Whirlpool, Ethan Allen and mattress maker Sleep Number all saw their stocks tumble after reporting bad earnings, all of them experiencing sales struggles consistent with the macro data.
This follows a trend now well-entrenched in the economy: people stocked up on hard goods, especially for the house, during the pandemic, when they were stuck at home more. All three companies saw shares surge during Covid, and growth has slacked off since as they found their markets at least partly saturated and consumers moved spending to travel and other services.
“All of the stimulus money went to the furniture industry,” Sundaram said, exaggerating for effect. “Now they’ve been falling apart for the last year.”
Ethan Allen sales dropped 24%, as the company said a flood in a Vermont factory and softer demand were among the causes. At Whirlpool, which said in second-quarter earnings that it was moving to make up slowing sales to consumers by selling more appliances to home builders, “discretionary purchases have been even softer than anticipated, as a result of increased mortgage rates and low consumer confidence,” CEO Marc Bitzer said during Thursday’s earnings call. Its shares fell more than 20%.
Amazon’s $1.3 billion holiday hiring spree
Amazon is making its biggest-ever commitment to holiday hiring, spending $1.3 billion to add the workers, mostly in fulfillment centers.
That’s possible because Amazon has reorganized its warehouse network to speed up deliveries and lower costs, sparking 11% sales gains the last two quarters as consumers turn to the online giant for more everyday repeat purchases. Amazon also tends to serve a more affluent consumer who is proving more resilient in the face of interest rate hikes and inflation than audiences for Target or dollar stores, according to CFRA retailing analyst Arun Sundaram said.
“Their retail sales are performing really well,” Sundaram said. “There’s still headwinds affecting discretionary sales, but everyday essentials are doing really well.
All of this sets the stage for a high-stakes holiday season.
PNC still thinks there will be a recession in early 2024, thanks partly to the Federal Reserve’ rate hikes, and thinks investors will focus on sales of goods looking for more signs of weakness. “There’s a lot of strength for the late innings” of an expansion, said PNC Asset Management chief investment officer Amanda Agati.
Sundaram, whose firm has predicted that interest rates will soon drop as inflation wanes, thinks retailers are in better shape, with stronger supply chains that will allow strategic discounting more than last year to pump sales. The Uggs sales outperformance was attributed to improved supply chains and shorter shipping times as the lingering effects of the pandemic recede.
“Though there are headwinds for the consumer, there’s a chance for a decent holiday season,” he said, albeit one hampered still by the inflation of the last two years. “The 2022 holiday season may have been the low point.”
DETROIT — The United Auto Workers strike is bringing a blue-collar versus billionaire battle to the Motor City, just as UAWPresident Shawn Fain wanted.
The outspoken union leader has weaponized striking — historically a last resort for the union — after less than 24 hours into a work stoppage arguably better than any UAW president has in modern times.
It wasn’t by accident.
Fain, a quirky yet emboldened leader, has meticulously brought the UAW back into the national spotlight after decades of near irrelevance. He wants to represent not just union members but also America’s embattled middle class, which UAW helped create.
United Auto Workers union President Shawn Fain joins UAW members who are on a strike, on the picket line at the Ford Michigan Assembly Plant in Wayne, Michigan, September 15, 2023.
Rebecca Cook | Reuters
To do so, he has leveraged a yearslong national labor movement and a growing disgust for wealthy individuals and corporations among many Americans — starting with his first time addressing the union’s more than 400,000 members during his inauguration speech in March.
“We’re here to come together to ready ourselves for the war against our only one and only true enemy, multibillion-dollar corporations and employers who refuse to give our members their fair share,” Fain said at the time. “It’s a new day in the UAW.”
Fain’s comments Friday morning as he joined UAW members and supporters picketing outside a Ford plant in Michigan — one of three facilities the company is currently striking — echoed everything he said during that first speech.
“We got to do what we got to do to get our share of economic and social justice in this strike,” Fain said outside the Ford Bronco SUV and Ranger pickup plant. “We’re going to be out here until we get our share of economic justice. And it doesn’t matter how long it takes.”
Fain’s upbringing plays into his strong unionism and religious beliefs, which he has growingly talked about with members as he emphasizes “faith” in the UAW’s cause.Two of his grandparents were UAW GM retirees, and one grandfather started at Chrysler in 1937, the year the workers joined the union. Fain, who joined the UAW in 1994, even keeps one of his grandfather’s pay stubs in his wallet as “a reminder” of where he came from.
National media and others really started paying attention to Fain when he said the union would withhold a reelection endorsement of President Joe Biden, who has called himself the “most pro-union president in history.” Fain and Biden have spoken and met, but the union leader has not shown much support for the president. In response to comments by the president Friday, Fain said: “Working people are not afraid. You know who’s afraid? The corporate media is afraid. The White House is afraid. The companies are afraid.”
While many past union leaders have talked such talk, Fain has thus far delivered on his promises to members without batting an eye — causing General Motors, Ford Motor and Stellantis to go into crisis mode this week as the UAW follows through on that promise to members.
“We’ve never seen anything like this; it’s frustrating,” Ford CEO Jim Farley told CNBC’s Phil LeBeau Thursday as he criticized Fain and the union for what he said was a lack of communication and counteroffers. “I don’t know what Shawn Fain is doing, but he’s not negotiating this contract with us, as it expires.”
In a statement Friday, Ford said that the UAW’s partial strike at its Michigan Assembly Plant has forced it to lay off about 600 workers.
“This is not a lockout,” Ford said. “This layoff is a consequence of the strike at Michigan Assembly Plant’s final assembly and paint departments, because the components built by these 600 employees use materials that must be e-coated for protection. E-coating is completed in the paint department, which is on strike.”
GM CEO Mary Barra echoed Farley’s feelings Friday morning on CNBC’s “Squawk Box.”
“I’m extremely frustrated and disappointed,” she said. “We don’t need to be on strike right now.”
Both CEOs said everything they could to indicatethey believe Fain may not be bargaining in good faith without using those exact words, which could justify a complaint with the National Labor Relations Board.
The UAW in late August filed unfair labor practice charges against GM and Stellantis with the NLRB, alleging they did not bargain with the union in good faith or a timely manner. It did not file a complaint against Ford. GM and Stellantis have denied those allegations.
Several past union leaders and company bargainers who spoke to CNBC hailed the way Fain has been able to propel the UAW into the national spotlight, including pausing bargaining for a Friday rally and march with Sen. Bernie Sanders, the progressive lawmaker from Vermont. Sanders, whose surprise 2016 Democratic presidential primary win in Michigan helped cement his national prominence, has lent support to numerous labor movements around the country as he rails against the billionaire class.
“I think they’re just doing an outstanding job,” said respected former UAW President Bob King, who cited growing support for the union among the public and the union’s own members. “Both those measurements say that UAW communications has been outstanding.”
UAW members have taken notice — especially after many of them disdained union leadership during and after a yearslong federal corruption investigation that landed two past UAW presidents and more than a dozen others in prison.
“For all the years that I’ve worked here, it’s never been this strong,” said Anthony Dobbins, a 27-year autoworker, early Friday morning while picketing the Ford plant in Michigan. “This is going to make history right here because we are trying to get what we deserve.”
Dobbins, a UAW Local 600 union representative, balked at current record offers by the automakers that have included roughly 20% pay increases, thousands of dollars in bonuses, retention of the union’s platinum health care and other sweetened benefits.
“That’s not working for us. Give us what we asked for,” Dobbins said. “That’s what we want. We have to work seven days, overtime, just to make ends meet.”
United Auto Workers President Shawn Fain, center, poses with Anthony Dobbins, right, a 27-year autoworker, and others as the union pickets a Ford plant in Wayne, Michigan, Sept. 15, 2023.
Michael Wayland / CNBC
Key demands from the union have included 40% hourly pay increases; a reduced, 32-hour, workweek; a shift back to traditional pensions; the elimination of compensation tiers; and a restoration of cost-of-living adjustments. Other items on the table include enhanced retiree benefits and better vacation and family leave benefits.
Automakers have argued such demands would cripple the companies. Farley even said the company would have “gone bankrupt by now” under the union’s current proposals and members would not have benefited from $75,000 in average profit-sharing over the last decade.
Ford sources said the automaker would have lost $14.4 billion over the last four years if the current demands had been in effect, instead of recording nearly $30 billion in profits.
Such profits are exactly what Fain has said UAW members deserve to share in. But his strategy to get workers a larger piece of the pie carries great risks.
“This is not going to be positive from an industry perspective or for GM,” Barra said Friday.
Many outside the unionbelieve if Fain pushes too hard, it could lead to long-term job losses for the union. A former high-ranking bargainer for one of the automakers told CNBC that it’s nearly guaranteed the companies cut union jobs through product allocation, plant closures or other means to offset increased labor costs.
“They’re going to have to pay up. The question is how much,” said the longtime bargainer, who agreed to speak on the condition of anonymity. “This ends up with fewer jobs. That’s how the automakers cut costs.”
Fain and other union leaders have argued that meeting the companies in the middle has led to dozens of plant closures, fewer union members and a growing divide between blue-collar workers and the wealthy.
So why not fight?
“This is about us doing what we got to do to take care of the working class,” Fain said Friday. “This isn’t just about the UAW. This is about working people everywhere in this country. No matter what you do for a living, you deserve your fair share of equity.”
The U.S. is pushing forward with incentives for domestic manufacturing of computer chips and electric vehicle components, while the European Union has announced a 43 billion euro ($46 billion) package to boost chip manufacturing in the bloc.
Luke Sharrett | Bloomberg | Getty Images
A new “reshoring” trend is set to upend global supply chains as firms look to source products — such as clothes and computer chips — closer to home, turning away from manufacturing powerhouses like China.
Some executives even appear more concerned about manufacturing domestically than they are about the effect of artificial intelligence on their businesses.
Meanwhile, Russia’s invasion of Ukraine and the aftereffects of the Covid-19 pandemic are continuing to disrupt shipping, meaning some companies are rethinking their sourcing methods.
At the same time, the U.S. is pushing forward with incentives for domestic manufacturing of computer chips and electric vehicle components, while the European Union has announced a 43 billion euro ($46 billion) package to boost chip manufacturing in the bloc.
A number of banks noted mentions of the domestic manufacturing trend in U.S. earnings calls for the most recent quarter.
In an analysis of S&P 500 earnings call transcripts, Bank of America said mentions of “reshoring” — in which companies move production from overseas to the countries where goods are sold — were up 128% in the first quarter of the year against the same time a year ago.
Mentions of artificial intelligence, meanwhile, were up 85% year over year, according to an April 29 note by BofA strategist Savita Subramanian.
UBS also examined the trend, with many senior executives in different sectors surveyed by the bank intending to move parts of the supply chain closer to home — 78% in Europe, 70% in the U.S. and 54% in China plan to do so, according to a research note published on March 2. The bank polled more than 1,600 executives.
The brokerage Strategas Securities analyzed S&P 1500 earnings call transcripts for last year, seeing a “notable uptick” in mentions of “reshoring” and “nearshoring” — in which manufacturing operations are transferred to countries closer to home.
“This is in stark contrast to the lack of mentions throughout the 2010s as low growth/inflation, global supply chains and ultimately globalization were in full swing,” Strategas Securities Managing Director Ryan Grabinski stated in an April 21 research note.
In the apparel industry, the model of producing goods overseas and shipping them to where they’re sold is broken, according to industry veteran Bill McRaith.
“It’s typically one factory, one place in the world that makes one end product that we place a purchase order to, three, four, five months in advance and keep our fingers crossed that it sells. And we have never … got the target right,” McRaith told an audience at a supply chain conference organized by software company o9 Solutions in April.
The challenge is that the supply chains that were in place were built for the old model.
Bill McRaith
Former chief supply chain officer, PVH
McRaith, a former chief supply chain officer at Tommy Hilfiger-owner PVH, said the apparel industry both over-orders and under-orders stock by about 20% to 25%. Too much inventory leads to the liquidation of goods, while having too little to sell results in margin loss, he said.
“The model that we’ve used for the last 30 years is redundant at this point. It should be destroyed,” he said at the conference.
A solution for this, which could reduce negative financial and environmental effects, is to create a “supply lattice,” McRaith said, where some goods continue to be sourced offshore, others are bought from neighboring countries, and a third portion are manufactured close to where they are sold.
In apparel, sales of common items such as white shirts are fairly easy to predict, so making and shipping those types of goods from overseas makes sense, McRaith told CNBC by phone. But producing onshore could work for more niche fashion items that see overnight demand from being featured on the likes of TikTok, with businesses able to react fast to produce items that are supplied locally.
“As we’ve moved into this Shein, TikTok, multiple influencer [world] … more and more stuff falls into that highly unpredictable, what I would call ‘fringe’ space,” he said. “The more unpredictable that happens to be, the more probability, you want a higher percentage of onshore or near shore [sourcing],” McRaith added.
Last month, Chinese fast-fashion giant Shein announced a $150 million investment into production in Brazil for the Latin American market, a move McRaith expects the company to replicate in the U.S. and Europe. “They can afford to make stuff locally, far more than any other retailer can,” he said, referring to Shein’s model of ordering a small number of items from a large base of manufacturers.
A worker makes clothes at a garment factory that supplies Shein, in Guangzhou, China. Shein is set to produce goods in Brazil for the Latin American market, instead of shipping them from China.
Jade Gao | AFP | Getty Images
The Covid-19 pandemic accelerated some business trends by five years, McRaith said. “It’s no longer a case of brands telling the consumer what to buy, it’s actually now the consumer telling brands what they want to buy. So it’s really reversed that whole model. The challenge is that the supply chains that were in place were built for the old model,” he said.
U.S. companies are set to make a record number of hires in manufacturing, according to lobby group Reshoring Initiative, with around 360,000 job announcements in 2022, up 53% from 2021 (figures cover U.S. manufacturing roles from both domestic and overseas companies). Electrical equipment-makers announced the most jobs, with EV batteries one of the top products, followed by computer product-makers including chips.
If we build an economy based on electrification and batteries, it’s going to be really important to control our own supply chain.
Keith Phillips
President and CEO, Piedmont Lithium
The Inflation Reduction Act, signed by U.S. President Joe Biden in August, provides tax credits for EVs. In February, the U.S. administration said it wants 500,000 public EV charging stations on highways by 2030.
Lithium hydroxide is a key component of EV batteries, with most of it produced in China right now. Those efforts by the U.S. government are set to benefit domestic suppliers, said Keith Phillips, president and CEO of U.S. mining company Piedmont Lithium.
“If we build an economy based on electrification and batteries, it’s going to be really important to control our own supply chain,” he told CNBC’s “Street Signs Asia” in April.
Elon Musk broke ground on Tesla‘s lithium refinery in Corpus Christi, Texas, on May 8, and said the car company aims to produce enough lithium to manufacture a million EVs a year. And Piedmont’s planned production facility in Tennessee will produce 30,000 metric tons of lithium hydroxide per year — double the current capacity in the United States, the company said.
Phillips said it will “take time” for the U.S. to become self-sufficient in lithium hydroxide production, and said more mining of the raw lithium itself is needed.
In the U.K., 40% of manufacturers surveyed by industry group Make UK said they had sourced more goods domestically over the past year, and around the same proportion plan to over the next year. Make UK surveyed 137 companies in January and February.
While producing goods close to their point of sale can reduce costs, the main reason for local sourcing is to avoid the disruptions that can happen in longer supply chains — such as Covid and the Ukraine war — according to Make UK’s survey.
For British audio equipment-maker BishopSound, moving some of its supply chain from China to Yorkshire in northern England has improved its cashflow because minimum order quantities are lower domestically.
“In the past, we imported finished plywood speakers from 7,000 miles away in China. We are now manufacturing all our speakers in the North of England and using British-made components wherever possible. We stopped importing finished wooden speakers last December,” company founder Andrew Bishop told CNBC via email.
Other benefits of producing domestically include the lower chance of products being copied, Bishop said, as well as improved quality control and smaller environmental impact. There is also a political reason for moving production: “The Chinese use Russian Plywood and we do not want to support war,” Bishop added.
DETROIT — Reform-minded candidates won several races as members of the United Auto Workers union voted on their leaders in an election that stemmed from a federal bribery and embezzlement scandal involving former union officials.
In unofficial results posted early Sunday on a federal court-appointed monitor’s website, challengers took six of 14 seats on the union’s International Executive Board. They could win as many as eight, including the presidency, and control a majority, depending on the outcome of three runoff elections.
The reform candidates, most part of a slate called UAW Members United, campaigned on taking a more confrontational stance in bargaining with Detroit’s three automakers. They want to rescind concessions made to companies in previous contract talks, restoring cost-of-living pay raises and eliminating a two-tier wage and benefit system.
The adversarial stance is likely to raise costs for General Motors, Ford and Stellantis, which almost certainly would be passed on to consumers. Even without the election, costs likely would have gone up as workers seek a bigger share of billions of dollars in profits.
In the race for president, incumbent Ray Curry defeated challenger Shawn Fain by 614 votes. Curry had 38.2% of the vote to Fain’s 37.6%. But neither got a majority in the five-candidate field, so there will be a runoff election in January.
Mike Booth and Rich Boyer, both from Members United, took two of three vice president slots. Two vice president candidates from Curry’s Solidarity Team slate, incumbent Chuck Browning and Tim Bressler, will compete in a runoff for the third vice president slot.
Members United candidate Margaret Mock ousted current Secretary-Treasurer Frank Stuglin. Reform-minded candidates took three regional director slots, with another headed for a runoff.
Winners will be sworn in on Dec. 12. Ballots for the runoff elections will be mailed Jan. 12 with a Feb. 28 deadline to return them. Votes will be counted starting March 1, according to the website of Monitor Neil Barofsky.
In an interview, Fain said the election puts the companies on notice “to get ready. We’re coming for you.” He said companies are making billions of dollars and have closed or spun off plants and failed to give the Stellantis plant in Belvidere, Illinois, a new vehicle to build after it stops making its current model.
“It’s just a fact that over the years our leadership has become way too close to management,” he said.
Curry’s slate said in a statement that it is fighting for all active and retired members. “Our member expectations are high, and our team has the experience and proven track record to both build coalitions for the fight and deliver results,” it said.
Curry, elected by a vote of the International Executive Board in 2021 to replace retiring Rory Gamble, said at a September candidates’ forum that he has put financial safeguards and reforms in place and has plans to bring union members “back into greater days.” He said the union also has plans to recruit new members.
“We don’t just make false demands and deliver false hopes,” he said.
Turnout in the election for the 372,000-member union was low. Of about 1 million ballots mailed to active members and retirees, only 10.5% were returned.
The 2023 contract talks come at a critical juncture for the union, which faces a transition from internal combustion vehicles to those that run on batteries. With fewer moving parts, fewer people will be needed to make electric vehicles, and jobs making engines and transmissions could be shifted to battery assembly plants that might not be unionized.
The election came after union members last December decided to directly vote on leaders for the first time instead of having them picked by delegates to a convention.
Under the old system, convention delegates were picked by local union offices. But the new slate of officers was selected by the current leadership, and there was rarely any serious opposition.
The voting happened after 11 union officials and a late official’s spouse pleaded guilty in the corruption probe, including the two former presidents, Gary Jones and Dennis Williams. Both were sentenced to prison. The first criminal charges in the probe were filed in 2017.
To avoid a federal takeover, the union agreed to reforms and Barofsky’s appointment to oversee the UAW and elections of the executive board.
NASHVILLE, Tenn. — A joint venture between General Motors and South Korean battery company LG Energy Solution announced Friday that it will invest an additional $275 million to expand a Tennessee battery cell factory for electric vehicles.
Officials with the companies had already pledged to spend $2.3 billion to build a battery plant in Spring Hill, Tennessee. The additional investment is anticipated to result in 40% more battery cell output when the plant is fully operational. Production at the 2.8-million-square-foot facility is expected to begin in late 2023.
The Tennessee plant is one of three lithium-ion battery factories being built by the joint venture, Ultium Cells LLC. The other two are in Michigan and Ohio. A fourth is also expected, but the site has not yet been named.
“We’re here because we know we can be successful with your partnership,” said Tom Gallagher, Ultium Cells vice president for operations, noting that GM already has employees training in Poland to start at the plant. “It’s an exciting journey that we’re on.”
Overall the three plants are expected to create up to 6,000 construction jobs and 5,100 operations jobs when completed.
U.S. Energy Secretary Jennifer Granholm has said the plants will help strengthen the nation’s energy independence and support President Joe Biden’s goal of having electric vehicles make up half of all vehicle sales in the United States by 2030. The Department of Energy has also made a conditional commitment to lend $2.5 billion to Ultium Cells to help build the plants.
Last year Toyota announced it would build a $1.3 billion battery plant in North Carolina. Stellantis, formerly Fiat Chrysler, has said it will build two battery plants in North America. Ford is currently building three plants in Kentucky and Tennessee.
Tennessee officials announced plans last month to invest $3.2 billion to develop a cathode materials plant for electric vehicle batteries.
The manufacturing facility will be built in Clarksville and create more than 850 jobs, according to a memorandum of understanding signed by the state of Tennessee and South Korea-based LG Chem.
Republican Gov. Bill Lee touted the investments in Tennessee, saying, “We are now a state that’s the center of future of the automotive industry.”
GM has set a goal of selling only electric passenger vehicles by 2035. The company plans to roll out 30 electric vehicles globally by 2025 and has pledged to invest $35 billion in electric and autonomous vehicles through that same year.
NASHVILLE, Tenn. — A joint venture between General Motors and South Korean battery company LG Energy Solution announced Friday that it will invest an additional $275 million to expand a Tennessee battery cell factory for electric vehicles.
Officials with the companies had already pledged to spend $2.3 billion to build a battery plant in Spring Hill, Tennessee. The additional investment is anticipated to result in 40% more battery cell output when the plant is fully operational. Production at the 2.8-million-square-foot facility is expected to begin in late 2023.
The Tennessee plant is one of three lithium-ion battery factories being built by the joint venture, Ultium Cells LLC. The other two are in Michigan and Ohio. A fourth is also expected, but the site has not yet been named.
“We’re here because we know we can be successful with your partnership,” said Tom Gallagher, Ultium Cells vice president for operations, noting that GM already has employees training in Poland to start at the plant. “It’s an exciting journey that we’re on.”
Overall the three plants are expected to create up to 6,000 construction jobs and 5,100 operations jobs when completed.
U.S. Energy Secretary Jennifer Granholm has said the plants will help strengthen the nation’s energy independence and support President Joe Biden’s goal of having electric vehicles make up half of all vehicle sales in the United States by 2030. The Department of Energy has also made a conditional commitment to lend $2.5 billion to Ultium Cells to help build the plants.
Last year Toyota announced it would build a $1.3 billion battery plant in North Carolina. Stellantis, formerly Fiat Chrysler, has said it will build two battery plants in North America. Ford is currently building three plants in Kentucky and Tennessee.
Tennessee officials announced plans last month to invest $3.2 billion to develop a cathode materials plant for electric vehicle batteries.
The manufacturing facility will be built in Clarksville and create more than 850 jobs, according to a memorandum of understanding signed by the state of Tennessee and South Korea-based LG Chem.
Republican Gov. Bill Lee touted the investments in Tennessee, saying, “We are now a state that’s the center of future of the automotive industry.”
GM has set a goal of selling only electric passenger vehicles by 2035. The company plans to roll out 30 electric vehicles globally by 2025 and has pledged to invest $35 billion in electric and autonomous vehicles through that same year.
DETROIT — Members of the United Auto Workers union appeared on Thursday to favor replacing many of their current leaders in an election that stemmed from a federal bribery and embezzlement scandal involving former union officials.
Reform-minded candidates, many part of the UAW Members United slate, are leading or close in multiple key races with about 68% of the vote counted. Many challengers campaigned on rescinding concessions made to companies in previous contract talks, including cost-of-living pay raises, elimination of a two-tier wage and benefit system, and other items.
That could raise costs for Detroit’s three automakers — General Motors, Ford and Stellantis — and almost inevitably will drive up already expensive auto prices.
With tallies from six of nine UAW regions counted, incumbent President Ray Curry had a slim lead over Shawn Fain, an international union official who started at a Stellantis plant in Kokomo, Indiana, in a five-candidate race.
Curry had 38.6% of the vote, while Fain was second with 38%. There likely will be a runoff election early next year between Fain and Curry since neither had a majority of the votes.
In the race for three vice presidents, Rich Boyer and Mike Booth, both Members United candidates, are first and second in an eight-candidate field, followed by incumbent Vice President Chuck Browning. A runoff could happen there, too.
Margaret Mock, the Members United candidate for secretary-treasurer, had 62.6% of the vote to lead incumbent Frank Stuglin at 37.4%. Where tallies have been completed, candidates who campaigned on reforming the union also won three of nine regional director positions, with another heading to a runoff.
It wasn’t clear when the vote count would be finished. The ballots are being counted by a company hired by a court-appointed monitor who is overseeing the election and the union.
Fain led the Members United ticket, which campaigned on reforming the 372,000-member UAW after the scandal. The election also has broad implications for contract talks with the Detroit auto companies that start next year.
Fain has advocated for more of a confrontational stance and has accused union leadership of complacency. He has said the UAW has had a philosophy for 40 years of viewing automakers as partners rather than adversaries.
He said it’s too early to declare a winner but said in an interview Thursday that the early vote totals are “a loud and clear message to the companies and the businesses to get ready, we’re coming for you.”
The automakers, he said, are making making the best profits in their history, yet are closing factories and costing union jobs. He gave General Motors’ 2019 closure of its Lordstown, Ohio, assembly plant as an example, plus a lack of new vehicles for Stellantis’ Belvidere, Illinois, plant, which he said has lost 3,000 workers.
At a candidates’ forum in September, Fain said union leaders should have reversed concessions made starting in 2007 and should have won job security guarantees.
“We’ve had at least 10 years with perfect conditions for regaining and improving what was lost during the Great Recession,” he said.
The contract talks come at a critical juncture for the union, which faces a transition from internal combustion vehicles to those that run on batteries. With fewer moving parts, fewer people will be needed to make electric vehicles, and jobs making engines and transmissions could be shifted to battery assembly plants that might not be unionized.
The election came after union members last December decided to directly vote on leaders for the first time instead of having them picked by delegates to a convention.
Under the old system, convention delegates were picked by local union offices. But the new slate of officers was selected by the current leadership, and there was rarely any serious opposition.
A company hired by Monitor Neil Barofsky mailed out about 1 million ballots to active and retired union members. But only 106,790, roughly 10.7%, were returned.
The voting happened after 11 union officials and a late official’s spouse pleaded guilty in the corruption probe since 2017, including the two former presidents, Gary Jones and Dennis Williams. Both were sentenced to prison.
To avoid a federal takeover, the union agreed to reforms and Barofsky’s appointment to oversee elections of the 14-member executive board.
Curry, appointed in 2021 to replace retiring Rory Gamble to lead the union, said he has put financial safeguards and reforms in place and has plans to bring union members “back into greater days.” He said at the candidates’ forum that the union also has plans to recruit new members.
“We don’t just make false demands and deliver false hopes,” he said.
————
This story has been corrected to show that 68% of the vote has been counted, not 73%.
DETROIT — Members of the United Auto Workers union appeared on Thursday to favor replacing many of their current leaders in an election that stemmed from a federal bribery and embezzlement scandal involving former union officials.
Reform-minded candidates, many part of the UAW Members United slate, are leading or close in multiple key races with about 73% of the vote in. Many challengers campaigned on rescinding concessions made to companies in previous contract talks, including cost-of-living pay raises, elimination of a two-tier wage and benefit system, and other items.
That could raise costs for Detroit’s three automakers — General Motors, Ford and Stellantis — and almost inevitably will drive up already expensive auto prices.
With tallies from six of nine UAW regions counted, incumbent President Ray Curry had a slim lead over Shawn Fain, an international union official who started at a Stellantis plant in Kokomo, Indiana, in a five-candidate race.
Curry had 38.6% of the vote, while Fain was second with 38%. There likely will be a runoff election early next year between Fain and Curry since neither had a majority of the votes.
In the race for three vice presidents, Rich Boyer and Mike Booth, both Members United candidates, are first and second in an eight-candidate field, followed by incumbent Vice President Chuck Browning. A runoff could happen there, too.
Margaret Mock, the Members United candidate for secretary-treasurer, had 62.6% of the vote to lead incumbent Frank Stuglin at 37.4%. Where tallies have been completed, candidates who campaigned on reforming the union also won three of nine regional director positions, with another heading to a runoff.
It wasn’t clear when the vote count would be finished. The ballots are being counted by a company hired by a court-appointed monitor who is overseeing the election and the union.
Fain led the Members United ticket, which campaigned on reforming the 372,000-member UAW after the scandal. The election also has broad implications for contract talks with the Detroit auto companies that start next year.
Fain has advocated for more of a confrontational stance and has accused union leadership of complacency. He has said the UAW has had a philosophy for 40 years of viewing automakers as partners rather than adversaries.
He hasn’t declared victory but said in an interview Thursday that the early vote totals are “a loud and clear message to the companies and the businesses to get ready, we’re coming for you.”
The automakers, he said, are making making the best profits in their history, yet are closing factories and costing union jobs. He gave General Motors’ 2019 closure of its Lordstown, Ohio, assembly plant as an example, plus a lack of new vehicles for Stellantis’ Belvidere, Illinois, plant, which he said has lost 3,000 workers.
At a candidates’ forum in September, Fain said union leaders should have reversed concessions made starting in 2007 and should have won job security guarantees.
“We’ve had at least 10 years with perfect conditions for regaining and improving what was lost during the Great Recession,” he said.
The contract talks come at a critical juncture for the union, which faces a transition from internal combustion vehicles to those that run on batteries. With fewer moving parts, fewer people will be needed to make electric vehicles, and jobs making engines and transmissions could be shifted to battery assembly plants that might not be unionized.
The election came after union members last December decided to directly vote on leaders for the first time instead of having them picked by delegates to a convention.
Under the old system, convention delegates were picked by local union offices. But the new slate of officers was selected by the current leadership, and there was rarely any serious opposition.
A company hired by Monitor Neil Barofsky mailed out about 1 million ballots to active and retired union members. But only 106,790, roughly 10.7%, were returned.
The voting happened after 11 union officials and a late official’s spouse pleaded guilty in the corruption probe since 2017, including the two former presidents, Gary Jones and Dennis Williams. Both were sentenced to prison.
To avoid a federal takeover, the union agreed to reforms and Barofsky’s appointment to oversee elections of the 14-member executive board.
Curry, appointed in 2021 to replace retiring Rory Gamble to lead the union, said he has put financial safeguards and reforms in place and has plans to bring union members “back into greater days.” He said at the candidates’ forum that the union also has plans to recruit new members.
“We don’t just make false demands and deliver false hopes,” he said.
MINNEAPOLIS — The Environmental Protection Agency on Thursday proposed increasing the amount of ethanol and other biofuels that must be blended into the nation’s fuel supplies over the next three years, a move welcomed by renewable fuel and farm groups but condemned by environmentalists and oil industry groups.
“This proposal supports low-carbon renewable fuels and seeks public input on ways to strengthen the program,” EPA Administrator Michael S. Regan said in a statement. “With this proposal, EPA seeks to provide consumers with more options while diversifying our nation’s energy mix.”
The proposal also includes new incentives to encourage the use of biogas from farms and landfills, and renewable biomass such as wood, to generate electricity to charge electric vehicles. It’s the first time the EPA has set biofuel targets on its own instead of using numbers from Congress. The agency opened a public comment period and will hold a hearing in January.
The goal of the existing Renewable Fuel Standard is to reduce carbon emissions that contribute to climate change, expand the country’s fuel supply, strengthen energy security and reduce fuel prices for consumers. Ethanol is a key part of the economy in many Midwest states, consuming about 40% of the nation’s corn supply.
But environmentalists argue that it’s a net ecological and climate detriment because growing all that corn fosters unsustainable farming practices, while the oil industry says ethanol mandates constrain free market forces and limit consumer choice, and that higher blends can damage older vehicles.
Geoff Cooper, president and CEO of the Renewable Fuels Association, told reporters on a conference call that the EPA’s plan creates a “clear pathway for sustainable growth for our industry when it comes to the production and use of low-carbon fuels like ethanol.” He said it also bolsters the industry’s push for year-round sales of gasoline with a 15% ethanol blend, as well as sales of the 85% ethanol blend E85.
“As the administration is working to address climate change, we’ve long known that biofuels will play an important role in reducing greenhouse gases while having the added benefit of providing expanded opportunities for farmers,” National Farmers Union President Rob Larew said in a statement.
But environmental groups said the plan offers false solutions to climate change.
“This is a toxic plan directly at odds with the Biden Administration’s commitment to Environmental Justice,” Sarah Lutz, climate campaigner at Friends of the Earth, said in a statement. “Charging electric vehicles with forests and factory farms should be a non-starter.”
Geoff Moody, senior vice president of the American Fuel & Petrochemical Manufacturers said the Renewable Fuel Standard was meant to be a liquid fuels program, not an electric vehicle program. He urged the EPA to go back as it develops the final rule and reject “yet another massive regulatory subsidy for electric vehicle manufacturers.”
The EPA proposes to set the total target for all kinds of renewable fuels at 20.82 billion gallons for 2023, including 15 billion gallons from corn ethanol. The target would grow to 22.68 billion gallons for 2025, including 15.25 billion gallons of corn ethanol. The plan also calls for growth in cellulosic biofuels — which are made from fibrous plant materials — biomass-based diesel and other advanced biofuels.
Republican U.S. Sen. Chuck Grassley, of Iowa, the country’s top corn and ethanol producing state, said in a statement that the EPA should have gone further to require even more use of advanced biofuels to move freight, which he said would help lower prices for consumer goods.
Cooper said there’s probably no way to meet the proposed higher targets without more use of E15 and E85 instead of the conventional 10% ethanol mix. That makes it important to eliminate regulations that block summertime sales of E15, he said.
So, he predicted, the EPA’s proposal should bolster prospects for legislation introduced this week by Democratic U.S. Sen. Amy Klobuchar, of Minnesota, and GOP Sen. Deb Fischer, of Nebraska, to allow year-round sales of E15 nationwide. E15 sales are usually prohibited between June 1 and Sept. 15 because of concerns that it adds to smog in high temperatures.
Eight Midwest governors asked the EPA in April to allow year-round sales of E15 in their states. But Cooper said the new bill would provide a “nationwide fix” that even the American Petroleum Institute considers preferable to the current patchwork of temporary waivers and ad hoc solutions.
OMAHA, Neb. — Warren Buffett’s company slashed its stake in U.S. Bank’s parent company and also sold shares in Chinese electric car maker BYD in the third quarter, according to regulatory filings Monday.
The moves were among several others including a more than $4.1 billion investment in Taiwan Semiconductor that Berkshire Hathaway disclosed in the filings with the SEC and the Hong Kong stock exchange.
The filings detailed all the stock moves made by Buffett’s company in the third quarter.
Many investors follow Berkshire’s moves closely because of Buffett’s remarkably successful track record over the decades.
Berkshire revealed a new 60 million share stake in Taiwan Semiconductor and two smaller new investments in Jefferies Financial Group and Louisiana Pacific Corp.in Monday’s filing.
Berkshire also picked up nearly 4 million more Chevron shares worth more than $700 million to give it 165.4 million shares and continue betting on oil producers. One of Buffett’s biggest investments this year has been buying up roughly $12 billion of Occidental Petroleum shares, including adding nearly 36 million shares in the third quarter.
Buffett’s company trimmed its Activision Blizzard, General Motors and Kroger holdings during the quarter. It also eliminated an investment in Store Capital Corp.
Berkshire said Friday that it now owns 3.5% of Minneapolis-based U.S. Bancorp, down from nearly 10% at the start of the year. The 52.5 million shares Berkshire now holds were worth roughly $2.4 billion Monday.
It also reduced its investment in the Bank of New York Mellon by 10 million shares during the quarter.
But financial stocks remain a core part of Berkshire’s portfolio. The Omaha, Nebraska-based conglomerate’s stake of more than 1 billion shares of Bank of America is one of its biggest investments.
Berkshire’s filings with regulators don’t specify if the decisions were made by Buffett or were the responsibility of the company’s two other portfolio managers, but Buffett generally handles investments over $1 billion. Berkshire officials don’t routinely comment on these stock filings, and they haven’t said why they are selling BYD and U.S. Bancorp stocks.
Berkshire said it now owns a little over 182 million BYD shares, down from 225 million when it started selling off the stock in August. Previously, Buffett hadn’t touched the investment he paid $232 million for in 2008. The stake had soared in value to nearly $7.7 billion by the end of last year.
Buffett’s company now holds 16.6% of the Hong Kong-issued shares of BYD.
Besides its equity investments, Berkshire owns more than 90 companies outright, including Geico insurance, BNSF railroad, several major utilities and an assortment of well-known brands such as Duracell, Dairy Queen and Fruit of the Loom.
ATLANTA — A Norwegian company will build a giant electric battery factory just southwest of Atlanta, company and state officials announced Friday, investing up to $2.6 billion over multiple phases.
Freyr Battery said it would build an initial plant that would produce batteries that could hold 34 gigawatt hours of electricity each year. Among battery plants currently operating, that would be the second-largest worldwide, behind a factory owned by Panasonic and Tesla in Nevada.
Freyr CEO Tom Jensen told attendees at the announcement in the Atlanta suburb of Newnan that the company’s vision of using renewable energy to make batteries could play an important role in reducing carbon emissions from electricity generation and transportation. The company’s initial plan is targeted toward storing electricity produced by renewable sources and releasing it later, but Jensen said sales to vehicle makers could also be included.
Jensen said battery production is a “massive growth opportunity,” predicting 70% of decarbonization efforts will somehow include batteries.
“We want to build something that matters, something that we can be proud of something that will matter for our children,” Jensen said. “Because at the end of the day, the world needs to rapidly decarbonize the society.”
The company said it plans an initial investment of $1.7 billion, and would hire 720 people at a site it has purchased in an industrial park near Newnan, about 35 miles (55 kilometers) southwest of Atlanta. Phases through 2029 involving $700 million of additional investment could include more production lines, material processing and other activities.
Employees are projected to make an average of $60,284 a year, said Molly Giddens of the Coweta County Development Authority.
Freyr, named for the Norse god of peace and fertility, rain, and sunshine, is also building a large factory in northern Norway and is planning a battery cell production facility in Vaasa, Finland.
The company aims to make batteries, an electricity-intensive process, using renewable energy. In Georgia, that could mean buying electricity from a dedicated solar facility with battery storage run by a third party, the company said.
Freyr said it looked at 130 sites in 25 states before selecting Georgia, citing the availability of engineers trained by Georgia Tech and other schools, job training, and proximity to Atlanta’s big airport, Savannah’s port, railroads and highways.
The company said it sees opportunities in the United States in part because of incentives for renewable energy passed by Congress earlier this year. Freyr said it intends to seek federal grants or loans.
In addition, the company said it is getting “strong” financial incentives from state and local officials in Georgia. The state plans to pay for worker training, and Freyr will eligible for up to $4.5 million in state income tax credits over five years, as long as workers make at least $31,300 a year. Coweta County will give property tax breaks for 20 years, Giddens said, not disclosing a projected value. She said the company would also get a “quality jobs creation grant.”
It’s the second huge battery factory announced in Georgia. Korean firm SK Innovation has built a $2.6 billion plant in Commerce, northeast of Atlanta, with plans to hire 2,600 workers eventually.
The state has targeted the electric vehicle industry. Hyundai Motor Group has announced plans to invest $5.5 billion in a plant near Savannah and hire 8,100 workers, also planning to make batteries there. Electric truck maker Rivian has plans to build a plant east of Atlanta, investing $5 billion and employing 7,500 workers.
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Follow Jeff Amy on Twitter at http://twitter.com/jeffamy.
Renault SA and China’s Geely say they plan to launch a joint venture to produce gasoline-powered and hybrid powertrains, adding to a series of partnerships between global automakers to share soaring technology costs
BEIJING — Renault SA and China’s Geely announced plans Tuesday for a jointly owned venture to produce gasoline-powered and hybrid powertrains, adding to a series of partnerships between global automakers to share soaring technology costs.
The venture will have 17 plants with annual production capacity of 5 million powertrains, five research and development centers on three continents and some 19,000 employees, the companies said. They gave no financial terms but said each partner will own half of the venture.
It will supply brands owned by or linked to Renault and Geely including Nissan, Mitsubishi, Volvo Cars, Renault, Dacia, Geely Auto, Lynk & Co. and Proton, the companies said. They said it might later supply third-party brands.
Global automakers have been forming partnerships over the past decade to share the multibillion-dollar development costs of electric vehicles and more efficient gasoline engines.
The Renault-Geely agreement will “enable the creation of a global leader in hybrid technologies to provide highly efficient advanced solutions for automakers around the world,” Eric Li, chairman of Geely Holding Group, said in a statement.
SACRAMENTO, Calif. — California on Monday settled a lawsuit against a German company stemming from the emissions scandal that tarred Volkswagen in 2015 and Fiat Chrysler two years later.
German auto supplier Bosch will pay $25 million to settle allegations by the state and California Air Resources Board under a court complaint and settlement agreement, both filed Monday. A judge will need to sign off on the settlement.
Volkswagen and Fiat Chrysler installed “defeat devices” in nearly 100,000 diesel passenger vehicles sold in California, the state said previously. The devices made it seem like the vehicles were meeting emissions requirements as they were undergoing testing, but on the road they actually polluted at many times the legal limit.
The settlement stems from some Volkswagen and Fiat Chrysler diesel vehicles sold in the U.S. from model year 2016 and earlier.
The complaint filed Monday said Bosch knew or should have known that the automakers were violating environmental and consumer protection laws, and that Bosch broke consumer protection laws through its marketing of Volkswagen and Fiat Chrysler vehicles and its own diesel components.
“Bosch violated consumer trust when it gave Volkswagen and Fiat Chrysler the technology they needed to skirt state and federal emissions tests,” Attorney General Rob Bonta said in announcing the settlement.
The Air Resources Board’s executive officer, Steven Cliff, said the company’s technology “was at the heart of the automobile emissions cheating scandals at Volkswagen and Fiat Chrysler and that has led directly to increased emissions and unhealthful air, especially in neighborhoods suffering from persistent air pollution.”
Bosch said in a statement that it “neither acknowledges the validity of the claims … nor does it concede any liability.” But it said its “robust compliance systems, as well as its full cooperation” aided the settlement. It also said that since 2015, the company’s “already existing extensive compliance policies and procedures have been substantially enhanced.”
Aside from the $25 million, the settlement requires Bosch to make changes in its policies and procedures and to tell state officials if it discovers that a manufacturer will use or has used cheating technology.
California previously settled with Volkswagen for nearly $1.5 billion in environmental mitigation payments, investments in zero-emissions technology and other damages. The company also was required to buy back at least 85% of affected vehicles or make emissions modifications on those vehicles.
Fiat Chrysler paid more than $78 million and similarly was required to bring at least 85% of the affected vehicles into compliance.
SACRAMENTO, Calif. — California on Monday settled a lawsuit against a German company stemming from the emissions scandal that tarred Volkswagen in 2015 and Fiat Chrysler two years later.
German auto supplier Bosch will pay $25 million to settle allegations by the state and California Air Resources Board under a court complaint and settlement agreement, both filed Monday. A judge will need to sign off on the settlement.
Volkswagen and Fiat Chrysler installed “defeat devices” in nearly 100,000 diesel passenger vehicles sold in California, the state said previously. The devices made it seem like the vehicles were meeting emissions requirements as they were undergoing testing, but on the road they actually polluted at many times the legal limit.
The settlement stems from some Volkswagen and Fiat Chrysler diesel vehicles sold in the U.S. from model year 2016 and earlier.
The complaint filed Monday said Bosch knew or should have known that the automakers were violating environmental and consumer protection laws, and that Bosch broke consumer protection laws through its marketing of Volkswagen and Fiat Chrysler vehicles and its own diesel components.
“Bosch violated consumer trust when it gave Volkswagen and Fiat Chrysler the technology they needed to skirt state and federal emissions tests,” Attorney General Rob Bonta said in announcing the settlement.
The Air Resources Board’s executive officer, Steven Cliff, said the company’s technology “was at the heart of the automobile emissions cheating scandals at Volkswagen and Fiat Chrysler and that has led directly to increased emissions and unhealthful air, especially in neighborhoods suffering from persistent air pollution.”
Bosch said in a statement that it “neither acknowledges the validity of the claims … nor does it concede any liability.” But it said its “robust compliance systems, as well as its full cooperation” aided the settlement. It also said that since 2015, the company’s “already existing extensive compliance policies and procedures have been substantially enhanced.”
Aside from the $25 million, the settlement requires Bosch to make changes in its policies and procedures and to tell state officials if it discovers that a manufacturer will use or has used cheating technology.
California previously settled with Volkswagen for nearly $1.5 billion in environmental mitigation payments, investments in zero-emissions technology and other damages. The company also was required to buy back at least 85% of affected vehicles or make emissions modifications on those vehicles.
Fiat Chrysler paid more than $78 million and similarly was required to bring at least 85% of the affected vehicles into compliance.
NEW YORK — A weekend fire that injured over three dozen people — and forced firefighters to use ropes to pluck people from a 20th-story window — is drawing attention to a rising concern in New York City: battery fires that can arise in the electric bikes and scooters that have proliferated here.
City officials are considering new laws after the fire department counted nearly 200 blazes and six fire deaths this year tied to problems with lithium-ion batteries in such “micromobility” devices.
WHAT ARE THESE BATTERIES? ARE THEY THE SAME TECH USED IN PHONES AND CARS?
Lithium-ion batteries are a Nobel Prize-winning innovation that entered the market in the early 1990s. Hailed as rechargeable, lightweight, powerful, durable and safe, the batteries have been envisioned as a key to greening the world’s energy supply by storing energy, including from the sun, wind and other renewable sources.
The technology has woven its way into many people’s everyday lives, powering phones, laptop computers, vehicles and more.
WHY CAN THEY CATCH FIRE?
The batteries’ electrolyte — a solution that lets electrical current flow — is flammable, explains Massachusetts Institute of Technology materials chemistry professor Dr. Donald Sadoway. The substance was chosen for its ability to handle the voltage involved, but fires can happen if the batteries are overcharged, overheated, defective or damaged, for instance.
Battery industry group leader James Greenberger notes that other energy sources aren’t trouble-free, and he says there’s nothing inherently unsafe about the batteries. But he said the industry is concerned about the fires lately in New York and worries that they could scare off consumers.
“This shouldn’t be happening and we need to figure out what’s going on,” said Greenberger, the executive director of NAATBatt — the North American trade association for advanced battery technology developers, manufacturers and users.
WHY ARE E-BIKES AND SCOOTERS GETTING SCRUTINY IN NEW YORK?
The city has seen “an exponential increase” in fires related to faulty lithium-ion batteries in recent years, Chief Fire Marshal Daniel Flynn said. He said there have been more deaths and injuries already this year than in the past three years combined.
“It’s a big issue,” he said at a news conference Monday, describing fires that occur without warning, grow rapidly and are tough to extinguish.
The batteries “fail almost in an explosive way — it’s like a blowtorch,” he said.
Saturday’s fire in a Manhattan apartment was sparked by a malfunctioning e-bike battery that residents were attempting to charge and left unattended while they fell asleep, he said. They were trapped when the battery, plugged in by the front door, caught fire, Flynn said.
Electric bikes and scooters have become popular, non-gasoline-burning ways to make deliveries, commute and zip around a city that has promoted cycling in recent decades. For the “deliveristas” who carry restaurant takeout orders, the bikes are crucial tools of the trade.
“What these workers have learned over the years, and they know it well, is that, like any equipment, it requires the maintenance required,” said Hildalyn Colón Hernández, a spokesperson for worker advocacy group Los Deliveristas Unidos. She said many workers have used their batteries for years without a hitch.
WHAT’S CAUSING THE PROBLEM?
There are different opinions. Greenberger, the industry group director, suggests there’s too little quality control on some of the largely imported batteries. Sadoway, the scientist, believes “we don’t have the appropriate protective measures” on e-bikes and scooters themselves to monitor the batteries for problems.
Colón Hernández, the delivery worker advocate, thinks there need to be tougher standards around the batteries, such as regulations for businesses that sell or service them.
WHAT IS NEW YORK CITY DOING ABOUT THIS?
The Fire Department has repeatedly issued warnings and safety tips over the past year. Fire Commissioner Laura Kavanagh asked the federal Consumer Product Safety Commission in August to consider new regulations. Mayor Eric Adams pointed again to the CPSC on Monday.
“The responsibility of navigating safe and unsafe batteries on the market should not fall to hard-working New Yorkers,” the mayor, a Democrat, said in a statement.
Some city lawmakers want to take their own steps.
A City Council committee has set a Nov. 14 hearing on various proposals. Some would require public education campaigns or safety reports. Another would prohibit the sale of some secondhand lithium-ion batteries, or e-bike or scooter batteries without certain seals of approval.
Meanwhile, fire officials continue to urge everyone not to leave batteries to charge unattended, to check that they’re not damaged or near a heat source, and to make sure the batteries, chargers, cords and devices are all from the same manufacturer and used as instructed.
“We understand the benefits that these batteries pose to our communities, and we want to encourage use of them, but safe use,” Flynn said. “So understand that it does pose a danger, and just use them safely.”
FILE – In this Wednesday, Aug. 1, 2018, file photo a logo of the brand Volkswagen on top of a company building is pictured prior to a Volkswagen stock company press conference in Wolfsburg, Germany. Volkswagen is recalling nearly 225,000 vehicles in the U.S., Friday, Nov. 4, 2022, because the tire pressure monitoring systems may not detect air losses in all four tires at the same time. The recall covers certain 2019 Tiguan, Golf Sportswagen, Golf Alltrack, Golf R, and Audi Q3 and A3 vehicles. Also covered are some 2019 and 2020 Jetta, Golf, Atlas and Audi A3 models and some 2020-2021 Atlas Cross Sport and Atlas vehicles. (AP Photo/Michael Sohn, file)
DETROIT — Ford Motor Co.’s top quality executive is retiring as the company continues to struggle with high warranty claims and reliability issues.
Stuart Rowley, chief transformation and quality officer, is leaving after 32 years with the company. He’ll be replaced by Jim Baumbick, who is now vice president of product development operations and internal combustion engine programs, the company said Wednesday.
“Quality is our No. 1 priority as a company, and Jim Baumbick is the right leader to deliver world-class quality and reliability at Ford,” CEO Jim Farley said in a statement.
Farley has complained about quality, warranty claims, recalls and problems with launching new vehicles since his appointment as chief executive two years ago.
At the company’s annual shareholders meeting in May, Farley said the problems are affecting Ford’s financial performance, but also causing pain for customers.
“We’ve made more progress on our launch quality and initial quality, you could see it in the surveys and our ramp-up of production,” Farley said at the meeting. “However, we are not satisfied at all with our quality performance, including our recalls and customer satisfaction efforts, which we need to quickly accelerate. ”
He said fixing the problems will require new talent, which the company has, as well as a culture shift and better processes for engineering, manufacturing and supply chain management. “It’s very frustrating for our customers, and so we’re doing everything we can to accommodate them with the right policies to support them when they do have a problem, and rest assured this management team is completely committed to fixing our gap to competition and return the company to being benchmark,” he said.
Ford’s statement said Josh Halliburton, who was hired in January from survey and data analysis company J.D. Power to be executive director of quality, will report to Baumbick.
The move, Ford said, will integrate quality improvement work in design, engineering, manufacturing and the supply chain.
Rowley will retire Dec. 1 after more than three decades with the automaker, where he held multiple positions including chief operating officer for North America, president of Ford Europe.
The change is among several management moves the company announced Wednesday.
Joy Falotico, president of the Lincoln luxury brand, will retire after 33 years with the company. She’ll be replaced by Dianne Craig, now president of the International Markets Group.
Steven Armstrong, vice president for the India and South America transformation, also will retire, after 35 years with Ford.
The moves come at a time of profound change that Farley is leading at Ford, including separating the company into electric vehicle and internal combustion units.
In August the company let go of 3,000 white collar workers to cut costs and help make the long transition from combustion vehicles to those powered by batteries.
Governments across the globe are pushing to eliminate combustion automobiles to mitigate the impact of climate change. Companies like Ford are orchestrating the wind-down of their combustion businesses over multiple years, even though they are still generating the cash to fund electric vehicle development.
FILE – The company logo shines off the hood of a 2021 K5 sedan on display in the Kia exhibit at the Denver auto show Friday, Sept. 17, 2021, at Elitch’s Gardens in downtown Denver. Kia is telling owners, Wednesday, Oct. 26, 2022, of nearly 72,000 older Sportage small SUVs in the U.S. to park them outdoors and away from structures after getting reports of more engine fires. It’s the second time that Sportages from the 2008 and 2009 model years have been recalled due to fire risks that apparently can start near a hydraulic engine control device. (AP Photo/David Zalubowski, File)
TAIPEI, Taiwan — The company that assembles smartphones for Apple Inc. and other global brands unveiled an electric SUV on Tuesday that will be produced for a Taiwanese automaker under a similar contract model.
Foxconn Technology Group said the SUV will be sold by Yulon Motor as the Luxgen n7 starting next year. It said the five-seat vehicle should be able to travel 700 kilometers (440 miles) on one charge. No price was announced.
Foxconn, also known as Hon Hai Precision Industry Co., plans to produce electric cars and buses for brands in China, North America, Europe and other markets. It said clients can modify their appearance and features.
The venture adds to a crowded global market with electrics offered by almost every established automaker and dozens of ambitious startups.
“Hon Hai will certainly redefine the EV industry,” company founder Terry Gou said in a statement.
Foxconn, headquartered in New Taipei City, Taiwan, is the world’s biggest contract assembler of smartphones and other consumer electronics.
Yulon, founded in the 1940s, assembles vehicles for Nissan Motor Co. and other automakers. The company launched its own brand, Luxgen, in 2009.
The Luxgen n7 is one of five proposed models for potential customers.
On Tuesday, Foxconn also displayed a five-seat crossover, the Model B, and a five-seat double-cab pickup truck, the Model V.
The company previously announced plans for a sedan developed with Italian design house Pininfarina and an electric bus, the Model T.
