General Motors wants to become a tech company, but it will mean making thousands unemployed

When I wrote a diary a few months back about bad cars, I mentioned the “Chicken Tax.” The market for small pickup trucks has been severely hampered by the “Chicken Tax,” a 25 percent tax on imported trucks and vans imposed in 1963 as a retaliatory tariff after some European countries put tariffs on cheap American chicken. Last year, Donald Trump cited the Chicken Tax as being an example of how his tariff policy will help American industry.

In automotive circles, the Chicken Tax is loathed since it has made innovations in the small truck market stagnant among American auto makers, the tax has raised the prices of vehicles in the segment, prevents availability of truck models offered in the rest of the world, and it now affects the companies it was meant to protect. Ford is a global company with production located all over the world. Some Ford vehicles have to be brought into the United States, disassembled, and then put back together again in order to get around the Chicken Tax.

However, the Chicken Tax has made it almost economically impossible for foreign automakers to compete with trucks in the United States. So with only a handful of notable exception they don’t even attempt it, giving Chevy and Ford an advantage which has been extremely profitable for the companies. This is part of the reason why the Ford F-Series has been the best-selling vehicle in America for the past 42 years.

The other part of it is Americans love trucks and SUVs. Only three of the 10 top-selling vehicles in the country last year were passenger cars, with the most popular car, the Toyota Camry, only selling about a third of what Ford does with its signature pickup truck. This has been part of an overall trend of American consumers moving away from buying new cars and towards trucks, SUVs, and crossover vehicles which straddle the line between car and trucks as fuel economy has improved. 

The Best-Selling Vehicles in the United States in 2018

Make and Model Units Sold
1. Ford F-Series 909,330
2. Chevrolet Silverado 585,581
3. Dodge Ram 536,980
4. Toyota Rav4 427,170
5. Nissan Rogue/Rogue Sport 412,110
6. Honda CR-V 397,013
7. Toyota Camry 343,439
8. Chevrolet Equinox 332,618
9. Honda Civic 325,760
10. Toyota Corolla 303,732

The consequence of this has been the movement away from manufacturing sedans, coupes, and small hatchbacks by all automakers. General Motors, Ford, Nissan, Hyundai, Honda Volkswagen, etc., have all announced the discontinuation of car models. By 2022, Ford will stop making ALL of their passenger cars, except for the Mustang.

But these decisions also have human consequences.

Late last year, GM announced a restructuring of their business model. As part of the decision, General Motors stopped production of the Chevrolet Cruze, Volt, and Impala, along with the Buick LaCrosse, Cadillac XTS, and Cadillac CT6, which means laying off approximately 8,000 salaried workers, including 25 percent of executives, and an additional 6,000 hourly workers, while closing 5 plants in the United States and Canada. The move is reported to save General Motors $6 billion by 2020, with GM claiming it will allow the corporation to focus on electric vehicles and driver-less automated vehicle technology. To that end, GM CEO Mary Barra wants people to remodel the image of the corporation to be that of a “tech company” with the motto“Zero Crashes, Zero Emissions, Zero Congestion.”

However, the flip side to some of this is that while GM is discontinuing lagging car models, they are also shifting the truck production done in some of these plants to their foreign manufacturing. Also, while they are pulling out of North America, General Motors is doing $14 billion in stock buybacks and investing $3 billion for production in Brazil, which rubs a lot of people the wrong way after American taxpayers literally saved the company’s ass

One of the plants affected by the move is the Lordstown Assembly Complex in Lordstown, Ohio which has been there for a half century. The closing of the plant has been a source of contention, since it has been spotlighted so much in political contexts.  

From Nathan Bomey at USA Today:

In the first nine months of 2018, U.S. sales of the Chevrolet Volt fell 15.9 percent to 12,664 units, compared with a year earlier. During the same period:

  • • Chevrolet Cruze sales fell 26.5 percent to 109,662.
  • • Chevrolet Impala sales declined 13.4 percent to 43,952.
  • • Cadillac CT6 sales fell 10.6 percent to 7,240.
  • • Cadillac XTS sales rose 15.9 percent to 12,664.
  • • Buick LaCrosse sales fell 14.2 percent to 13,409.

Altogether, during the first nine months of the year GM sold 199,591 units of the vehicles to be discontinued.

That’s less than half of the Chevy Silverado, GM’s most popular model.

President Obama hailed the Lordstown plant’s continued existence in 2009 to highlight the importance of the American auto industry. After Trump shifted support in Trumbull County (the home of the Lordstown plant) over 30 points in his direction in 2016, as well as winning overall in Ohio and Michigan, the GM announcement of closure put the lie to Trump’s claim of saving/creating American manufacturing jobs. And Trump’s renegotiated sorta-NAFTA agreement (i.e., the United States-Mexico-Canada Agreement) still makes it more advantageous to build vehicle in Mexico.

In May, after ineffective whining via-Twitter did nothing to change General Motors’ decision to close the Lordstown Complex, Trump attempted to save face by announcing a deal for GM to sell the plant to electric vehicle manufacturer Workhorse.

Almost immediately GM had to correct Trump and state there was no deal, only discussions to sell. Local officials in Lordstown are “not optimistic” about the situation, and the nature of Workhorse itself has been described as a “corporate cipher.” According to reports, the proposed new venture for Lordstown exists “entirely on paper,” needs “at least $300 million” in raised capital, and Workhorse is barely hanging on with little cash-on-hand, supported by high-cost loans from hedge funds, and its suppliers are demanding “payment in advance before filling orders.”

From Ian Thibodeau of The Detroit News:

General Motors Co. CEO Mary Barra wants people to think of the 110-year-old automaker as a technology company by the time she retires.

“There’s still a story to be told,” Barra said Monday at the CityLab Detroit forum of leaders from across the country. “But because of what happened to General Motors late last decade, a lot of people lost confidence in us, so we have to work doubly hard to earn that respect and trust back that we can be a company that not only innovates and grows, but leads.” … GM plans to launch its first fleet of autonomous vehicles without a steering wheel, brake pedal or accelerator sometime in 2019. That’s the first stage for GM’s plan for autonomous vehicles, Barra said. Within the next decade, she said, those cars should pop up in “many” cities across the globe, as GM moves to grow the number of those vehicles in operation.

The vehicles will be deployed in one controlled environment at first, likely as a ride-hailing service, in the U.S. The company is working with Cruise Automation, a San Francisco-based technology company GM acquired, to develop those vehicles.

“The technology’s the hardest piece,” Barra said. “Once we establish that, and we’re on a path to do that next year, then it just becomes how fast we can roll that out.”

Whether GM’s focus on driver-less vehicles will pay off is an open question. According to some analysts, there will be 8 million driver-less cars on the road by 2025 and 20 million by 2030. The automated vehicle market is predicted to generate $173 billion in revenue by 2023. Multiple tech firms with varying degrees of cooperation with auto industry giants have been working on autonomous vehicles. General Motors’ offering is its “Super Cruise” auto pilot for highway traffic in passenger vehicles, and its Cruise Automation division, which in partnership with Honda is modifying Chevrolet Bolts with drive control algorithms and artificial intelligence created by Cruise.” Reports indicate GM wishes to deploy around “2,500 modified Chevrolet Bolt electric vehicles as part of a controlled on-demand ride-sharing fleet, likely to be based in San Francisco, by the end of 2019.”

Manufacturers and Tech Companies Working on Autonomous Vehicles
Waymo A subsidiary of Google’s parent company, Alphabet Inc., its system is reported to be one with extensive testing in multiple areas. The company claims its artificial intelligence and machine learning, using lidar and radar, will be capable of fully autonomous driving, and is now operating vehicles in the Phoenix area as part of Lyft’s ride sharing app.
Intelligent Drive A collaborative effort between BMW and Daimler AG, the parent company of Mercedes-Benz, the system is reported to be more attuned for European streets/roads and akin to an advanced cruise control, with the more advanced autonomous systems maybe being limited only to partnerships with ride services.
Ford, Volkswagen, and Argo AI The system has shown enough potential there are already partnerships with Postmates and Walmart for delivering groceries and pet food.
Aptiv The successor company to General Motors’ old parts division, Delphi/ACDelco, which divorced itself from GM in 2011, for the past year Aptiv and Lyft have been operating specially outfitted BMW 5-Series in Las Vegas. According to Lyft, there have been more than 50,000 rides in the vehicles and the average ride “received a rating of 4.97 out of 5 stars … which added that 92 percent of riders said they felt very safe or extremely safe during the ride.”
Tesla Autopilot The advantage of the Tesla system is that it uses the technology already a part of the Tesla vehicles to provide a degree of autonomous driving. However, it’s only for highways and requires supervision according to Tesla. However, that hasn’t stopped some enterprising souls, including ones who shot a porno while the car drove itself.
Uber and Volvo The ride share company, which went public two-months-ago with a valuation of $82 billion and a warning in its IPO the company may never be profitable, has done extensive testing across the United States. Its self-driving vehicle unit has seen over a $1 billion investment, partnership with Volvo, and was reported to be burning through $20 million per month in an attempt to have 75,000 autonomous vehicles in 13 cities by 2022.
Apple and Drive.ai Not much is known about Apple’s program, but the tech giant has been researching the technology for a while as part of something called Project Titan. Just two-weeks-ago, Apple acquired the self-driving startup Drive.ai, which has developed technology with deep learning to recognize and avoid objects, and conducted fixed-route tests with its autonomous vehicles without human safety drivers on public roads. 

However, a fatality involving an Uber self-driving vehicle last year, as well as problems experienced by Tesla with its automated driving software, has made some wonder whether the industry is ready, and General Motors in particular is being a bit too optimistic in their belief of launching driver-less taxis this year. GM’s request that U.S. regulators waive some automobile safety standards (e.g., the need to put mirrors, dashboard warning lights, and turn signals on the cars) to put the vehicles on the road has faced pushback

And there are stories indicating GM’s Cruise technology is “riddled with technical glitches,” and were having “safety critical events” once every 450 miles.

From Amir Efrati at The Information:

In the middle of April, Honda Motor CEO Takahiro Hachigo hopped into a self-driving car prototype made by General Motors’ Cruise Automation for a demonstration ride. It didn’t go well. About 20 minutes in, the car’s software suddenly turned itself off even as the car kept moving. A man sitting behind the wheel—the backup driver—had to take control. Attempts to restart the system failed, and a second Cruise vehicle had to pick up Mr. Hachigo to finish the demonstration.

The previously unreported glitch was embarrassing for GM, Cruise’s majority owner, as Honda is an investor in the company, which was valued at $19 billion in its latest fundraising. More significantly, though, the software outage and previously undisclosed internal data highlight the technological challenges faced by Cruise that have forced it to repeatedly delay the planned launch of a fully automated robotaxi service to the public, from the original time frame of 2018 to the very end of 2019, according to people with knowledge of the matter.

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