Folks Are Pissed At Ford For Cutting F-150 Lightning Production In Half

Good morning! It’s Monday, December 18, 2023, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.

Nissan Finally Turns a Profit

1st Gear: Suppliers Are Upset Over F-150 Lightning Cuts

Ford is having a rough go of it with its electric F-150 Lightning pickup. The automaker idled the third shift at the Rouge Electric Vehicle Center a couple of months ago, and it told suppliers it was slashing its 2024 production goals in half. This is a real blow to the automaker’s mojo and has, unsurprisingly, pissed off suppliers.

Some say that automakers should have seen this downturn coming and planned accordingly, rather than boosting production. But alas, it’s too late for that. From Automotive News:

“Everybody’s eyes were bigger than their stomachs,” Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions, told Automotive News. “This downturn we’ve experienced should have been expected by the industry, but when they looked at the early growth, they figured it’d grow by [that much] each year. That was never going to happen.”

According to a planning memo obtained by Automotive News, Ford told suppliers the Lightning plant’s expected weekly production rate will drop to 1,600 in early January from about 3,200 trucks because of “changing market demand.” That would equate to around 75,000 vehicles next year, or half of the run rate Ford spent much of this year racing to achieve.

While the Lightning remains popular — it’s the nation’s top-selling electric pickup, with deliveries up 54 percent to 20,365 this year through November — Fiorani said the decision shows the automaker was “overenthusiastic” about demand. Most early adopters already have received their trucks, he said, which leaves Ford and other automakers to figure out how to “convert stubborn buyers who aren’t ready to make that leap” to EVs.

This F-150 Lightning news comes after Ford postponed some EV production targets in July and said it would delay about $12 billion in EV investment in October. It said it was going to lower Mustang Mach-E production and push back the opening of one of two new battery plants.

“The narrative has taken over that EVs aren’t growing. They’re growing,” CFO John Lawler said in October. “It’s just growing at a slower pace than the industry and, quite frankly, we expected.”

Now, here’s where the suppliers get involved, and it isn’t pretty.

Fiorani said some automakers’ rush to boost EV capacity could have been to please investors.

“The manufacturers should have been anticipating [the slowdown], but they also didn’t want to be the ones being left behind in this transition,” he said. “Part of the issue is Wall Street doesn’t like legacy automakers, but they do like tech companies. Manufacturing modern EVs makes them look like a tech company, and that had to be behind a lot of the planning of an all-EV future.”

Some suppliers have invested millions of dollars in tooling and equipment to meet Ford’s changing EV plans.

As recently as mid-2023, Ford said it expected to hit an annual run rate of 150,000 by this fall. To reach that goal, the company idled the plant for six weeks at that time to make it more than 70 percent larger.

[…]

Fiorani said his firm has been cautioning suppliers to “beware of how much you’re investing” in EVs.

“If you invest for a large volume of tooling, it’s not going to pay itself off quickly,” he said. “If the suppliers were planning on every number the manufacturers gave them, they’re over-capacitized now and have to figure out what to do with these plants, tooling and people.”

He said the Lightning cutback especially could hurt smaller Tier 2 or Tier 3 suppliers that have struggled financially in recent years from the coronavirus pandemic, semiconductor shortage and UAW strike this fall.

“Bigger suppliers are financially strong enough to weather these issues,” he said. “But when it comes to smaller suppliers, they’re not ready for overcapacity in their plants. They need to pay bills, pay workers and they don’t have a lot of money backed up for any missed numbers.”

As it turns out, some Americans are ready for the EV revolution, but not everyone is, and it’s hurting businesses further down the line. Won’t someone think of the businesses?

2nd Gear: Chinese Nissan EVs Are Going Global

Nissan will start selling electric vehicles it developed in China on a global scale. The news comes as the Japanese automaker struck a deal with China’s top university to leverage local resources in order to accelerate research and development on electrification.

Now, Nissan is considering exporting the lineup of existing ICE vehicles and upcoming EVs and plug-in hybrids manufactured and developed in China to overseas markets. The news comes from Masashi Matsuyama, Nissan Motors VP and Nissan China president. From Reuters:

Nissan is considering aiming at the same markets as Chinese rivals such as BYD, he said.

The company is joining foreign brands including Tesla , BMW and Ford that are expanding their exports of China-made cars to exploit the country’s lower manufacturing costs and increase the capacity utilisation of their factories.

China accounted for just over a fifth of Nissan’s worldwide sales of about 2.8 million vehicles over the first 10 months of the year, down from over a third for the same period last year.

Japanese automakers have faced a severe sales challenge this year in China, the world’s biggest auto market, due to the popularity of domestic brands and heavy price competition amid a rapid shift to EVs.

Nissan announced it would establish a joint research centre with China’s leading Tsinghua University next year, focussing on research and development of EVs, including charging infrastructure and battery recycling.

“We hope that this collaboration will help us gain a deeper understanding of the Chinese market and develop strategies that better meet the needs of customers in China,” Nissan President and Chief Executive Makoto Uchida said in a statement.

The launch of the new research center is an extension of joining research efforts Nissan has had with Tsinghua since 2016. The partnership has focused on “intelligent mobility and autonomous driving technology.” Great. I love that. What we need is more of that.

3rd Gear: Nio Gets $2.2 Billion Lifeline From Abu Dhabi

Chinese electric vehicle maker Nio has signed on for a $2.2 billion investment from CYVN Holdings, an investment firm based out of Abu Dhabi. The investment comes as Nio continues to struggle under the pressure it is getting from a price war started by Tesla. It has tried to boost efficiency by cutting a tenth of its workforce and pushing non-core projects down the road. From Reuters:

The deal, expected to close in the final week of December, would take CYVN’s shareholding to 20.1% of Nio’s total issued and outstanding shares, following an investment of $1 billion in July, Nio said in a statement on its website.

That would make CYVN the largest single shareholder of Nio, although founder and chief executive William Li retains the most voting power, with his ownership of Class ‘C’ ordinary shares.

CYVN, which will subscribe to 294,000,000 newly issued Class A ordinary shares priced at $7.50 each, will also be entitled to nominate two directors to Nio’s board, the company said.

The company, whose Nio-branded EVs compete with premium brands such as Mercedes-Benz and BMW in China, has been developing two new brands for mass markets that it aims to bring them to Europe from 2025, its executives have said.

Right about now, I’d try to be sarcastic about how this is finally the thing that’ll save Nio, but with billions now pouring in from Abu Dhabi, I wouldn’t be that surprised if it actually worked out.

4th Gear: Longstanding U.S. Automotive Steel Supplier Bought By Japanese Company

Japan’s Nippon Steel is set to purchase U.S. Steel, a longtime strategic supplier for the North American automotive industry. The deal is worth $14.9 billion including debt. From Automotive News:

U.S. Steel, a stalwart of American industry with roots stretching back more than a century, has been considering potential transactions since mid-August, after rejecting an offer from rival Cleveland-Cliffs Inc. for $7.25 billion.

Nippon Steel is focusing on the U.S., which it sees as a growth market, amid sliding demand in the Japanese market due to the declining birth rate, a Nikkei report said. It would be the largest purchase ever for Nippon Steel, the paper said.

Nippon will pay $55 per share in cash, the companies said in a statement. The deal is a 142 percent premium to U.S. Steel’s share price on the last trading day before it announced the review and Cliffs revealed it had made a bid. U.S. Steel’s shares had suffered after several quarters of falling revenue and profit, making it an attractive takeover target for rivals looking to add a steelmaker used by the automobile industry.

[…]

Nippon has secured financing commitments for the deal and expects it will enable the company to move toward 100 million tons of global crude steel capacity.

The companies said they agreed U.S. Steel will keep its name and headquarters in Pittsburgh.

All of U.S. Steel’s commitments to its employees, including collective bargaining agreements put in place by unions, will be honored. However, the union representing thousands of U.S. Steel workers says it does not support the deal.

“To say we’re disappointed in the announced deal between U.S. Steel and Nippon is an understatement,” USW International President David McCall said in a statement.

Nippon’s executive vice president, Takahiro Mori, told Reuters in an interview that the company had operated in the U.S. for 40 years and that it was confident the transaction would be completed.

“Standard Steel that we own is a union company in the United States, we have a good history of working with unions. We see no regulatory or antitrust issues with the deal,” Mori said.

Nippon Steel also has an electric arc joint venture with ArcelorMittal in Alabama. Those operations are not unionized.

The transaction, which was reported by Nikkei earlier on Monday, is expected to close in the second or third quarter of 2024, subject to approvals.

This story feels like it came straight from central casting for “stories your grandfather would be fucking pissed about,” doesn’t it?

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