‘Let’s Get Back To Work’ Ford And Auto Workers Reach Tentative Deal To End Strike

Good morning! It’s Thursday, October 26, 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.

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Contents

1st Gear: UAW’s Deal With Ford To End The Strike

The United Auto Workers union and Ford have reached a tentative deal to end the 41-day-long strike against the automaker. Now, the deal heads to a membership vote. The news was made official by UAW President Shawn Fain in a video posted to social media around 8:30 p.m. on October 25.

“The stand up strike is working. Ford knew what was coming for them Wednesday, if we didn’t get a deal done,” Fain said in the video. “That was checkmate. From The Detroit Free Press:

The tentative agreement includes an 11% wage increase the first year and totals 25% over a 4½-year contract, plus a $5,000 ratification bonus and cost-of-living adjustments, according to two sources familiar with the deal but not authorized to speak publicly.

The gains in the deal are valued at more than four times the gains from the last UAW contract in 2019, and provide more in base wage increases than Ford workers have received in the past 22 years, the UAW said in a news release. The union said the tentative agreement also includes:

Cumulatively raising the top wage by more than 30% to more than $40 an hour

Raising the starting wage by 68%, to more than $28 an hour

Providing a raise of more than 150% to the lowest-paid workers at Ford over the life of the agreement, with some workers receiving an immediate 85% increase immediately upon ratification

Reinstating major benefits lost during the Great Recession, including cost-of-living allowances and a three-year wage progression

Killing different pay rates, or tiers, for workers

Improving retirement benefits for current retirees, those workers with pensions, and those who have 401K plans

Including the right to strike over plant closures

The news comes right after an “especially good” meeting between the UAW and Ford, according to Freep.

Ford CEO Jim Farley issued a statement saying he is pleased to have reached a tentative agreement and eager to get 20,000 Ford employees back to work at factories in Michigan and Illinois.

Charmaine Sanderfield, 34, of Canton is a Ford assembly worker at the Michigan Assembly Plant who has walked the picket line in Wayne since the start of the strike. She texted the Free Press, “God is good. Now let’s get back to work!”

The strike now continues against General Motors and Stellantis until those companies can reach an agreement with the UAW.

2nd Gear: Fisker’s Ocean Price Cut

Fisker is cutting the price of its top-tier Ocean crossover by $7,500 just four months after the vehicle launched in the U.S. However, it’s raising prices for other trims. Weird! From Automotive News:

The adjustments come amid an ongoing price war started by EV segment leader Tesla Inc. in January, forcing some rivals to cut prices and offer sales incentives such as lease promotions or below-market financing rates.

“It is essential that Fisker responds to competitive realities in the rapidly growing EV market,” CEO Henrik Fisker said in a press release Monday. “We want our customers to have greater access to the Ocean.”

After this 11 percent price reduction, the Ocean Extreme is now going to start at $61,499 before shipping. The $7,500 price cut actually applies to both new orders and ones already on the books. If that $7,500 number feels familiar, that’s because it just happens to be what the federal EV tax incentive is. That’s something the Ocean doesn’t qualify for since its built in Austria.

Fisker said that on Nov. 5 it will raise the price of the mid-level Ocean Ultra trim by $3,000 to $52,999, excluding shipping. The entry-level Sport model will see a $1,000 price increase to $38,999, excluding shipping.

“We are very confident in the continued demand for the Ocean and we expect the Sport and the Ultra models to be the highest sellers starting in 2024,” Henrik Fisker said.

The company has reportedly struggled to produce Oceans and cut its 2023 production forecast significantly back in August. Last month, it says it reached a production milestone of 5,000 vehicles and expected to rapidly pick up deliveries in the fourth quarter of this year.

3rd Gear: Mercedes’ EV Margin Issue

Mercedes-Benz said a “brutal” electric vehicle market with heavy price cuts and supply chain issues means it will more than likely hit the lower end of its 12 to 14 percent adjusted return on sales forecast. At the same time, third-quarter earnings fell. From Reuters:

The luxury carmaker said it remained committed to its EV targets, but could bolster earnings with better returns from its combustion engine portfolio if margins on EVs remained lower than previously assumed, its chief financial officer said on an analyst call.

With some traditional players selling battery electric vehicles below the level of internal combustion engine cars despite their higher production costs, “this is a pretty brutal space,” Harald Wilhelm said.

“I can hardly imagine the current status quo is fully sustainable for everybody,” he said.

Discounts offered on some models in Germany in the fourth quarter did not represent an overall shift in the carmaker’s pricing strategy of keeping prices high to focus on boosting margins over volume, Wilhelm said.

Automakers like Ford and Tesla have been cutting prices throughout the year in most of North America to get demand up, however Mercedes-Benz hasn’t really been doing that.

The company on Thursday reported a 12.4% adjusted return on sales in its cars division in the third quarter.

Earnings before interest and taxes (EBIT) across the group fell 6.8% to 4.8 billion euros ($5.1 billion), slightly above consensus, as its earnings from vans jumped 44% to 715 million euros with an adjusted return on sales of 15%.

Group revenue was down 1.4% at 37.2 billion euros.

Mercedes-Benz described the market environment as “subdued”, but Wilhelm said “we are beyond the worst” when it comes to inflation and energy pricing.

Earlier in October, Benz reported a four percent drop in overall third-quarter sales, and top end sales were down 11 percent, according to Reuters. Part of that comes from model changeovers and a shortage in Bosch 48-volt systems. Car revenue dropped 3.8 percent because of the fall in deliveries, but the average selling price remained about the same.

4th Gear: Stellantis’ $1.6 Billion Chinese Investment

Stellantis is reportedly buying a 21 percent state in Leapmotor, a Chinese EV maker, to the tune of a $1.6 billion deal. It’s supposed to give the automaker a new lease on life in China, the world’s biggest market. From Reuters:

Legacy international carmakers are playing catch-up in the shift to electric vehicles and the deal gives Stellantis access to Leapmotor’s advanced technology.

Meanwhile, a growing number of Chinese EV makers are launching lower-cost models across Europe.

“The Chinese offensive is visible everywhere,” Stellantis CEO Carlos Tavares told reporters. “With this deal we can benefit from it rather than being the victims of it.”

Since Stallantis originally formed back in 2021, it has reportedly struggled to sell cars in China. This move should, in theory, help that effort.

Stellantis’ new deal follows a tie-up between Volkswagen and Xpeng announced in July which heralded a new era of automotive alliances in China and reflects how the country has emerged as a global centre of EV technology.

As part of a joint venture 51% controlled by Stellantis, the Chrysler parent will have exclusive rights to export, sale and manufacture Zhejiang Leapmotor Technology’s products outside Greater China.

[…]

Stellantis was previously concerned about growing competition from cheap Chinese EVs in Europe, which spurred the EU probe.

Tavares, once a vocal critic of lower-cost Chinese imports into Europe, told reporters the Leapmotor deal did not make Stellantis a “Trojan horse” and was critical of the EU’s probe.

Over 40 EV brands are locked in a reportedly price war in China, which was pretty much started by Tesla earlier in 2023. Despite big price cuts, sales are slowing because of weak demand for EVs.