Future models and an FTA - the week

By Graeme Roberts | 18 September 2020

The FTA with Japan came as negotiations on a free trade deal between the UK and its biggest trading partner, the EU, appeared to be struggling

The FTA with Japan came as negotiations on a free trade deal between the UK and its biggest trading partner, the EU, appeared to be struggling

Our future models reports continued this week with a look at Honda: Thanks to its sales and production records being broken in China, Honda has been able to offset troubled times both at home and in North America. Profits for fiscal 2020-21 will of course be deeply impacted by the coronavirus, yet that isn't greatly affecting investments in all manner of new models due out later this decade.

We also took a look at Acura which has so much going for it yet it can't quite seem to break through with luxury car buyers in the same way that Lexus has, particularly in China, not to mention the big three German makes. And why it remains absent from Japan is an ongoing mystery.

The UK has secured a free trade agreement with Japan, the country's first major post-Brexit trade deal. The positive development comes as negotiations on a free trade deal between the UK and its biggest trading partner, the EU, appear to be struggling to make headway.

Not all motor shows have been axed. After a delay of five months, AutoChina is set to go ahead during the last week of September. The latest additions to just-auto's list of premieres are facelifts for the BMW 5 Series Li and Le sedans as well as an updated Ford Territory EV.

BYD recently began operations at its third plant in Brazil, which it claims it the country's first lithium iron phosphate battery factory. It's in the Manaus Industrial Zone (PIM) in the northern state of Amazonas. The batteries are installed on electric bus chassis. The factory cost BRL15m (US$2.7m) and covers 5,000 square metres. Expansion is possible when needed. The plant has capacity for 18,000 battery modules per year, and it was expected to deliver 1,000 in its first month.

Hyundai Motor has recalled around 180,000 SUVs in the US due to defective anti lock brake circuit boards which it said could cause fires. Kia is also recalling a model. This was the second US recall by Hyundai this month, after regulators said that the automaker and sister company Kia Motors were recalling more than 600,000 vehicles, combined, in the US and Canada to fix a brake fluid leak that had caused engine fires. For this latest recall, the South Korean automaker told US owners of its Tucson SUVs to park outdoors after reports a dozen or so fires had been caused by the defective circuit board. The company confirmed that corrosion in defective anti lock braking circuit boards can cause short circuits, even with the engine switched off, which can cause fires. The recall affects 2019, 2020 and 2021 model year Tucsons. The model line was redesigned for 2022.

The boards of Fiat-Chrysler (FCA) and Peugeot-Citroen (PSA) have agreed to amend terms of their proposed merger in a move designed to further conserve cash in the light of the ongoing impacts of the COVID-19 pandemic. The two also confirmed the timetable to create the new merged company (to be called Stellantis) by the end of the first quarter of 2021. In a statement, they said annual estimated run-rate synergies in the new company are also increased to in excess of EUR5bn. The parties have agreed the amendments to merger terms in order to 'address the liquidity impact on the automotive industry of the COVID-19 pandemic while preserving the economic value and fundamental balance of the original agreement'. Specifically, the special dividend to be distributed by FCA to its shareholders before closing is set at EUR2.9bn (previously EUR5.5bn), while Groupe PSA's 46% stake in Faurecia will be distributed to all Stellantis shareholders promptly after closing following approval by the Stellantis board and shareholders. As a result of these amendments, FCA's and Groupe PSA's respective shareholders will receive equal 23% shareholdings in Faurecia (capitalisation EUR5.867bn at market close, 14 September 2020), while their 50/50 ownership of Stellantis – a group that will now have  EUR2.6bn more cash on its balance sheet – will remain unchanged. Additionally, it has also been agreed that the boards of both Groupe PSA and FCA will consider a potential distribution of EUR500m to the shareholders of each company before closing or, alternatively, a distribution of EUR1bn to be paid following the closing to all Stellantis shareholders. The companies also said the boards of both FCA and Groupe PSA are 'more than ever convinced' of the logic and extraordinary value creating potential of their merger. As a result of the 'significant progress made by the joint workstreams over the past months', the estimated annual run-rate synergies from the creation of Stellantis have been significantly increased to in excess of EUR5bn from the EUR3.7bn originally estimated.  The total estimated one-time implementation cost of achieving these synergies has also increased from EUR2.8bn to up to EUR4bn.

No surprises here: EU demand for passenger cars contracted 32% year on year in the first eight months of 2020, according to ACEA. A tally of 6,123,852 new cars was registered across the European Union from January to August, almost 2.9m less in the same months of 2019. July 2020 registrations declined 5.7%. Seven of the 27 member states posted growth in July, including France (+3.9%) and Spain (+1.1%). Outside the EU perimeter, the United Kingdom (+11.3%), Iceland (+44.5%) and Norway (+6.5%) also showed first signs of recovery. August volume fell 18.9% though that was less dramatic than earlier in the year.

General Motors is suing a former board member, claiming he leaked confidential information to a rival company and to the United Auto Workers, a move the automaker claims added billions to its labour costs. According to Marketwatch.com, GM filed a federal lawsuit accusing Joseph Ashton, a former vice president at the UAW, of accepting bribes from Fiat Chrysler Automobiles NV which was at the time trying to pressure GM into a merger. Ashton served as a GM director at the time of the merger advances, which later became public. The report said Fiat Chrysler had called GM's allegations meritless and an attempt to hurt its reputation.

Senior French politicians have expressed their "total disagreement" with Bridgestone's decision to shutter its aftermarket tyre plant in Bethune, potentially affecting up to 863 jobs. Bridgestone said the closure would not take place before the second quarter of 2021 and insisted the move was the "only viable option" to safeguard its competitiveness in Europe. In a rare joint statement from French Labour Minister, Elisabeth Borne, Economy Delegate Minister, Agnès Pannier-Runacher and Hauts-de-France Regional Council president, Xavier Bertrand, the politicians combined to urge Bridgestone consider alternative possibilities.

Still in jobs axe vein, Mahle sees no return to pre-crisis levels "for several years" and said it had "excess global capacities of 7,600 jobs". It was consequently accelerating group restructuring on top of cost-saving programmes begun last year "against the background of technological change in the automotive industry and a challenging market environment". "The major slowdown in the international markets and persistently low customer demand because of the coronavirus pandemic have yet again significantly increased the urgency to take action," it said in a statement. It had evaluated business units, regions, and locations and identified global excess capacities of 7,600 jobs and now will be "discussing with the relevant employee representatives which adjustment measures can be implemented".

BYD Canada said 10 zero-emission, 40-foot K9M battery-electric buses would be put into service by the Toronto Transit Commission (TTC). TTC is Canada's largest and North America's third largest transit operator. The buses are the first from BYD's 45,000-square-foot assembly facility in Newmarket, Ontario; the first new electric bus plant to open in the province in a generation. The assembly of the buses created 30 jobs and are the first buses built in the province since Orion closed its plant in 2012.

Have a nice weekend.

Graeme Roberts, Deputy Editor, just-auto.com