Author: CNBC Online news

BMW’s US boss slams tariffs as South Carolina factory approaches record production numbers

BMW increasing production at South Carolina plant, says North American CEO
11:10 AM ET Wed, 13 Feb 2019 | 04:25

BMW's North American boss has some tough words on tariffs, as automakers await a potentially pivotal decision on tariffs from the Trump administration.

The Commerce Department is expected to deliver a report within days that many industry experts say could deem auto imports into the United States a threat to national security and seek tariffs as high as 25 percent on all vehicles imported into the U.S. The tariffs for most light vehicles is now at 2.5 percent, and there is a long-standing 25 percent tariff on imported pickup trucks.

“If tariffs go up, it's not good for the consumer it's not good for our dealer network it is not good for the economy in total,” said Bernhard Kuhnt, CEO of BMW North America told CNBC on Wednesday.

“I'm not at politician, but we'll deal with the consequences,” he added.

BMW is a German company that both imports vehicles into the United States and exports them out, many from a factory in Spartanburg, South Carolina — BMW's largest globally. The automaker is expanding production at the plant and expects to hit a near-record level of production this year of more than 400,000 vehicles, most of them premium sport utility vehicles and crossovers which are quickly growing in popularity with buyers both in the United States and around the world. BMW says it is the largest U.S. exporter of vehicles in terms of total sales. It exported $8.8 billion in vehicles in 2017, according to the Commerce Department.

Meghan Reeder | CNBC
Bernhard Kuhnt, CEO of BMW North America.

Part of problem for BMW is that it stands to be hit with import tariffs on sedans imported into the United States, and potentially hit with retaliatory tariffs in other countries on U.S.-made vehicles. China, for instance, briefly raised tariffs on any U.S.-made vehicles to 40 percent in 2018 in response to U.S. duties on Chinese products.

U.S. premium SUV sales climbed from roughly 1 million in 2015 to 1.3 million in 2018 and are expected to hit 1.5 million by 2020.

President Donald Trump has repeatedly railed against what he says is a fundamental trade imbalance between the United States and its trading partners, including China and European countries. Tariffs, such as the 25 percent tax on imported pickups, have been successful in keeping American-made trucks popular and U.S. workers employed, he said on Twitter in late November.

“The reason that the small truck business in the U.S. is such a go to favorite is that, for many years, Tariffs of 25% have been put on small trucks coming into our country. It is called the “chicken tax,'” he said. “If we did that with cars coming in, many more cars would be built here…..”

Correction: BMW expects to hit a near-record level of production at the Spartanburg, South Carolina, plant this year of more than 400,000 vehicles. An earlier version misstated the number of vehicles.

As Trump ponders auto tariffs, free-trade Republicans push back

Patrik Stollarz | AFP | Getty Images
Volkswagen cars at the harbor of Bremerhaven, Germany.

The Commerce Department is expected to deliver its long-awaited report on auto tariffs to the president by a Feb. 17 deadline, according to two sources familiar with the matter. But as President Trump deliberates his next moves – by law, he has 90 days to decide –he will face an uphill battle from companies, foreign allies and Republican lawmakers if he decides to impose duties.

The report was crafted under section 232 of a 1962 trade law, a provision that allows tariffs on items that threaten national security that was scantly used before the Trump Administration. In March 2018, the president used the provision to slap duties on foreign steel and aluminum, and called for an investigation into automobiles several months later, tweeting before the research was conducted that he'd be interested in a 25 percent rate.

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Whether the Commerce Department took the president's lead in recommending tariffs on all imported automobiles is unclear. But such a move would face resistance in the West Wing. “There's not a whole lot of support for auto tariffs,” a senior administration official told CNBC. “But only one person's opinion matters.”

In July 2018, President Trump called on Twitter for tariffs of 20 percent on foreign automobiles, and in November upped the suggestion to 25 percent following news of layoffs at General Motors.

Business groups are already warning of the economic impacts. A new study by the Center for Automotive Research found a 25 percent tariff on autos and parts would increase the price of a car by an average of $2,750 and as many as 366,900 U.S. jobs would be lost. Its analysis factors in exclusions for South Korea and assumes Canada and Mexico would also be exempt under the yet-to-be-passed U.S. Mexico Canada trade agreement.

Pro-free-trade Republicans are building new tools to push back, in case the president implements new tariffs in the name of national security.

Sen. Pat Toomey (R-PA) introduced a bill last month that would give Congress sixty days to approve any proposed tariffs under section 232. It would also apply retroactively to steel and aluminium tariffs, giving Congress 75 days to pass a resolution to approve those tariffs.

Sen. Toomey says he has heard from dozens of Pennsylvania companies who use steel and aluminium products who have been hurt by the increased cost of materials. “We have seen this administration use this tool in a way that was never intended,” said Toomey.

Sen. Robert Portman (R-OH) also has a proposal to address what he sees as the misuse of national security in trade fights. Under his proposal, the Pentagon would make the primary determination that a tariff is needed, not the Commerce Department. And Congress would have the right to disapprove of those measures.

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Sen. Portman said his measure is timely because of the widespread opposition among Republicans to placing tariffs on auto imports, most of which come from allied countries. Any action taken out of spite, and not because of a true security concern, will backfire.

“If it's not based on fairness, it comes back to haunt us,” Portman said. “If you are going to say minivans from Canada are a national security threat, Canada is going to react, knowing that's not legitimate.”

Sen. Chuck Grassley (R-IA), chairman of the influential Senate Finance Committee, is working to come up with a compromise between Toomey and Portman's proposals that can get broad bipartisan support. But he brushed off any association between that effort and the Trump Administration's recent actions.

“Our moving on 232 has nothing to do with autos or aluminium or steel, it's comes from the proposition that Congress in 1962 delegated too much Constitutional authority to the president,” Sen. Grassley told reporters on Wednesday.

3,500 jobs at risk as Honda refuses to deny UK factory closure

Tim Ireland | PA Images | Getty Images
Workers on the Honda CR-V production line at the Honda Plant in Swindon.

Japanese automaker Honda looks set close its Swindon car plant, risking the loss of 3,500 jobs.

In an emailed statement to CNBC on Monday, Honda failed to deny it would close the plant.

“At this point, we are not able to make any comments regarding the speculation. We take our responsibilities to our associates very seriously and will always communicate any significant news with them first,” said a spokesperson from Honda U.K.

The U.K. lawmaker responsible for the area in which the factory is based, Justin Tomlinson, took to Twitter to apparently confirm the closure.

The North Swindon Conservative MP added that a task force would be set up to support employees, before adding that no job losses were expected until 2021.

The Swindon factory builds the Honda Civic five-door hatchback and the CR-V crossover for sale in Europe and the U.S.

The announcement, first reported by Sky News, suggested Honda would confirm the closure on Tuesday.

Fire at Tesla factory in Fremont contained, won’t impact production

CNBC | Lora Kolodny
Tesla's car plant in Fremont, California features a large tent where the company produces some of its Model 3 electric sedans.

A fire broke out at Tesla's car plant in Fremont, California, on Saturday night, in an area where the company stores some hazardous materials outside.

While Tesla can manage some fires with its own internal brigade, the one on Saturday was contained within a few hours by the local Fremont Fire Department, and required a hazardous materials unit, Fremont Deputy Fire Chief Amiel Thurston told the East Bay Times.

Tesla confirmed that no employees were injured and the fire would not impact vehicle production.

The company has a history of frequent fires at this facility, including a significant one at its paint shop in April last year that temporarily halted electric vehicle production, and another outdoor fire (near a tent on the south side of the factory) in August.

This latest fire comes at a time when Tesla is defending its workplace safety record before California's Division of Occupational Safety and Health.

In January, Cal-OSHA cited and fined Tesla for allegedly violating six different worker safety regulations in their “GA4” — or general assembly 4 — production line. GA4 is where workers produce some of Tesla's Model 3 electric sedans under a giant tent structure. Tesla plans to appeal those citations.

Electric truck start-up Rivian announces $700 million investment round led by Amazon

Source: Rivian
Rivian R1T electric pickup truck

Electric truck start-up and potential Tesla rival Rivian announced a $700 million investment round led by Amazon on Friday.

The announcement comes just months after the Michigan-based company unveiled both an electric pickup truck and sport utility vehicle at the LA Auto Show in November.

“This investment is an important milestone for Rivian and the shift to sustainable mobility,” said RJ Scaringe, Rivian Founder and CEO. “Beyond simply eliminating compromises that exist around performance, capability and efficiency, we are working to drive innovation across the entire customer experience. Delivering on this vision requires the right partners, and we are excited to have Amazon with us on our journey to create products, technology and experiences that reset expectations of what is possible.”

The news confirms a Reuters report on Tuesday that Amazon had invested in the firm. Reuters had also reported that automaker General Motors had made an investment in Rivian, but neither GM nor Rivian has confirmed this yet.

The round included investments from Rivian's existing shareholders. It will remain an independent company. Rivian currently has more than 750 employees located in several locations, including Plymouth, Michigan; San Jose and Irvine, California; Normal, Illinois; and Surrey, England.

It plans to launch its R1T pickup truck and R1S sport utility in the U.S. in 2020, and begin introducing them overseas in 2021. The company has modeled both vehicles on what it calls a “skateboard” platform, which it says it flexible enough to accommodate several different vehicle body styles.

Some industry analysts have speculated that Amazon could be interested in Rivian's platform for developing vehicles for its massive global logistics needs.

“We're inspired by Rivian's vision for the future of electric transportation,” said Jeff Wilke, Amazon CEO Worldwide Consumer. “RJ has built an impressive organization, with a product portfolio and technology to match. We're thrilled to invest in such an innovative company.”

This is Amazon's second investment in transportation this month. The online giant recently put money into Aurora, an autonomous vehicle technology company run by Waymo and Tesla alumni.

Trucks and SUVs are also increasingly more popular with U.S. consumers than cars, and customers seem willing to pay more for them, meaning more profits for automakers. The business case for an electric pickup or SUV could be stronger than one for a sedan, given how much money companies have had to sink into electric batteries and motors and how difficult it has been for companies to make money on electric cars.

Morgan Stanley analyst Adam Jonas said in a note this week that a successful electric pickup from an upstart such as Rivian or Tesla could pose a serious threat to Detroit automakers, who depend heavily on sales of truck-based vehicles.
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Ford CFO Bob Shanks expected to retire by end of year, sources say

Jeff Kowalsky | Bloomberg | Getty Images
Bob Shanks, chief financial officer of Ford Motor Co.

Ford CFO Bob Shanks plans to retire in 2019, sources familiar with the matter told CNBC on Thursday.

Shanks is expected to stay through the end of the year, according to sources familiar with the matter. His replacement will likely begin transitioning into the role in the second half of the year.

“As all boards of responsible companies do, our board of directors regularly reviews executive succession plans to ensure we have access to the best talent available and are prepared for orderly transitions to take place should the need arise,” Ford said in a statement.

Shares of Ford were up less than 1 percent Thursday afternoon.

General Motors starts taking orders for its electric bicycle

Source: General Motors
The ARĪV Meld is a compact eBike

General Motors just unveiled its electric bicycle in a bid to arm itself against an uncertain future for cars.

The largest U.S. automaker on Thursday released the name of its bike, Ariv, and said it will start taking orders in select countries in Europe.

The name is the result of a crowdsourced campaign announced in November. There are two versions: the Meld, a compact e-bike, and the Merge, a folding e-bike.

GM is launching the bikes in Germany, Belgium and the Netherlands, where lithium-ion battery-powered e-bikes are popular. In Belgium and the Netherlands, the Ariv Meld starts under $3,200 and the Ariv Merge is around $3,800. Prices will be slightly lower in Germany. GM expects to begin shipping to customers in the second quarter.

It is another move by a major automaker to broaden its portfolio to protect against the uncertainties of a changing market. GM and rivals have expanded into scooters, ride-sharing and self-driving cars in an effort to stay relevant in an era where consumers' transportation choices are changing. Even motorcycle maker Harley-Davidson has unveiled lightweight electric two-wheeler concepts as fears of declining ridership grow.

“I think both GM and Ford are both exploring nontraditional transportation opportunities because their overall vehicle sales have been declining,” CFRA analyst Garrett Nelson said. “We view GM's e-bike and Ford's recent e-scooter investment [in Spin] as an attempt to appeal to a younger and more urban demographic, whose transportation needs are proving to be considerably different than prior generations.”

With ride-hailing companies and similar businesses spreading, some industry watchers wonder whether broad swaths of future generations will even consider car ownership at all.

“Carmakers are highly concerned about the implications of this ongoing shift in consumer preferences on their long-term car sales, particularly with the rise of Uber, Lyft, and various ride-sharing options which weren't available several years ago,” Nelson said. “Their fear is that this demographic may not need — or want to — purchase a vehicle at all.”

Morgan Stanley: An electric pickup from Tesla or Rivian is a ‘serious problem’ for Detroit

With competition heating up, is Tesla losing its dominance?
15 Hours Ago | 09:06

The auto industry's electric vehicle revolution has only just begun, Morgan Stanley told investors in a note on Thursday, and the highly profitable pickup truck market is next.

“An electric pickup truck successfully launched by a new player (i.e. Rivian or Tesla) could be a serious problem for the Detroit based [traditional automakers],” Morgan Stanley analyst Adam Jonas said in a note to investors. Jonas is widely known on Wall Street for being one of the first to recognize the significance of Tesla and electric vehicles to the auto industry.

Jonas called reports that General Motors and Amazon are in talks to invest in Rivian, if true, “the biggest news in US autos so far this year.” Without such investments, he said, GM and Ford are losing the opportunity for a “first mover advantage” in producing all electric pickup trucks. Jonas also says Rivian has a competitive advantage from building its truck from the ground up, with little prior conception of an internal combustion engine truck to cloud its view.

“Both GM and Ford have the technical capability to develop and produce and all electric pickup … but we believe design, software, electrical architecture, and brand may be best coming from the 'outside,'” Jonas said.

Additionally, Morgan Stanley said “investors may find it surprising that nearly 9 years after Tesla's IPO there are only 2 pure play EV manufacturer stocks trading publicly in the US market.” The other electric vehicle company that Jonas is referring to is Nio, a Chinese company that listed shares on the New York Stock Exchange in September.

Tesla may unveil an electric pickup truck this summer, CEO Elon Musk said during the company's fourth-quarter conference call. In December, Musk talked extensively on Twitter about what he would like to include in a pickup truck design, including all-wheel drive with “crazy torque & a suspension that dynamically adjusts for load.”

Phillip Faraone | Getty Images Entertainment | Getty Images
Rivian CEO RJ Scaringe attends and speaks at Rivian unveiling of R1T All-Electric Truck.

Rivian showed off prototypes of its R1T electric truck and its seven-passenger R1S sport utility vehicle in November. Rivian CEO R.J. Scaringe said the R1T and R1S will deliver 400 miles of range, with four individual motors allowing for all-wheel-drive. The R1T will be able to hit 60 miles per hour in 3 seconds and tow up to 11,000 pounds.

Morgan Stanley had already featured Rivian twice this week: once as “the next serious competition for Tesla” and again when reports of Amazon and GM's investment surfaced. If GM does invest, Jonas said, it would be “another sign of GM's prescient strategic vision.”

“From an industrial strategy perspective, while many other [traditional automakers] are playing checkers, GM seems to be playing chess,” Jonas said.

Finally, even without the possible investment, Morgan Stanley believes Rivian represents one of the top challengers to Tesla's dominance in the global electric vehicle market.

“The increased legitimacy and capitalization of new/startup EV firms, like Rivian, pose a compounding competitive threat to Tesla. All else equal, a potential GM-Amazon-Rivian tie up could be a clear negative for Tesla in our view,” Jonas said.

Self-driving truck start-up achieves unicorn status in funding round that values it at $1 billion

Imaginechina | AP Images
A self-driving TuSimple truck is on display during 2018 World Artificial Intelligence Conference in Shanghai, China.

Autonomous trucking company TuSimple has achieved unicorn status on Wall Street with a fresh funding round that values the start-up at $1 billion.

The company said Wednesday it raised $95 million in a series D funding led by Sina Corp. and Composite Capital, a Hong Kong-based investment firm, as it prepares to expand its testing of self-driving semis on highways in Arizona, New Mexico and Texas.

“By the end of 2020 or early 2021 we think we think we can take the driver out of the cab on trucks,” said Chuck Price, chief product officer of TuSimple.

San Diego-based TuSimple is developing technology to allow shipping companies to operate self-driving class 8 tractor-trailers, potentially eliminating the need for drivers, the biggest expense facing trucking firms today, especially in a tight labor market. On average, shipping firms spend $2 per mile hauling goods, a cost TuSimple believes it could cut by 30 percent by eliminating the driver with autonomous trucks.

The money will help TuSimple expand its fleet of 12 test trucks to more than 50 by June. The company is currently testing autonomous semis on routes between Phoenix and Dallas.”

The extra cash will also help the company develop joint production of autonomous semis with truck manufacturers. TuSimple is currently working with two tractor-trailer makers, which it is not naming.

There are just under 3.5 million semis on the road in the U.S., according the American Trucking Association. They are the heartbeat of an $800 billion freight shipping industry TuSimple executives believe will continue growing.

“With e-commerce growing by double digits every year, freight shipping is not slowing down,” said Cheng Lu, CFO of TuSimple

Most of the attention surrounding the development of autonomous vehicles has been focused on self-driving cars and the race to build autonomous ride-hailing companies. Alphabet subsidiary Waymo, General Motors subsidiary Cruise and Uber are just a few of the companies that have dominated headlines with their work on self-driving cars. By comparison, the potential of autonomous semis has not received as much attention.

That could change as TuSimple and others demonstrate tractor-trailers can drive autonomously from shipping depot to shipping depot. “A big milestone will be showing that on one route we can take out the driver completely,” said Price.

TuSimple is not alone in the push to develop self-driving semis. Embark Trucks, Ike, Starsky Robotics, Thor Trucks and Udelv are also working on autonomous trucks.

Correction: This story was revised to correct the date of TuSimple's announcement to Wednesday.