Author: CNBC Online news

Expect heads to roll at Nissan over Ghosn scandal

Chesnot | Getty Images News | Getty Images
Carlos Ghosn, Renault-Nissan CEO.

It is shaping up to be a bad year for Nissan.

The arrest of auto industry titan Carlos Ghosn in Tokyo last month was believed by some to be a palace coup designed to remove him from power at Japanese automaker Nissan, just one of the companies Ghosn had a hand in running.

Now it's looking like a big problem for Nissan as well.

Ghosn was indicted Monday on allegations of underreporting income and misusing company funds, but investors weren't necessarily expecting Japanese prosecutors to slap Nissan with an indictment as well.

That could spell trouble for Hiroto Saikawa, Nissan's CEO and a onetime protege of Ghosn's, said Jefferies analyst Philippe Houchois.

Ghosn files complaint over extension of his detention
6:52 AM ET Tue, 11 Dec 2018 | 00:41

“Nissan takes this situation extremely seriously,” the company said in a statement. “Making false disclosures in annual securities reports greatly harms the integrity of Nissan's public disclosures in the securities markets, and the company expresses its deepest regret.” The company said it will strengthen its compliance efforts and improve the accuracy of its financial disclosures.

Saikawa was the one who stood to benefit the most from Ghosn's downfall. Ghosn, who was chairman of Nissan, had planned to replace Saikawa at a November board meeting, The Wall Street Journal reported. Some industry watchers say Saikawa's career at the automaker is in danger.

“I suspect Saikawa knows his days are numbered as well. Because the indictment of Mr. Ghosn today is also an indictment of Nissan,” Houchois said. In the wake of this new indictment, “it is likely heads will roll at Nissan as well.”

Nissan's shares traded in the U.S. fell 3.1 percent Monday and were down 2.7 percent in intraday trading Tuesday.

The indictment comes on the heels of scandals involving the falsification of vehicle inspection data. The automaker had to recall more than 1 million vehicles in 2017 over faulty vehicle checks, and reports filed in 2018 revealed even more misconduct.

Morningstar analyst Richard Hilgert told CNBC he thinks investor confidence in Nissan's management has been compromised by both the Ghosn scandal and the inspection fiasco.

Ghosn was in many ways the glue holding together an alliance between French automaker Renault and Japanese manufacturers Nissan and Mitsubishi. Renault saved Nissan from the brink of bankruptcy in 1999, and took a 40 percent stake in the company. Nissan, in turn, took a nonvoting 15 percent stake in Renault. But since then Nissan has become a far bigger financial contributor to the alliance, generating a lopsided share of the group's earnings. Tensions over the now two-decades-old arrangement have simmered as the relationship has grown more uneven.

Carlos Ghosn's arrest is prosecutorial overreach, says management guru
7:46 AM ET Mon, 10 Dec 2018 | 05:50

The scandal has created its fair share share of problems for Renault as well, Houchois said.

“The press has been quick to blame this on Nissan, but the reality is the governance issues are just as severe at Renault, we think,” he said.

For one thing, Ghosn was chairman and CEO of both companies for years, and he seems to have held too much power at the company.

The companies will likely have to redefine their alliance if they expect it to survive, Houchois said. He said he expects that to happen some time in the next three months or so. The problem is that there could be considerable turnover in the ranks at both companies in the meantime.

“You will have to come up with a number of new individuals who will run Nissan and run Renault,” he said.

Tesla will revolutionize consumer buying habits like Amazon and Apple, analyst says

David McNew | AFP | Getty Images
Tesla Motors CEO Elon Musk unveils large utility scale home batteries at the Tesla Design Studio in Hawthorne, California.

Wedbush Securities began coverage of Tesla shares on Friday with an outperform rating, saying Elon Musk's electric vehicle and energy storage company is now in the top echelon of 21st century technology companies.

“Tesla has evolved into one of the most dynamic technology innovators over the last 30 years and, in our opinion, has put itself into an esteemed category of companies such as Apple and Amazon that have revolutionized consumer buying habits and behaviors over the last decade,” Wedbush analyst Daniel Ives said in a note to investors.

Ives believes Tesla's value is debatable from a number of angles — such as a potential capital raise or government investigations stemming from Musk's tweets. But looking at the company as a whole, Ives said, Tesla should become “a technology titan over the coming years despite the near-term turbulence.”

“Seeing the forest through the trees we believe Tesla has the most innovative product roadmap in the technology space over the next 5 to 10 years,” Ives said.

Shares of Tesla closed Friday trading down 2.9 percent at $365.71 a share. Wedbush has a $440 price target on Tesla shares.

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Tesla cuts prices on Model X and Model S in China after Beijing reduces US auto tariffs

Tesla slashes car prices in China after tariff suspension
9:44 AM ET Fri, 14 Dec 2018 | 02:21

Tesla is slashing prices on its Model S sedan and Model X sport utility vehicle in China after Beijing suspended some tariffs on cars imported from the U.S..

The company confirmed the news on Friday.

Tariffs on U.S.-made cars and light trucks will be temporarily reduced to 15 percent from Jan. 1 until March 31, which temporarily brings tariffs on U.S. exports in line with other World Trade Organization member countries, said Kristin Dziczek, vice president of industry, labor & economics at the Center for Automotive Research.

The electric car maker has been hit hard by the steep duty on all vehicles imported to the country. The tariff on imported vehicles into China had originally been 25 percent, a policy that had been in place since China joined World Trade Organization, Dziczek said.

On July 1, the country lowered the duty to 15 percent for every other member of the WTO except the United States, she said. China then boosted the tariffs solely on U.S.-made vehicles to 40 percent on July 6 in retaliation for U.S. duties on Chinese imports.

Tesla CEO Elon Musk has been particularly vocal about the tariffs China has long levied against U.S. imports, in comparison with the mostly low tariffs the U.S. has historically charged importers.

Tesla was not immediately available for comment.

China accounted for 17.2 percent of Tesla's total revenues in 2017, but only 6 percent in the third quarter due to the impact of the tariffs, said CFRA analyst Garrett Nelson.

US auto sales are expected to drop below 17 million for first time since 2014

Getty Images
A man walks by new vehicles at a Queens auto dealership in New York City.

U.S. auto sales are tumbling further and further away from record highs hit just a few years ago.

Automakers are projected to sell 16.8 million passenger vehicles in 2019, a 1.1 percent decline from this year and below 17 million for the the first time since 2014, according to the National Automobile Dealers Association's annual sales forecast released Thursday. U.S. sales eclipsed 17 million in 2015 for the first time since the recession, peaking at 17.6 million vehicles sold in 2016. They've been falling ever since, and they are expected to continue that trend next year.

Higher interest rates and a bevy of new cars coming off lease stand to push more customers into the used market in 2019, said Patrick Manzi, senior economist for the trade group.

For 2018, car dealers are expected to sell 17 million vehicles, a better year than the industry had anticipated.

“This was a little bit unexpected,” Manzi said on a conference call on Thursday. “If you had asked me at the beginning of the year, I was expecting new vehicle sales to fall off more than they had. But then the new tax law was passed. The new tax law put more money in the pockets of consumers including the average new vehicle consumers. And many went out and purchased new vehicles.”

Car buyers mostly purchased light trucks, cross-over vehicles, pickups and SUVs, he said.

But with rising interest rates, dealers are growing concerned about “price creeping” that could keep some buyers out of the market, said NADA Chairman Wes Lutz, who is also president of Extreme Dodge-Chrysler-Jeep-Ram in Jackson, Michigan.

Falling incentives and rising rates could put “tremendous” pressure on consumers' monthly payments, he said, adding that interest rates remain a “wildcard.”

Average interest rates on new-vehicle financing have risen 60 to 70 basis points from 2017 through the third quarter of 2018, Manzi said. That has dramatically the cost of borrowing, he said, and he expects interest rates to continue to rise, though there has been some speculation that the frequency of rate increases may slow.

“Customers who are returning to the store this year and may have leased a car or purchased a car three to four years ago at a very low interest rate and are hoping to keep their payment roughly the same will not be able to do that, because the cost of borrowing has gone up considerably,” he said.

The other side of this of course, is that record sales over the last few years mean used car lots are stocked with robust inventories.

The other big trend is the staggering shift from passenger cars to crossovers and truck-based vehicles that has taken place over the last several years. Automakers have been scrambling to realign portfolios around the shift. Earlier this year, Ford said it will essentially stop selling traditional passenger cars in the U.S. altogether, except for its Mustang sports car.

“As someone who likes to drive sedans, I am a little concerned because there are fewer and fewer choices out there,” Lutz said. However he added that the breadth of choice in SUVs far surpasses what was available several years ago.

General Motors said in November it plans to slash production at several U.S. factories that focus on making passenger cars, such as the Chevrolet Cruze mid-size sedan. The decision has labor leaders and lawmakers in Ohio, Michigan, and Maryland up in arms.

Light trucks are on track to account for about 70 percent of all sales, with cars dropping to 30 percent, NADA said. A decade ago, car sales represented 52 percent while light trucks, including SUVs, accounted for 48 percent of all sales.

Those vehicles tend to be more profitable than sedans and passenger cars, in part because they simply cost more. Customers are willing to spend a bit more on an SUV, crossover or pickup because they feel they are getting more for their dollar in terms of space and flexibility. While these vehicles are becoming more efficient, rising gas prices have been cited by some industry analysts as a potential catalyst for at least a partial swing back into sleeker, more efficient vehicles.

But gas prices are not expected to rise enough to make consumers panic and send them flocking back to cars, Manzi said.

“We haven't seen the bottom of the car market yet,” he said.

‘Suicide doors’ make a comeback on 80th anniversary edition Lincoln Continental

Source: Lincoln
The 80th Anniversary Lincoln Continental Limited Edition with coach doors

Once deemed dangerous, suicide doors are making a comeback on the Lincoln Continental.

Ford is celebrating the 80th anniversary of the long-lived luxury Lincoln line by making 80 cars in 2019 with the classic center-opening doors that once served as the signature of the Continental.

The doors are not just a gimmick or aesthetic flourish. By opening toward the rear of the car, they allow passengers in the rear seats to enter and exit the vehicle more comfortably. Passengers don't have to lean forward to push the door open or pull it closed, for example.

The design was featured commonly on horse carriages, hence the name “coach doors.” Over time they had come to be called “suicide doors,” thanks to the danger of the wind forcing the rear door open while driving at high speeds, according to automotive historians. This was particularly dangerous in the era before seat belts.

Lincoln unveils 80th anniversary Continental with suicide doors
2 Hours Ago | 01:14

More recent takes on the suicide door have incorporated safety features such as locking the door once the car reaches a certain speed.

Apart from the coach doors, the car's wheelbase will be 6 inches longer, which Lincoln said gives the rear seats more room. The car lights up as its driver approaches with a welcoming lighting sequence. The trim is Lincoln's best quality leathers and dash materials, its Black Label, which typically offers higher-quality materials and membership privileges, such as vehicle detailing and free car washes.

Sedans are a tough sell these days. Ford said it plans to all but stop making them over the next several years, with the exception of its Mustang sports car.

But this version of the Continental is more of a specialty sedan, and sales of those are still relatively healthy, said Robert Parker, director of marketing, sales and service at Lincoln.

“I find it incredibly interesting,” said Stephanie Brinley, an analyst at IHS Markit. “The Continental is a vehicle that has had weak sales in a difficult segment, for sure. So I think it is an effort to draw in some interest and create some buzz around the car.”

Source: Lincoln
The front interior of the 80th Anniversary Lincoln Continental Limited Edition.

Building a vehicle with suicide doors seems to be quite a lot of work for a car that doesn't sell well in the first place, she added. It is much more difficult than just dropping a new engine into the car. But she she doesn't think Lincoln will have any trouble selling every one of the limited run it's making.

It also seems to be part of a larger strategy Lincoln has taken in recent years of trying to reach far back into the brand's history in a nod to its roots as a distinctly American luxury label, she said. In recent years Lincoln has been carving out a space for itself in the luxury market by emphasizing service and making spacious, plush vehicles that drive comfortably, rather than the sportier luxury cars European makers are known for.

No specifics on the price are available yet, but Parker said it is safe to say it will be the most expensive vehicle Lincoln sells. That means it stands to cost more than $100,000, which is the price some of Lincoln's Black Label vehicles.

Lincoln first came out with the Continental as a custom luxury vehicle in 1939, but didn't add the coach doors until 1961.

“There hasn't been a conversation about product planning I have been in during all my time in Lincoln that hasn't involved bringing back coach doors,” Parker said.

Source: Lincoln
Inside the back seat of the 80th Anniversary Lincoln Continental Limited Edition.

Nissan fails to appoint a replacement for Carlos Ghosn

Issei Kato | Reuters
Passersby are silhouetted as a huge street monitor broadcasts news reporting ousted Nissan Motor chairman Carlos Ghosn's indictment and re-arrest in Tokyo, Japan December 10, 2018.

Nissan failed to name a replacement for ousted Chairman Carlos Ghosn on Monday.

Ghosn was apprehended in Japan last month over allegations that he had been under-reporting compensation and misusing company funds.

Chief Executive Hiroto Saikawa reportedly said Monday that talks to replace the embattled auto executive were ongoing, and that there was no deadline to announce a successor.

The Japanese automaker instead announced the creation of a special committee aimed at boosting corporate governance.

Nissan said Monday that the committee would beformed of independent third party members as well as outside directors, and will lay out recommendations on how to improve the firm's approval process for setting compensation for directors and creating “a healthy state of governance.”

“It has been confirmed that the proposed independent third parties are not related to or with any interest in the company, including any direct business with Nissan,” the firm said in a press statement Monday.

The future of the global auto alliance between Nissan, Renault and Mitsubishi, which Ghosn had overseen for almost two decades, has been in doubt following his arrest.

Both Nissan and Mitsubishi have ousted Ghosn, while Renault's board last week decided that he should stay in office. Last week, Renault said the board had found no irregularities in his pay packages between 2015 and 2018, and that the approval of his compensation was in compliance with the law.

Nissan said it expects to receive recommendations from the special committee by March 31, 2019.

Toyota struggles to save breakthrough Prius hybrid

Source: Toyota
2019 Toyota Prius AWDde

In an automotive industry that offers American buyers hundreds of different options, few models have the immediate name recognition of the compact Toyota Prius.

When it debuted in Japan in 1997, it became the world's first mass-market hybrid electric vehicle and demand exploded when it reached the U.S. three years later.

The Prius delivered around 50 miles a gallon and had far more interior space than the typical fuel-saving minicar — all at an affordable price. That made it the best-selling car of any form in California, and the best-selling hybrid vehicle worldwide earlier this decade.

But, as an updated 2019 version of the Prius gets ready to roll into U.S. showrooms, Toyota is facing a difficult situation. Sales of the Prius have been tumbling for several years and were down 23.2 percent for the first 11 months of 2018. The new version delivers updates Toyota hopes will revive the hybrid's momentum, including a new all-wheel-drive system that could improve its appeal in the Snowbelt. But whether that will be enough is uncertain and company officials admit they're struggling to figure out what to do next.

First look

“For the next Prius we have to think about how to … separate [it] from the rest of the Toyota line-up,” Deputy Chief Engineer Koichi Kaneko said in an interview in Kohler, Wisconsin where the automaker was giving journalists a first chance to drive the 2019 model last week.

There are a variety of reasons why Toyota sold just 3,180 of its Prius hatchbacks in November. Sales of the entire Prius “family,” including a plug-in hybrid version, are running barely a quarter of its peak.

The sharp downturn in fuel prices has scuttled sales of all mileage-minded vehicles. But, as Kaneko alluded to, Toyota has also diluted the appeal of the Prius by now offering hybrid powertrain options on a variety of its more conventional models, such as the Corolla sedan and RAV4 crossover-utility vehicle.

The RAV4 is now Toyota's best-selling American model, last year nudging past the familiar Camry sedan. And some observers believe the hybrid version of the cross-over utility vehicle could out-sell Prius in 2019. As a result, many are questioning whether Toyota even needs the Prius anymore.

“Toyota can say the Prius did everything they needed,” said Stephanie Brinley, principal automotive analyst for IHS Markit, helping burnish the Japanese automaker's green credentials and proving there's a market for gas-electric drivetrain technology.

“But what do they need Prius for” anymore? Brinley quickly added. “It's difficult to walk away from a nameplate with so much equity, but it may make sense to drop it.”

For now, at least, that's not something Toyota plans to do. And the 2019 model shows that the automaker is looking for ways to revitalize the hybrid hatchback's appeal. That includes some modest tweaks to interior and exterior design responding to wide criticism of the fourth-generation model after its 2016 model-year debut.

More technology

There's also a lot more technology, something that appears to appeal to buyers of a vehicle using a high-tech powertrain. There's a tablet-sized 11.6-inch touchscreen, lots of USB ports, Apple CarPlay and the Toyota Safety Sense suite of advanced driver assistance systems, such as forward collision warning with automatic emergency braking.

But the biggest addition for 2019 is an electric all-wheel-drive system that markedly improves the Prius hatchback's grip on slick roads, as Toyota set out to demonstrate during its media preview in frigid Kohler.

The system is a simpler version of the all-wheel-drive technology found on some products, and works only at relatively low speeds, but it helps Toyota maintain Prius's position as “an affordable hybrid.” A base model starts at just $23,770, and versions with all-wheel-drive start at $26,380.

Still, Toyota officials concede that the 2019 updates aren't going to be enough to keep Prius a viable player going into a future where, as Brinley points out, virtually all products will use some form of electric drive. General Motors and Volkswagen are planning to eliminate gas and diesel drive technology entirely.

“Toyota has to be ready to respond to these trends” reshaping the automotive market and might even have to consider the possibility of either shifting to a crossover body style or adding a CUV to the broader Prius family that today also includes the small Prius C and bigger Prius V.

“I don't think Prius can be the same as before,” said Kaneko, looking forward to the gen-5 model that is just now beginning to enter the development process. “Our role is to figure out what we can do with it. We need to find a new direction.”

Though Toyota won't discuss the timing of that next model, its traditional product cadence would suggest it should reach market by around the 2022 model year. That is, of course, assuming Prius remains part of the brand's line-up. But considering how much Toyota has invested in the world's first hybrid, it clearly will be reluctant to give up on Prius without trying out every possible approach to keeping it viable.

Source: Toyota
2019 Toyota Prius AWDde

GM says it plans to relocate 1,100 factory workers

Cole Burston | Bloomberg | Getty Images
A General Motors Co. worker attends an information meeting at Unifor Union Hall in Oshawa, Ontario, Canada, on Monday, Nov. 26, 2018.

More than 1,100 General Motors employees have already volunteered to transfer from plants where the automaker is cutting jobs to other GM factories, the company said Friday.

GM has about 2,700 job openings at U.S. manufacturing plants in several states, including Michigan and Ohio, the company said. It will also be providing training and tuition assistance for affected employees as part of its plan to cut roughly 14,000 North American jobs, GM said.

“Strong U.S. and Canadian economies enable us to provide these opportunities now as we position General Motors for long-term success,” GM Chairman and CEO Mary Barra said in a statement. “Our focus remains on providing interested employees options to transition including job opportunities at other GM plants. We remain committed to working with local government officials, our unions and each individual to find appropriate opportunities for them.”

The news comes as GM files layoff notices with federal regulators. GM recently said it will cut up to 14,000 salaried and hourly jobs at facilities across the U.S. and Canada. The decision was viewed by some in the industry as a necessary step for GM to stay competitive in the short term and make investments to grapple with disruptive businesses and technologies such as ride sharing and automated driving technologies. However the move has also drawn criticism, particularly from labor leaders, politicians in the affected regions, and President Donald Trump.

The story is breaking news. Please check back for updates.

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Trump says ‘GM is not going to be treated well’

Andrew Harrer | Bloomberg | Getty Images
President Donald Trump, left, listens during a Strategic and Policy Forum meeting with business leaders and White House advisors in the State Dining Room of the White House in Washington, D.C., U.S., on Friday, Feb. 3, 2017.

President Donald Trump criticized job cuts at General Motors as well as CEO Mary Barra again Thursday, saying the U.S. automaker isn't “going to be treated well.”

“I don't like what she did, it was nasty,” Trump said on Fox News.

The recent decision by the largest U.S. automaker to cut up to 14,000 jobs that span three states has brought the company controversy with lawmakers from the affected areas and drawn the president's ire.

Trump: General Motors won't be treated well
3 Hours Ago | 04:07

“To tell me a couple of weeks before Christmas that she's going to close in Ohio and Michigan, not acceptable to me,” Trump said Thursday on Fox News. “General Motors is not going to be treated well.”

Trump also criticized GM's use of Mexican labor and said the recently signed United States-Mexico-Canada Agreement that replaces the North American Free Trade Agreement “really makes it uncomfortable for people to go out of the country, and I think it will be very uncomfortable for them.”

Trump is not the only U.S. politician who has been critical of the decision. Barra met with lawmakers from Ohio, Michigan and Maryland last week over the automaker's plans. Since then, Democratic Sen. Sherrod Brown and Republican Sen. Rob Portman, both from Ohio, sent a letter to Barra seeking more information about the company's plans for its assembly plant in Lordstown, Ohio, and asking Barra to consider retooling the plant for more popular vehicles.

“As we previously stated, our focus remains on our employees currently working at the impacted plants in Maryland, Michigan and Ohio,” GM said in a statement. “Our announcement was timed to enable interested employees job opportunities that are available at other GM plants beginning in early 2019.”

Mark Fields, Ford's former CEO, said GM is doing what's right for the business and investors, but closing factories always draws attention.

“Any time you close a plant or idle a plant around the world, you are going to get attention from the government because it's so important to the economy and jobs,” he said on CNBC's “Closing Bell.” “When you take these kind of actions, you need to make sure that you are doing it in a way that allows you to tell what the story is and at the same time make sure you have a narrative around why it's good for the business over the medium to long term, why you have to take these short-term painful actions.”

GM's shares closed down 1.6 percent Thursday.

China auto sales keep falling and falling

Fred Dufour | AFP | Getty Images
Vehicles at a Hongqi car dealer in Beijing. – Car sales are falling in China this year but one brand is speeding ahead: The national 'Red Flag' sedan is flying high, powered by purchases from the government, state companies and patriotic citizens.

Auto sales in China fell 14 percent in November over the same month in 2017, the Chinese Association of Automobile Manufacturers said Tuesday.

Sales fell 14 percent compared with November 2017, continuing a downward trend that started in July. It is the largest decline so far this year, the association said in a press release.

“This is the first sustained downturn in memory,” said Michael Dunne, CEO of ZoZoGo, a firm that advises automakers on doing business in China. “We would have to go back to the Asian financial crisis in 1998-1999 to see the last time China had flat or down sales for four months or more in a row.”

A slowing economy, a crackdown on certain types of auto lending and a trade war with the United States have all been factors in contributing to the slowdown, Dunne said.

There were a couple of bright spots though. Heavy truck sales rose last month, which was surprising, Piper Jaffray analyst Alexander Potter said in a note published Tuesday. The growth came primarily from a jump in the sale of semi-trucks, which outsold construction trucks for the first time in more than a year.