UAW Applies Peer Pressure, Ford’s EV Investment Drop, Hertz Takes A Step Back

October 27, 2023
It’s Friday and we’re talking about the new pressure on GM and Stellantis to reach a deal with the UAW. We’re also covering the reality check and big step back from EV rollouts from both Ford and Hertz.
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Show Notes with links:

The UAW's negotiation with General Motors takes a new turn as the union proposes a revised contract offer. This move comes on the heels of a promising tentative agreement with Ford, setting the stage for potential resolutions in the ongoing labor disputes.

  • The recent tentative deal with Ford promises a 25% wage increase over the next four years and the reintroduction of cost-of-living adjustments.
  • UAW President Shawn Fain said, "Ending the strike at Ford would pressure GM and Stellantis to also reach a deal." as he hopes to put pressure on both GM and Stellantis to finalize their own agreements.
  • Both GM and Stellantis expressed intentions to reach a swift tentative agreement with UAW, echoing their desire to resolve the labor standoffs.
  • Current GM and Stellantis offers suggest a wage rise of 23%, pushing top hourly wages above $40 by the contract's conclusion.

Ford is making significant adjustments to its EV strategy and deferring around $12 billion in projected investments intended for new EV manufacturing facilities, noting a shift in North American consumer behavior and a reduced willingness to pay a premium for electric vehicles. 

  • This decision stems from the slower-than-anticipated growth rate of EV sales, despite the overall increase in the industry.
  • CFO John Lawler said, “"The customer is going to decide what the volumes are. Ford is able to balance production of gas, hybrid and electric vehicles to match the speed of EV adoption in a way that others can't."
  • He continued by highlighting that Ford isn't retracting from its upcoming EV models but will reconsider the speed at which they increase manufacturing capacity.
  • Ford's EV business unit, Ford Model e, reported a $1.3 billion operating loss in the third quarter, doubling its loss from the previous year, even with a 26% revenue hike.

Following lower than expected earnings, Hertz, is also rethinking their once enthusiastic shift towards EVs due to including higher repair expenses and a decrease in EV resale values, primarily influenced by Tesla's pricing strategies and parts availability. 

  • Hertz initially aimed to acquire a vast number of electric vehicles for its fleet. However, significant repair costs and diminished resale values, mainly due to Tesla's price cuts, have forced Hertz to adjust its trajectory.
  • The company remains "committed" to its previous agreement of purchasing 100,000 cars from Tesla and 175,000 EVs from GM. However, its goal of making EVs a quarter of its fleet by the end of 2024 appears unattainable.
  • Hertz Global Chief Executive Officer Stephen Scherr said the company is working closely with Tesla, “…to look at the performance of the car so as to lower the risk of incidents of damage," Scherr said. "And we're in very direct engagement with them on parts procurement and labor and the like."

Unknown: 0:00Oh

Paul Daly: 0:27

yo, Friday already we have so many good things to talk about. We're back in the seat. Back in the saddle. Of course we're gonna talk about the UAW applying pressure to GM, Ford's Evie investment drop. Hertz is backup from EVs and a whole bunch of other stuff to people because it's Friday, Friday, they stopped. I wish I wish everyone could understand what happens before the show rolls in.

Kyle Mountsier: 0:51

38 seconds right before we hit go.

Paul Daly: 0:56

Nobody would believe this if we told them

Kyle Mountsier: 0:58

never never. I actually I was talking to someone this week. They were like, so wait a second, you guys. You guys, you guys do a show every day who does the content? And I was like, really? For every Okay, okay. Yeah, you're looking at him? Yeah, like again, Adam. These two

Paul Daly: 1:18

guys do that. Oh, man. We were. We had a great time. This week. We kind of split opposite sides. We probably been as far away as we've ever been away. You were up in Toronto I was down in San Antonio is spending time trying to make this industry better. And so it's good to be back in the saddle literally before we hit play on my Hey, Kyle, April. What do we got? So episode two and more than cars launched this week or last week? Please go to more than more than ABC Episode Two at Beaver Toyota. It's a pretty amazing,

Kyle Mountsier: 1:52

so I'm on the plane last night real quick, real quick.

Paul Daly: 1:54

I'm gonna hopefully I got one, two. I'm more than cars. You're gonna love this one. Yeah,

Kyle Mountsier: 1:57

the the lady sitting next to me. She's like, What do you do? She's very, you know, she's one of those talkative ones. And she's like, What did you do, telling her about what we do? And anytime I'm talking to anyone outside of the industry, I start to talk about more than cars because it's the thing that they can relate to. That's where I started, I pull it up. We're watching just a couple of the screens. I'm telling her about beaver Toyota and what's going on and she goes, I would have no clue that any dealership would ever be able to pull that off. That's what I'm talking. And I was like, that's why we're making the show. I can point to hundreds, potentially 1000s that are doing that. And she I had no idea. That's good. She goes, Wait a second. Wait a second. You're not telling dealership stories. You're telling people story? I was like mean,

Paul Daly: 2:45

I was getting coffee and the barista? She was asking me what I do. And I was telling her and she's like, go check it out, right? She's not gonna check it out. But she's like, go check it out. I step away with my coffee. There's a lady sitting there she goes, Hey, can I get a picture with you? I was like, Sure. She wasn't with the dealer. Like just random coffee shop. She's like, Yeah, I just heard she said, and I looked it up. And she goes, I have a really like, cringy Boomer Instagram account. And so like, I want to post about it. I was like, Sure. Perfect. There you go. That's right. That's what we're doing. We're spreading the message to the people who have no idea it's even possible. It's just proves that it needs to be done. So good. All right. We gotta get into this. Hey, you gotta go. Nathan, can you queue up the new trigger pack because I didn't have time to load it into my road caster. What is the new UAW update sound? Do we have that? It's not the sad trombone anymore. I'll maybe Jordan, you're in the show. Hit it I love it. It just made my morning, Jordan. Thank you. was so good. We're gonna play it twice. The UAW negotiation with General Motors now is taking a new turn as the union proposed. The UAW proposed to GM a revised contract offer now the UAW is making offers The move comes on the heels of promising tentative agreement with four we announced yesterday setting the stage for some resolutions in the ongoing labor disputes. So basically, the deal yesterday with 42 days ago, 25% wage increase over the next four years reintroduction of cost of living adjustments, and the UAW president Sean fain said, ending the strike of Ford will pressure GM and Sue Lantus to also reach a deal a little peer pressure there. Both GM and slant has expressed intentions to reach a swift, tentative agreement. So of course, now currently, GM, it's the Lantis are at 23%. So they get 2% to go

Kyle Mountsier: 4:42

well, it's like now you just know the target. Right. So then it's an internal discussion on whether how do we get their target? Yeah, you know, it's like, or maybe you do something slightly different so your people feel, you know, so that your union workers feel a little bit better or something like that. And absolutely, we didn't have that unique you You know, little USP as a brand, but really, it's like that's the target. Are we willing to go there? Yeah.

Paul Daly: 5:06

And I guess that's it. I mean, it's pretty simple at this point. The planes on its way down with Ford slats and GM know what path they have to take to get the plane on the ground. It feels like you know, probably by maybe by today, but feels good. I would just

Kyle Mountsier: 5:21

love for Monday to be our last UAW update and we keep rockin this and

Paul Daly: 5:26

I don't think it'd be ratified that quick but it'll be ratified quickly. But once it you know, once they can tell it's funny yesterday, I was with a bunch of dealers about 50 with glenlyn ds 800% club and one of the questions one of the one of the dealers was like, Look, the feeling is that this this strike could last for months. And that is like some of presiding sentiment but like then the news dropped and then it was like whoosh or not speaking of or not. So a couple of articles on CNBC. CNBC actually kind of came to the top of our attention both around EVs. The first one is Ford, making significant adjustments to its Evie strategy and deferring or route yet now that the contract is side and differing around $12 billion in projected investments for evey manufacturing facilities, noting the shift in North American consumer behavior, their decrease in willingness to pay a premium for EVs. So basically, lower than anticipated growth and enthusiasm. We've been seeing this and talking about this CFO John Lawler said, the customer is going to decide what the volumes are Ford is able to balance projection of gas hybrid and electric vehicles to match the speed of Evie adoption in way that others can't.

Kyle Mountsier: 6:45

Where's my I told you so button? Yeah. Where's that on the

Paul Daly: 6:49

title told we're not those kinds of people. But treat your pad button in like a sarcastic way we'd be able to hit that quite a bit. Actually. He continued on by highlighting that Ford isn't backing off or retracting from upcoming Eevee models, but it's just reconsidering the speed at which they will increase manufacturing capability to do that their EV business unit for model II reported a $1.3 billion operating loss in the third quarter doubling its loss from the previous layer year even with a 26% revenue hike. Yeah,

Kyle Mountsier: 7:19

they are a startup. It's very clear. Startups have to adjust. They're doing that heard that somewhere. We may or may not have experienced that in our own lives. You know, and then like when when the thing here is they are the EVs are not going away. That's what I'm convinced it is not going to Well, it's the pace. It's where it's who are going to deliver these in what timelines and I think that Ford saying, hey, and it's probably because they did so much to change. The fact that they have these two business entities actually allows them to pivot quicker than if they would have just like, oh, that all in one.

Paul Daly: 8:00

That's a great point. That is a great point. So yeah, I mean, we'll see, we'll see what happens. I think everyone that's on the ground has known this truth for a long time. Yep. Right. I think everyone on the pop culture side that was listening to you know, kind of government rhetoric and just pop culture rhetoric think it's like, oh, great, but you know, we know this is true, it's nice to see an OEM saying like, Alright, we're gonna pump the brakes, right? Or just let our foot off the gas and it'll regenerate if we break.

Kyle Mountsier: 8:30

Speaking of regenerative, braking, braking and letting your foot off the gas. Hertz is throwing on the brakes, following lower than expected earnings, and is rethinking their once enthusiastic shift toward EVs as well due to declining due to including higher repair expenses, and a decrease in evey resale values, primarily influenced by price Tesla's pricing strategies and parts availability. So initially, they hertz aim to acquire a massive amount of EVs for its fleet repair costs, and and just what they're committing now is significantly change changing. Their previous agreement was for 100,000 cars from Tesla, and 175,000 EVs from GM. However, the the goal originally of having a quarter of its EVs come from our goal of its total inventory, be EVs just not looking like it's going to happen. So massive, massive change and I it's wild, because so much of what happens and if you know from the dealership side, so much of what happens to the resale of these is basically hertz takes them and after a certain amount of time has to resell them, dealers and their profitability is significantly impacted by that and their ability to rent it and and manage the rental prices in that time. And so they can't meet the resale values that they were originally expecting. And that's a significant blow to their, to their profit. So

Paul Daly: 10:06

I think the original target was that a quarter of their fleet would be all electric by 2024. So by next year, and they're backing way off that and they're saying, Wait, I was looking, I didn't have enough time to find this. But I'm pretty sure we did a story within the last year about a rental company. And I think it was hertz saying how much cheaper they are to actually maintain. Wow, no, I know it's in there, we'll find it because it was like less oil changes more uptime all this. And they're like, that's why our profits are up.

Kyle Mountsier: 10:38

I wish I could fight this morning. But that this is the this is the it's they don't have like normally even with with their regular vehicles, it's not like they have a massive output on regular maintenance, their output is on collision. And that's what they're pointing to is that collision repair expenses because of parts availability, and the requirement of going to certain to I don't think

Paul Daly: 11:02

it's just collision though, just because there's there's I wasn't able to put it, the notes in there. But basically, the whole, the whole Lane was like talking about tires, and suspension. And like because of the increased torque and the heavier vehicle. So I think it's I think what we're learning here is that it's way more complicated than the rose colored glasses everyone's been looking through and that whether you're an OEM, whether you're a rental car company, and I think the Evie bubble is being popped, and we're realizing oh, it's like mostly are a lot of it is kind of like rhetoric and just talk and now we're finding the understanding. Oh, you know what, we can't live in a utopia. It's going to actually take a little work, a lot of transition. So talk about learning experience.

Kyle Mountsier: 11:51

What a learning experience.

Paul Daly: 11:53

So speaking learning experiences. We're heading one right now. Kyle and I are heading over to the All Things use car room by David Long on clubhouse. We hope you can join us there for a conversation. What's the topic today? It's a big one. Brian Kramer's?

Kyle Mountsier: 12:07

Yeah Carvana has value trap tracker and its effect on the industry rule. Good

Paul Daly: 12:12

one. Whatever happens on the weekend. We hope you have a great one.

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