Dec 20, 2019

Axios Navigate

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Smart Brevity count: 1,563 words (about 6 minutes)

1 big thing: Detroit goes all-in in risky times

Illustration: Sarah Grillo/Axios

Detroit automakers are facing technological disruption, whipsawing government policies and economic uncertainty.

  • Instead of pulling on the reins, they are pouring money into their American manufacturing operations.

Driving the news: Just-completed labor contracts between Detroit automakers and the United Auto Workers union yielded $22.7 billion in planned investment in U.S. factories over the next four years, adding or securing 25,400 jobs.

Why it matters: The spending commitments provide a measure of stability for American auto workers in a rapidly transforming industry, while also giving President Trump something to boast about in industrial swing states.

  • "Every time a car plant opens in Michigan, think of Trump!" the president told supporters at a rally in Grand Rapids on Wednesday.

There's only one new car plant going up in Michigan, but the state and its workers are undoubtedly the big winners from the latest round of labor bargaining.

  • About $15 billion, or two-thirds of the overall commitment from GM, Ford and FCA, is earmarked for Michigan, says the Center for Automotive Research.
  • The rest is sprinkled across the Midwest to revamp factories in Illinois, Indiana, Kentucky, Missouri and Ohio.

Two big factors — technology and trade — are driving the increased investments.

  • Electric vehicles require new equipment and processes, which means some plants must be gutted.
  • Carmakers also need to bolster their U.S. manufacturing footprint to ensure compliance with the new U.S.-Mexico-Canada trade agreement, passed by the House on Thursday and likely to be taken up by the Senate in January.
"You've got to put a lot of money on the table right now."
— Kristin Dziczek, CAR's vice president of research

Between the lines: The USMCA, which replaces the 25-year-old North American Free Trade Agreement, allows current trade flow to continue but sets stricter rules — and in turn higher costs — for parts and labor rates. For automakers to avoid tariffs:

  • 75% of light vehicles and core components like engines and transmissions must be sourced in North America, up from 62.5% under NAFTA.
  • 40% of passenger vehicle components (and 45% of pickup trucks) must be made by workers earning at least $16 per hour — almost four times what the typical Mexican autoworker earns.

How it's playing out: With ratification complete, companies are beginning to disclose details about where the money's going.

  • Ford will invest more than $1.45 billion in two Michigan plants and add 3,000 new jobs.
  • GM will spend $3 billion and create 2,225 new jobs to produce electric pickups and vans at a plant in Detroit.
  • Fiat Chrysler Automobiles will spend $4.5 billion, on top of $4.5 billion previously announced, to expand factories, adding up to 6,750 new jobs.

The bottom line: In an unsettled environment, the business risks are high, but automakers have no choice but to keep investing if they want to stay in the game.

Go deeper: Driven by greed: Alliance of FCA, union leaders fueled decade of corruption (Detroit News)

2. Latest big auto merger can't solve it all

PSA's Carlos Tavares (left) and FCA's Mike Manley. Photo: Courtesy of FCA

Fiat Chrysler Automobiles is merging with France's PSA Group to create the world's fourth-largest automaker, a deal intended to help both companies bear the cost of new technologies like electric and self-driving cars.

The big picture: The merger also gives Peugeot's parent a long-desired entry into the U.S. and will help FCA catch up in fuel-efficient powertrains.

  • "It is better to face the challenges of the future together than on a standalone basis," PSA CEO Carlos Tavares said during an investor call, CNBC reported.

Yes, but: The merged company will have some glaring problems.

  • It will still be overly reliant on the European market, where sales are sluggish and tightening regulations make it more difficult for all players to do business there.
  • And both companies are poorly positioned in China, a combined weakness that's only amplified as the world's largest auto market shifts sharply toward electric vehicles and homegrown brands.

The bottom line: Tavares, who will lead the combined entity, is an industry wizard, but pulling this off will likely be the most difficult challenge of his career.

3. Keeping AV expectations in check

Argo AI CEO Bryan Salesky. Photo: Courtesy of Argo AI

First came the hype, then the disillusionment. But the rollout of self-driving cars is happening as it should — gradually and safely — Bryan Salesky, CEO of Argo AI, a leading developer of automated driving technology, tells Axios.

The big picture: Self-driving vehicles could help improve safety, reduce traffic congestion and improve access to transportation for many, but those benefits will come slowly and as part of a larger transportation system, Salesky said.

  • "We don't pretend that self-driving cars as a technology platform can solve the larger-scale issues around congestion and efficiency. My view is it will take a systems approach to solve."
  • AVs, he believes, will operate as part of a connected fleet, taking instructions from cloud-based management software to find the optimal routes that balance traffic loads across roadways.
  • Those fleets will be very small, however, with hundreds, not thousands, of AVs available to both consumers and businesses in just a handful of cities where the weather is good.

"All these business models will be messy at first," he predicts, as companies try to figure out what works and where to invest over the next decade.

  • "The societal impact won't be felt for many years from now. Over time, we will look back on this and say, 'Wow, that was a remarkable amount of progress in that time.'"

What to watch: Ford plans to launch a limited fleet of AVs using Argo's self-driving technology in Miami, and then Washington, D.C., and Austin, Texas, starting in 2021.

4. Complacency behind the wheel

A man using a phone while driving. Photo: Spencer Platt/Getty Images

The more drivers use assisted-driving systems, the more comfortable they become with the technology — and the more likely they are to misuse it, according to new research from AAA and Virginia Tech.

What they found: After becoming accustomed to driving with advanced driver assistance systems (ADAS), like adaptive cruise control and lane-keeping assist, drivers were nearly twice as likely to engage in distracted driving behavior (texting, adjusting the radio) compared to when they were driving without the systems.

  • Conversely, drivers less familiar with the technology paid closer attention when the systems were turned on than when they were off.

"This new research suggests that as drivers gain more experience using ADAS technology, they could develop complacency while behind the wheel," said David Yang, executive director of the AAA Foundation for Traffic Safety. "Over-reliance on these systems can put drivers and others in dangerous conditions during critical moments."

Virginia Tech researchers compare the risks of learning to trust ADAS technology to other industries.

  • Pilots and nuclear technicians demonstrate similar patterns of over-reliance on automated systems, which can eventually lead to distraction.

The bottom line: Getting people to trust ADAS technology — without over-relying on it — is going to require concerted education efforts.

5. IBM battery breakthrough

Photo: Julian Stratenschulte/picture alliance via Getty Images

Scientists at IBM have developed a new battery that extracts materials from seawater rather than from metals like cobalt, which is expensive and hard to come by.

Why it matters: If IBM's claims are true, it could speed the introduction of fast-charging, low-cost electric vehicles.

What they're saying: IBM says its technology is cheaper, faster and more energy-efficient than today's lithium-ion batteries.

  • In tests, the battery recharged to 80% capacity in less than five minutes.
  • The battery has a higher power density and is less flammable than lithium-ion batteries, IBM says.

To try to commercialize the technology, IBM is partnering with the research wing of Daimler AG's Mercedes-Benz, battery electrolyte supplier Central Glass and battery manufacturer Sidus.

"The goal would be, within a year or so, to have the first working prototype (of the battery)," Jeff Welser, vice president at IBM Research, told Reuters.

6. Driving the conversation

Data collection: What does your car know about you? We hacked a Chevy to find out (Geoffrey A. Fowler — Washington Post)

  • Why it matters: In the 2020 model year, most new cars sold in the U.S. will be connected to the internet and sharing data, which can help improve safety and convenience. But they're also collecting gobs of data about the car and its occupants.
  • What to watch: In 2020, the California Consumer Privacy Act will require any company that collects personal data about the state's residents to provide access to the data and give people the ability to opt-out of its sharing.

Exiting: Share Now, formerly Car2Go, is leaving North America (Andrew J. Hawkins — The Verge)

  • Why it matters: As similar pullbacks by GM's Maven car-sharing unit and Ford's Chariot ride-sharing business demonstrate, defining future mobility is hard. Daimler and BMW, owners of the car-sharing service, said they'll keep trying to make it work in some European cities.

Unexplained: Boeing's Teflon CEO (Dan Primack — Axios)

  • The big picture: CEOs often depart without much explanation, other than wanting to spend more time with their families. At Boeing, whose 737 Max planes killed 346 people, the situation is reversed: CEO Dennis Muilenburg still has his job, despite a ruinous year that would have toppled most other CEOs. No one seems to know why.
7. What I'm driving

Volvo's V60 Cross Country wagon in the wild. Photo: Courtesy of Volvo

This week I'm driving the Volvo V60 T5 AWD Cross Country, which is like an exotic animal.

Why it matters: In a world dominated by SUVs, the V60 station wagon is indeed a rare breed. Sadly, wagons are déclassé among Americans, which is a shame because it's a great alternative to what all your neighbors are driving.

  • The V60 Cross Country sits 3 inches higher and is a tad wider than the traditional V60 wagon, making it more like a Subaru Outback, but in a premium package.
  • Starting at $46,095, my test model priced out at $56,990.
  • That includes a $2,500 "advanced package" that adds Volvo's "Pilot Assist" technology with adaptive cruise control and lane-keeping technology, along with a 360° camera and other goodies.

Under the hood: The T5 comes with a 2.0-liter, turbocharged I4 engine and eight-speed automatic transmission, good for 250 hp and 258 pound-feet of torque.

  • Fuel economy is 22 mpg city, 31 mpg highway.

The bottom line: If you're hunting for something a little different, the V60 Cross Country is a special breed.