Oct 25, 2019

Axios Navigate

By Joann Muller
Joann Muller

Happy Friday! Welcome back to Navigate. I've been on the road all week in D.C. and Chicago, grappling with crowded airplanes and snarled traffic. You too?

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📺 Next on "Axios on HBO": An exclusive interview with Iraq's President Barham Salih (sneak preview), the head of the IMF Kristalina Georgieva talks socialism and taxes, and Sen. Kamala Harris gives her take on 2020. Tune in Sunday at 6pm on HBO.

Smart Brevity count: 1,355 words, a 5-minute read.

1 big thing: Detroit's gamble on the future

Illustration: Eniola Odetunde/Axios

The proposed deal between one of Detroit's biggest automakers and striking workers is a calculated bet on a vision for the auto industry that's far from certain.

The big picture: GM can afford the rich contract terms negotiated with the United Auto Workers — as long as nothing goes wrong. Higher gas prices, an economic downturn or a new president with different priorities could throw off the entire equation and put GM and other domestic automakers in a financial bind.

  • On top of those worries, the industry is facing the most disruptive technology shift in 100 years, leaving companies like GM awkwardly straddling the past and future.
  • Jonathan Smoke, chief economist at Cox Automotive, says it's not clear when the inflection point for giving up the steering wheel will be, if ever.

Driving the news: The deadline for UAW members to vote on the proposed GM contract is this afternoon.

  • Though union members remain divided over whether the deal provides enough long-term job security, early voting results indicate ratification is likely, which would put an end to the nearly 6-week-old strike, which has already cost GM $1.75 billion in lost profits, according to Anderson Economic Group.
  • The union will then turn its attention to Ford or Fiat Chrysler, with the GM contract as a template.

GM is more aggressive than most in the push toward the future with its majority stake in self-driving startup Cruise Automation and a plan to introduce 20 EVs by 2023.

  • The automaker is sustained, however, by the fat profits from traditional pickup trucks and SUVs.
  • To pay for the R&D on future technologies, GM needs to keep pushing those gas guzzlers for the foreseeable future.
  • "They're really trying to run 2 auto companies," says Barclays automotive analyst Brian Johnson.

GM tried to protect its flexibility in the labor agreement by trading higher wages and benefits for the ability to close a massive car factory in Ohio and two transmission plants.

  • Yes, but: Detroit's total labor costs remain significantly higher than foreign-based rivals with factories here: $63 per hour at GM vs. $61 for Ford, $55 for Fiat Chrysler and $50 for the so-called transplants.

But all 3 Detroit carmakers left their flank open by getting out of the traditional sedan business — effectively ceding that market to Asian competitors.

A new president could alter the landscape, too. Sen. Elizabeth Warren, for example, has pledged to halt fracking, which would likely drive up oil prices.

  • That would make those thirsty trucks and SUVs less appealing to consumers, squeezing Detroit's primary profit source.
  • Trade policy and emissions standards are also wild cards, depending on who is in the White House.

What to watch: Auto sales are already trending downward. A recession would cause them to drop 20%, Smoke tells Axios.

2. Look before crossing

Illustration: Sarah Grillo/Axios

There is both good news and bad news in the latest government accounting of highway fatalities.

First, the good news: The number of people who died in vehicle crashes in 2018 dropped 2.4%, to 36,560, the National Highway Traffic Safety Administration reported this week.

  • That's 913 fewer people than in 2017, and the second year in a row that highway fatalities have dropped.
  • NHTSA credited new car safety technology, and noted that alcohol- and speeding-related fatalities were both lower.

Now, the bad news, which is getting worse: Pedestrian and cyclist deaths keep rising.

  • 6,283 pedestrians were killed by cars in 2018, up 3.4%.
  • 857 cyclists died in vehicle crashes, up 6.3%.
  • The vast majority of those deaths occurred after dark, NHTSA says.
  • Pedestrian deaths are up 50% in the past decade, reports Wired.

Distraction could be a factor — by both motorists and pedestrians — but the popularity of trucks and SUVs could also be contributing to the spike in pedestrian deaths.

  • Taller, heavier vehicles are more likely to strike a person in the torso or head, rather than in the legs.

What to watch: The NHTSA plans to upgrade its 5-star rating system for new vehicles to include technologies for pedestrian and cyclist safety.

  • Yes, but: So far, AAA testing shows that pedestrian detection and braking systems don't work very well.

Go deeper: Pedestrians are dying while vehicle safety tech lags

3. United's new regional jet

United's new regional jets have more legroom and self-serve snacks in first class. Photo: Joann Muller

At Chicago's O'Hare airport this week, I got a sneak peek at United Airlines' new Bombardier CRJ-550 regional jet going into service this weekend.

Why it matters: By designing its own plane, United aims to close an amenities gap for short-hop flights to try to get more business travelers in medium-sized cities like Cincinnati, St. Louis and Madison.

  • Most of the 300+ regional jets United currently flies aren't appealing for corporate travelers, United vice president Ankit Gupta tells me, because there's no premium first class cabin and often no WiFi.

Details: The new plane looks like the 70-seat regional workhorse CRJ-700, but United removed 20 seats to provide more comfort and storage.

  • It includes 10 seats in the first class cabin, where passengers have access to a self-service beverage and snack station and four luggage closets.
  • Passengers in economy and economy-plus also have more legroom and storage for their luggage, along with WiFi service.

The bottom line, says Gupta: "We're trying to attract the corporate customer who otherwise wouldn't fly with us."

  • United expects to have 54 of the new planes in service by mid-2020.
4. Schumer's EV plan

Photo: Tasos Katopodis/Getty Images

Senate Minority Leader Chuck Schumer is announcing a new proposal designed to rapidly phase out gas-powered vehicles and replace them with zero-emission vehicles like electric cars, writes Axios' Ben Geman.

Why it matters: In a New York Times op-ed on Thursday, Schumer claims his proposal already has buy-in from the the United Auto Workers; major carmakers including Ford and GM; and big environmental groups including the Sierra Club and the Natural Resources Defense Council.

Driving the news: Schumer's plan has three core elements.

  • Big discounts for consumers who trade in gasoline-powered cars for U.S.-made electric or hydrogen fuel-cell models.
  • Grants to cities and states to deploy more EV charging infrastructure.
  • Grants for building or re-tooling manufacturing plants to focus on EVs and battery technologies.

The big picture: Schumer said last month that a sweeping climate bill would be "one of the first things we put on the floor" if Democrats gain a majority in the Senate.

  • The EV plan would be a key part of the bill, according to his op-ed.
5. Driving the conversation

Special delivery: UPS drone fleet expands services to CVS and others (Marisa Fernandez — Axios)

  • The state of play: UPS is hitting the health care business on all sides, from patients to providers and suppliers — all of whom would value faster deliveries on lab testing, prescriptions and medical supplies.
  • Go deeper: UPS receives approval to fly commercial drones


Bold: Tesla chairwoman on Elon Musk’s promises: Setting ‘audacious goals’ drives success (Mike Wayland—CNBC)

  • Why it matters: Robyn Denholm was brought in as chairwoman a year ago to replace Musk as part of an SEC settlement after his infamous "funding secured" tweet. Rather than babysitting Musk, she seems to be encouraging his audacious management style.

Cheapskates: Who tips best on Uber? Economists analyzed 40 million trips. Here’s what they found. (Andrew Van Dam—The Washington Post)

  • The bottom line: Nearly 60 percent of Uber riders never tip, about 1 percent always tip, and those who tip leave an average of $3, the analysis found.
6. What I'm driving

Inside the 2020 Ford Explorer. Photo: Ford

This week I'm driving the 2020 Ford Explorer, which looks similar to the previous generation, but is fundamentally different, because it is now on a rear-wheel-drive platform.

Why it matters: The Explorer has been around for 30 years, but for the last eight years, it's been on a front-wheel-drive platform, similar to other mid-sized crossovers. Now it's back to its RWD roots. (All-wheel-drive is also available.)

What else is new: The vertical 10.1-inch touchscreen is hard to miss in the top-of-the-line Platinum version I'm driving. It looks out of place to me and doesn't seem very driver-oriented, but the buttons are big and so is the text, making it easy to use.

  • Standard driver-assistance features include forward collision warning, automatic emergency braking, blind spot warning, lane keeping assist, and lane departure warning.
  • Higher-priced models offer adaptive cruise control, evasive steering assist, a 360° camera and rear-parking assistance, among other features.
  • One cool feature: Ford uses animations in the settings menu to show the driver exactly what each system does in a clear, concise way.

Fuel economy: With the base 2.3-liter engine, the Explorer gets an EPA rating of 21 mpg city, 28 highway, 24 combined.

  • The thirstier Explorer Platinum I'm driving has a 3.0-liter V-6, and gets an estimated 18/24/20 mpg.
  • A hybrid is available too, which will get 27/29/28 mpg in rear-wheel-drive, and go over 500 miles between fill-ups,

The bottom line: Starting at $33,860, the Explorer has always been a family favorite, but it can get pretty pricey. My AWD Platinum costs $61,330.

Joann Muller