Articles in Category: Automotive

Source: Toyota

Automaker Toyota last week announced a push to increase its previous investment pledge in the U.S.

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Last week the automaker announced it would up a 2017 pledge to invest $10 billion in the U.S. over five years, increasing the investment up to $13 billion.

“These latest investments represent even more examples of our long-term commitment to build where we sell,” said Jim Lentz, chief executive officer for Toyota Motor North America, in a company release. “By boosting our U.S. manufacturing footprint, we can better serve our customers and dealers and position our manufacturing plants for future success with more domestic capacity.”

In addition to the wider pledge, Toyota announced investments totaling $750 million in five states: Alabama, Kentucky, Missouri, Tennessee and West Virginia. The investments include “production capacity increases and building expansions at Toyota’s unit plants in Huntsville, Alabama, Buffalo, West Virginia, Troy, Missouri and Jackson, Tennessee.”

An investment of $288 million aims to increase annual engine capacity from 670,000 to 900,000 by the end of 2021 at its Huntsville, Alabama plant, and will include the addition of 450 new jobs.

A $238 million investment at its Georgetown, Kentucky plant will see to the commencement of production of the Lexus ES 300h hybrid in May, with production of the RAV4 hybrid beginning in 2020.

Toyota is also investing in its Bodine Aluminum plant in Missouri toward the goal of producing an additional “864,000 cylinder heads for Toyota’s New Global Architecture (TNGA),” up from the current level of more than 3 million cylinder heads per year. The automaker is also investing in its Tennessee aluminum plant, namely for equipment and a building expansion to double its annual capacity of hybrid transaxle cases and housings to 240,000.

Toyota also plans to double its capacity of hybrid transaxles to 240,000 by 2021 at its West Virginia plant.

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Earlier this month the automaker reported its February U.S. sales were down 5.2% year over year. For the first two months of the year, Toyota’s U.S. sales are down 5.9% compared with the same time period in 2018.

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This morning in metals news, China’s copper imports fell in February, U.S. Steel won an award sponsored by the Department of Energy and General Motors rolled out its last Chevy Cruze this week.

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Copper Imports, Aluminum Exports Down in China

China’s February copper imports fell to their lowest level in 11 months, Reuters reported, while copper concentrate imports rose to an all-time high.

Meanwhile, China’s aluminum exports fell 37.9% in February compared to the previous month, according to the report.

U.S. Steel Wins DOE Award

U.S. Steel won an award from the High-Performance Computing for Manufacturing Program sponsored by the Department of Energy, which will allow the company to “expand the company’s manufacturing capabilities for advanced high-strength steel.”

“The goal of the winning project, drafted by researchers Evgueni Nikitenko and Susan Farjami at U. S. Steel’s Research and Technology Center in Munhall, Pa., is to enhance the company’s hot strip mill model used in creating AHSS,” a U.S. Steel release stated. “This type of steel is used by automakers to manufacture economically lightweight vehicles to meet increasing fuel efficiency requirements while maintaining exceptionally high safety standards.”

According to the release, the project research will take place at the Lawrence Livermore National Lab, which will receive $300,000 to collaborate with U.S. Steel.

End of the Cruze

Per its announcement late last year, General Motors idled its Lordtown, Ohio assembly plant earlier this week, where the automaker rolled out its last Chevy Cruze vehicle.

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According to NBC News, the closure will lead to the elimination of nearly 1,700 hourly jobs by the end of the month.

March 29 is currently supposed to be the date by which Britain’s future relationship with the European Union is finally settled.

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There are several possible outcomes of varying likelihood. Britain could remain part of the E.U., which is looking comparatively unlikely.

Or, it will leave based on the agreement Prime Minister Theresa May has reached with Brussels, but including some last-minute tweaks around the longevity of the Irish border question (the most likely option).

Or, Britain will plunge out with no formal agreement — and to judge by the opinions of much of the business community and many commentators, it would plunge into an extremely uncertain and volatile future.

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The Automotive Monthly Metals Index (MMI) picked up one point this month, rising for an MMI value of 93.

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U.S. Auto Sales

As noted in previous reports, General Motors last year announced a switch from monthly sales reports to quarterly reports. Fellow Big Three automaker Ford Motor Co. has followed suit, recently announcing it would also move to a quarterly reporting schedule.

“We knew that a lot of our competitors would watch to see what our experience would be and if we’d stick to our guns,” GM spokesman Jim Cain told the Detroit Free Press. “We always expected they’d follow.”

Meanwhile, most automakers continue to report on a monthly basis. Fiat Chrysler reported February sales fell 2% year over year, breaking an 11-month streak of year-over-year gains.

“The overall industry is starting off slower due in part to weather, the U.S. government shutdown and concern over tax refunds,” U.S. Head of Sales Reid Bigland said. “We still see a strong, stable economy and anticipate any lost winter sales will be made up in the spring. For us, the Ram brand was the standout in February, and Jeep Cherokee set a February record as well.”

Honda saw its total sales dip 0.4% year over year in February. However, Honda’s Acura brand posted a strong February, with Acura sales increasing 11.3% year over year.  Sales of Acura trucks increased 23.9% year over year.

Nissan’s U.S. sales dropped 12% year over year. Nissan’s ousted former CEO Carlos Ghosn was granted bail by a Tokyo court, NPR reported, as he awaits trial on corruption charges.

Subaru reported a 3.9% year-over-year sales increase, with its Forester performing well in the year to date (up 17.6% compared with January-February 2018 sales). However, earlier this month Subaru recalled 1.3 million vehicles due to brake light issues, impacting certain Forester, Impreza and Crosstrek vehicles.

Section 232 Auto Report Moves to Trump

Last month, Secretary of Commerce Wilbur Ross submitted a report to President Donald Trump related to the Trump administration’s Section 232 investigation on imports of automobiles and automotive parts.

Pursuant to Section 232 of the Trade Expansion Act of 1962, once an investigation begins the commerce secretary has 270 days by which to provide the president with a report including recommendations. This particular investigation began May 23, 2018, setting the deadline on Feb. 17.

However, some industry groups have complained because the report was not made available to the public.

“It is critical that our industry have the opportunity to review the recommendations and advise the White House on how proposed tariffs, if they are recommended, will put jobs at risk, impact consumers, and trigger a reduction in U.S. investments that could set us back decades,” the Motor and Equipment Manufacturers Association said in a prepared statement. “Secrecy around the report only increases the uncertainty and concern across the industry created by the threat of tariffs. MEMA calls for the immediate and full release of the report.”

Meanwhile, the European Automobile Manufacturers’ Association (ACEA) issued a statement, arguing European automobiles do not pose a national security threat to the United States.

“Imports of cars and auto parts from the EU clearly do not pose a national security risk to the United States,” ACEA Secretary General Erik Jonnaert said. “Any trade restrictive measures in our sector will have a serious negative impact, not only on EU manufacturers but also on US manufacturers.”

Investments and Relocation

General Motors made waves late last year when it announced plans to close several of its North American plants and cut 15% of its workforce.

GM is far from the only automaker cutting costs and shuffling production, as MetalMiner’s Stuart Burns explained last month. Ford, Jaguar Land Rover, Nissan and Honda, among others, have either cut jobs or moved production.

“The U.S. market could be due for a severe shakeup if President Donald Trump’s threat to slap import tariffs on foreign cars comes into effect,” Burns explained.

“UBS Bank reckons that the worst case — tariffs of 25% — would see the American market shrink by 12% next year.”

As for investment, while GM previously announced the shuttering of five North American plants in 2019, it recently announced new investment in other plants. The automaker plans to invest a total of $56 million in two Michigan plants, located in Romulus and Lansing.

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Actual Metal Prices and Trends

U.S. HDG steel rose 1.8% month over month to $896/st as of March 1. U.S. platinum bars rose 6.0% to $869/ounce. U.S. palladium bars rose 14.9% to $1,522/ounce.

U.S. shredded scrap steel rose 5.7% to $332/st.

Chinese primary lead rose 0.8% to $2,615.72/mt. LME copper rose 5.3% to $6,494/mt.

Korean aluminum coil fell 3.5% to $3.31/kilogram.

The association representing Europe’s automotive manufacturers recently weighed in on the latest developments in the U.S.’s Section 232 automotive probe.

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“Imports of cars and auto parts from the EU clearly do not pose a national security risk to the United States,” said Erik Jonnaert, secretary general of the European Automobile Manufacturers’ Association (ACEA). “Any trade restrictive measures in our sector will have a serious negative impact, not only on EU manufacturers but also on US manufacturers.”

On May 23, 2018, the Trump administration launched a Section 232 investigation into imports of automobiles and automotive parts. Section 232 of the Trade Expansion Act of 1962 is used to determine if certain imports are threats to U.S. national security. The Trump administration used Section 232 to impose tariffs on imported steel and aluminum last year.

Following the initiation of a Section 232 investigation, the U.S. secretary of commerce has 270 days by which to give the president a report with recommendations. The president then has 90 days to decide what to do with the findings, if anything.

Secretary of Commerce Wilbur Ross sent President Donald Trump his Section 232 auto report Sunday, Feb. 17, just hours before the deadline.

Unsurprisingly, European automakers are concerned at the prospect of new U.S. tariffs on imported automobiles. In its prepared statement, ACEA also posited the tariffs would have a deleterious effect on the U.S. economy.

“ACEA cautions that the application of additional duties on imports of passenger cars and parts would not only severely affect the EU industry, but also the US economy and consumers alike,” ACEA said in the release. “It would mean that all automobile manufacturers in the United States, whether domestic or international, would face a significant increase in costs.

“This cost increase would have to be mitigated by lowering margins, reducing production costs or passing additional purchase and repair costs on to consumers. Such measures would make American automobile manufacturing less competitive and hit US consumers in their pockets. In other words, the imposition of tariffs would have a counter-productive effect on the US economy.”

While the ongoing trade negotiations between the U.S. and China dominate much of the headlines, the U.S. and the E.U. are working through trade differences, too. For example, the U.S.’s Section 232 tariffs on steel and aluminum remain in effect for the trading bloc.

With the 90-day Section 232 window underway for Trump, the clock is ticking. According to Reuters, European ministers on Friday debated when to begin trade negotiations with the U.S.

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According to media reports last week, European Commission President Jean-Claude Juncker said Trump had promised him he would hold off on imposing automotive tariffs. However, Juncker added that if the U.S. went forward with the tariffs, the E.U. would retaliate in kind.

Currently, the E.U. has a 10% tariffs on imported U.S.-made vehicles, while the U.S. tariff on E.U.-made cars is 2.5%.

Britain has been in paroxysms of concern over the fate of its car industry.

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In January, Jaguar Land Rover (JLR), announced it will lay off 4,500 employees as part of a plan to save £2.5 billion ($3.2 billion) in the face of a collapse in the sale of diesel cars (some 90% of JLR’s cars were diesel last year).

Nissan, the largest of the Japanese car builders in the U.K., announced it would not be building its new X Trail model in the U.K., contrary to earlier promises made to secure millions in public support. Honda announced it was planning to cut 800 jobs at its Swindon plant this year.

Then, according to the Economist last week, Ford unveiled the European end of a global effort to cut costs by $14 billion a year, which may see 24,000 of its 200,000 workers laid off.

Such is the political fever in the U.K. at present, and the fault is being laid firmly at the door of Britain’s departure from the European Union (that is, Brexit).

In reality, while the uncertainty created by the U.K. government’s bungled exit negotiations have not helped, all these decisions reflect a wider downturn in the global automotive market.

Back to the Economist piece, citing automakers blaming falling sales and the need to merge operations or share platforms – such as Volkswagen and Ford’s recent tie-up for vans and pick-ups – to counter the threat from automotive electrification.

Yet many of the factors cited, while certainly constituting threats in the medium term – the move to car sharing or ride-hailing services could certainly decimate sales of personally owned cars in the medium term — are still in their infancy in terms of overall numbers and haven’t begun to impact total car demand yet.

Nor has the electric vehicle (EV), said by some to be the death knell of traditional manufacturers of internal combustion powered vehicles, as the likes of Google, Tesla and even rising Chinese EV manufacturers take over.

Source: The Economist

The drop in sales both in Europe, the U.S. and, most importantly, China is real enough — but the reason is much simpler than a change in consumers’ buying preferences.

GDP is slowing, most markedly where the fastest decline in sales has been: China. Consumers are worried by trade wars, slowing growth, fears over the stock market and even talk of recessions.

Rising sales come on the back of confidence and rising living standards; when consumers fear for their economic future, they stop or postpone buying.

That is what is happening in China and we are seeing beginning to happen in Europe, South America and probably later this year in the U.S.

According to The Economist, China, the world’s largest car market, shrank for the first time in over 20 years in 2018. Sales fell by 2.8% to 28.1 million vehicles and slid by 13% in December alone, giving a taste of what may be in store this year.

The U.S. market could be due for a severe shakeup if President Donald Trump’s threat to slap import tariffs on foreign cars comes into effect.

UBS Bank reckons that the worst case — tariffs of 25% — would see the American market shrink by 12% next year.

Further out, there are certainly challenges.

The consulting firm Bain & Company, is quoted by the paper as saying that America’s driving-age population is not growing (a trend mirrored in the rest of the world, the paper says). The firm reckons that the American market, currently at 17 million cars a year, could shrink to 10 million by 2025.

But for now, automakers are struggling to cope with a market that was growing strongly but has now taken a turn for the worse. China was for many Western brands their most profitable market. Not only have overall passenger car sales fallen, but Western automakers have been most heavily hit as the Chinese have reacted to the trade standoff by shunning foreign makes.

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Car sales are not going to rise until confidence and growth picks up — when that may be remains to be seen, but for this year more of the same seems the most likely.

Automaker General Motors announced plans to invest $36 million and $20 million in its Lansing and Romulus plants, respectively, in Michigan.

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The Lansing plant produces the Chevrolet Traverse and Buick Enclave crossovers.

“We are proud of the hard work and commitment of the entire Lansing team and the Chevrolet Traverse and Buick Enclave are important products in our growing crossover portfolio,” GM Chairman and CEO Mary Barra during a visit to the plant to meet with employees and community leaders, as quoted in a company release. “This investment will allow us to prepare the plant for future crossover production.”

The Lansing Delta Township plant opened in 2006 and has produced more than 2 million crossovers since then. According to the release, GM has invested more than $600 million in the plant since 2009.

Meanwhile, at its Romulus propulsion plant, the company plans to invest $20 million in order to augment its “capacity for future 10-speed transmission production.”

The plant produces V6 engines and 10-speed transmissions used in GM vehicles.

“Romulus has a long-standing reputation of quality, productivity and performance and we are proud of the hard work and commitment displayed by the entire Romulus team,” Barra said. “GM’s investment in Romulus will enable the plant to continue playing an important role in our core business going forward.”

Per the release, GM has invested more than $880 million in its Romulus plant since 2009.

The Romulus plant opened in 1976 and has been producing engines since the 1980s, having since produced over 10.8 million V8 engines and over 6.6 million V6 engines.

The twin investment announcements come a few months after GM’s announced closure of five North American plants by the end of 2019, in addition to a 15% workforce reduction. Two of the plants tapped for closure are in Michigan (Detroit-Hamtramck Assembly in Detroit and Warren Transmission Operations in Warren). GM’s planned plant closures and workforce reduction was expected to save the company $6 billion by the end of 2020.

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“In the past four years, GM has refocused capital and resources to support the growth of its crossovers, SUVs and trucks, adding shifts and investing $6.6 billion in U.S. plants that have created or maintained 17,600 jobs,” GM said in a release Nov. 26, 2018. “With changing customer preferences in the U.S. and in response to market-related volume declines in cars, future products will be allocated to fewer plants next year.”

Just before the statutory deadline, Commerce Secretary Wilbur Ross on Sunday sent President Donald Trump his report on the Section 232 automotive investigation opened last year.

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The Trump administration launched the investigation May 23, 2018, using Section 232 of the Trade Expansion Act of 1962 — the same statute used to impose tariffs of 25% and 10% on steel and aluminum imports, respectively — to determine whether imports of automobiles and automotive parts are considered injurious to national security.

Once a Section 232 probe is launched, the U.S. secretary of commerce has 270 days to send the president a report with recommendations (if any), after which the president has 90 days to make a decision (in this case making for a May 17 deadline for Trump’s decision).

While Ross did send his report just hours before the deadline Sunday, the report was not made public.

As such, industry groups have made calls for the public release of the report.

The Motor and Equipment Manufacturers Association (MEMA) in a statement said it was “alarmed and dismayed” that the report was not available to the public.

“It is critical that our industry have the opportunity to review the recommendations and advise the White House on how proposed tariffs, if they are recommended, will put jobs at risk, impact consumers, and trigger a reduction in U.S. investments that could set us back decades,” the association said in a prepared statement. “Secrecy around the report only increases the uncertainty and concern across the industry created by the threat of tariffs. MEMA calls for the immediate and full release of the report.”

MEMA also warned of a compounding negative impact if the tariffs were introduced on top of the existing Section 232 tariffs on steel and aluminum.

“If these tariffs are imposed, the first impacts will be felt by smaller suppliers,” MEMA said in the release. “Usually North American-based, smaller supplier manufacturers’ two largest costs are raw materials/inputs and salaries. These suppliers are already paying significantly more for their raw materials due to tariffs on steel and aluminum. If Section 232 tariffs are implemented, suppliers will have no choice but to lay off members of their workforce.”

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Earlier this week, Reuters reported European Commission President Jean-Claude Juncker said Trump had told him he would not impose tariffs on imported automobiles for the time being.

However, Juncker added that Europe would retaliate if the U.S. went forward with tariffs on imports of automobiles and automotive parts.

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This morning in metals, we’re getting up to speed on where the tin market could be in a decade, what U.S. and Chinese trade negotiators are continuing to discuss, and where the EU car market seems to be heading (hint: it’s not good news).

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Tin Metal Use Expected to Boom Due to Batteries

The International Tin Association (ITA) recently said that tin could experience “a surge of new demand from lithium-ion batteries for electric vehicles and energy storage of up to 60,000 tonnes a year by 2030,” according to Reuters.

According to that report, the ITA did not forecast any numbers of overall tin consumption in 2030, but “it has seen rising interest in the metal for energy materials and technologies.” Last fall, the group went on record forecasting a global tin market surplus of 500 metric tons in 2018 mainly due to weaker demand in China, according to Reuters.

U.S.-China Trade Talks Mention Big Semiconductor Moves

Among the things trade negotiators for both countries discussed at the table recently, according to the WSJ (paywall), were a proposal to increase U.S. semiconductor sales to China to a total over six years of $200 billion (although “that increase would be generated in part by moving assembly operations of U.S. semiconductors from third countries like Mexico and Malaysia to China, allowing those products to be counted as U.S. exports rather than those of other countries”…so much for reshoring).

The Chinese also offered “to eliminate a national vehicle-procurement policy that has given consumers subsidies to buy domestically made new-energy, small-engine and other types of cars,” according to the WSJ.

E.U. Car Market Looking Dim

Speaking of vehicles, while carmakers like Ford are worried about what a hard Brexit may mean for their plants, they may have bigger, more systemic issues when it comes to the E.U. and U.K. car markets.

“European car sales declined for a fifth straight month in January,” and “passenger car registrations dropped 4.6 percent compared with last year to 1.23 million vehicles in the European Union and European Free Trade Association, according to the European Automobile Manufacturers Association,” as reported by Bloomberg.

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Of course, all eyes on on China and its auto market to see if glimmers of hope are on the horizon.

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Before we head into the weekend, let’s take a look back at the week that was and some of the metals storylines here on MetalMiner: