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Auto Roundup: TM's $60M Penalty, NSANY's Wage Hike & More

Auto giants with production facilities in the United States are increasing wages of non-union employees following the United Auto Workers' (UAW) record-setting deals with the Detroit Three automakers.The UAW labor agreements with General Motors GM, Ford F and Stellantis STLA until 2028 feature a 25% boost in base wages, including an immediate 11% rise. This cumulative increase will elevate the top wage by 33%, incorporating estimated cost-of-living adjustments, reaching over $42 per hour. Additionally, the agreements will eliminate wage tiers in factories and streamline the progression to earn the top wage from eight years to three years.

In recent weeks, auto biggies like Hyundai, Honda, Subaru and Toyota TM increased wages for non-union U.S. factory workers, indicating a response to the union's growing focus on organizing the workforce in foreign-owned auto plants. Last week, Japan’s Nissan NSANY and Germany’s Volkswagen also announced wage hikes for U.S. workers.

Meanwhile, the European Automobile Manufacturers Association released data on new car registrations for October 2023. The European Union (“EU”) car market rose 14.6% last month to 855,484 units, marking the 15th straight month of growth. Most EU markets witnessed robust growth. Registrations in Spain, France and Italy rose 18.1%, 21.9% and 20%, respectively, on a year-over-year basis. Germany saw an increase of 4.9% in registrations last month. In the first 10 months of 2023, EU market vehicle registrations reached 9 million units, up 16.7% year over year. During January-October, the majority of markets recorded double-digit percentage growth, with the top four being Spain (18.5%), Italy (20.4%), France (16.5%) and Germany (13.5%).

On the news front, Toyota's credit division is set to pay $60 million in fines for illegal lending practices and violating the Fair Credit Reporting Act. Ford will reduce investment in its $3.5 billion Michigan battery plant due to lower-than-expected demand for electric vehicles (EVs), high cost of labor and the company's cost-cut strategy. Close peer General Motors’ self-driving unit, Cruise, has hit a roadblock. It is facing a critical safety crisis, which has cast a shadow on its ambitious vision to revolutionize urban transportation.  Amid the challenges, the company has scaled back its robotaxi ambitions to one city. Italian-American automaker Stellantis joined forces with CAL to localize the supply of LFP batteries in the European market.

Last Week’s Top Stories

Toyota has been charged for illegally preventing car buyers from canceling add-ons to their loans that increased their monthly loan payments and deteriorated buyers’ credit reports. The automaker will pay $60 million in fines to settle the U.S. regulator's charges. Per the Consumer Financial Protection Bureau (“CFPB”), Toyota Motor Credit will pay a $12 million civil fine and $48 million to the harmed consumers since 2016. Toyota Motor Credit provides vehicle financing to customers who buy vehicles from Toyota dealerships.

The settlement revolves around add-on products that cost the buyers nearly $700-$2,500 per loan. The add-ons provide protection when vehicles are damaged, stolen or out of warranty and in case the buyer dies or becomes disabled. Per CFPB, the borrowers complained to Toyota Motor Credit that dealers misinformed them about the necessity of the product and rushed them through paperwork, because of which they didn’t realize how much they were paying. The company is accused of violating the Fair Credit Reporting Act by misinforming credit reporting agencies and failing to correct the misinformation for more than 27,500 borrowers.

TM currently sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Ford announced scalingback its plan for a $3.5 billion Michigan Battery plant due to lower-than-expected demand for electric vehicles, high cost of labor and the company’s cost-cutting strategy. The facility was announced in February. The U.S. legacy automaker will cut the plant’s production capacity by nearly 43% to 20 gigawatt hours per year and reduce expected employment to 1,700 jobs, down from 2,500 jobs. The company refused to disclose the reduced amount of investment in the plant. The move follows a recent retreat from EVs by automakers around the globe amid declining demand due to higher costs, supply chain & battery technology-related challenges.

Last month, Ford announced cutting or delaying $12 billion in its previously announced investment. The scale-back plan is part of the same announcement. Ford will also delay the construction of the Kentucky EV battery plant. Per Mark Truby, chief communications officer of Ford, despite a halt in construction of the plant due to collective bargaining with UAW, the plant is still expected to open in 2026. The construction of the Michigan plant is set to resume after being paused for two months.

General Motors’ Cruise is scaling back its plans and is now focusing on deploying autonomous vehicles in just one city instead of the previously targeted 13 across the United States. The specific city and the timeline for this deployment remain undisclosed. Additionally, GM has postponed the production of the much-anticipated Cruise Origin robotaxi. Cruise is completing a small number of pre-commercial prototypes. However, the full-scale production remains on hold. The company will not manufacture any prototype or commercial model of Origin in 2024.

This comes amid regulatory and safety hurdles. California's suspension of Cruise's driverless permits has led to a nationwide operational pause. The company's troubles were further compounded by the departure of its founding executives, Kyle Vogt and Daniel Kan.

The Cruise Origin, a central piece of the company's autonomous strategy, was set to be produced at GM's Factory Zero in Detroit. There were plans for its deployment in U.S. cities and Tokyo but regulatory approvals have stalled the process. GM has been awaiting a decision from the National Highway Traffic Safety Administration on an exemption request for federal safety standards since February 2022

Stellantis signed a non-binding Memorandum of Understanding with Contemporary Amperex Technology Co. to localize the supply of lithium iron phosphate batteries and cells to power the automaker’s EV production in Europe. To underpin Stellantis’ aggressive electric push, both companies are contemplating a joint venture with an equal contribution. The MoU highlights a long-term collaboration between both companies on two strategic fronts. Firstly, devise a bold technology roadmap to support Stellantis’ cutting-edge battery EVs and secondly, identify opportunities to strengthen the battery chain value.

Per Carlos Tavares, CEO of Stellantis, both companies will bring innovative and accessible battery technology to Stellantis’ customers while helping the company achieve its carbon net zero ambition by 2038.As part of the Dare Forward 2030 plan, Stellantis aims to achieve a 100% EV sales mix in Europe and a 50% passenger car and light-duty truck BEV sales mix in the United States by the end of the decade. It is securing approximately 400 GWh of battery capacity to achieve these targets, underpinned by six battery manufacturing plants in North America and Europe. The company is assembling a roster of partnerships to support a stable, low-carbon supply of crucial materials for its electrified future.

Nissan announced a wage hike for its 9,000 US factory workers after the UAW reached new contracts with the Detroit Three. The wage hike of 10% will be effective from Jan 8, 2024, for production, maintenance and tool & die technicians. Workers who are not at the top salary scale will also be eligible for the hike. The automaker also decided to eliminate wage tiers for U.S. production workers.Nissan slashed the number of years it takes for an employee to get top pay from eight years to three years. It will increase the wages of temporary workers by 150% and make them permanent employees.

Additional benefits encompass the inclusion of Juneteenth and Veterans Day as paid holidays, along with an extension of paid parental leave by an extra eight weeks, totaling 16 weeks and covering both parents. Per Brian Brockman, spokesperson of Nissan, the move is aimed at attracting and retaining top talents in the industry. The company also stated that the hike reflects its commitment to its employees in the United States.

Price Performance

The following table shows the price movement of some of the major auto players over the last week and six-month period.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

What’s Next in the Auto Space?

Industry watchers will keep a tab on auto biggies releasing November 2023 U.S. vehicle sales data.

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Ford Motor Company (F) : Free Stock Analysis Report

Toyota Motor Corporation (TM) : Free Stock Analysis Report

Nissan Motor Co. (NSANY) : Free Stock Analysis Report

General Motors Company (GM) : Free Stock Analysis Report

Stellantis N.V. (STLA) : Free Stock Analysis Report

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