19 November 2016

Industry Snippets - November 2016

VW has done a deal with its workers to reduce its global workforce by 30,000, or nearly 5%. Most of those will be in Germany. The reduction will be achieved by not replacing workers who leave the company. It is to save money associated with the diesel scandal that is costing billions of dollars to fix. As a compensation to the German workforce, two new electric cars will be built in Germany.

My take: This is what VW has wanted for years, less workers in Germany. The unions wouldn't agree to reduced numbers. This crisis means it now has to happen. Obviously VW didn't plan all of this, but let's say that the diesel scandal has become a cloud with a silver lining.

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Jaguar is to produce an i-Pace electric crossover vehicle, to be released in 2018. The manufacturing will be done in Austria, at Magna Steyr in Graz. This is one of two models JLR have stated they will have assembled at this plant, though what the second one will be hasn't been revealed. Approximately 13,000 units per annum are expected to be made of the I-Pace

My take: JLR has capacity restraints in the UK. They already have assembly facilities - with varying local content - in China, Brazil and India. Slovakia will soon join that list as will Austria. As JLR grows, it is becoming more multinational.

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GM Europe has been losing money for some time. At the beginning of 2014, Morgan Stanley estimated 2015 would be profitable. However, no one could have predicted the slump in Russia and Opel's decision to leave the market and close its assembly plant there. 2016 was then heralded as the time for black ink. However, GM Europe has now said it's doubtful.

My take: The UK is a huge European market for GM, with too little investment there from the giant car maker. The drop in the value of the pound will therefore be a factor. However, there are many reasons. Sales should be product driven, not price driven. The product has to be good enough and factory capacity needs to reflect demand.

I'm sure GM Europe is working hard to improve the product, hurt by years of under-investment while GM US was struggling. It will take time to win back customers it has lost over the years...providing the product is now good enough.

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