November 7, 2020
The Detroit News
By Breana Noble
President-elect Joe Biden could help accelerate the most sweeping technological shift in the auto industry since Henry Ford’s moving assembly line a century ago, analysts said, as automation, connectivity and electrification go mainstream and transform transportation as generations have known it.
President Donald Trump relaxed regulations for the industry and cut taxes, but he also called out CEOs on Twitter for decisions to close factories, build vehicles in Mexico and support California’s stricter fuel-economy standards. Biden’s leadership is expected to provide a less eruptive approach to the industry and trade.
Since Michigan is a key to rebuilding the so-called “blue wall” of labor support in the industrial Midwest, he also has promised to be “the most friendly” president to unions and to grow jobs in the industry.
“A Biden presidency would likely bring less volatility to the communication process and trade,” said Glenn Stevens, executive director of MICHauto, a division of the Detroit Regional Chamber. “That is something the industry really needs and wants, which is an active line of communication with policymakers and dialogue on an ongoing basis. The industry needs stability because it is a capital-intensive, global business.”
Biden proposes to accelerate electric-vehicle production and adoption, a transformation already underway inside Detroit’s automakers and a growing set of start-up companies. The technological change requires billions of dollars in investments with significant implications on jobs and operations even as consumer acceptance remains uncertain.
“The auto sector’s overall vitality is critical to America’s economy and is the nation’s largest durable goods manufacturer, supporting more than 10 million jobs coast to coast,” said John Bozzella, CEO of the Alliance for Automotive Innovation that represents automakers in Washington. “Advancing cleaner, safer, smarter mobility will be a cornerstone to continuing the economic recovery from the COVID-19 public health situation as well as helping us meet our safety and environmental goals.”
The state that put America on wheels soon may have a different kind of ally in the White House. A more traditional Democrat, Biden has played up his role in the auto-industry bailout under President Barack Obama that began during the Bush administration. Michigan Gov. Gretchen Whitmer was on Biden’s short list for vice president. And United Auto Workers President Rory Gamble called Biden “a friend of UAW members and labor.”
“Our members, our families and our communities are hurting in this pandemic and with economic challenges, health care challenges and workplace rights and safety challenges as union members,” Gamble said in a statement. “These are the issues that unite us as union members regardless of who is in power in the White House, in Congress or our courts.”
Ford Motor Co. — which has said it is investing $11 billion on future technologies — cited steadiness in policy Saturday when the race was called for Biden by the Associated Press: “It is our hope these leaders will focus on bringing the country together and pursue policies that encourage U.S. manufacturing, sustainability and global economic stability.”
General Motors Co. is spending $20 billion on electric and autonomous vehicles through 2025, with 20 fully electric nameplates in its global portfolio by 2023. Cadillac could be a fully electric brand by 2030, and GM has shared plans for three U.S. manufacturing plants to produce electric vehicles.
“We look forward to working with the new administration and incoming Congress,” the Detroit automaker said in a statement, “on policies that support our customers, dealers and employees, help strengthen our manufacturing presence in the United States and advance our vision of an all-electric, zero-emissions future.”
Noting the industry is “one of the most powerful engines of the U.S. economy,” Fiat Chrysler Automobiles NV said it hopes to work with the new government “to strengthen the automotive industry and build a more secure future for our employees, customers and society.”
FCA is poised to consummate its transatlantic merger with Groupe PSA of France to increase investments in e-mobility. FCA previously said it plans to spend $10.5 billion on electrification efforts through 2022.
Despite those widely publicized plans, Biden in an October ABC town hall said without explanation on electric vehicles: “We’re not investing. We’re not doing any of the research.”
The former vice president said electrification efforts would save billions of gallons of oil and help create 1 million auto industry jobs even though electric vehicles require fewer parts and workers to make them. The federal government will purchase American-made electric vehicles, he said, though U.S. electric-vehicle sales in 2019 accounted for less than 5% of the total.
Detroit’s three automakers posted robust earnings for the third quarter, citing strong retail demand and pricing for trucks and SUVs. Under a tentative agreement GM has made with Canadian labor union Unifor, it would reverse course and return truck manufacturing to its Oshawa plant in Ontario.
“Right now you look at the price of oil and gas, and you do a cost-benefit analysis of these vehicles because of the advancements that have been made in these vehicles,” the Detroit chamber’s Stevens said. “You’re getting remarkable mileage on vehicles that traditionally did not. These are the market forces at play right now.”
Biden has said he would increase incentives for purchasing electric vehicles to increase consumer adoption, including a program he has mentioned that is reminiscent of a $3 billion Obama administration initiative known as “cash for clunkers” that helped more than 690,000 people buy a new car in 2009 with government rebates of up to $4,500. The program, he has said, would give Americans an incentive to buy more fuel-efficient vehicles.
But those plans could be tempered if the Republicans maintain control of the Senate, said Kristin Dziczek, vice president of industry, labor and economics for the Center for Automotive Research in Ann Arbor: “Anything there may be moderated by reaching bipartisan compromise on spending.”
The same is true for infrastructure investment. Biden has said he would deploy 500,000 charging stations by 2030, though even more will be needed for widespread adoption, Stevens said.
Biden has expressed a willingness to rejoin the Paris Climate Accords that would require the United States to be net-zero in carbon emissions by 2050. He may have more control over how to proceed with fuel-economy standards that Trump has rolled back from stricter regulations implemented under Obama and that have divided the auto industry.
The former vice president has suggested he would withdraw Trump’s challenge to California’s efforts to limit greenhouse gases, which Ford has supported. Meanwhile, GM and FCA have sided with the Trump administration, which called for a single national standard.
Stricter regulations could prove costly. A federal Court of Appeals in August overturned Trump’s delay in the more-than-double increase in penalties for automakers that do not meet fuel-economy standards. If that decision is applied to the 2019 model year, FCA says it could cost it up to almost $583 million.
But the challenges to the Trump rollbacks would take years to play out in the courts, Dziczek said: “Ending that will provide some more certainty for the auto industry.”
Likewise, Dziczek expected Biden will take a more predictable, strategic approach to tariffs and trade compared with Trump’s tactical efforts to use tariffs — or the threat of them — to pressure foreign nations into signing deals.
“If you were using tariffs as a way to protect the domestic industry and allow it to grow, you need to provide some long-term signals,” she said. “Investing in steel capacity and automotive capacity costs billions of dollars. These are long-term investments that last a long time and will be less affected by tariffs that are only for six months or eight months.”
Efforts to re-engage in multinational discussions, such as through the World Trade Organization and the Trans Pacific Partnership that Trump rebuffed, could be possible. Central to those engagements, Stevens said, would be bringing back manufacturing from other countries. Biden has suggested providing a 10% tax credit for certain investments that spur domestic manufacturing jobs but also a 10% “offshoring penalty tax” on the corporate tax rate for profits U.S. companies make on goods made overseas and sold here.
Those, too, however, would be subject to scrutiny in a new Congress that is on track to be more evenly divided between the Republicans and Democrats than the one it would replace come January.
Biden has promised to “stand up to China’s trade abuse,” implement “aggressive” trade enforcement actions against the Middle Kingdom and protect American intellectual property. That could lead to more auto-industry production in North America, particularly of batteries used in vehicles, noted Patrick Anderson, CEO of the East Lansing-based Anderson Economic Group LLC.
“We noted this in February when we called coronavirus a crisis that electric-car batteries and lithium and other rare-earth materials that have been sourced in China have become a high-risk commodity for auto manufacturers and supplies,” he said.
The “Made in America” emphasis is a similar message that had been touted by Trump, but with a different approach.
“What this election provided is a negative vote on the referendum for Donald Trump, but a cautiously positive vote in favor of a pro-business, modestly conservative approach to regulation and taxation,” Anderson said. “Americans voted to increase the number of Republicans in Congress and probably to keep Republican control of the Senate. Biden was not elected based on enthusiasm for aggressive climate-change policies.”
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