United States: Foley Weekly Automotive Report

This report helps automotive suppliers inform their legal and operational decisions to help address challenges and opportunities. Contact your Foley relationship partner, or John R. Trentacosta or Ann Marie Uetz, to follow up.

Key Developments

• U.S. new light vehicle sales in July fell to an estimated SAAR of 14.5 million to 14.8 million units, failing to reach the 15 million mark for the first time in 2021. 
• Full-year 2021 U.S. new light vehicle sales  are forecast to reach 16.5 million,  according to LMC Automotive and the National Automobile Dealers Association.
• U.S. fleet sales  reached an estimated 1.09 million units for January - July, 40% lower than the same period in 2019 and 6% higher compared to the same period in 2020.
• GM  extended downtime at three North American pickup truck plants in Michigan, Indiana and  Mexico due to the chip shortage.
• A COVID-19 Task Force comprised of the UAW, Ford, General Motors and Stellantis announced the reinstatement of mask requirements at all U.S. facilities beginning August 4, regardless of vaccination status.
• The New York International Auto Show  has been canceled due to concern over rising COVID-19 cases; it had been scheduled for August 20-29.
• Customs compliance is expected to merit increased focus for automotive companies acting as the importer of record, according to a recent article by Foley & Lardner attorneys Gregory Husisian and Jenlain Scott in IndustryWeek.
• Qualcomm extended a $4.6 billion counteroffer to acquire advanced driver assistance supplier Veoneer,  exceeding an offer announced by Magna; this story continues to evolve.
• Contract electronics manufacturer Foxconn  will acquire a semiconductor manufacturing facility from Macronix, in support of plans for expansion into the auto industry.
• The Environmental Protection Agency proposed new rules that would require automakers to achieve a fleetwide average fuel-efficiency equivalent of 52 miles per gallon by the 2026 model year.
• Electric vehicles and low emissions technology:
  
  
  • President Biden announced a goal - but not a mandate - that 50% of all new cars and trucks sold in the U.S. be fully electric or hybrids by 2030.
  • IHS Markit commented that "regulation is quickly becoming a primary driver of electrification, enabled by automakers' technology development, as well as focus on reducing costs."
  • SK Innovation intends to separate its battery business and oil exploration and production operations into two wholly owned subsidiaries by the fourth quarter.

Market Trends and Regulatory

• U.S. new light vehicle sales in July reached approximately 1.28 million units, for a seasonally adjusted annualized rate of sales estimated at 14.5 million to 14.75 million units.  July's results fell short of expectations for a SAAR of 15 million to 15.2 million units. Total sales in July were largely flat compared to July of 2020, with the sales pace reflecting historically low inventory levels resulting from the chip shortage. Following July's results, LMC Automotive revised its full-year U.S. sales forecast to 16.5 million units, from a previous forecast of 16.9 million units.
• The $1 trillion bipartisan infrastructure bill is currently still under debate in the U.S. Senate and could potentially be positioned for passage; however, the legislation is expected to experience significant challenges from Democrats in the House.
• The majority of U.S. counties are experiencing "high" or "substantial" levels of coronavirus spread, resulting in the recommendation to use masks indoors regardless of vaccine status, based on recently revised CDC guidance. Michigan's seven-day moving average for daily cases was 938 as of August 6, reflecting an increase of approximately 64% from the previous seven-day average.

OEMs/Suppliers

• Production impact of the semiconductor shortage - GM added another week of downtime affecting pickup truck production at Flint Assembly plant in Michigan, Ft. Wayne Assembly plant in Indiana  and Silao Assembly plant in Mexico; the three plants are now scheduled to resume production August 16.
  
  
  • Unnamed sources in The Detroit Free Press estimate that as of last week, GM had over 10,000 SUVs parked and waiting for chips to complete final assembly; the automaker has not confirmed these estimates.
• GM  and Stellantis raised full-year earnings outlooks after reporting profitable second quarter financials: GM  reported a second quarter earnings profit of $2.8 billion, and raised its full-year guidance; the automaker produced 200,000 fewer vehicles during Q2 2021 compared to Q2 2019, but earnings were boosted by strong demand and higher transaction prices. Stellantis lost approximately 20% of its planned production, or 700,000 units, in the first half of the year due to the chip shortage. The automaker raised its full-year profit guidance based on strong H1 results, but it expects the effects of the chip shortage, as well as higher raw material prices, to persist in the second half of the year.
• Continental  reduced its full-year production forecast  to an increase of 8-10%, down from a previous forecast of 9-12%, due to the impact of the ongoing chip shortage. The supplier also noted that it expects market developments "to be characterized by high volatility in the coming months." Adient and Lear lowered full-year earnings guidance  in their most recent earnings results, due to the impact of supply chain disruptions.
  
  
• Listening sessions are a key requirement of companies' approach to diversity, equity and inclusion, according to representatives from Magna, Continental, Toyota and Ford.
• Lear Corp. will supply seats for GM electric vehicles by creating a just-in-time manufacturing facility at the former location of the Cadillac Stamping Plant in Detroit.
  
  
• Bridgestone  announced the acquisition of fleet tracking platform Azuga for $391 million in an effort to strengthen its capabilities in technology and logistics services.
• Firestone  began construction on a $51 million project focused on producing air suspension systems for EVs at its plant in Williamsburg, Kentucky. The expansion will add 68,000 square feet of manufacturing space and is due to be completed by the end of next year.

Connected/Autonomous Vehicles and Mobility Services

• Silicon Valley autonomous truck startup Plus completed a test of its technology on China's Wufengshan highway without a safety driver on board.

Electric Vehicles and Low Emissions Technology

• Nikola reduced its production forecast due to supply shortages, including semiconductors and electric vehicle batteries. The company now estimates it will manufacture between 25 and 50 hydrogen-powered and electric trucks in the fourth quarter, from a previous goal of 50 to 100 trucks.
• GM intends to add two new electric vehicles to support its commercial vehicle fleet, a full-size battery-electric Chevrolet cargo van and a medium-duty truck for service and utility vehicles that incorporates both Ultium battery technology and Hydrotec hydrogen fuel cells.
• Tesla will require employees at its Nevada plant to wear masks beginning this week, regardless of vaccination status.