On Thursday, March 22^nd, Ryan Olson and I attended the Canadian Auto Innovation Summit in Detroit.  The event was a way for Canadian universities and research organizations to showcase their expertise, talent, and strategic partnerships with industry, as well as show the ongoing support and commitment from the Canadian government to further development in the high-tech automotive sector.  With the auto industry moving to the next frontier with autonomous vehicles, the importance of a solid working relationship between American and Canadian companies is more important than ever.  With NAFTA negotiations being the hot topic today, Douglas George, Consul General of Canada in Detroit, focused on the importance of past working relationships between American and Canadian organizations and highlighted the importance of maintaining these relationships moving forward.  Sandy K. Baruah, President and CEO of the Detroit Regional Chamber, echoed the Consul General’s message by furthering the point that regardless of where NAFTA ends up, it is up to the private sector to ensure the mutually beneficial relationship between the U.S. and Canada continues to thrive.

Many Canadian Universities spoke of their research in the realm of autonomous vehicles and their willingness to share their data to help drive innovation.  The University of Waterloo is currently the only University able to conduct on road testing and has shown great strides with their research.  Sharing data and partnering with research institutions is the type of willingness that will ensure manufacturers produce the highest caliber and safest autonomous vehicles for the public.  The recent news of the Uber vehicle striking and killing a pedestrian inevitably arose.  Dr. Ziad Kobti from the University of Windsor brought up the great point that we are expecting these vehicles to drive better than humans because as we all know; pedestrians are struck by vehicles every day.  Unfortunate accidents and temporary setbacks aside, research in the autonomous vehicle space will likely continue with the intention and goal to produce smarter and safer vehicles.  Approximately 30,000 people were killed in automobile accidents last year in North America alone; and autonomous vehicles have the potential to drastically minimize this number and save thousands of lives each year.

Raed Kadri of the Ontario Centres of Excellence dove deep into the Ontario government’s robust drive to invest in the auto industry.  In early November of 2017, the Ontario government launched the Autonomous Vehicle Innovation Network (AVIN) with an investment of $80 million over five years.  AVIN acts as a focal point to help coordinate industry, academia, research organizations and governments, as well as other interested stakeholders in the connected and autonomous vehicle technology space. AVIN also provides programs that support the development of leading edge technologies by small and medium sized enterprises and post-secondary institutions in Ontario.  This cross investment of the Ontario government and industry shows the progress being made to develop the best connected and autonomous vehicles for consumers.  Mr. Kadri further outlined the work of Ontario Centres of Excellence in connecting small and medium sized automotive entities with large suppliers and manufacturers to promote and sustain organic economic growth.

This type of cooperation incentivizes cross-border relationships between companies and governments alike for the growth of an ever expanding high-tech auto industry.  If you have any questions or would like to discuss how your company could benefit from these cross border investments, feel free to reach out to Dawda anytime.

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Beijing air pollution

Pollution and congestion in Delhi, London and Beijing may have an impact on worldwide automobile demand and therefore production right here in Detroit.

London has been limiting congestion in its center district for several years, charging people a hefty £11.50 per day (the equivalent of $16.31) to drive in the central district.

As it is, London has very low car ownership. Its population of 8 million people owns 2.6 million cars, with 70% of households in London not owning a car. In addition, the average age of obtaining a license has been inching up. At this point, less than 30% of London residents between the age of 17 and 20 have a driver’s license.

Taxi usage, shared car services and schemes, Uber usage and of course the London tube all provide alternatives to private cars.

Delhi

India’s pollution problem is actually greater than China’s. Of the 20 cities in the world plagued with the highest air pollution, 13 of them are Indian cities.

Delhi is often cited as the world’s most polluted city and their most polluted days are typically in the winter, as residents light fires to hear their homes.

Just this past week, Delhi enacted “even and odd” days; one could only drive a car with an even numbered license plate on even days and vice versa. Schools were also closed, so that the empty school buses could be used to supplement the increased need for public transportation. In addition, trash burning was abolished. Large diesel vehicles were also prohibited from entering the city center.

There are mixed reports as to the success of the partial car bans. Some authorities say that it reduced air pollution by 13%; others say its ameliorative effect was as high as 50%. What is certain is there was a reduction.

Not all drivers were compelled to follow the ban: women drivers, high level politicians and judges were exempt. In addition, motorcycle riders continued to drive apace. Motorcycles far outnumber cars in Delhi, although their air pollution output is smaller as well.

India’s testing season in its schools is in March. There will be much political pressure to keep schools open and allow everybody to get to school as they approach testing days.

Indian authorities and municipal leaders are beginning to investigate investing in public transportation infrastructure and utilizing reduced traffic days in the future.

Beijing

Beijing is another of the most polluted cities on the planet. This fall, following a week of incredibly heavy fog, Chinese authorities closed schools and resorted to every other day usage of cars. They enacted “even and odd” days,  just like Delhi did, where driving privileges were linked to the final number on your license plate. Beijing may enact more of these days. There is also talk of increasing bus usage or even creating other public transportation infrastructure.

Cars are just part of the Chinese air pollution problems. Their coal generated electricity is also concerned a rather “dirty” energy source.

Despite the one-way nature of information in the Chinese government, there appears to be a growing awareness of the dangers of air pollution among the middle class. They are also receiving information from expatriates in the country as well as non-Chinese business people and tourists, who complain bitterly about the pollution when visiting. Some American and European companies report that their employees are refusing to bring their children to China for work assignments there, due to health considerations of the regularly high air pollution.

The complexities of pollution and congestion may change buying habits and usage habits throughout the world, which could reverberate back in Detroit.

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Japanese airbag crisis not yet over? As Americans are being strongly urged to check to see if they have Takata airbags, Takata is still having problems. In December a Takata airbag exploded in a scrapyard in Gifu prefecture. Nobody was hurt. The airbag was in a 2003 Toyota WiLL Cypha, a vehicle not currently being recalled. Furthermore, at least in America, the public was told the cars under recall were the only dangerous ones, and the highest risk were cars in warmer climates.This latest explosion seems to defy the conventional wisdom about the Takata debacle.

Russia’s Lada in trouble? The ubiquitous Lada, the cheaply made Soviet-era car that still dominates the Russian roads (and can be seen in many other locales, just not America), is no longer the top seller in Russia. The Lada Granta, a subcompact car, was outsold by the Kia Rio towards the end of 2014. Russia blames the Lada’s downturn on supplier problems. The supply problem occurred when the plant shut down, presumably because there was a decrease in demand. The iconic Granta will likely overtake Kia again shortly.

Ferrari spinoff the latest in auto manufacturer recombinations? The merger of Fiat and its Chrysler unit may not be the end of the news from Milan. Quickly after the merger was announced, Sergio Marchionne, who headed that merger, announced that he planned to sell off the vaunted Ferrari brand. Selling off the Ferrari component of the business reduces the corporate debt and positions Fiat Chrysler to be an attractive partner for future joint operating agreements. Other car manufacturers that could be future partners with Fiat Chrysler include Volkswagen, Ford and General Motors. In addition, talks could be possible with Mazda or Suzuki. Ferrari, meanwhile, is considering moving its corporate headquarters from Milan to London, for tax purposes, while maintaining its plant in Maranello, Italy.

Tesla vs. the Germany luxury automakers: The German luxury auto market has  a couple of challenges on its hand. One is the sluggish European economy. But the automakers are also keeping a watchful eye on Tesla’s progress. Audi will be debuting an electric car at the Detroit Auto Show. Audi will also be showcasing  a hybrid, known as the Audi Q7 . Not yet at the Auto Show, but in the works are hybrid and alternative-powered vehicles by BMW and Mercedes. These could be displayed as early as 2017. And Porsche, which already offers some hybrids, is also looking to develop a plug-in. As oil prices dip, it will be interesting to see if Tesla maintains public fascination or if that dips as well.

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OSHA has new record keeping changes that will be enacted January 1, 2015.

In the past, only certain industries had to maintain OSHA 300 Logs. These tended to be industries that had a history of workplace injuries, due to the nature of the work. These included manufacturing and shipping companies, as well as high injury industries like construction work.

There are many industries which in the past have been exempt from maintaining the OSHA 300 logs. The exempt list included many retail establishments, financial institutions and businesses that focused exclusively in technological and clerical work.

However, beginning in January, many new businesses have been added to those companies that must maintain the logs. Some of these new businesses include:

• Automobile dealers
• Automobile parts stores and tire dealers
• Specialty food stores
• Liquor/beer/wine stores
• Ambulatory health care facilities

According to OSHA, employers have to report the following events: work-related fatalities, work-related in-patient hospitalizations of one or more employees or any loss of limbs or eyes.

In-patient hospitalizations that are the result of a car accident (in most cases), or that occur on public transportation are exempt from reportings. In addition, in-patient hospitalizations for the purposes of diagnostic testing are not required to be reported.

All of these new businesses that have to turn in logs will become part of the OSHA data collection. If it turns out that more injuries occur at these establishments than was previously thought, this will certainly trigger future oversight on OSHA’s part.

Some action items to take now:

• It is important that all companies avail themselves of the information on the OSHA.gov website about compliance and recordkeeping.
• There needs to be a designated person within each company who is in charge of all OSHA recordkeeping. Although the OSHA logs are not onerous, haphazard attention will surely be a recipe for a disaster.
• Be sure to keep all physical copies of records which require an executive signature. Having an electronic copy without  a signature will not be sufficient.

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Michigan’s auto suppliers have provided nearly $5 billion in new investment and announced the creation of more than 28,000 jobs in the past four years, according to the Center for Automotive Research.

And it’s happening with even less suppliers around, largely because of industry consolidation during the economic downturn five years ago, the data shows.

Auto supplier impact, by the numbers:

790: The total number of auto suppliers based in Michigan, down from 886 just five years ago.

109,800: The number of employees tied to those companies.

$69,000: The average annual salary of those employees.

$13 million: The total investment by one auto supplier, Japan-based Aisin, for its new North American headquarters in Northville that opened July 14.

$7.5 billion: The practical effect of those wages on other sectors of Michigan’s economy.

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Are you shopping for a new vehicle or looking for service at local dealerships this summer? There may be more employees there ready to help you, according to the organization representing more than 32,500 auto franchises nationwide.

The National Automobile Dealers Association (NADA)  recently  reported a surge of employees in 2013 that topped 1 million for the first time since the start of the Great Recession in 2008. The average dealership had 57 employees in 2013, up from 55 in 2012, and had an annual $3 million payroll, reflecting a 3 percent spike. Total payroll for all dealerships approached $54 billion for the year.

As one would expect, the increase in employees is correlated to revenue, according to the organization’s annual financial profile dubbed NADA Data 2014.

The average U.S. dealership made more than $923,000 in net pretax profits in 2013, a ten percent increase from 2012. Dealers are banking on that trend continuing as NADA Chief Economist Steven Szakaly projects a sales increase of 800,000 in total light vehicles this year, the report states.

The surge in employees is not just for showrooms, either. Maintenance services and parts demonstrated a five percent increase in sales, and total service and parts profits rose by seven percent last year, according to the report.  Specific employee data for Michigan dealerships was not available in the report, but NADA estimated that Michigan’s 33,135 new-car dealerships employed 52 people, on average. Other notable data about Michigan in the report:

• More than $15.1 million in total auto sales were reported statewide, which ranked 15^th in the nation.
• NADA found that 637 new-vehicle dealerships opened in Michigan during 2013, the seventh-highest amount nationwide.
• The average annual payroll for Michigan dealerships in 2013 was $2.84 million.
• The average weekly earnings of new-car dealership employees in Michigan were $1,064. That ranked 11^th nationwide, and was higher than Illinois ($1,017), Ohio ($929) and Indiana ($906).
• There are more than 8.1 million vehicles in operation in Michigan (3,783,589 passenger cars; 4,339,618 light trucks).

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Auto makers sold 1.71 million passenger vehicles in March of 2014. The sales of cars are primarily to first time buyers. Foreign brands continue to have robust sales; GM and its Chinese joint ventures sold 313,000 vehicles in March and Ford sold 104,000 vehicles. China eclipses the US in total auto sales at this point with China selling 22 million vehicles, compared to the 15.6 million vehicles sold in the U.S.

At the same time, China has been experiencing worsening air quality issues and crippling smog. Although the most polluted cities in the world in terms of air pollution are actually in India,

Hangzhou, the capital of the relatively prosperous Chinese province of Zhejiang, enacted new laws that limited the numbers of cars that could be sold. The Hangzhou restrictions began on March 26^th. There was a run on cars in the city up until that time, as people wanted to complete their purchases prior to the restriction becoming law.

China’s booming car sales could take a hit this year as the government steps up its battle against pollution.

Hangzhou isn’t the only city limiting car purchases and registrations. Auto sales in China’s largest cities could be limited to 300,000, while some smaller cities could have caps closer to 25,000. On top of that, a group of cities are even banning some cars from the streets on certain days to lighten traffic and reduce pollution.

Automakers are strategizing how to work around these new edicts. The auto companies may move dealerships and cars to cities that have the least restrictive sales caps or begin looking at boosting sales outside of China for the foreseeable future.

China’s smog is also hampering its effort to entice foreigners to work and invest in the country. Non-native Chinese who work in Beijing and other northern Chinese locations perceive the smog and air pollution as dangerous to their health. Business leaders report that convincing foreign executives to live in northern China is becoming problematic, according to a poll conducted by the American Chamber of Commerce in Beijing. Northern China has more factories and relies on coal burning plants to provide heat during the long and harsh winter. In contrast, non-Chinese don’t complain in the same way about Shanghai’s air quality, as Shanghai is in the south.

Beijing’s official air quality index (AQI), which measures airborne pollutants including particulate matter and sulphur dioxide, routinely exceeds 300, and sometimes hits levels higher than 500. This past fall, Harbin, a city of 11 million had multiple “hazardous air days”, during which schools and factories were closed and the use of cars was forbidden.

Beijing has only 500 inspectors who are empowered to investigate complaints about pollution and enforce regulations. The inspectors are handling 5,000-6,000 cases a month.

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