China Isn't Imposing Tariffs On U.S. Autos Just Yet

China is delaying auto tariffs, Germans are asking for a higher CO2 tax to aid the environment, and big investments from GM. All this and more in The Morning Shift for Monday, December 16, 2019.

On Sunday, December 15, the United States agreed to postpone the tariff hike on Chinese goods that came to a total of about $160 billion as well as halving the tariffs that are already in place, the Associated Press reports. As a result, China has also decided to postpone the punitive taxes it planned to impose on U.S. auto imports.

Here's a little context from the article:

Beijing had planned to impose 25% duties on American-made autos on Sunday, which would have raised the total charge to 40%. Hardest hit were Germany's BMW AG and Daimler AG's Mercedes unit, which ship U.S.-made SUVs and other cars to China.

Other goods were targeted for 10% and 5% penalties.

On top of that, China also made two commitments: it will buy $40 billion in American farm products over the next two years, and it will end its practice of pressuring companies to give them technology on the grounds of having better market access.

Tthat's a pretty good sign. It implies that there might just be a chance for both the United States and China to find some sort of common ground and negotiate a more promising trade deal as opposed to consistently duking it out with each other, and driving up the cost of cars for the rest of us. There are no guarantees that things will get exceptionally better as a result of this postponement, but it at least suggests a willingness to figure things out.

What do you do when your attempts to lower carbon emissions aren't working? If you're German, you ask your government to raise the CO2 taxes to a level that might actually affect some change.

From Bloomberg:

Lawmakers from Germany's 16 states reached preliminary agreement over the weekend to more than double a new tax on carbon dioxide emissions from transport and heating, according to a document seen by Bloomberg News. Consumers in Europe's biggest economy will now face a 25 euros ($27.85) a ton surcharge rather than the 10 euros a ton initially proposed. The pollution premium will rise to 55 euros by 2025, a jump of almost three-fifths from the original proposal.

Basically, raising taxes is intended to encourage people to seek out more eco-friendly options for, say, heating their home or powering their cars. It's definitely not ideal for two of Germany's most powerful lobbies—but it just goes to show exactly how desperate people are getting. Even those big governmental powers can't quite turn the tide of change.

Here's more:

The so-called upstream charges for pollution certificates will be paid by sellers of oil and gas, who can pass the extra costs on to customers. Merkel said the levy was the "centerpiece" of her government's move to get Germany back on track to cut emissions. Pollution from transport and heating accounts for about a third of all German emissions and have barely declined this decade.

The government will use additional revenue from the updated charges to cut the cost of retail power that has swelled because of clean-energy surcharges, according to the document. Germany will also cut the value-added tax on rail travel from 2020 and increase tax rebates for commuters living long distances from their workplace.

Essentially, this all just boils down to forcing peoples' hands when it comes to making travel choices. You still have the opportunity to drive places, but with cheaper rail tax and higher gas tax, it makes more sense to commute via train.

As anyone who has ever earned a paycheck knows, though, taxes suck, and protests like the Yellow Vest movement in France have shown just how desperate people can get when they're being forced to pay more money for basic living expenses.

We've said it before and we'll say it again: people love trucks. So much so that GM is preparing to invest a whopping $1.5 billion into its next-generation Chevrolet Colorado and GMC Canyon.

Here's how the money will be allocated, as per the Detroit News:

A $1 billion investment at GM's Wentzville, Missouri, plant where the Chevrolet Colorado and GMC Canyon are built will retain about 4,000 jobs. Another $500 million will be spent on supplier tooling for the new trucks...

To prepare for the introductions, the plant's paint shop, body shop and general assembly areas will all receive upgrades, including the installation of new machines, conveyors, controls and tooling.

If you've got a strategy that works, stick to it. GM has sold more than 700,000 models of both the Canyon and the Colorado since the trucks were reintroduced in 2013. Trucks are, in fact, GM's most dependable sector. Why not make sure your products are as solid as they can be?

And that's just one aspect of change coming from GM. Here's more that was included on the list:

$3 billion into Detroit-Hamtramck Assembly for electric trucks and vans; $200 million at Warren Technical Center's pre-production operations; and $1 billion into Lansing Delta Township and Spring Hill Assembly in Tennessee for a next-generation midsize SUV.

Get ready to see the GM name a little more frequently.

PSA and FCA are about to embark on one of the biggest mergers in years. One of the biggest sticking points there, though, was the country of France itself. From Auto News:

The French state, which holds roughly 12 percent in PSA and has board representation, is supporting a binding memorandum of understanding that could be approved this week, said the people, who asked not to be named because the deliberations are private. PSA directors are scheduled to meet Tuesday to review the terms, which reflect minor changes to an accord unveiled Oct. 31, the people said.

The whole goal here is to join two mid-sized automakers to create a powerhouse conglomerate designed to rival the Volkswagen Group. It'll enable both manufacturers to benefit from one another in terms of research and development, which is essential in the era of EVs and autonomy.

That said, the French aren't quite ready to ease up on the reins just yet. From Reuters:

French shareholders in the planned merger of PSA and Fiat Chrysler are seeking reassurances that they will retain a numerical advantage on a combined board if CEO Carlos Tavares leaves, two sources close to PSA said.

Basically, both PSA and FCA will hold five seats in this new conglomerate. But a special eleventh seat was made just for Tavares, thus giving PSA a slight advantage here. But if Tavares leaves, PSA wants reassurance that it will remain ever so slightly the top dog.

The Wall Street Journal has a pretty fascinating scoop this morning: Renault's chief at the time, Thierry Bolloré, demanded an independent audit of Nissan's investigation of chairman Carlos Ghosn back in October. He had a feeling that the probe was "tainted by conflicts of interest." Nissan refused, claiming that Bolloré was sympathetic to Ghosn. Three days later, Bolloré lost his job.

From the article:

"To my astonishment, none of these problems has been raised to my attention by Nissan's management or governance bodies," Mr. Bolloré said in the letter, which was viewed by the Journal. He said he learned of the complaints "only through an article in The Wall Street Journal."

He called for "the formal launch of an external, fully independent audit" of the Nissan investigation "and more broadly of any conflict of interest.

[...]

In a letter of response to Mr. Bolloré, excerpts of which were viewed by the Journal, Nissan said it would not "investigate the investigation." It said the former Renault chief's letter included inaccurate information and "read like allegations that one would expect to be made by a representative of Mr. Ghosn."

There's plenty more juicy drama in the article itself, so make sure you check out the frankly impressive back-and-forth that went on between Bolloré and Nissan.

Basically, this whole situation shows just how much internal fighting there's been between Renault and Nissan. There was a pretty massive lack of transparency between the two companies that left everyone feeling like they'd gotten the short end of the stick.

And a few years later the American nation was born, which means that we are currently not dealing with Brexit in a personal fashion.

A CO2 tax probably isn't going to solve all of the world's emissions problems, but some folk firmly believe that it could be a pretty effective way to encourage people to make choices that are better for the environment. But will taxes help? Or is there a better way to go about this?