Automotive News - January 30, 2023 - 28

28 * January 30, 2023
LITHIA
Analyst: Strategic merits to
exposure in this market
continued from Page 4
support for after-sales and used-vehicle operations.
" Other
than the heavy skew of the brand
portfolio to premium, there is nothing that I
would identify as being unique or special
about Jardine but it is still a solid foundation
on which to build, " Young wrote. " You could
argue that by buying a business in this condition
you're not paying a premium for recent
investments and possibly success of the previous
owners' efforts. In addition there is
nothing that's wrong about the business so
there's no remedial work required. "
Stephens Inc. analyst Daniel Imbro said in
a note to investors last week that Lithia's pursuit
of a U.K. asset " is not surprising, following
headlines of the company's interest in
Pendragon last year. " Imbro wrote that he
thought reaction to the acquisition could be
potentially negative, " but we believe there
are strategic merits to exposure in that market. "
Lithia,
of Medford, Ore., ranks No. 2 on
the most recent Automotive News list of the
top 150 dealership groups based in the U.S.,
retailing 260,738 new vehicles in 2021.
Through the third quarter of last year, Lithia
is tracking ahead of rival AutoNation Inc.
for new-vehicle sales in 2022. AutoNation
has long held the No. 1 spot in the annual
ranking. a
CDK
Employee head count
'where we want it'
continued from Page 4
MacDonald noted that the moves followed
his statements after taking over as CEO six
months ago that he would work to enhance efficiencies
and increase innovation after Brookfield
closed on its $8.3 billion deal to buy CDK.
" When we took over the company, we told
the employee base one of the key priorities
would be getting fit and focused, and focused
on what we want to do and be really good at
that and deprioritize [other] things and get a
little bit fitter, " MacDonald said.
No plans for more layoffs
CDK employs about 6,000 people. Head
count is now " where we want it to be, " MacDonald
said, and there are no plans for another
companywide layoff at this point.
MacDonald, who led CDK from January
2016 through November 2018, also outlined
the technology advances the company
planned to promote at the NADA Show.
The focus, he said, was on modernizing existing
products and launching innovative offerings.
That included a formal debut of
CDK's Neuron Performance View reporting
tool, which the company pitches as providing
intelligent insight through advanced analytics,
artificial intelligence and near-real-time
updates. CDK also demonstrated its CDK Intelligent
Connect product, a conversational
AI virtual assistant that will launch in the
spring and is intended to help dealers, in
part, better connect with consumers.
Security tool
CDK also highlighted a new virtual chief information
security officer product. That tool
is designed to help connect a trained security
professional to dealership clients to help
them develop cybersecurity strategies that
comply with the Federal Trade Commission's
updated Safeguards Rule to keep customer
information secure.
The FTC in November extended its compliance
deadline for Safeguards Rule changes to
June 9 of this year. a
Layoffs, funding delays at Solera
John Huetter
john.huetter@crain.com
Solera Auto Finance, which launched in 2022 to
serve as a " captive-like " finance option for dealerships
and consumers and went on to experience explosive
growth, has laid off dealership sales representatives
and stalled funding loans purchased from
dealerships, two recently dismissed area sales managers
told Automotive News.
The two said they were summoned to a companywide
call Jan. 12. They requested anonymity, one
citing fear of retaliation. The company was having
issues funding loans sent in by dealerships; one said
he thought the call would reveal a solution.
Instead, they were fired effective immediately. The
layoffs affected most of a 39-person sales force. Other
managers announced being fired via LinkedIn.
" In response to the current challenging economic
conditions, Solera Auto Finance made the difficult
decision to restructure on Jan. 12, " Amy Casas,
spokesperson for parent company Solera, wrote in
an email Tuesday, Jan. 24.
The company was aggressive in seeking business,
one of the former employees said. It had reached a
rate of $25 million a month in loans, " and that's
when they hit the brakes on everything, " he said.
The first manager said funding began to fall behind
last fall. A general manager at a southern U.S.
independent dealership, who asked not to be identified,
said the first loan he sent to Solera flopped
around then.
He said the company agreed in October to buy a
loan for a BMW 4 Series. It was " 100 percent good to
go, " he said, then Solera said it wouldn't fund the
deal. Casas said any deal returned was in accordance
with the agreement between Solera Auto Finance
and the individual dealer.
The first manager said the company sent dealers
their funding for October's deals in November,
and planned to cover November loans in December,
but " they never got around to that. " Casas said
the company continues to fund deals.
The second manager said representatives were
barred from asking when their retailers would reChip
shortage improving but won't end soon
Even as the microchip supply improves, the
auto industry remains at least several months
away from the semiconductor shortage ending,
according to AutoForecast Solutions.
" Getting the capacity to supply automotive
production takes time, which means we're still
looking at slowed production for months to
come, " said Sam Fiorani, AFS vice president of
global vehicle forecasting.
Automakers are expected to eliminate about
2.8 million vehicles from their production
schedules this year because of the microchip
shortage, according to AFS, which has moniceive
the money owed. Casas said they always had
contact with underwriters and funding staff.
And yet, the second former manager said " we were
still instructed to push for contracts. " Casas said the
lender " adapted its underwriting standards to the
current macroeconomic conditions. "
The company told representatives to tell dealers
funding would come, the second manager said. But it
would wait 30 to 60 days before sending it. In some
cases, the company had even collected the first or
even second payment without reimbursing the dealer,
the first manager said. Casas said this isn't unusual.
Once delays stretched beyond the three weeks
the company was promising, the former employees
said they began to warn dealerships. Casas
said employees were never told to say funding
would come in three weeks.
The owner of independent dealerships said a November
Indiana deal failed to receive funding until
January - long enough that he had to transmit the
title to Solera to stay compliant with state law. Another
reported a similar lag on a Florida loan. n
2023 YEAR TO DATE
tored the impact of the supply crunch since its
early stages in 2021. Through last week, automakers
had already cut about 304,600 units
from production plans around the globe.
That figure includes about 15,900 vehicles
that were cut at European factories last week.
Year-to-date totals in every other region were
unchanged from a week earlier.
The breakdown
Number of vehicles
eliminated from
production schedule
Rest of Asia*
North America*
Europe
South America*
China*
Middle East/Africa*
Total
*Unchanged from week prior
Source: AutoForecast Solutions
2023 PROJECTED
184,300 721,600
43,900
912,000
42,300 814,800
16,400 138,100
16,200 190,600
1,500
21,900
304,600 2,798,900
MANCHIN
EV tax credit transition
period will be complicated
continued from Page 3
have given consumers a $4,500 bonus for purchasing
union-made EVs.
" What was put in place on this piece was complicated, "
Stabenow said of the EV battery sourcing
rules. " It doesn't work for several years for American
companies. It doesn't stop China. It doesn't
stop anybody else from coming into our market ...
but it stops our companies from fully benefiting. "
Delayed guidance
Treasury was required to issue proposed guidance
on the sourcing rules by Dec. 31 but missed
the statutory deadline. Instead, the department is
planning to issue the guidance in March.
After it is issued, the $7,500 tax credit for new
EVs, known as 30D, will be parceled out in two
halves for qualifying vehicles and buyers. Half is
based on meeting escalating requirements for
battery components to come from North America.
The other half is based on critical minerals
coming from the U.S. or free-trade partners.
" Bottom line, it is not unreasonable, " Stabenow
said of Treasury's delay. " They have been given, I
believe, an incredibly complicated task to try to
figure out how this consumer credit will work. "
Treasury's delay has potentially opened up
more vehicles to qualify for the full credit in the
interim. Manchin, however, said allowing vehicles
to get the credit without meeting the sourcing
rules goes against the law's congressional intent.
Treasury had no comment in response to Manchin's
bill.
Abigail Wulf, vice president of critical minerals
strategy at SAFE, previously known as Securing
America's Future Energy, was quick to remind
policy spectators that the stringent sourcing requirements
are what got Manchin to reconsider
his prior opposition to EV tax credits in the first
place and said his latest move is " not surprising. "
" Ensuring critical mineral supply chains for EVs
are not overly concentrated or reliant upon strateTiming
of battery
sourcing rules
credit once the EV battery sourcing rules take effect.
" What we should be doing right now is reducing
The Inflation Reduction Act's tax credit for
new electric vehicles adds increasingly
stringent sourcing requirements for
critical minerals and battery components.
While Sen. Joe Manchin's bill seeks to
require compliance with those provisions
as of Jan. 1, 2023, to qualify for the
credit, here's when they take effect as the
law is currently written.
For critical minerals: Before 2024 and
after Treasury issues proposed guidance
on the required EV battery sourcing, 40%
must be extracted or processed in the
U.S. or in a country where the U.S. has a
free-trade agreement in effect, or from
materials that were recycled in North
America. By 2027, the law requires 80%.
For battery components: Before 2024
and after Treasury issues proposed
guidance, 50% must be made or
assembled in North America. By 2029,
the law requires 100%.
Source: Inflation Reduction Act
gic competitors that do not share our interests or
values is essential for U.S. national security and
economic competitiveness, " she said. " This highlights
the importance of Treasury moving swiftly
to issue clear guidance on the rules to meet the
dual purpose of securing supply chains while not
lagging behind other countries. "
Nearly 40 new models are potentially eligible for
the full tax credit between Jan. 1 and until Treasury
issues the required EV battery sourcing guidance,
according to an IRS list. However, under
Manchin's bill, eligibility would be significantly
limited during that time frame, with very few to
no vehicles likely qualifying for the critical minerals
portion of the credit.
The Alliance for Automotive Innovation, a trade
group that represents the U.S. auto industry, also
has said no vehicles would be eligible for the full
consumer confusion about availability of the tax
credits, not adding to it, " John Bozzella, CEO of
the alliance, said last week during a LinkedIn Live
chat with Automotive News.
'A lot of surprises'
Patrick Anderson, CEO of Anderson Economic
Group, said his consulting firm anticipated the tax
credit would have a negative effect on EV sales
and adjusted its assessment of the number of EVs
that would be sold in 2023 and 2024, citing the
tougher eligibility restrictions and complex rules.
" This tawdry drama about whether the federal
government has to be forced to follow its own law
is going to add to that, " he said. " I would again
warn both buyers and auto dealers against making
any confident assertions about whether customers
can get ... tax credits for EVs. "
Meanwhile, several policy experts said it's unlikely
- though not entirely inconceivable - that
Congress would act on Manchin's bill before
Treasury issues the guidance.
" It seems like it may not go anywhere, but, then
again, over the past year we've had a lot of surprises,
especially when Joe Manchin has been involved
in climate policy, " said Ilaria Mazzocco, a
senior fellow at the Center for Strategic and International
Studies.
Nick Nigro, founder of EV research group Atlas
Public Policy, said he expects there to be " very little
appetite " in this Congress for taking up legislation
on EV incentives.
While Manchin's goal of insourcing essential
supplies for EVs is laudable, he added, the senator's
legislation could introduce " more uncertainty
in an already uncertain period " and potentially
hurt EV adoption in the near term.
" There is going to be a transition period where
some vehicles will be eligible and then they won't
be, or vice versa, " Nigro said.
" That's going to be complicated for consumers
to understand, so the quicker we can get to a period
where consumers can just go to a website and
see all the vehicles that qualify and how much
they qualify for, the better position it will be for the
market. " a
Automotive News - January 30, 2023

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