Automotive News - August 12, 2024 - 28

28 * August 12, 2024
Supplier R&D cuts may slow EV momentum
Kurt Nagl
knagl@crain.com
TRAVERSE CITY, Mich. - Automotive
suppliers are slashing R&D and
engineering budgets in response to intense
cost pressures, but doing so
could come at their own peril - and
that of the industry.
Some of the world's largest, most
tech-savvy parts producers have hit
the brakes on spending in part because
of electric vehicle launch delays
and a dim outlook for returns on investment.
Aptiv
is cutting engineering spending
by up to $100 million this year,
while Magna International targets its
engineering operations for a $200 million
reduction. BorgWarner said it will
cut its previously planned R&D in half,
and Continental is pulling back R&D
dramatically as it evaluates a spinoff of
its automotive group.
The cuts are being made to protect
balance sheets amid less-than-anticipated
demand for EVs in North America,
but they could jeopardize some of
the progress made over the past three
LOSSES
continued from Page 8
The Newark, Calif., automaker said Aug. 5 that the
Public Investment Fund of Saudi Arabia will inject $1.5
billion in cash. Ayar Third Investment, an affiliate of the
Saudi fund, has agreed to buy $750 million worth of convertible
preferred stock and provide a similar amount as
a credit line. The fund is Lucid's majority shareholder.
The cash should be enough to fund Lucid's operations
through next year, said Gagan Dhingra, Lucid's
interim CFO.
Lucid announced the investment on the same day it
reported a second-quarter net loss of $790 million despite
record sales of its Air sedan in the period. The loss
was 3.4 percent higher than in the same quarter last year.
Second-quarter revenue was $201 million, a 33
percent improvement from a year earlier. Lucid said
it ended the second quarter with cash, cash equivalents
and investments of $4.3 billion.
Lucid reported that it delivered a record 2,394 cars
in the quarter. But that came at a cost. The automaker's
sales incentives reached $16,537 per vehicle, according
to Motor Intelligence. The Air, Lucid's lone
model, starts at $71,400 including shipping.
Lucid lost $112,688 per vehicle delivered in the second
quarter compared with $288,412 a year earlier.
Both Lucid and Rivian are pressured by Tesla's sustained
cuts in its EV prices.
GHOSN
continued from Page 8
global sales volume growth. The company
posted a 4.1 percent increase in
global sales to 3.4 million in the fiscal
year ended March 31.
Ever since rebalancing the alliance
with Renault last year to gain independence,
Nissan has resembled a company
" trying to find a savior, " Ghosn
said. " Signing an agreement with Honda
looks like an initiative of trying to
turn attention away from the miserable
results. "
Japan's No. 2 automaker, in contrast
to Nissan, announced record operating
income in the fiscal year ended
March 31, as global sales climbed 11
percent to 4.1 million vehicles.
Honda also said its operating profit
in the April-June quarter rose 23 percent
to an all-time high of ¥485 billion
($3.3 billion).
" I can't imagine for one moment
how it's going to work between HonStyling
tweaks include gloss black exterior trim and 19-inch black wheels. The standard 10.2-inch center display has a wide-screen mode.
RDX
continued from Page 8
and that it helps advance the brand's " Precision
Crafted Performance " philosophy.
The RDX front end has a new frameless diamond
pentagon grille with a more striking
mesh pattern. It also has gloss black exterior
trim and 19-inch black wheels. The Advance
Package gets body-color lower exterior trim
and black machine-finished 19-inch wheels
with an exclusive design.
da and Nissan unless it's a takeover,
unless it's a disguised takeover by
Honda of Nissan and Mitsubishi with
Honda in the driver's seat, " Ghosn
said.
Nissan and Honda haven't discussed
capital cross-holdings between each
other, Nissan CEO Makoto Uchida and
Honda CEO Toshihiro Mibe said at
their joint news conference.
But Mibe added that he isn't ruling it
out.
The partners are considering many
options, perhaps even setting up a new
company, the Honda boss added.
Honda took that approach in establishing
a separate EV venture with
electronics and tech giant Sony.
Big challenge
Ghosn was sent by Renault to Japan
in 1999 to lead Nissan back from the
brink of bankruptcy. His initial success
in turning around the troubled Japanese
industrial icon won him accolades
as a managerial miracle worker.
The RDX A-Spec and A-Spec Advance are
sportier in appearance with a blacked-out exterior
treatments and 20-inch wheels. The
A-Spec's wheels are gray, and the A-Spec Advance
has black machine-finished wheels.
Paint, center display
New paint colors are available: all-new Solar
Silver Metallic as well as Canyon River Blue
Metallic and Urban Pearl (also available on the
freshened 2025 MDX).
The RDX has a revised center console with
He was soon entrusted to head both
the French and Japanese carmakers,
becoming the first person to simultaneously
lead two Fortune 500 companies.
By
2016, he had orchestrated Nissan's
purchase of a controlling 34 percent
stake in Mitsubishi Motors Corp.,
solidifying the grand alliance's position
as the world's biggest auto group.
Looking back, Ghosn said successful
partnerships are a holistic balancing
act.
" Saying they will work together is
just 5 percent of the challenge. The
other 95 percent of the areas are where
you really need to sit down, have a
strong position and have a repartition
of the work, " Ghosn said. " You need to
work on synergies. You need to make
sure that you're not fixated about your
identity or your national belonging.
You need to really look at your bottom
line, at increasing your revenues, cutting
your costs. "
The new alliance taking shape might
increased storage and larger cupholders. Acura
said the wireless smartphone charger will be
easier to access.
The standard 10.2-inch center display features
a wide-screen mode for new standard
wireless Apple CarPlay and Android Auto.
The Advance Package and A-Spec Advance
feature full-leather upholstery, more ambient
lighting on the new center console and new
front- and rear-door speakers.
The Acura RDX is assembled alongside the
MDX at Honda's East Liberty Auto Plant in Ohio.
have trouble delivering on all its potential,
given Honda's history of determined
independence, Ghosn said.
Honda has never been in a significant
capital tie-up with another carmaker,
although it has had loose ties with
General Motors.
During his time at Nissan, Ghosn
said the company never considered
pairing with Honda.
'Turned the page'
Ghosn's era at Renault-Nissan-Mitsubishi
crashed to an end with his arrest
and eventual indictment in Japan
on four charges of financial misconduct.
The
former Nissan executive, who
denies any wrongdoing, says the
charges leveled against him were concocted
to block Nissan's fuller integration
with Renault.
Ghosn has holed up in his ancestral
homeland of Lebanon since fleeing Japan
in a dramatic dark-of-night escape
packed in a box aboard a charter jet.
Japan issued an Interpol red notice for
his arrest. But Ghosn holds a Lebanese
passport, and Lebanon doesn't extradite
its citizens.
Ghosn said he spends his time now
teaching at a local college and fielding
overtures from startups seeking business
advice. He continues to fight various
legal cases around the world, including
in Japan, where prosecutors
are still pursuing criminal charges
and Nissan has brought a $105.8 million
civil
complaint.
Meanwhile,
Ghosn has filed his own civil claim in
a Lebanese court against Nissan,
seeking $1 billion in damages and lost
compensation.
" I have my lawyers. They are playing
with this, " Ghosn said.
" I have turned the page. I'm having
my own life here. I'm a 70-year-old
man. I had a very hectic life, so I'm trying
to enjoy a little bit of time for me
also. "
Wire services contributed to this report.
years, industry experts say. U.S. automakers
are leaning on suppliers more
than ever in their quest to make affordable
EVs and secure a long-term
future.
" I think the risk is we lose that momentum
in EVs and software that
we've been doing for the last three
years to get to where we are today to be
able to launch the EVs, " Collin Shaw,
president of the Original Equipment
Suppliers group at MEMA, told Crain's
Detroit Business, an affiliate of Automotive
News.
" I fear we take a pause and that globally
the rest of the world continues that
investment. You look at China specifically,
that's a risk for us. "
Evaluating risk
Risk has been a central topic at the
CAR Management Briefing Seminars
here. While the Detroit 3 wrestle with
the risk of fast-rising Chinese automakers,
suppliers are weighing the
possibility that their investments may
never pay off.
There's strong consensus that burning
cash on EV-related R&D in the
North American market would be unwise.
Restraint on capital spending
and returning cash to shareholders are
the favored policies for suppliers for
now, as recent quarterly reports show.
" It's important we position ourselves
for the trends in our industry and the
challenges that our customers are
dealing with, " Aptiv CEO Kevin Clark
said on a recent call with investment
analysts. " As we look at some of those
slowdowns, we have scaled back investment
in certain areas, in areas like
high voltage electrification, in areas
like smart vehicle architecture. We
haven't
completely stopped
but
slowed. "
Aptiv cut 1,000 salaried employees
this year as part of a global head count
reduction. Magna is also consolidating.
" This
year alone we are taking actions
at more than 40 divisions to restructure,
consolidate or wind down
operations, " Magna CEO Swamy Kotagiri
said on an earnings call.
The financial strains and risks of the
past three years have tested automaker-supplier
relations, spilling into pricing
disputes that in the most extreme
cases have turned into lawsuits.
'We're in it together'
Automakers such as Ford Motor Co.,
which issued a " call to action " to suppliers
this year, are demanding cost reductions
from suppliers and pressing
them for EV solutions.
Speaking here Aug. 7, General Motors
President Mark Reuss said the automaker's
success is tied to a healthy
relationship with suppliers, and he
underscored the importance of strong
R&D activity in the U.S.
" We're in it together, " Reuss said.
" We have got to win and make things
that win globally. It's important for our
company. It's important for our national
security that we have the R&D,
the industry, the supply base and the
markets that lead the world. If we
aren't doing that here, it's going somewhere
else. "
Partnerships are forming in the supply
chain, from automakers down, in
unprecedented ways as companies
look to defray capital risks and accelerate
product development, said Neal
Ganguli, automotive adviser at global
consulting firm AlixPartners. Three or
four years ago, suppliers of all types
were throwing money at EVs, inspired
by government incentives and bullish
forecasts on how EV sales would grow.
" Now the buck is changing direction,
so the suppliers are retooling, rethinking
their spend, " Ganguli said. " Is the
advancement of the overall technology
in the United States going to slow?
Potentially. "
The EV pullback should not be confused
with where experts agree the
market will eventually go. That's why
R&D investing, from EV powertrains
and thermal systems to software, is
more important than ever, Ganguli
said. But suppliers are ultimately constrained
by what their customers demand.
Said
Ganguli: " The suppliers are in a
constant state of 'Where do I spend,
given the cost pressures of the industry
right now?' "

Automotive News - August 12, 2024

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