The Chinese automotive industry is suffering its first sustained downturn in at least two decades. As previewed in our July update, sales in China started to turn over the summer. After a 4.8% increase in June, sales fell by 4% in July and 3.8% in August. In September, vehicle sales fell by 11.6%, with SUVs, the strongest performer, suffering a 10.1% drop that month. In October, Chinese officials said lower auto sales were the “new normal.” October sales declined by 13%, and November saw the decline steepen further to 19%. Sales of SUVs were down 16% in November compared to 2017.
As part of Foley & Lardner LLP’s ongoing mission to ensure that clients are prepared for dynamic changes in the current legal landscape, the firm recently presented the Association of Corporate Counsel – Michigan and Foley & Lardner LLP 2018 Legal Trends for In-House Counsel Program.
The business community, lawmakers and even workers across North America breathed a collective sigh of relief on October 1, 2018, after the renegotiated NAFTA agreement was unveiled. Following negotiations that had become acrimonious, and fears that Canada might be left out, the newly dubbed United States-Mexico-Canada Agreement (USMCA) yielded significant but workable changes to cross-border trade on the continent.
In the face of what General Motors’ CEO Mary Barra calls a “fast-changing market,” this week General Motors announced its plans to end the production of certain vehicles, reduce its North American work force by more than 10%, and idle five plants in the United States and Canada. General Motors also announced that it plans to cease operations at two additional (but not yet identified) plants outside of North America by the end of 2019. The moves are intended to save General Motors $6 billion by the end of 2020. While the market reacted positively to the news — shares in General Motors were up 4.8% to close at their highest closing price in recent months — this action by General Motors will no doubt have an impact on its suppliers, as well as sub-suppliers within its supply chain.
Guest Author: Ruth Knox, Managing Associate, Linklaters LLP
Given the pace of change in the automotive industry and related technologies, combined with increasing regulatory scrutiny and recent developments in trade and M&A, there are several risks and challenges the global automotive industry can expect to deal with for the remainder of 2018 and beyond across Europe, China, and the United States.
Recently, Foley & Lardner LLP and Linklaters LLP held a roundtable on the “Future of the Automotive Sector in Europe, China and the United States.” Participants addressed four major points during the roundtable, which are summarized below.