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By Joseph White, Global Automotive Correspondent

Greetings from the Motor City!

If auto industry executives feel their ears burning, it is because people are talking about them at the COP28 climate conference in Dubai.

Cars and trucks account for about 16% of CO2 emissions blamed for climate disruption. Dubai, a nation built on oil wealth, has become another venue for the debate over phasing out petroleum-burning vehicles. Spoiler alert: No one has come forward with a cheap, painless path from here to a world of carbon-free transport.   

Meanwhile, there’s more drama from the world of robo-taxis, Volkswagen is cutting staff and the M&A wheels are turning as Toyota and other automakers re-think what they need to own in a future where everything is expensive.

Happy St. Nicholas Day! Let’s dive in.

Today –

• • EV Bulls and Bears jockey at the climate summit

  • GM’s Cruise hits an “all time low.”

  • Toyota sells its stake in another family supplier

Can this cool the planet? Reuters/Mike Blake

Growing sales of electric vehicles are giving a lift to advocates for more forceful action to combat climate disruption gathered at the COP28 climate summit in Dubai.

The International Energy Agency (IEA) now forecasts that global oil consumption will peak by 2030, in large part due to replacement of combustion vehicles with EVs. Transportation accounts for about 60% of global oil consumption. Shifting the energy required to move vehicles from gas pumps to the grid does not eliminate CO2 emissions, but as grids clean up, CO2 should go down.

That’s one long-term view – Big Oil has a different one. The problem for automakers is that they must survive and raise capital in the near-term. And the short view for many automakers is, to use Stellantis CEO Carlos Tavares’ metaphor, “Darwinian.”

EV market leaders Tesla and BYD make money on electric vehicles. But most automakers are losing eye-watering sums on their EV models. Investor euphoria over EVs has given way to pressure on legacy automakers to hand over the cash generated by profitable combustion vehicle franchises instead of burning it trying to out-Tesla Tesla.

That’s why big automakers are slowing EV investment, and lobbying to weaken regulations that would accelerate the EV shift.

The optimists at the IEA forecast that EVs could account for 40-45% of global vehicle sales by 2030 – though they say that share would need to be 70% or more to achieve the Paris climate treaty targets to avoid severe climate disruption. (The IEA EV outlook is here. A guide to climate conference jargon is here.)

Forecasts for the future of world auto markets have a dodgy track record. Consumers can be rational – why else is the Toyota Corolla so popular? But they are also irrational. Does anyone need an SUV capable of scaling a rock wall to make it to the hardware store? No, but U.S. consumers pay Ford, Stellantis and GM premium prices to own such vehicles.

The IEA and auto industry executives agree on this: Government subsidies will be needed to convince many buyers to choose a more expensive EV over a cheaper gasoline model.

In China, EVs and plug-ins are now cheaper than many ICE vehicles thanks to aggressive subsides, according to research firm JATO Dynamics. Electrified vehicles are now a quarter of the Chinese market and growing. That leaves 75% left to go.

GM CEO Mary Barra takes her first driverless ride. Screenshot from Cruise video.

General Motors’ Cruise robo-taxi operation has hit an “all time low,” a top executive told employees Tuesday. Layoffs are in the offing, as are pay cuts for the survivors. Many Cruise employees face tax bills for share grants that have lost value – a problem GM and Cruise said they will address at an unspecified cost.

A Cruise worker no longer feels comfortable wearing one of the operation’s logo jackets outside the office, the unit’s new president told employees.

But there is no quick resolution for Cruise on the horizon – which is exacerbating GM’s problems with Wall Street.

GM CEO Mary Barra said a safety review could extend into the first quarter. Cruise President Mo Elshenawy told workers that the new standard for safety will be automated drivers that are “significantly better than human performance” across a “wider spectrum of use cases and edge cases.” That’s a tough standard that will take time to achieve.

Cruise faces more pummeling from regulators for botching the response to an accident in which one of its driverless cars struck a pedestrian.

Cruise could face fines for withholding information about how one of its driverless cars hit and dragged a pedestrian for 20 feet after the victim had been hit by another car, an administrative law judge with the California Public Utilities Commission warned in a court document.

Barra said during an appearance in Detroit that she is focused on “righting the ship” at Cruise. She declined to say how much more money she is willing to lose at Cruise, which was burning cash at the rate of about $2.8 billion annually as of the third quarter.

GM’s CFO has said Cruise will cut “hundreds of millions” of dollars from expenses going forward. Barra said she views spending on Cruise’s automated driving technology as investments, not losses.

The Cruise crisis highlights a bigger challenge for GM as its share price drifts around the $33 level set at its post-bankruptcy IPO in 2010. The company is spending the equivalent of its market cap every two years on capital investments and R&D – a pace faster than any other non-financial S&P 500 company, writes Morgan Stanley analyst Adam Jonas.

“Currently, investors feel that cash is worth more to them outside of the company than re-invested inside the company,” he wrote.

VW brand chief Thomas Schaefer REUTERS/Sumaya Hisham

Days after slamming his operation for being uncompetitive, the head of Volkswagen’s eponymous mass market brand is moving to slash administrative staff by 20%, Reuters reports.

VW Brand Chief Thomas Schaefer’s actions are part of a broader effort at the world’s second-largest automaker to cut 10 billion euros from operating costs. The VW brand faces intense competition from Chinese automakers and Tesla not just in China, but increasingly in Europe.

The automaker also has faced costly setbacks to its EV and advanced software projects.

Still, this is Germany. VW has promised unions it won’t fire workers until 2029. Instead, the company will try to reduce staff through attrition and buyouts as workers age toward retirement.

Toyota said it will sell its entire stake in Japanese supplier Harmonic Drive Systems. The cash raising move comes just days after Toyota said it will sell a stake in Denso, which has been a centerpiece of the automaker’s supplier family, or keiretsu.

Toyota is transforming shares into cash at a time when it needs capital to develop new solid-state batteries and other technology to accelerate electrification of its fleet – and reinvent its manufacturing system to keep pace with Tesla.

Toyota is not alone in rethinking what assets it must own as capital costs rise. Chinese EV startup Nio is working on plans to spin off its battery making unit as it tries to rein in losses, Reuters colleagues report.

Elon Musk is not a fan of unions. Unions in multiple nations are saying, “Back at you!”

Unions in Norway, one of Tesla’s biggest markets outside of China and the United States, said they will block shipments of Teslas to Sweden, where unions have blocked imports of Teslas to support demands from mechanics for Tesla to sign a collective bargaining contracts.

Tesla also faces pressure from German industrial unions, and a reinvigorated campaign by the U.S. United Auto Workers to organize Tesla manufacturing workers there.

Stellantis, Nissan, Toyota, BMW and other automakers with manufacturing on both sides of the English Channel got a lift as the European Union delayed plans to impose tariffs on electric vehicles traded with the UK.

Automakers said they stood to pay 4.3 billion euros in duties – levies they would have likely tried to pass on to consumers.

The three-year respite from proposed post-Brexit duties comes with strings attached. Vehicles have to meet domestic content requirements – a boost for EU battery makers such as Northvolt. 

Volkswagen’s Xinjiang operations are not using forced labor, as far as a German human rights auditor can tell. The auditor cautioned that the difficulties of gathering the data and testimony needed for such a review in China are “well known.” Shareholders demanded more vigilance of the company’s Chinese operations.

Good news for EVs? Chinese miners are cranking up output at cobalt mines, despite crashing prices for the EV battery mineral. Lower prices should be good for automakers desperate to cut EV costs. But more cobalt that cannot pass ESG sniff tests would be a headache.

Nissan and Mitsubishi will invest in Renault’s Ampere EV unit and use it to develop EVs for Europe. The agreement is part of a broader restructuring of the alliance among the three automakers that points toward smaller-scale sharing among the companies –which all face significant competitive challenges.

Uncle Sam wants you not to hit a moose on the highway. The Biden administration has awarded $110 million in grants to study new ways to prevent car vs. wildlife collisions or build infrastructure to keep animals and cars apart.

Ford Pro, the Ford commercial vehicle unit, and utility company Xcel Energy plan to install 30,000 EV chargers by 2030.

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