See inside Ford’s new tech campus, a century-old Detroit train station restored for $950 million

Ford Motor is turning an abandoned train station used for decades as an infamous symbol of Detroit’s downfall and blight into a new technology campus for the automaker and mixed-use property for the city.

Michael Wayland / CNBC

DETROIT – Ford’s latest project out of the Motor City is the restoration and reopening of an abandoned train station, for decades a symbol of Detroit’s downfall and now the automaker’s new technology campus.

The $950 million project encompasses the 18-story former train station called Michigan Central Station – once the state’s marquee transit building – an adjacent 270,000-square-foot building and other, supporting facilities.

The 30-acre “Michigan Central” campus and station was initially announced in 2018 and slated to open by 2022. However, the coronavirus pandemic and the extensive work needed to renovate the station delayed its reopening. Ford is celebrating the restoration of the century-old train station on Thursday.

Following the event Thursday, the ground floor of the train station building will be open to the public through June 16, before the first commercial occupants begin moving in this fall.

The new campus comes at a precarious time for Ford investors as the company continues to restructure its business. It also comes as many companies attempt to downsize office space and fill their current buildings with employees who grew accustomed to working from home during the pandemic.

A photo of Michigan Central’s main concourse prior to its renovation sits in the newly restored room toward the back of the building.

Michael Wayland / CNBC

Specifically in Detroit, a stark juxtaposition has emerged: In April, Ford’s crosstown rival General Motors announced it would be downsizing from its towering Renaissance Center headquarters along the city’s riverfront to two floors in a nearby building that’s under construction.

Yet Ford Chair Bill Ford said he believes the investment made in the historic train station is a crucial part of the automaker’s future, including in aspects of talent acquisition and retention.

“We’re in a war for talent, our industry and our company,” Ford, who spearheaded the project, told CNBC. “And you need to give talent two things: You need to give them, first, really interesting problems to solve, and then you have to give them a great place to work. With Michigan Central, we checked both those boxes.”

Bill Ford decided to purchase the dilapidated building after years of trips to Silicon Valley for his Fontinalis venture capital firm and during his tenure as a member of the eBay board of directors. He’s long been outspoken about the need for the traditional automotive industry to compete with newer tech companies in both product and talent acquisition.

Ford Motor released this image of Chair Bill Ford, great-grandson of company founder Henry Ford, when the automaker announced it would be purchasing Michigan Central Station in June 2018.

Ford

Ford said attracting top talent to Detroit is “getting better” but noted that “it’s a tall order” to convince workers from California or the East Coast to relocate to Detroit and work for Ford.

“If you can show them a place like Michigan Central, not just in its beauty, which alone is incredible, but then talk about the kind of things that will be going on there, then it becomes, I think, a really valuable resource for the company going forward,” he said.

Train station campus

The Michigan Central campus is located southwest of Detroit’s main business district in a trendy neighborhood known as Corktown. It’s about 10 miles down the road from Ford’s world headquarters in Dearborn, Michigan.

The Michigan Central campus in total spans 1.2 million square feet of commercial space, including retail, restaurants and hospitality. It was awarded $300 million in state, local and historic rehabilitation tax incentives, according to officials.

The restored grand waiting room inside Ford’s Michigan Central Station in Detroit.

Michael Wayland / CNBC

Ford officials went to great lengths to restore the station to its original glory after decades of vandalism and decay. The project involved 3D-scanning the rooms, matching materials and referencing historical photos to recreate parts of the building.

This was especially true for the first floor of the train station, where a grand room features massive windows, an arcade and a large concourse full of marble and terrazzo flooring, Mankato stone and other unique materials.

Architects and designers opted to leave some graffiti on walls to represent the station’s dormant years after closing in 1988.

As one measure of Ford’s determination, officials traced the facility’s original limestone to a quarry in Indiana only to find out it had since closed. Michigan Central worked with the owners to reopen the quarry.

Some graffiti from when Michigan Central sat dormant for more than 30 years was purposely preserved to represent that part of the station’s history.

Michael Wayland / CNBC

“It has been painstakingly and lovingly restored to, wherever possible, to its original condition,” said Josh Sirefman, Michigan Central CEO, during a tour of the project. “Before we start activating it with lots of things, it’s probably in its most pristine condition.”

Amid national commercial real estate challenges, about two-thirds of the tower has scheduled tenants or planned use cases, officials said. That includes an unnamed restaurant and hotel, pending rezoning approval.

The adjacent building, known as the Detroit Public Schools Book Depository, already houses more than 600 employees from nearly 100 startup companies.

“It really is the beginning of the ecosystem that I want to create,” Bill Ford said. “There’s going to be a lot of experimentation taking place down there.”

Ford plans to house at least 2,500 employees in the building, primarily members of the company’s electric vehicle and connected services teams. Roughly 1,000 of those employees are expected to move into the station’s tower by the end of this year, Ford said.

Other building occupants could include local universities, other businesses and a restaurant. However, officials declined to release a full list of expected tenants. Google, a founding partner of the project, runs its “Code Next” program, which teaches students how to code, from the Book Depository building.

Ford said he expects future automaker employees to be able to collaborate with other occupants of the station’s tower as well as the startups occupying the Book Depository building.  

A photo of Michigan Central’s arcade prior to its renovation sits in the newly restored room toward the east end of the building.

Michael Wayland / CNBC

‘Legacy project’

Resurrecting the train station and surrounding campus is the latest project Bill Ford, a great-grandson of company founder Henry Ford, has undertaken in the Motor City.

He was instrumental in moving the Ford family-owned Detroit Lions from suburban Pontiac to a new stadium, appropriately named Ford Field, in downtown Detroit in 2002. He also was part of the team that brought the Super Bowl to the city in 2006.

And he redeveloped the company’s River Rouge Assembly plant into a “green” production facility amid calls to close it. It’s now a tourist destination for the production of the Ford F-150 full-size pickup.

Ford, who served as CEO of the automaker from 2001 to 2006, described Michigan Central as a continuation of such projects. He called the effort a “legacy project” for himself as well as for those who have been able to work on it.

“I’m very proud of both of those [prior projects], but I think this is going to kind of put an exclamation point on it because this will be a wonderful place to work but it will also be a wonderful place for the public to come,” Ford said.

The renovated “reading room” off of the grand waiting room at Ford’s Michigan Central Station in Detroit.

Michael Waylans / CNBC

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GM all-electric Chevy Equinox goes on sale as the latest test for EV production and demand

GM’s 2024 Chevrolet Equinox EV during a media launch event for the vehicle on May 16, 2024 in Detroit.

Michael Wayland / CNBC

DETROIT — The Chevrolet Equinox has been a crucial part of General Motors’ lineup for two decades. The vehicle is a quintessential family hauler and a go-to car for people seeking an economical compact crossover for everyday driving.

GM is hoping the 2024 Chevrolet Equinox EV can do the same for its growing all-electric vehicle portfolio as it begins shipping the crossover to dealers amid slower-than-expected demand for EVs. The rollout marks the latest test for mass-market adoption as well as the company’s production of new “Ultium” EV technologies.

“It’s very important to us but, more importantly, it’s very important to customers and people who want affordability and electric vehicles,” GM President Mark Reuss told CNBC last week. “This is about $27,500 [including up to $7,500 in federal incentives] for an over 300-mile range car, which is right in the heart of everything.”

Offering a new EV for around $25,000 has long been a target for automakers such as GM, Tesla and others. The importance of such a vehicle has grown more apparent as Chinese automakers like BYD and Nio grow their sales of less expensive EVs outside of China.

The Equinox EV is launching with higher-priced models that start at roughly $43,000 to $51,100 (without any incentives). The entry-level Equinox LT model, starting at about $35,000, is expected later this year.

“The Equinox EV is the vehicle that’s really going to make a difference for a lot of customers that maybe previously haven’t been interested or looked at EVs,” Kathleen Murawski, marketing and advertising manager for gas-powered and Equinox EVs and Chevy Blazer EVs, told CNBC.

GM sells hundreds of thousands of gas-powered Equinox crossovers annually, including 212,701 last year. The crossover is typically one of GM’s bestselling vehicles and top five in sales for its segment, according to Autopacific.

Testing GM

The Equinox EV is GM’s new entry point for all-electric vehicles in the U.S. after the automaker discontinued the Chevy Bolt last year. It’s expected to be GM’s top-selling EV.

With such lofty sales expectations, it also will test the legacy automaker’s ability to successfully mass produce an Ultium-based EV following pricier vehicles such as the $110,000 GMC Hummer EV, $60,000 Cadillac Lyriq and a botched launch of the Blazer EV, starting at roughly $55,000, due to software issues.

“We’ve got the launch on this vehicle right. We’ve got the quality of this vehicle right. We’ve got the software of this vehicle right. We’re just super excited to see now where it goes,” GM President of Global Markets Rory Harvey told CNBC. “We think we’ve got a product that’s out there to win.”

The Equinox EV is arriving to market following the Blazer EV and alongside GM’s more than $96,000 Silverado EV RST. The company has already launched a work truck version of the Silverado EV.

The production ramp-up of GM’s new EV vehicles — using what the automaker calls its “Ultium” platform, batteries and other technologies — has been slower than the company and investors had expected. The Equinox will change that, according to GM North America President Marissa West.

“We’ve eliminated the production constraints, and now it’s about meeting the customer demand with the most affordable, longest-range vehicle on the market in the heart of our Chevrolet lineup, which is … the heart and soul of General Motors,” West said during an interview Monday.

Paul Waatti, director of industry analysis at AutoPacific, agrees. He called the Equinox a critical product for GM’s EV plans as well as a potential redemption opportunity for the company following its disappointing ramp-up of current Ultium-based products.

“GM is going to start to see real volume in their EV portfolio,” Waatti said. “It was a slow start, but now they’re going to have the big volume players in the mix. It’s really a turning point for GM.”

“[The Equinox is] undoubtedly the most significant Ultium launch for GM yet,” he added. “It might just be the most compelling EV on the market right now.”

Equinox EV

All of that being said, the Equinox EV is an Equinox in name only. It shares little to nothing with the traditional gas-powered vehicle, which the company redesigned to look more rugged for the 2025 model year.

The Equinox EV is wider and lower than the traditional crossover. It’s a result of GM’s Ultium EV platform, aerodynamics and other targeted features for the vehicle, including an up to EPA-estimated 319 miles of range on a single charge.

A standard front-wheel-drive Equinox EV has a 213 horsepower and 236 foot-pounds of torque, according to company estimates. GM says optional all-wheel-drive models have an estimated 288-horsepower and 333 foot-pounds of torque.

Outside of the U.S., the Equinox EV will be sold in Canada, Mexico, the Middle East and some South American markets such as Brazil.

GM’s 2024 Chevrolet Equinox EV (right) next to a gas-powered Chevy Equinox on May 16, 2024 in Detroit.

Michael Wayland / CNBC

Brad Franz, director of Chevy car and crossover marketing, said retaining the familiar names for the EVs was a “strategic decision” to leverage names people know and trust.

“The Chevy proposition here is these can make your life easier. Not only easier, but better,” he said Thursday during a media event. “How are we going to tackle that? We’ll start with just leveraging our brand reputation.”

Keeping the same names also aligns with the company’s target to exclusively offer EVs to consumers by 2035. While the automaker hasn’t shifted that goalpost in light of slower-than-expected sales of EVs, it has recently shifted its messaging to note the transition will be based on customer demand.

GM ranked fourth in U.S. market share of all-electric vehicles during the first quarter, representing 6.1% of new EVs sold, according to data provided by Motor Intelligence. Tesla, at 52.3%, is by far the leader in estimated U.S. EV sales, followed by Hyundai, including Kia, at 9.3% and Ford Motor at 7.5%.

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Why automakers are turning to hybrids in the middle of the industry’s EV transition

2023 Prius Prime on display, April 6, 2023.

Scott Mlyn | CNBC

DETROIT — As sales of all-electric vehicles grow more slowly than expected, major automakers are increasingly meeting their customers in the middle.

More and more companies are reconsidering the viability of hybrid cars and trucks to appease consumer demand and avoid costly penalties related to federal fuel economy and emissions standards.

The shifting strategies run counterintuitively to industrywide EV messaging of recent years. Many auto companies have begun to invest billions of dollars in all-electric vehicles, and the Biden administration has made a push to get more EVs on U.S. roadways as quickly as possible.

But hybrid vehicles — those with traditional internal combustion engines combined with EV battery technologies — could help the automotive industry lower fuel consumption and emissions in the short-term, while easing consumers into vehicle electrification.

Sales of traditional hybrid electric vehicles, or HEVs, such as the Toyota Prius, are outpacing those of all-electric vehicles in 2023, according to Edmunds. HEVs accounted for 8.3% of U.S. car sales, about 1.2 million vehicles sold, through November of this year. That share is up 2.8 percentage points compared with total sales last year.

EVs made up 6.9% of sales heading into December, or roughly 976,560 units, up 1.7 percentage points compared with total sales last year. Sales of plug-in hybrid electric vehicles, or PHEVs, accounted for only 1% of U.S. sales through November.

“There’s been so much talk over the past few years about the move toward electrification and sort of forgoing hybrids, but … hybrids are not dead,” said Jessica Caldwell, Edmunds executive director of insights. “There’s a lot of consumers out there that are interested in electrification, maybe not ready to go fully electric.”

Hybrids can also cost less and relieve many concerns typically associated with EVs such as range anxiety and lack of charging infrastructure. The average hybrid this year cost $42,381, according to Edmunds. That’s below the roughly $59,400 average for an EV; $60,700 for a PHEV; and $44,800 for a traditional vehicle.

Morgan Stanley earlier this month said Toyota Motor, Honda Motor and Hyundai Motor, including Kia, account for 9 out of 10 hybrid sales in the U.S. Representatives for those automakers said they are actively attempting to increase production and sales of hybrid vehicles in the U.S.

“While the transition to full battery electric transportation will take time, hybrids and plug-in hybrids will play an equally important role in Kia America’s near and mid-term goals,” Eric Watson, vice president of Kia America sales, said in a statement to CNBC.

And other companies, such as the Detroit automakers, are following suit.

Detroit Three automakers

The Detroit automakers have varying strategies for hybrid vehicles.

Ford Motor offers PHEVs but is leaning into HEVs, announcing plans in September to double sales of the V-6 hybrid model during the 2024 model year to roughly 20% in the U.S. It’s part of Ford CEO Jim Farley’s plans to quadruple the company’s production of gas-electric hybrids.

Ford’s hybrid sales through November of this year are up 23% over the same period in 2022 to more than 121,000 units, or 6.8% of its total sales through that point. In comparison, Ford’s EV sales are up 16.2% to roughly 62,500 units, accounting for 3.5% of its total sales.

Battery breakdown

Both hybrids and plug-in hybrids have a traditional engine combined with EV technologies. A traditional hybrid such as the Toyota Prius has electrified parts, including a small battery, to provide better fuel economy to assist the engine. PHEVs typically have a larger battery to provide for all-electric driving for a certain number of miles until an engine is needed to power the vehicle or electric motors.

Chrysler parent Stellantis, for its part, is leaning on PHEVs for its electrification strategy, before introducing a host of EVs starting next year. The company is the top seller of plug-in hybrid electric vehicles in the U.S., and the vehicles accounted for about 10% of the company’s third-quarter sales, led by Jeep Wrangler and Grand Cherokee SUVs.

But General Motors isn’t ready just yet to alter its EV plans, which include a goal to exclusively offer all-electric vehicles by 2035.

GM led the way for plug-in electric vehicles with the Chevrolet Volt during the 2010s. The company discontinued the vehicle in early 2019, citing demand and cost concerns.

Since then, the automaker has not offered another hybrid vehicle in the U.S. other than the recently launched Chevrolet Corvette E-Ray, a hybrid version of the famed sports car. GM does offer hybrids, including PHEVs, in China.

2024 Chevrolet Corvette E-Ray hybrid sports car

GM

“We still have a plan in place that allows us to be all light-duty vehicles EV by 2035,” GM CEO Mary Barra said Monday during an Automotive Press Association meeting in Detroit. “We’ll adjust based on where the customer is and where demand is. It’s not going to be ‘if we build it they will come.’ We’re going to be led by the customer.”

Her comments come after GM President Mark Reuss told CNBC in August that he was “flexible” regarding hybrids as a way of meeting federal regulations.

“If it means we have to do that by law, then we have to do that by law,” he said. “If there’s regulations that get dealt on us, then we’re going to look at everything in our toolbox to meet them.”

Federal regulations

Major auto companies, including the Detroit automakers, were counting on EVs to assist in offsetting the emissions and low fuel economies of larger SUVs and trucks that can cost them hundreds of millions of dollars in fines by the federal government.

GM and Stellantis were forced to pay a combined $363.8 million in penalties for failing to meet federal fuel-economy standards for cars and trucks they produced in previous years, according to information published by the National Highway Traffic Safety Administration in June.

Such fines would significantly increase under current proposals by the Biden administration to improve fuel efficiency of vehicles and move toward EVs, according to automaker lobbying groups.

The American Automotive Policy Council, a group representing the Detroit Three, earlier this year said the automakers would face more than $14 billion in noncompliance penalties between 2027 and 2032 barring significant changes to their fleets’ overall fuel efficiency. U.S. automakers have separately warned the fines would cost $6.5 billion for GM, $3 billion at Stellantis and $1 billion at Ford, according to Reuters.

NHTSA in July proposed boosting fuel efficiency requirements by 2% per year for passenger cars and 4% per year for pickup trucks and SUVs from 2027 through 2032, resulting in a fleetwide average fuel efficiency of 58 mpg.

With EVs playing a lesser role than anticipated to boost those fleetwide averages, hybrids could save automakers millions.

“Even without electric vehicles, there’s an expectation that electrification of an internal combustion engine is going to be necessary to meet regulations anyway,” said Stephanie Brinley, principal automotive analyst at S&P Global Mobility.

Industry leader

The resurgence of hybrids is especially important for Toyota. The world’s largest automaker is considered the pioneer of traditional hybrids, with the Prius.

The company ironically became a target of environmental groups last year for its strategy to move forward with a mix of hybrids, PHEVs and EVs, which critics viewed as a lack of commitment to an all-electric future.

Toyota’s argument at the time, and still, is that it’s meeting consumer needs and planning for a more gradual global adoption that will naturally include some markets shifting to EVs sooner than others.

The company further says it takes into account the entire environmental impact of producing EVs compared with hybrid electrified vehicles, arguing it can produce eight 40-mile plug-in hybrids for every one 320-mile battery electric vehicle and save up to eight times the carbon emitted into the atmosphere.

“People are finally seeing reality,” Toyota Chairman and former CEO Akio Toyoda, who has been heavily criticized for the slower approach on EVs, said in October regarding EVs, according to The Wall Street Journal.

Toyota CEO Akio Toyoda speaks during a small media roundtable on Sept. 29, 2022 in Las Vegas.

Toyota

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As the market enters correction territory, don’t blame the American consumer

An Amazon.com Inc worker prepares an order in which the buyer asked for an item to be gift wrapped at a fulfillment center in Shakopee, Minnesota, U.S., November 12, 2020.

Amazon.com Inc | Reuters

The initial third-quarter report on gross domestic product showed consumer spending zooming higher by 4% percent a year, after inflation, the best in almost two years. September’s retail sales report showed spending climbing almost twice as fast as the average for the last year. And yet, bears like hedge-fund trader Bill Ackman argue that a recession is coming as soon as this quarter and the market has entered correction territory.

For an economy that rises or falls on the state of the consumer, third-quarter earnings data supports a view of spending that remains mostly good. S&P 500 consumer-discretionary companies that have reported through Oct. 25 saw an average profit gain of 15%, according to CFRA — the biggest revenue gain of the stock market’s 11 sectors.

“People are kind of scratching their heads and saying, ‘The consumer is holding up better than expected,'” said CFRA Research strategist Sam Stovall said. “Consumers are employed. They continue to buy goods as well as pursue experiences. And they don’t seem worried about debt levels.” 

How is this possible with interest rates on everything from credit cards to cars and homes soaring?

It’s the anecdotes from bellwether companies across key industries that tell the real story: Delta Air Lines and United Airlines sharing how their most expensive seats are selling fastest. Homeowners using high-interest-rate-fighting mortgage buydowns. Amazon saying it’s hiring 250,000 seasonal workers. A Thursday report from Deckers Outdoor blew some minds — in what has been a tepid clothing sales environment — by disclosing that embedded in a 79% profit gain that sent shares up 19% was sales of Uggs, a mature line anchored by fuzzy boots, rising 28%.

The picture they paint largely matches the economic data — generally positive, but with some warts. Here is some of the key evidence from from the biggest company earnings reports across the market that help explain how companies and the American consumer are making the best of a tough rate environment.

How homebuilders are solving for mortgages rates

No industry is more central to the market’s notion that the consumer is falling from the sky than housing, because the number of existing home sales have dropped almost 40% from Covid-era peaks. But while Coldwell Banker owner Anywhere Real Estate saw profit fall by half, news from builders of new homes has been pretty good.

Most consumers have mortgages below 5%, but for new homebuyers, one reason that rates are not biting quite as sharply as they should is that builders have figured out ways around the 8% interest rates that are bedeviling existing home sellers. That helps explains why new home sales are up this year. Homebuilders are dipping into money that previously paid for other incentives to pay for offering mortgages at 5.75% rather than the 8% level other mortgages have hit. At PulteGroup, the nation’s third-biggest builder, that helped drive an 8% third-quarter profit jump and 43% climb in new home orders for delivery later, much better than the government-reported 4.5% gain in new home sales year-to-date.

“What we’ve done is simply redistribute incentives we’ve historically offered toward cabinets and countertops, and redirected those to interest rate incentives,” PulteGroup CEO Ryan Marshall said. “And that has been the most powerful thing.”

The mechanics are complex, but work out to this: Pulte sets aside about $35,000 for incentives to get each home to sell, or about 6% of its price, the company said on its earnings conference call. Part of that is paying for a mortgage buydown. About 80% to 85% of buyers are taking advantage of the buydown offer. But many are splitting the funds, mixing a smaller rate buydown and keeping some goodies for the house, the company said.

Wells Fargo economist Jackie Benson said in a report that builders may struggle to keep this strategy going if mortgage rates stay near 8%, but new-home prices have dropped 12% in the last year. In her view, incentives plus bigger price cuts than most existing homes’ owners will offer is giving builders an edge. 

At auto companies, price cuts are in, and more are coming

Car sales picked up notably in September, rising 24% year-over-year, more than twice the year-to-date gain in unit sales. But they were below expectations at electric-vehicle leader Tesla, which blamed high interest rates, and at Ford

“I just can’t emphasize this enough, that for the vast majority of people buying a car it’s about the monthly payment,” Tesla CEO Elon Musk said on its earnings call. “And as interest rates rise, the proportion of that monthly payment that is interest increases.” 

Maybe, but that’s not what’s happening at General Motors, even if investor reaction to good numbers at GM was muted because of the strike by the United Auto Workers union. 

GM tops Q3 expectations but pulls full-year guidance due to mounting UAW strike costs

GM beat earnings expectations by 40 cents a share, but shares fell 3% because of investor worries about the strike, which forced GM to withdraw its fourth-quarter earnings forecast on Oct. 24. Ford, which settled with the UAW on Oct. 25, said the next day it had a “mixed” quarter, as profit missed Wall Street targets due to the strike. Consumers came through, as unit sales rose 7.7% for the quarter, with truck and EV sales both up 15%. GM CEO Mary Barra said on GM’s analyst call that the company gained market share, posting a 21% gain in unit sales despite offering incentives below the industry average.

“While we hear reports out there in the macro that consumer sentiment might be weakening, etc., we haven’t seen that in demand for our vehicles,” GM CFO Paul Jacobson told analysts. But Ford CFO John Lawler said car prices need to decline by about $1,800 to be as affordable as they were before Covid. “We think it’s going to happen over 12 to 18 months,” he said. 

Tesla’s turnaround plan turns on continuing to lower its cost of producing cars, which came down by about $2,000 per vehicle in last year, the company said. Along with federal tax credits for electric vehicles, a Model Y crossover can be had for about $36,490, or as little as $31,500 in states with local tax incentives for EVs. That’s way below the average for all cars, which Cox Automotive puts at more than $50,000. But Musk says some consumers still aren’t convincible. .

“When you look at the price reductions we’ve made in, say, the Model Y, and you compare that to how much people’s monthly payment has risen due to interest rates, the price of the Model Y is almost unchanged,” Musk said. “They can’t afford it.”

Most banks say the consumer still has cash, but not Discover

To know how consumers are doing, ask the banks, which disclose consumer balances quarterly. To know if they’re confident, ask the credit card companies (often the same companies) how much they are spending. 

In most cases, financial services firms say consumers are doing well.

At Bank of America, consumer balances are still about one-third higher than before Covid, CEO Brian Moynihan said on the company’s conference call. At JPMorgan Chase, balances have eroded 3% in the last year, but consumer loan delinquencies declined during the quarter, the company said.

“Where am I seeing softness in [consumer] credit?” said chief financial officer Jeremy Barnum, repeating an analyst’s question on the earnings call. “I think the answer to that is actually nowhere.”

Among credit card companies, the “resilient” is still the main story. MasterCard, in fact, used that word or “resilience” eight times to describe U.S. consumers in its Oct. 26 call.

“I mean, the reality is, unemployment levels are [near] all-time record lows,” MasterCard chief financial officer Sachin Mehra said.

At American Express, which saw U.S. consumer spending rise 9%, the mild surprise was the company’s disclosure that young consumers are adding Amex cards faster than any other group. Millennials and Gen Zers saw their U.S. spending via Amex rise 18%, the company said.

“Guess they’re not bothered by the resumption of student loan payments,” Stovall said.

Consumer data is more positive than sentiment, says Bankrate's Ted Rossman

The major fly in the ointment came from Discover Financial Services, one of the few banks to make big additions to its loan loss reserves for consumer debt, driving a 33% drop in profit as Discover’s loan chargeoffs doubled.  

Despite the fact that U.S. household debt burdens are almost exactly the same as in late 2019, and declined during the quarter, according to government data, Discover chief financial officer John Greene said on its call, “Our macro assumptions reflect a relatively strong labor market but also consumer headwinds from a declining savings rate and increasing debt burdens.”

At airlines, still no sign of a travel recession

It’s good to be Delta Air Lines right now, sitting on a 59% third-quarter profit gain driven by the most expensive products on their virtual shelves: First-class seats and international vacations. Also good to be United, where higher-margin international travel rose almost 25% and the company is planning to add seven first-class seats per departure by 2027. Not so good to be discounter Spirit, which saw shares fall after reporting a $157 million loss.

“With the market continuing to seemingly will a travel recession into existence despite evidence to the contrary from daily [government] data and our consumer surveys, Delta’s third-quarter beat and solid fourth-quarter guide and commentary should finally put the group at ease about a consumer “cliff,” allow them to unfasten their seatbelts and walk about the cabin,” Morgan Stanley analyst Ravi Shanker said in a note to clients.

One tangible impact: United is adding 20 planes this quarter, though it is pushing 12 more deliveries into 2024, while Spirit said it’s delaying plane deliveries, and focusing on its proposed merger with JetBlue and cost-cutting to regain competitiveness as soft demand for its product persists into the holiday season.

As has been the case throughout much of 2023, richer consumers — who contribute the greater share of spending — are doing better than moderate-income families, Sundaram said.

The goods recession is for real

Whirlpool, Ethan Allen and mattress maker Sleep Number all saw their stocks tumble after reporting bad earnings, all of them experiencing sales struggles consistent with the macro data.

This follows a trend now well-entrenched in the economy: people stocked up on hard goods, especially for the house, during the pandemic, when they were stuck at home more. All three companies saw shares surge during Covid, and growth has slacked off since as they found their markets at least partly saturated and consumers moved spending to travel and other services.

“All of the stimulus money went to the furniture industry,” Sundaram said, exaggerating for effect. “Now they’ve been falling apart for the last year.”

Ethan Allen sales dropped 24%, as the company said a flood in a Vermont factory and softer demand were among the causes. At Whirlpool, which said in second-quarter earnings that it was moving to make up slowing sales to consumers by selling more appliances to home builders, “discretionary purchases have been even softer than anticipated, as a result of increased mortgage rates and low consumer confidence,” CEO Marc Bitzer said during Thursday’s earnings call. Its shares fell more than 20%. 

Amazon’s $1.3 billion holiday hiring spree

Amazon is making its biggest-ever commitment to holiday hiring, spending $1.3 billion to add the workers, mostly in fulfillment centers. 

That’s possible because Amazon has reorganized its warehouse network to speed up deliveries and lower costs, sparking 11% sales gains the last two quarters as consumers turn to the online giant for more everyday repeat purchases. Amazon also tends to serve a more affluent consumer who is proving more resilient in the face of interest rate hikes and inflation than audiences for Target or dollar stores, according to CFRA retailing analyst Arun Sundaram said.

“Their retail sales are performing really well,” Sundaram said. “There’s still headwinds affecting discretionary sales, but everyday essentials are doing really well.

All of this sets the stage for a high-stakes holiday season.

PNC still thinks there will be a recession in early 2024, thanks partly to the Federal Reserve’ rate hikes, and thinks investors will focus on sales of goods looking for more signs of weakness. “There’s a lot of strength for the late innings” of an expansion, said PNC Asset Management chief investment officer Amanda Agati.

Sundaram, whose firm has predicted that interest rates will soon drop as inflation wanes, thinks retailers are in better shape, with stronger supply chains that will allow strategic discounting more than last year to pump sales. The Uggs sales outperformance was attributed to improved supply chains and shorter shipping times as the lingering effects of the pandemic recede.

“Though there are headwinds for the consumer, there’s a chance for a decent holiday season,” he said, albeit one hampered still by the inflation of the last two years. “The 2022 holiday season may have been the low point.” 

Deloitte predicts soft holiday sales

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UAW strike brings blue-collar vs. billionaire battle to Detroit

DETROIT — The United Auto Workers strike is bringing a blue-collar versus billionaire battle to the Motor City, just as UAW President Shawn Fain wanted.

The outspoken union leader has weaponized striking — historically a last resort for the union — after less than 24 hours into a work stoppage arguably better than any UAW president has in modern times.

It wasn’t by accident.

Fain, a quirky yet emboldened leader, has meticulously brought the UAW back into the national spotlight after decades of near irrelevance. He wants to represent not just union members but also America’s embattled middle class, which UAW helped create.

United Auto Workers union President Shawn Fain joins UAW members who are on a strike, on the picket line at the Ford Michigan Assembly Plant in Wayne, Michigan, September 15, 2023.

Rebecca Cook | Reuters

To do so, he has leveraged a yearslong national labor movement and a growing disgust for wealthy individuals and corporations among many Americans — starting with his first time addressing the union’s more than 400,000 members during his inauguration speech in March.

“We’re here to come together to ready ourselves for the war against our only one and only true enemy, multibillion-dollar corporations and employers who refuse to give our members their fair share,” Fain said at the time. “It’s a new day in the UAW.”

Fain’s comments Friday morning as he joined UAW members and supporters picketing outside a Ford plant in Michigan — one of three facilities the company is currently striking — echoed everything he said during that first speech.

“We got to do what we got to do to get our share of economic and social justice in this strike,” Fain said outside the Ford Bronco SUV and Ranger pickup plant. “We’re going to be out here until we get our share of economic justice. And it doesn’t matter how long it takes.”

Fain’s upbringing plays into his strong unionism and religious beliefs, which he has growingly talked about with members as he emphasizes “faith” in the UAW’s cause. Two of his grandparents were UAW GM retirees, and one grandfather started at Chrysler in 1937, the year the workers joined the union. Fain, who joined the UAW in 1994, even keeps one of his grandfather’s pay stubs in his wallet as “a reminder” of where he came from. 

National media and others really started paying attention to Fain when he said the union would withhold a reelection endorsement of President Joe Biden, who has called himself the “most pro-union president in history.” Fain and Biden have spoken and met, but the union leader has not shown much support for the president. In response to comments by the president Friday, Fain said: “Working people are not afraid. You know who’s afraid? The corporate media is afraid. The White House is afraid. The companies are afraid.”

While many past union leaders have talked such talk, Fain has thus far delivered on his promises to members without batting an eye — causing General Motors, Ford Motor and Stellantis to go into crisis mode this week as the UAW follows through on that promise to members.

“We’ve never seen anything like this; it’s frustrating,” Ford CEO Jim Farley told CNBC’s Phil LeBeau Thursday as he criticized Fain and the union for what he said was a lack of communication and counteroffers. “I don’t know what Shawn Fain is doing, but he’s not negotiating this contract with us, as it expires.”

In a statement Friday, Ford said that the UAW’s partial strike at its Michigan Assembly Plant has forced it to lay off about 600 workers.

“This is not a lockout,” Ford said. “This layoff is a consequence of the strike at Michigan Assembly Plant’s final assembly and paint departments, because the components built by these 600 employees use materials that must be e-coated for protection. E-coating is completed in the paint department, which is on strike.”

GM CEO Mary Barra echoed Farley’s feelings Friday morning on CNBC’s “Squawk Box.”

“I’m extremely frustrated and disappointed,” she said. “We don’t need to be on strike right now.”

Both CEOs said everything they could to indicate they believe Fain may not be bargaining in good faith without using those exact words, which could justify a complaint with the National Labor Relations Board.

The UAW in late August filed unfair labor practice charges against GM and Stellantis with the NLRB, alleging they did not bargain with the union in good faith or a timely manner. It did not file a complaint against Ford. GM and Stellantis have denied those allegations.

Ford CEO Jim Farley: No way we would be sustainable as a company with UAW's wage proposal

Several past union leaders and company bargainers who spoke to CNBC hailed the way Fain has been able to propel the UAW into the national spotlight, including pausing bargaining for a Friday rally and march with Sen. Bernie Sanders, the progressive lawmaker from Vermont. Sanders, whose surprise 2016 Democratic presidential primary win in Michigan helped cement his national prominence, has lent support to numerous labor movements around the country as he rails against the billionaire class.

“I think they’re just doing an outstanding job,” said respected former UAW President Bob King, who cited growing support for the union among the public and the union’s own members. “Both those measurements say that UAW communications has been outstanding.”

UAW members have taken notice — especially after many of them disdained union leadership during and after a yearslong federal corruption investigation that landed two past UAW presidents and more than a dozen others in prison.

“For all the years that I’ve worked here, it’s never been this strong,” said Anthony Dobbins, a 27-year autoworker, early Friday morning while picketing the Ford plant in Michigan. “This is going to make history right here because we are trying to get what we deserve.”

Dobbins, a UAW Local 600 union representative, balked at current record offers by the automakers that have included roughly 20% pay increases, thousands of dollars in bonuses, retention of the union’s platinum health care and other sweetened benefits.

“That’s not working for us. Give us what we asked for,” Dobbins said. “That’s what we want. We have to work seven days, overtime, just to make ends meet.”

United Auto Workers President Shawn Fain, center, poses with Anthony Dobbins, right, a 27-year autoworker, and others as the union pickets a Ford plant in Wayne, Michigan, Sept. 15, 2023.

Michael Wayland / CNBC

Key demands from the union have included 40% hourly pay increases; a reduced, 32-hour, workweek; a shift back to traditional pensions; the elimination of compensation tiers; and a restoration of cost-of-living adjustments. Other items on the table include enhanced retiree benefits and better vacation and family leave benefits.

Automakers have argued such demands would cripple the companies. Farley even said the company would have “gone bankrupt by now” under the union’s current proposals and members would not have benefited from $75,000 in average profit-sharing over the last decade.

Ford sources said the automaker would have lost $14.4 billion over the last four years if the current demands had been in effect, instead of recording nearly $30 billion in profits.

Such profits are exactly what Fain has said UAW members deserve to share in. But his strategy to get workers a larger piece of the pie carries great risks.

“This is not going to be positive from an industry perspective or for GM,” Barra said Friday.

Many outside the union believe if Fain pushes too hard, it could lead to long-term job losses for the union. A former high-ranking bargainer for one of the automakers told CNBC that it’s nearly guaranteed the companies cut union jobs through product allocation, plant closures or other means to offset increased labor costs.

“They’re going to have to pay up. The question is how much,” said the longtime bargainer, who agreed to speak on the condition of anonymity. “This ends up with fewer jobs. That’s how the automakers cut costs.”

Fain and other union leaders have argued that meeting the companies in the middle has led to dozens of plant closures, fewer union members and a growing divide between blue-collar workers and the wealthy.

So why not fight?

“This is about us doing what we got to do to take care of the working class,” Fain said Friday. “This isn’t just about the UAW. This is about working people everywhere in this country. No matter what you do for a living, you deserve your fair share of equity.”

GM CEO Mary Barra on UAW strike: We put a historic offer on the table

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Jim Cramer’s top 10 things to watch in the stock market Thursday

My top 10 things to watch Thursday, Sept. 14

1. U.S. equities edge up in premarket trading, with investors largely betting the Federal Reserve won’t raise interest rates further when the central bank convenes next week. The S&P 500 is up 0.33%, while the Nasdaq Composite is 0.24% higher. U.S. government bond yields tick up, with that of the 10-year Treasury hovering just below 4.3%.

2. Oil prices continue to climb higher, with West Texas Intermediate crude, the U.S. oil benchmark, climbing above $90 a barrel for the first time since last November. Club oil holdings Coterra Energy (CTRA) and Pioneer Natural Resources (PXD) are up 1.48% and 0.88%, respectively, in early trading. Here’s the Club’s take on oil’s 10-month highs.

3. U.S. wholesale inflation climbs more than expected in August, according to the Labor Department’s monthly producer price index. At the same time, U.S. retail sales come in higher than predicted for last month, the Commerce Department reports, though the gains are largely driven by higher gasoline prices.

4. The European Central Bank raises interest rates by a quarter percentage point, bringing its deposit rate to a record-high 4%. The increase is the ECB’s 10th-conesecutive rate hike.

5. British chip designer Arm Holdings, owned by SoftBank Group (SFTBF), sets its highly anticipated initial public offering at $51 a share, valuing the company at over $54 billion. At this price, there’s not a lot of room for error. The firm will start trading Thursday on the Nasdaq under the stock symbol ARM.

6. The European Union launches an “anti-subsidy” investigation into China’s electric-vehicle companies, with Beijing calling the move “blatant protectionism.” Will Europe go 27.5% tariffs on Chinese cars? This could be a real issue for China.

7. China’s central bank is cutting the reserve requirement ratio for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points from Sept. 15, in the government’s latest effort to prop up its faltering economy.

8. Jim Farley, the CEO of Club holding Ford Motor (F), rejects allegations by United Auto Workers President Shawn Fain that the automaker is not taking bargaining seriously ahead of a Thursday night strike deadline. Here’s the Club’s take on how a union strike could impact Ford.

9. KeyBank raises its price target on Chip designer Cadence Design Systems (CDNS) to $290 a share, up from $270, while reiterating an overweight rating on the stock. The firm’s call comes after KeyBank analysts met with early users of the company’s new AI-enabled EDA design portfolio. Cadence is a partner of AI chipmaker and Club holding Nvidia (NVDA).

10. Wolfe Research upgrades ecommerce firm Etsy Inc. (ETSY) to outperform, from peer perform, with a $100-per-share price target. The firm cites “many paths” for Etsy shares to outperform over the next 12-18 months.

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Why auto worker strikes against GM, Ford and Stellantis seem inevitable

Members of the United Auto Workers union hold a rally and practice picket near a Stellantis plant in Detroit, Aug. 23, 2023.

Michael Wayland / CNBC

DETROIT – United Auto Workers President Shawn Fain appears ready to fire up the picket lines.

The union’s bulldog new leader has repeatedly vowed to drive a hard bargain with Detroit automakers General Motors, Ford Motor and Stellantis in contract negotiations ahead of an expiration at 11:59 p.m. on Sept 14.

He’s maintained it’s a hard deadline that his leadership team does not plan to extend, like the union has in the past, and that he’s not afraid to take roughly 150,000 auto workers out of factories if necessary.

That — plus the revelation late Thursday that Fain and the union filed unfair labor practice charges against GM and Stellantis with the National Labor Relations Board, claiming the companies weren’t bargaining in good faith — makes a strike against one, if not all three of the automakers, increasingly inevitable.

Unlike prior union leaders, Fain is attempting to negotiate with all three automakers at once, refusing to select a “target” company to focus on while extending deals at the others. He’s also been far more confrontational with the automakers compared to previous union leaders, at times launching personal attacks on executives.

There’s a belief among some industry analysts and experts that a strike, or several, may be necessary to convince UAW members that the union leaders fought as hard as they could to reach the demands.

“I expect there to be a strike,” said Art Wheaton, a labor professor at the Worker Institute at Cornell University. “I think there’s a reasonable chance they strike Stellantis first and then give a couple more days for Ford and GM to give a better offer.”

Wheaton believes that a strike at Stellantis is nearly guaranteed with the sides as far apart as they are now. The union could use that work stoppage as a warning to GM and Ford to finalize their deals, he said.

“I think a strike is almost essential at Stellantis or they will never get a deal ratified,” Wheaton said. “Stellantis is picking a fight, saying, ‘Try me if you dare.'”

Strikes could take various forms, including a national strike, where all workers under the contract cease working, or targeted work stoppages at certain plants over local contract issues.

During a Facebook Live on Aug. 8, 2023, UAW President Shawn Fain

Screenshot

Prolonged strikes against all three of the automakers would be unprecedented and quickly impact the automotive supply chain, U.S. economy and domestic production.

The Biden administration has taken particular interest in the talks, including the appointment of longtime Democratic adviser Gene Sperling to monitor the situation for the White House.

Wall Street watching

Wall Street has warned of a potential work stoppage for several months, and investors have taken heed.

A brief survey of 99 investors by Morgan Stanley found 58% believe a strike is “extremely likely.” That’s followed by 24% who said it’s “somewhat likely.” Just 16% said a strike was unlikely, while 2% said it was “neither likely not unlikely.”

Industry and labor experts agree, and for good reason.

The impending contract deadline follows combative rhetoric by Fain and other union leaders; a years-long labor movement involving work stoppages, including the UAW; and ambitious demands by the union for 40% or more pay increases, retention of platinum healthcare and a 32-hour workweek.

Such demands aren’t typically made public or even fully reported until close to the end of the negotiations, in part as an effort to bargain in good faith but also to avoid setting expectations — either too high or too low — for UAW members, who need to ratify the contracts after the sides announce a tentative agreement.

“I’ve always said that the best way to reach agreements is to be negotiating with each other and not in the newspapers, TV or anywhere else,” said Dennis Devaney, senior counsel at Clark Hill who formerly served as a NLRB board member and attorney for GM and Ford. “I don’t think the public negotiation … is really going to move things along.”

United Auto Workers members on strike picket outside General Motors’ Detroit-Hamtramck Assembly plant on Sept. 25, 2019 in Detroit.

Michael Wayland / CNBC

o be clear, it’s not exclusively up to Fain to call for strikes. It’s up to the UAW’s 14-member International Executive Board (IEB), which Fain leads as president. The leaders, based on weighted votes, must approve such a work stoppage by a two-thirds majority vote.

Then there’s the question of how long a strike would last.

Of its surveyed investors, Morgan Stanley found the vast majority of respondents (96%) expected a potential strike to last longer than a week. Over a third (34%) expect the strike to last longer than a month.

A strike against GM in 2019 during the last round of contract negotiations lasted 40 days and cost the automaker $3.6 billion in earnings that year, GM reported at the time.

The UAW has more than $825 million in its strike fund, which it uses to pay eligible members who are on strike. The strike pay is $500 per week for each member.

Assuming 150,000 or so UAW members covered by the contracts, strike pay would cost the union about $75 million per week. A fund of $825 million, then, would cover about 11 weeks. One caveat: that doesn’t include health-care costs that the union would cover, such as temporary COBRA plans, that would likely drain the fund far more quickly.

Ratification

For much of the union’s history, it was largely expected that members would ultimately approve whatever deal was bargained and endorsed by UAW leaders.

However, in recent negotiations, that hasn’t been the case and the sides have needed to return to the negotiating table.

That was the situation two rounds of negotiations ago, in 2015, with then-Fiat Chrysler, now Stellantis, workers, who voted down a tentative agreement. That same year, GM skilled trade workers also voted against a tentative deal with the Detroit automaker, stalling ratification.

Typically, once a tentative deal is reached between the union and an automaker, the members of that automaker will then vote by local organization on whether to accept the tentative agreement and make it a contract. The whole ratification process can take about two weeks for each company.

“The UAW’s tentative agreement with an automaker is really a set of agreements—the main text, as well as appendixes for different aspects, such as pensions and retirement plans, health care benefits, supplemental unemployment benefits, profit sharing, personal savings plans, life and disability benefits, dependent care benefits, and salaried workers (for those who are also UAW-represented),” said Kristin Dziczek, automotive policy advisor for the Federal Reserve Bank of Chicago’s Detroit branch, in a blog post.

In 2019, it took eight additional weeks to negotiate and ratify all three agreements once the first tentative agreement was reached following GM’s strike. The negotiations and ratification voting ended in early December.

Spokespeople for the automakers declined to comment directly for this article, but reiterated that their teams continue to bargain in good faith with the union in hopes of deals that benefit both sides.

– CNBC’s Michael Bloom contributed to this report.

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How gas station economics will change in the electric vehicle charging future

As electric vehicles proliferate, some gas stations are making expensive overhauls to add EV charging stations. 

In most cases, they aren’t scrapping traditional liquid fuel pumps. But select locations, including an RS Automotive in Takoma Park, Md., and a Shell station in Fulham, England, have made a full switch.

Location, cost, power requirements and conversion time are among the multiple considerations that factor into a gas station’s decision to convert all or a portion of their existing infrastructure to allow for EV charging. 

“Figuring out how to do this on an active site can be complex and challenging,” said Neha Palmer, chief executive of TeraWatt Infrastructure, which is developing a network of electric vehicle charging centers for fleet operations across California, Arizona, and New Mexico. “How do you sequence the construction when you have vehicles that might want to fuel there?” 

Here’s what gas station owners need to know about the EV charging trend and their future.

The EV fast-charging model

Locations like office complexes, hospitals and hotels typically offer a slower charging option, since people generally stay put for hours at a time. Gas stations, however, are investing in Level 3 chargers, which are more powerful and generally charge a car in 20 to 30 minutes. 

While slower charging stations are often free to motorists, that’s not generally true for fast charging stations, given ongoing operational expenses such as electricity and extra fees charged by utilities in commercial settings, said Seth Cutler, chief operating officer of EV Connect, whose software tools help companies build charging station networks.

Big oil company franchisers and car dealers are on board

For large oil giants, adding EV chargers is both a defensive and offensive play. 

Gas station numbers have been decreasing at a sharp rate in the past three decades and the trend is expected to continue in the coming years, according to Shubhendra Anand, vice president of research and strategy at Market Research Future. In fact, at least a quarter of service stations globally are at risk of closure by 2035 without significant business model tweaks, according to consulting firm BCG.

The Biden administration has a stated goal of having 500,000 electric vehicle chargers nationally where EVs make up at least 50% of new car sales by 2030. By current administration estimates, there are more than three million EVs and more than 130,000 public chargers nationwide.

The European oil majors are among the energy sector leaders in the global EV charging push.

Shell has EV-charging-only mobility hubs in China and the Netherlands, in addition to the Fulham location. The company intends to own more than 70,000 public EV charge points worldwide by 2025, and 200,000 by 2030, according to an email statement from Barbara Stoyko, senior vice president of mobility for Shell Americas.

BP also sees the need for mixed-use hybrid refueling and EV charging stations, according to Sujay Sharma, chief executive of BP’s electric vehicle charging business in the U.S. “Today’s gas stations are well positioned to adopt EV charging due to locations in high-demand areas, in addition to their existing convenience offerings including restrooms, food and beverage,” Sharma stated in an email. 

Franchise car dealers are also increasingly getting on board, thanks to pushes from automakers like GM and Ford.

As of late last year, 65% of Ford’s dealers had opted into the EV certification program (a little under 2,000, according to data shared by Ford), as it has started to make the role of car dealers central to the EV transition process. 

The National Automobile Dealers Association said in a May release that franchise owners will spend an estimated $5.5 billion on EV infrastructure across OEM brands, with per store costs ranging from $100,000 to over $1 million. 

Upfront costs can be jaw-dropping, incentives help

Adding EV charging capabilities is not a one-two decision that owners should take lightly. Indeed, the return on investment could be seven to 10 years on average, according to an estimate provided by Yair Nechmad, co-founder and chief executive of Nayax, a global commerce enablement and payments platform, which offers its services to gas stations.

The hardware and software for fast charging can run between $50,000 for one charger and $500,000 for multiple fast chargers and dispensers, said Michael Hughes, chief revenue officer of ChargePoint Holdings, a technology company that makes EV charging hardware and software to help drivers find local charging stations and amenities. The infrastructure, meanwhile, which includes the cost of breaking ground, running power, permits and contractors, generally costs about twice that, he said.

That makes it advisable to incur all the infrastructure changes upfront, even if a gas station only intends to make a few chargers available at the onset, said Rohan Puri, chief executive of Stable Auto Corporation, which helps make charging stations more profitable for companies that own and operate them. His advice: “Put in as much power as you think you’re going to need in 10 years.”

There are numerous federal, state and utility-based incentives for commercial businesses to purchase and install fast chargers. This includes the U.S. Department of Transportation’s Federal Highway Administration NEVI Formula Program, which provides generous funding to states to strategically deploy EV charging stations. 

Gas station owners can search for information on incentive programs they may qualify for.

Location is a key factor, gas station franchise concerns

Even with incentives, there can be barriers to entry, location being a major factor. According to the U.S. Department of Energy, 80 percent of EV charging happens at home, which makes adding EV charging less appealing for in-town gas stations, Hughes said. Local gas stations also don’t generally have amenities to keep people entertained while they are charging their vehicles.

Real estate can also be prohibitive. A traditional gas station may have two islands with four pumps each for liquid fuel; the same utilization rate would require about 40 charging stations, Hughes said.

By contrast, gas stations along major highways between highly traveled destinations can be ideal for electric charging hubs. These locations tend to have multiple amenities, offering people the opportunity to grab a cup of coffee, get a quick bite to eat, stretch their legs or walk the dog while they charge their vehicle, Hughes said.

Convenience stores like Sheetz, Wawa, Royal Farms and Buc-ee’s that double as gas station operators are also starting to add electric chargers at certain locations, said Albert Gore, executive director of The Zero Emission Transportation Association, a federal coalition that advocates for EVs, and who is a former Tesla and SolarCity executive. It can’t be “a place that you’re just going to run in and buy a Snickers,” Gore said.

While there can be a first-mover advantage for gas stations, some owners, like Blake Smith, founder of SQRL Holdings, a gas station and convenience store operator, are taking it slow. His company operates more than 150 convenience store gas station locations and offers electric charging in select locations in Florida. By contrast, the company hasn’t installed any EV charges in Arkansas, where it has more than 60 stations.

“I would never recoup my investment,” he said, adding that a move to all electric charging could be decades away. “We’re not flipping a switch to where gas vehicles are getting off the road and it will be EV-only.”

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What Wall Street needs to know about UAW talks, a potential strike, and what it could all cost

United Auto Workers members on strike picket outside General Motors’ Detroit-Hamtramck Assembly plant in Detroit, Sept. 25, 2019.

Michael Wayland / CNBC

DETROIT – The Oracle of Omaha is cutting exposure to the U.S. automotive industry amid union negotiations — potentially for good reason.

Warren Buffett’s Berkshire Hathaway this week said it nearly halved its stake in General Motors in the second quarter. While the firm didn’t disclose its reasoning, the sale front runs what is expected to be a challenging end of the year for the U.S. automotive industry, plagued by contentious contract talks between the United Auto Workers union and GM, Ford Motor and Stellantis.

The talks, which cover nearly 150,000 U.S. auto workers, could cost the automakers billions of dollars in additional labor costs, work stoppages or, in a worst-case scenario, both.

New UAW leadership team has dubbed these talks the union’s “defining moment.” President Shawn Fain has already deployed harsh messaging and a few theatrics, including throwing contract proposals by Stellantis in a trash bin, and there’s been little to no talk about “give and take” or “win-win” deals.

“They’re ready to strike if a deal does not happen,” said Melissa Atkins, a labor and employment partner at Obermayer. “Going in with that mindset, I anticipate it being very contentious … and just given the history, there probably will be a strike.”

Aggressive efforts by the union are great for organized labor and the embattled UAW, which is attempting to regain its footing after a yearslong federal corruption probe landed several top leaders in prison for bribery, embezzlement and other crimes — but not for the companies or their shareholders.

Here are the numbers investors should know ahead of the expiration date for current contracts between the Detroit automakers and UAW at 11:59 p.m. ET on Sept. 14.

$80 billion

Contract proposals made by the UAW at this point would add more than $80 billion in labor costs for each of the biggest U.S. automakers over the length of the contract, Bloomberg News first reported earlier this month.

“One might think of these UAW contracts as a set of three large purchase orders to secure the labor needed to assemble future vehicles, parts, and components—contracts that are collectively worth roughly $70–$80 billion over the course of the next four years,” Kristin Dziczek, automotive policy advisor for the Federal Reserve Bank of Chicago’s Detroit branch, wrote in a Wednesday blog post.

United Auto Workers President Shawn Fain greets workers at the Stellantis Sterling Heights Assembly Plant, to mark the beginning of contract negotiations in Sterling Heights, Michigan, U.S. July 12, 2023. 

Rebecca Cook | Reuters

The demands include a 46% wage increase, restoration of traditional pensions, cost-of-living increases, reducing the work week to 32 hours from 40 and increasing retiree benefits.

If the UAW gets those demands, without any changes to other benefits, the all-in hourly labor cost for the automakers would more than double from at least $64 per hour to more than $150 per hour, according to media reports.

That would be a significant increase over wage hikes seen during the previous four-year agreements, according to estimates from the Center for Automotive Research. The 2019 deals were projected to increase average hourly labor costs over the length of the contracts by $11 per worker for then-Fiat Chrysler, now Stellantis, and $8 per worker at GM and Ford.

Under the current pay structure, UAW members start at about $18 an hour and have a “grow-in” period of four years to reach a top wage of more than $30 an hour.

$5 billion

A work stoppage by nearly 150,000 UAW workers at GM, Ford and Stellantis would result in an economic loss of more than $5 billion after 10 days, according to Anderson Economic Group, a Michigan-based consulting firm that closely tracks such events.

AEG estimates the total economic loss by calculating potential losses to UAW workers, the manufacturers and to the auto industry more broadly if the sides cannot reach tentative agreements before the current contracts expire.

In another analysis, Deutsche Bank previously estimated that a strike would hit earnings at each affected automaker by about $400 million to $500 million per week of production.

Strikes could take several forms: a national strike, where all workers under the contract cease working, or targeted work stoppages at certain plants over local contract issues. A strike against all three automakers, as Fain has alluded to, would be the most impactful but also the riskiest and most costly for the union.

$825 million

The UAW has more than $825 million in its strike fund, which it uses to pay eligible members who are on strike. The strike pay is $500 per week for each member – up from $275 in 2022.

Speaking in front of a backdrop of American-made vehicles and a UAW sign, President Joe Biden, then a presidential candidate, speaks about new proposals to protect U.S. jobs during a campaign stop in Warren, Michigan, Sept. 9, 2020.

Leah Millis | Reuters

1.5 million

If the union decides to strike against all three Detroit automakers, production losses would quickly add up.

S&P Global Mobility estimates a 10-week strike would mean lost production of roughly 1.5 million units, according to an investor note from Mizuho Securities USA.

A 40-day strike against GM during the last round of negotiations in 2019 led to a production loss of 300,000 vehicles, the company said then. It also cost the automaker $3.6 billion in earnings, GM said.

Industry experts argue that a strike against all or any of the automakers would likely impact the operations and bottom lines of the companies more quickly than four years ago since the U.S. auto industry is still recovering from supply chain problems caused during the coronavirus pandemic.

Vehicle inventory levels for the automakers also are lower than they were heading into the talks four years ago.

Heading into 2019 contract negotiations, U.S. vehicle supply was 3.73 million — essentially enough units to last 86 days of selling under normal conditions at the time, according to Cox Automotive. The industry is currently just under 2 million units, with 56 days’ supply.

“In 2019, there was quite a slack in there. There’s almost no slack now,” AEG CEO Patrick Anderson said Thursday during a webinar with the Automotive Press Association. “If we are to get a strike, within the first week, the numbers start to get serious for each of the automakers.”

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How the job of Amazon delivery has changed with Rivian’s electric vans and routing software

For the 275,000 Amazon drivers dropping off 10 million packages a day around the world, the job can be a grind. But a lot has changed since drivers in 2021 told CNBC about unrealistic workloads, peeing in bottles, dog bites and error-prone routing software.

Among the biggest developments is the arrival of a brand-new electric van from Rivian.

Amazon was a big and early investor in the electric vehicle company, which went public in late 2021 with a plan to build trucks and SUVs for consumers and delivery vans for businesses. Since July, Amazon has rolled out more than 1,000 new Rivian vans, which are now making deliveries in more than 100 U.S. cities, including Baltimore, Chicago, Las Vegas, Nashville, New York City and Austin, Texas.

The partnership began in 2019, when Amazon founder and ex-CEO Jeff Bezos announced Amazon had purchased 100,000 electric vans from Rivian as one step toward his company’s ambitious promise of reaching net-zero carbon emissions by 2040.

″[We] will have prototypes on the road next year, but 100,000 deployed by 2024,” Bezos said at the National Press Club in Washington, D.C., in September 2019. Amazon has since revised the timeline, saying it expects all 100,000 Rivian vans on the road by 2030.

Rivian has faced several challenges in recent months. It cut back 2022 production amid supply chain and assembly line issues. Its stock price dropped so sharply last year that Amazon recorded a combined $11.5 billion markdown on its holdings in the first two quarters.

CNBC talked to drivers to see what’s changed with the driving experience. We also went to Amazon’s Delivering the Future event in Boston in November for a look at the technology designed to maximize safety and efficiency for delivery personnel.

For now, most Amazon drivers are still in about 110,000 gas-powered vans — primarily Ford Transits, Mercedes-Benz Sprinters and Ram ProMasters. Amazon wouldn’t share how it determines which of its 3,500 third-party delivery firms, or delivery service partners (DSPs), are receiving Rivian vans first. 

The e-commerce giant has been using DSPs to deliver its packages since 2018, allowing the company to reduce its reliance on UPS and the U.S. Postal Service for the so-called last mile, the most expensive portion of the delivery journey. The DSP, which works exclusively with Amazon, employs the drivers and is responsible for the liabilities of the road, vehicle maintenance, and the costs of hiring, benefits and overtime pay.

Amazon leases the vans to DSP owners at a discount. The company covers the fuel for gas-powered vans and installs charging stations for electric vehicles.

The company says DSP owners have generated $26 billion in revenue and now operate in 15 countries, including Saudi Arabia, India, Brazil, Canada, and all over Europe. 

What drivers think

In the early days of testing the Rivian vans, some drivers voiced concerns about range. An Amazon spokesperson told CNBC the vans can travel up to 150 miles on a single charge, which is typically plenty of power for a full shift and allows drivers to recharge the vehicle overnight.

As for maintenance, Amazon says that takes place at Rivian service centers near delivery stations or by a Rivian mobile service team, depending on location.

Julieta Dennis launched a DSP, Kangaroo Direct, in Baltimore three years ago. She employs about 75 drivers and leases more than 50 vans from Amazon. She now has 15 Rivian vehicles.

“It’s very easy to get in and out with all of the different handles to hold on to,” Dennis said. She said that some drivers were hesitant at first because the vehicles were so new and different, “but the moment they get in there and have their first experience, that’s the van that they want to drive.”

Baltimore DSP owner Julieta Dennis shows off a Rivian electric van at Amazon’s Delivering the Future event in Boston, Maryland, on November 10, 2022.

Erin Black

Brandi Monroe has been delivering for Kangaroo Direct for two years. She pointed to features on a Rivian van that are upgrades over what she’s driven in the past. There’s a large non-slip step at the back, a hand cart for helping with heavy packages and extra space for standing and walking in the cargo area.

“We have two shelves on both sides to allow for more space,” Monroe said, adding that she’d prefer to drive a Rivian for every shift. “And then the lights at the top: very innovative to help us see the packages and address a lot easier, especially at nighttime.”

There’s even a heated steering wheel.

Former driver B.J. Natividad, who goes by Avionyx on YouTube, says his non-electric van could get very cramped.

“I remember one time I had 23 or 24 bags and over 40 oversize packages and I had to be able to figure out how to stuff that all in there within the 15 minutes that they give us to load up in the morning,” said Natividad, who now works for USPS.

The Rivian vans have at least 100 more cubic feet than the Sprinter and up to double the cargo space of the Ford Transit vans Natividad drove in Las Vegas. Rivian vans are still small enough that they don’t require a special license to drive, though Amazon provides its own training for drivers.

One driver in Seattle, who asked to remain unnamed, was especially excited about the new Rivian vans. He offered an extensive tour of the new driving experience on his YouTube channel called Friday Adventure Club.

He said one of his favorite features is a light bar “that goes all the way around the back.” He also likes that the windshield is “absolutely massive,” the wide doors allow for easy entry and exit, and the cargo door automatically opens when the van is parked. There are two rows of shelves that fold up and down in the cargo area.

There’s also new technology, such as an embedded tablet with the driving route and a 360-degree view that shows all sides of the van.

Mai Le, Amazon’s vice president of Last Mile, oversaw the testing of the center console and Rivian’s integrated software.

“We did a lot of deliveries as a test,” Le said. “As a woman, I want to make sure that the seats are comfortable for me and that my legs can reach the pedals, I can see over the steering wheel.”

She demonstrated some of the benefits of the new technology.

“When we start to notice that you’re slowing down, that means that we can tell you’re getting near to your destination,” she said. “The map begins to zoom in, so you begin to find where’s your delivery location, which building and where parking could be.”

The new vans have keyless entry. They automatically lock when the driver is 15 feet away and unlock as the driver approaches. 

Workers load packages into Amazon Rivian Electric trucks at an Amazon facility in Poway, California, November 16, 2022.

Sandy Huffaker | Reuters

Cameras and safety

Above all else, Amazon says the changes were designed to make the delivery job safer.

A ProPublica report found Amazon’s contract drivers were involved in more than 60 serious crashes from 2015 to 2019, at least 10 of which were fatal. Amazon put cameras and sensors all over the Rivian vans, which enable warnings and lane assist technology that autocorrects if the vehicle veers out of the lane.

Dennis mentioned the importance of automatic braking and the steering wheel that starts “just kind of shaking when you get too close to something.”

“There’s just so many features that would really, really help cut back on some of those incidental accidents,” she said.

Amazon vans have driver-facing cameras inside, which can catch unsafe driving practices as they happen.

“The in-vehicle safety technology we have watches for poor safety behaviors like distracted driving, seat belts not being fastened, running stop signs, traffic lights,” said Beryl Tomay, who helps run the technology side of delivery as vice president of Last Mile for Amazon.

“We’ve seen over the past year a reduction of 80% to 95% in these events when we’ve warned drivers real time,” she said. “But the really game-changing results that we’ve seen have been almost a 50% reduction in accidents.”

As a DSP owner, Dennis gets alerts if her drivers exhibit patterns of unsafe behavior. 

“If something with a seat belt or just something flags, then our team will contact the driver and make sure that that’s coached on and taken care of and figured out, like what actually happened,” Dennis said.

That level of constant surveillance may be unsettling for some drivers. Dennis said that issues haven’t come up among her staffers. And Amazon stresses it’s focused on driver privacy.

“We’ve taken great care from a privacy perspective,” Tomay said. “There’s no sound ever being recorded. There’s no camera recording if the driver’s not driving and there’s a privacy mode.”

Amazon says the cabin-facing camera automatically switches off when the ignition is off, and privacy mode means it also turns off if the vehicle is stationary for more than 30 seconds.

Safety concerns extend beyond the vehicle itself. For example, an Amazon driver in Missouri was found dead in a front yard in October, allegedly after a dog attack.

Amazon says new technology can help. Drivers can choose to manually notify customers ahead of a delivery, giving them time to restrain pets. Another feature that’s coming, according to Le, will allow drivers to mark delivery locations that have pets.

Natividad said he had multiple close calls with dogs charging at him during deliveries.

“You customers out there, please restrain your dogs when you know a package is coming,” he said. “Please keep them inside. Don’t leave them just outside.”

Optimizing routes

Providing drivers with more efficient and better detailed routes could improve safety, too. Drivers in 2021 told us about losing time because Amazon’s routing software made a mistake, like not recognizing a closed road or gated community. In response, they sometimes tried to save time in other ways.

“People are running through stop signs, running through yellow lights,” said Adrienne Williams, a former DSP driver. “Everybody I knew was buckling their seat belt behind their backs because the time it took just to buckle your seat belt, unbuckle your seat belt every time was enough time to get you behind schedule.”

Amazon listened. The company has been adding a huge amount of detail to driver maps, using information from 16 third-party map vendors as well as machine learning models informed by satellite driver feedback and other sources.

One example is a new in-vehicle data collection system called Fleet Edge, which is currently in a few thousand vans. Fleet Edge collects real-time data from a street view camera and GPS device during a driver’s route.

“Due to Fleet Edge, we’ve added over 120,000 new street signs to Amazon’s mapping system,” Tomay said. “The accuracy of GPS locations has increased by over two and a half times in our test areas, improving navigation safety by announcing upcoming turns sooner.”

Tomay said the maps also added points of interest like coffee shops and restrooms, so in about 95% of metro areas, “drivers can find a spot to take a break within five minutes of a stop.”

In 2021, Amazon apologized for dismissing claims that drivers were urinating in bottles as a result of demanding delivery schedules. Natividad said he occasionally found urine-filled bottles in his vans before his shift in the mornings.

“As soon as I open the van, I’m looking around, I see a bottle of urine. I’m like, ‘Oh, I’m not touching this,'” he said.

Pay for Amazon drivers is up to the discretion of each individual DSP, although Amazon says it regularly audits DSP rates to make sure they’re competitive. Indeed.com puts average Amazon driver pay at nearly $19 an hour, 16% higher than the national average.

Natividad started delivering for Amazon in 2021 when his gigs as a fulltime disc jockey dried up because of the pandemic. He liked the job at the time, generally delivering at least 200 packages along the same route. However, during the holiday season that year, he once had more than 400 packages and 200 stops in a single shift.

“Towards the end of my day, they sent out two rescues to me to help out to make sure everything’s done before 10 hours,” he said.

Amazon is working to optimize its routes. But it’s an unwieldy operation. The company says it’s generated 225,000 unique routes per day during peak season.

Tomay said the company looks at the density of packages, the complexity of delivery locations “and any other considerations like weather and traffic from past history to put a route together that we think is ideal.”

There’s no one-size-fits-all solution.

“Given that we’re in over 20 countries and every geography looks different, it’s not just about delivery vehicles or vans anymore,” Tomay said. “We have rickshaws in India. We have walkers in Manhattan.”

In Las Vegas, Amazon held a roundtable last year for DSP owners and drivers. Natividad says he spoke for 20 minutes at the event about the need for Amazon to improve its routing algorithms.

“I think they should do that probably once a month, with all the DSP supervision and a few of the drivers, and not the same drivers every time. That way different feedback is given. And like seriously listen to them,” Natividad said. “Because they’re not the ones out there seeing and experiencing what we go through.” 

Natividad didn’t get to try out the routing technology in the Rivian vans before he left to deliver for USPS in July. He’s excited that the postal service is following in Amazon’s footsteps with 66,000 electric vans coming by 2028.

Amazon, meanwhile, is diversifying its electric fleet beyond Rivian. The company has ordered thousands of electric Ram vans from Stellantis and also has some on the way from Mercedes-Benz.

Correction: Julieta Dennis launched a DSP, Kangaroo Direct, in Baltimore three years ago. An earlier version misspelled her name.



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