Every day brings us closer to the movie Canadian Bacon becoming a reality. While we may never see a fighting war with Canada, there’s a bit of an economic showdown starting, and there’s a lot of posturing. The current target? Stellantis.
I intended to start yesterday’s Morning Dump with the news that Stellantis was going to make a big investment in the United States, but got sidetracked by another story. That investment is both good news for America and sensible for the company, which hadn’t placed enough importance on the market.
Something has to give, though, and the give seems to be coming from Canada, which is seeing Jeep Compass production move to Illinois. Canadian politicians are extremely mad. You know who is maybe going to be less angry at Stellantis soon? Dealers, allegedly.
I’ve been waiting for the moment when private credit would appear in the Dump, and it seems the moment has come. GM made a deal to sell $2 billion in loans to private credit.
Stellantis Makes A Big Bet On America
Some of the announcements made in the last few months by companies about expanding in the United States felt like repackaging planned commitments in order to placate the President. What Chrysler, Jeep, Dodge, Ram, Vernors Ginger Ale, Leapmotor, and Alfa Romeo parent company Stellantis announced this week is more than that.
The $13 billion expansion includes some plans likely considered before the last election, but a lot of this is new. There’s the midsize truck that’s going to be built in Toledo, a large SUV to be built in Warren that’s likely to be Wagoneer-based (A big Chrysler? A new Dodge?), and some other stuff as well.
“This investment in the U.S. – the single largest in the Company’s history – will drive our growth, strengthen our manufacturing footprint and bring more American jobs to the states we call home,” said Antonio Filosa, Stellantis CEO and North America COO. “As we begin our next 100 years, we are putting the customer at the center of our strategy, expanding our vehicle offerings and giving them the freedom to choose the products they want and love.”
“Accelerating growth in the U.S. has been a top priority since my first day. Success in America is not just good for Stellantis in the U.S. — it makes us stronger everywhere,” Filosa said.
Because my biggest complaint was that Stellantis made all its money in the United States and then invested little of it back here, this about-face by the new leadership is welcome news.
Unless you’re in Canada.
‘I’m Not Going To Give Them A Penny,’ Ontario Premier Doug Ford Is Big Mad
North America’s automotive industry is, or was, a highly interconnected machine. This goes back decades, though it really ramped up after the North American Free Trade Agreement and, more recently, with the USMCA in President Trump’s first term.
If you’re a carmaker, this has (or had) many benefits. You could build cars in certain places where labor was cheap or energy was abundant. If the facts on the ground didn’t make a good business case, there was always some form of tax break to be had.
Those tax breaks are now at issue because Jeep had initially planned to build the new Jeep Compass in Brampton, Ontario, Canada. Now it’s going to be in Illinois.
There’s a lot going on here. For one, it was recently leaked that U.S. Commerce Secretary Howard Lutnick suggested Canada should take a “U.S.-first, Canada-second” policy when it comes to carmaking. The Canadians do not love this.
The timing of this announcement from Stellantis has set off a lot of anger in Canada. This story from The Toronto Star is just full of mad elected officials, including Ontario’s Premier Doug Ford:
The premier said the auto giant told him 1,500 of the 3,000 Brampton jobs in jeopardy could move to Windsor where Stellantis is building an EV factory.
But Ford, who along with Ottawa has committed billions in production tax credits to Stellantis, warned the company that it needs to hold up its end of the deal.
“I’m not going to give them a penny because it was tied in to making sure Windsor and Brampton keep going. And we haven’t given them a penny for Brampton yet,” he said, noting he will be meeting privately with Prime Minister Mark Carney on Thursday in Toronto.
“We gave about $55 million out of the couple billion that the feds and I and the companies agreed.”
The current Prime Minister, Mark Carney, got elected partially because everyone was angry with the United States for implying Canada should become the 51st state. So I’m sure this will all go nicely and calmly for everyone involved.
Stellantis Says It’s Being Less ‘Disrespectful’ Toward Suppliers
The outgoing Stellantis administration did a great job of squeezing suppliers, adding them to the list of people who kinda hated them. The company has been trying to mend fences, and now you can add suppliers to this list.
Marvin Washington, vice president of purchasing for the automaker, said Oct. 15 that the company is working to win back the trust of its supply base.
“I can honestly say that we’ve lost over the last year or so some of the trust of the suppliers, and we’re building it back up,” Washington said. “Fourth quarter last year, we had a huge cut in volumes without notice to the supply base, and it’s disrespectful to the supply base to make a move like that, because our suppliers have investment and forecasts and expenses and shocks to their system. It hurts their stock price. It’s damaging to them.”
You gotta start somewhere.
GM Sold $2 Billion In Loans To Private Credit
When GM’s finance arm, General Motors Financial, wants to make a bunch of loans, it usually borrows the money via the public bond market. While that’s still usually what happens, GM did something a little different recently. It used private credit.
If you’re not familiar, private credit is sort of exactly what it sounds like. Instead of going to the public markets for money, you get it from private investors. There are pros to this (and some big cons).
Why did GM suddenly decide to take some of these “prime” loans and sell them this way? This Bloomberg report suggests some reasons:
It’s unusual for major auto lenders like GM to privately sell large pools of loans directly to investors, according to market participants. But selling debt directly can be faster than using public securities, and deals like GM’s can help demonstrate to ratings firms that companies have multiple avenues for raising money, a sign of a stronger and more creditworthy borrower.
GM’s issuance of asset backed securities has waned this year. So far it has sold $5 billion of ABS backed by auto loans, data compiled by Bloomberg shows, after selling at least $8 billion of the bonds annually for each of the last five years. With US holidays in late November and December, there are a dwindling number of days for it to sell more debt. The company’s vehicle for selling bonds backed by subprime auto loans, known as AmeriCredit Automobile Receivables Trust, hasn’t completed any deals so far this year, according to Bloomberg data.
Despite private credit’s rapid growth in recent years, some on Wall Street have been sounding the alarm that the opaque nature of this “shadow” lending market could be hiding underappreciated risks.
Remember yesterday when JPMorgan boss Jamie Dimon complained about cockroaches? It’s probably not these specific loans he was talking about, but the showdown between traditional lenders and alternative ones is starting to get serious.
What I’m Listening To While Writing TMD
As far as musical operations named after Graham Greene stories go, England Made Me by Black Box Recorder has to be up there (though I’m partial to Third Man Records). Enjoy the strange “Child Psychology” on this fine Thursday.
The Big Question
What’s your favorite Canadian car?
Top graphic images: Stellantis; Gramercy Pictures
Gotta love The Eventful Frontenac! (TM)
My favourite Canadian car would probably be the Volvo 240 wagon. Volvo had an assembly plant in Halifax.
I am so pissed off what the USA’s government has become under Trump 2.0. I didn’t like it under 1.0, but it’s so much worse this time around. Ludnick sounds like a portmanteau for Luddite and Dick. And he appears to be both. As is his boss.
If it weren’t for the fact that my mother is still alive and in this country, I’d be somewhere else.
Wow, this article just proves why America is so messed up — people start talking about things they clearly don’t understand. The U.S. and Canadian auto industries have been tied together for over seventy years, ever since the 1965 Auto Pact made us one production system. Cars built here use U.S. parts, and U.S. cars depend on Canadian manufacturing. Automakers build in Canada for a reason: our dollar is worth 25–30% less, so they save a third on every part before it even leaves the factory. And Canadian workers deliver higher quality and fewer mistakes — Toyota, GM, and Ford have all said so for decades. We don’t cut corners; we build things right. So when Stellantis takes government money and then ships jobs south, it’s not “Canada whining,” it’s frustration at being treated like the cheap extension of America’s industry. If you really think Canada doesn’t matter, try building your cars without our parts, steel, and labor — you’ll find out fast what “Made in America” really costs.
> tied together for over seventy years, ever since the 1965 Auto Pact made us one production system
That’s sixty years. Maybe the Canadian year isn’t doing super well against the US year.
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“Why Canada Is Pissed At Jeep’s Parent Company Stellantis”
Do they even need a reason?
“What’s your favorite Canadian car?”
My Dads old Dodge Caravan. Even though it was the basest of the basic; 2.4l I4/3A, steel wheels, three doors and primer trim it was a wonderful vehicle.
My. Favorite Canadian car was my Canadian market Windstar I bought in Dearborn, Michigan from a Ford dealer. Big Bertha lasted for over200,000 miles. I went from Detroit, Michigan to Oklahoma City pulling a trailer and got 28 mpg. We had it for 13 years. with it being driven by a beginning driver at 16 to her graduating college. Many a band competition, front and rear air conditioning really helped in 100 degree weather. Oh yeah we had a 2008 Edge that lasted for7 year s. We now drive a 2020 Edge with 82,000 miles on it. I also had a 2004 Windstar that lasted thru 4 boys and 50,000 miles until I traded it in for Big Bertha.
Huh? I thought Stellantis was a trans-Atlantic merger of Fiat , Peugeot and Chrysler? How did it suddenly become an ‘American’ company?