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
My favorite Canadian car? Probably Red Green’s Possum Van. Even if it’s fictional, the rusty old ’80s Dodge Ram Van painted like a possum embodies the idea you can do anything with imagination, a go-getter attitude, and a basic understanding (or misunderstanding) of mechanics. Also Duct Tape. Lots of Duct Tape.
If the women don’t find you handsome, they should at least find you handy.
Story of my life !
While not originally a Canadian company, I nominate Intermeccanica. I love their weirdness and resourcefulness. The ElectraMeccanica stuff also intrigues me. I once accidentally wandered into their production facility. I was looking for another business I was to visit and got the address wrong. One of the workers offered to show me around. That was fun.
As for the pharmaceutical/pet food company, building more new cars isn’t the same as selling them profitably. I expect we will continue to hear about these plants being regularly idled.
Well, the old Ford 351W has a W for a reason, Windsor Canada.
Not many people know this story:
https://hikingthegta.com/2022/11/13/torontos-model-t-factory/
Ford had a similar assembly plant on Baum Blvd in Pittsburgh. The bulding is now used by the University of Pittsburgh.
The Toronto one became a Planter’s Peanut facility. I grew up right near there and the old timers would tell me it was a car factory at one time. I thought they were messing with me. It was so hard to imagine.
Most of my modern Canadian time is spent up in BC.
Where you travel SOUTH from the US to cross the border.
You mean Alaska? 😉
Point taken, was focused on the contiiguous states.
I assumed that. Those other second class ‘murcans aren’t worth noting. Angle, Point Roberts, probably even Hawaii. Not to mention the territories… 🙂
We already know that some of the Stellantis announcement is a bit of fluff. The ALL-NEW 4-cylinder engine is just a refreshed version of the existing GME4 2.0T; I think they announced NA production of the Peugeot 1.6T for the Cherokee hybrid a year ago. The 2 NEW Jeep vehicles might just be refreshes of the Wagoneers (the EREV might be considered a seperate model). The next-gen Durango is probably just another refresh.
The ALL-NEW mid-size truck is going to be a Ram/Dodge that should bring back utilization after Gladiator sales have crumbled and Wrangler sales took a hit after the Bronco released.
Reintroducing the Cherokee is definitely a gain, though it really shouldn’t have been discontinued in the first place. Moving some Compass production to the US might not be as consequential as hoped if they don’t refresh it to keep it relevant.
TARPS OFF, BOYS.
This certainly helps move the needle on the current discussion to drop tariffs on Chinese cars. Let’s get some of those EREV platforms launched over here.
Combine that with the push to accept EU emissions/safety standards and we can tell the Big 3 to Take Off.
Also, my fav Canadian “car” is the Campagna T-Rex
Favorite Canadian car is the Lexus RX made at the TMMC plant in Ontario. We have two in our extended family. My in-laws have a second and third gen both with over 200k miles on them and they’re both running like a top. Absolute tanks with no signs of slowing down.
I was literally listening to that Black Box Recorder album yesterday. I love that record on sad days.
“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
productsbig expensive truck or SUV they want and love.”FIFY.
I had a Canadian-built Silverado that was pretty darn good. I still regret selling it, but the kid who bought it was super jazzed about it, which was nice.
Oddly badged Chevy as Pontiac. Beumont, Firelfly. Give me a Mercury truck, an M-100!!
Yes, this. This is exactly where my brain went as well. All the sweet vintage rebadging and Canada only domestic offerings.
Beaumont Special Deluxe for me, please. Or maybe a ’77 Pontiac Laurentian!
Why wouldn’t someone be pissed at Stellantis? Pissing people off is like the only thing they’re good at LOL
I wish they’d go POOF. Nobody would miss them.
I like the cars Canada got that we didn’t. The B-Class, X-trail, Echo hatch, Orlando, 323 Neo, etc.
“What Chrysler, Jeep, Dodge, Ram, Vernors Ginger Ale, Leapmotor, and Alfa Romeo parent company Stellantis”
Great now I have to worry about the quality of my favorite ginger ale.
I was so concerned i had to go google it.
Should be a nice change for Stellantis to build cars for customers, instead of the people who steal them and destroy them in take overs.
Favourite Canadian car? I’ve wanted a Mercury pickup ever since I learned of them. Maybe in a nice courgette green, aubergine would be too flashy.
The only problem with the Stellantis investment is they will be building Stellantis cars. I don’t know a single person who has bought a Stellantis product in the past 10 years.
Canadian car? The Bricklin, perhaps?
There’s been a bunch of Canadian-assembled or Canada-specific branded cars, but they’ve all been derivatives of things produced elsewhere.
The North American vehicle market has been integrated for a very long time.
Same here Doug Ford, that’s exactly how I feel about Stellantis products too.
Always telling when your company’s enthusiast community is known by the repair parts brand. Nobody with a GM out there saying they drive an ACDelco.
“Mopar or no car!” Ok, get to walking buddy.
Nor does MotorCraft have the same zing.
My favorite Canadian car is the 1985 Mercury Marquis LTS. Canada-only Mercury version of the already rare Ford LTD LX, and the only variant of the midsize Marquis to ever come with a factory V8. Only 134 built. I’d love to have one.
I always thought the LTD LX was the ultimate “sleeper” of its time. I still remember the Motorweek review. I didn’t know about the Marquis LTX though, that’s interesting!
Canada should work closer to Japan to expand their current production. The investments from Toyota and Honda are probably bigger compared to what the Big 3 are doing these days.
And South Korea. There’s a big Kia/Hyundai/Genesis presence in Ontario.
I get it, eh? That incompetent hoser in the White House wants to act like a three year-old, eh? So Stellantis has to build the cars in the States, otherwise a Renegade will cost $62,000, and nobody’s paying that, eh?
G’day. And remember, use “2” ‘cuz it’s “winter gear”, eh?
I’m not sure that a long-term strategy is fully baked.
If automakers in Canada close up, one of the major things that ties both Canadian and US economies together, why would Canada elect to align to the country who’s president openly admitted to trying to economically devastate them?
Australia’s market is peppered with all kinds of interesting things direct from China since they’ve no auto manufacturing of their own to protect.
Exactly – The US needs Canada more than Canada needs the US.
Lol, lmao even.
I don’t support trade wars, least of all this one, but this statement is ridiculous. 75% of Canada’s exports and nearly half their imports are to/from the US.
There are other markets and other buyers.
Look at the soybean trade, for instance.
Canadians who have been vacationing in the US for years are already ignoring the US and going to Mexico and elsewhere – and Canadians who own in the US are selling out.
My prediction: With Stellantis turning their back on Canada, BYD and/or Geely will be welcomed with open arms and setting up shop in Canada before long.
I think some small changes at the margins will not change the fact that Canada is utterly dependent on the US for trade, always will be without a radical change to how its economy is structured, and pretending it isn’t so doesn’t serve anyone.
What you say about Chinese companies may be true, although I hope it isn’t.
That said, I find it very difficult to be upset about auto production returning to the US. Canadians of course are welcome to feel otherwise.
The trouble Canada has is the size of the market. The population is pretty low for a lot of companies to invest there unless they can leverage trade to the US.
Yes, there are plenty of ways to negotiate that and I’m sure this will happen but it’s a tough sell to get a company in China or Japan to move all the way overseas to build anything in Canada if it has to be exported back overseas somewhere because the US tariffs make it unlikely for trade there. No one is investing much in Canada to gain access to the Canadian market exclusively. Perhaps smaller companies at the lower end of the scale but that’s not what we’re talking about here obviously.
I very often disagree with the US administration’s motives/goals. I always disagree with their methods. But they have leverage here and they are using it for better or worse.
For reference, I am a proponent of free trade and I think all of our economies benefit when there are fewer barriers to letting everyone do what they are good at. Not to mention maintaining a friendly relationship with a neighbor should we ever need something. But the idea that we need Canada more than they need us is truly and utterly laughable.
Canada has a larger market than Australia/New Zealand or Great Britain, which had their own designs and manufacturing plants for decades.
Setting up shop and delivering KD parts for assembly in Canada (25% tariff rather than 100% on fully-assembled cars) is a no-brainer – and building up to full manufacturing is an even smarter bet for the Chinese to make Canadians feel better about doing business with them.
I do not suspect that Chinese manufacturers will rush to set up in a small, high production cost market that will assuredly result in said market’s largest export market being cut off. The whole point of setting up in Canada would be to leverage the trade agreement between Canada and the US.
This would be a carte blanche for any US administration – regardless of political leanings – to exert maximum effort against Canada.
It would effectively close all US-based and Japanese-based auto plants in Canada (with associated suppliers) and pretty much demolish the one of the last value add industries we have.
Not so much ‘cut you nose off to spite your face’ as much as ‘hold onto a lit M-80 in your fist because somebody didn’t want to shake your hand’.
With all these ‘maximum pressures’, it sure makes it hard to keep from turning everyone away.
BYD is already manufacturing busses in Canada.
But it takes quite an effort to get a full brand off the ground, and Canada would need to endure further wrath from the American government if they were to drop/reduce the 100% tariffs.
It might make most sense to just wait ’til next November to see.
Love the optimism, but not thrilled about the reality.
I suspect there will be politically nominal reasons to keep some auto manufacturing in Canada (i.e. automakers have a separate national/provincial government to lobby for support) so absolute withdrawal would effectively close that door.
Mostly, I wonder where the floor is for the ‘Big 3’ and what that composition of vehicles looks like. If North American brands end up some weird species that can only exist inside the boundaries of North America in a handful of vehicle categories (truck/SUV), it does not portend great things for the future.
Mostly, I’m at the juncture of wondering if more investment in the ‘Big 3’ is worth the cost given the legacy of disinvestment here and their less than rosy outlook.
Fair point on the long-term strategy, to support a strategy where Toyota & Honda are exporting to markets with Canadian free trade agreements may become in their best interest.
Else, there’s always the possibility of replicating Magna Steyr’s strategy in Graz into Stellantis’ former building to make lower-volume local market vehicles. Magna’s claimed they wanted to become an automotive OEM before, they’re Canadian based, and already control the Steyr facility and could replicate. But that might be a worst-case scenario for the American-3, as Steyr is currently building some of the Chinese market cars for the EU and this would give them a big door to walk through into the Canadian market.
The Stellantis news for Canada should be fairly unsurprising. Not nice, but unsurprising.
The ‘Big 3’ have continually reduced their operations in the country over the past 15 years. Stellantis was the only ‘Big 3’ automaker to have two assembly plants in the country, even as the company’s market share and vehicle lineup withered.
Something had to give, and I’m mostly surprised that they didn’t announce Brampton’s closure completely. I mostly am surprised at the scale of the investment in the United States given its threadbare lineup and questionable finances. But announcements are cheap and they’re likely reading the winds correctly, even if much of the investment is vapourware.
The long-term future of Stellantis in North America (outside the Ram 1500/2500 and a few Jeep models) is pretty murky.
Companies can make announcements today and reorganize the execution next November depending how the winds blow.
What’s your favorite Canadian car?
Beaumont SD 396
Must be the most generic car of all cars ever, and so forgettable I have to google the name every time: The Eagle Premier!
As for a person, this guy of course (watch the new documentary!) https://www.imdb.com/title/tt26683420/
Just watched the doc the other day. Seemed like a good person who was beloved by the people in his industry. Also seemed like he went through life expecting (and sadly getting) an early expiration date. I had forgotten he had a few dramatic roles later in his career (i.e. JFK). Also, an old and out-of-stage-character Bill Murray is kind of a sad figure. Very much worth watching.
The Eagle Premier was sold in the US too. Perhaps you’re thinking of the Eagle 2000 GTX which was a rebadged Mitsubishi Galant only sold in Canada.
Yes, it was meant for the US, but built in Canada, so I see it as a Canadian car. And of course I chose that one for comedic purposes also to make a point 😉
I often think of the Italian designed (French) Peugeot 107, with Japanese Toyota drivetrain, which was built in the Czech Republic, and I bought mine in Denmark… Which country was that from?
https://en.wikipedia.org/wiki/Peugeot_107
Ah, fair enough.
“Canada is pissed off at Stellantis”
So get in line. Behind (checks notes) Italy, France, Germany, Spain, Poland, Mexico, and probably some others I’m missing. I think the more surprising story is it took them this long to get angry.
Don’t forget half of America.
And their entire supply base.
As a member of Cree, First Nations, I care as little of Canada’s financial success in this matter. There are still Native communities in Canada who don’t have access to water yet the egg heads in the government choose to focus on a false sense of moral patriotism built from a history of colonialist genocide theft and racism, no different than of the US.
Very true. It feels like the US is basically trying to prove that no matter how bad something is, the U.S. has the ability to make it worse.
I’m actually taking graduate classes from a university in Toronto, and at least they have enough shame to start the class with the performative acknowledgment of being on First Nations land, while the U.S. is looking for new ways to honor the soldiers who committed the atrocities at Wounded Knee and the confederates who defended chattel slavery.
My partner and I don’t have kids and have set up a trust so that once we die, our estate will be transferred to the Mdewakanton Sioux, which is the local community that has the rightful claim to the land where I live, and my Scandinavian ancestors were given land stolen through violence by the government in around 1855. This will happen even if we are living outside of the country when we pass, which is a very likely scenario.
Basically anyone who has ever purchased anything they have sold.