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Could Ride-Sharing Services Slow U.S. Car Sales?

By Greg Gardner, Detroit Free Press (TNS)

DETROIT — Global new car sales will soar from 70 million in 2010 to 125 million by 2025, but the way those cars are used and who will own them is going to change rapidly according to a new report from the McKinsey consulting firm.

Urban Mobility at a Tipping Point is a 22-page discussion of the trends such as in-vehicle connectivity, electrification, car sharing, ride-hailing and autonomous vehicles that are expected to create new options for how people get around, especially in big cities.

While the report, which is co-authored by experts from McKinsey offices in Detroit, Stamford, Conn., San Francisco and Los Angeles, steers clear of sweeping predictions that Google and Uber will dominate this new market, it raises a series of provocative questions.

It does recognize that individual vehicle ownership is not going to disappear. One chart illustrates that, even in the technology-embracing San Francisco Bay Area, the cost of travelling 10,700 miles per year by ride-hailing services such as Uber or Lyft (more than $22,000 per year per vehicle equivalent) is more than twice as expensive as a financed new vehicle (about $9,200 per year) and nearly three times as expensive as a financed used car ($7,500 per year).

That’s even factoring in parking costs and California’s higher-than-average gasoline prices.

But the McKinsey study says that for those who use Uber or Lyft for shorter distances per year, the cost is more competitive.

Car sharing, through companies such as ZipCar, now owned by the Avis Budget Group, also continue to grow. Other major rental companies, as well as automakers, are getting into that market. Daimler launched Car2Go. BMW has Drive Now. Earlier this year Ford introduced Peer-2-Peer, a car sharing option being tested through November in Berkeley, Calif., Oakland, Calif., and San Francisco; Portland, Ore., Chicago and Washington, D.C., as well as London.

Ford Credit is inviting 14,000 customers in the U.S. and 12,000 in London to sign up to rent vehicles to prescreened drivers for short-term use. U.S. customers participate through software provided by ride-share company Getaround.

The strongest economic argument for car-sharing, in McKinsey’s view, is that instead of sitting idle for 90 percent of their useful lives, car-sharing vehicles will be on the road much more and perhaps reduce the number of cars on the road.

“There is little argument that widespread car-sharing would mean each vehicle gets used more intensively, thereby increasing its annual mileage from 11,700 to 20,400 miles.”

U.S. new vehicle sales are running near record levels, but most of the global growth in new car sales will continue to come from emerging markets.

Traditional automakers are phasing in various levels of autonomous driving, but so far they aren’t moving away from personal ownership as the foundation of their business model. New players such as Google and Uber, and perhaps Apple, may pursue fleet-based, on-demand services that could change the way some consumers look at vehicles.

“If I were in Google’s or Apple’s shoes I would try to acquire as much automotive talent as I could,” said Stefan .Knupfer, one of the study’s authors.

The McKinsey report cites data from the University of Michigan Transportation Research Institute showing that the rate of vehicle ownership in the U.S. has fallen from 0.79 vehicles per person in 2006 to 0.74 in 2012, while vehicles per household has dropped from 2.05 to 1.93 in the same period.

The report counters recent data published from automakers showing that millennials — those born after 1980 — are beginning to buy cars and trucks in numbers comparable to older generations.

“Surveys has found that American millennials are 16 percent less likely to commute by car to work, use public transit almost three times more often and are 23 percent less interested in owning a car that the generation that precedes them,” the authors wrote.

Near the end the McKinsey authors provide this observation.

“Given rising incomes and aspirations, there will be more demand for mobility. That will stress the world’s infrastructure, as well as its nerves.

“So what will the future of urban transit be ? Our view is that it will be more on-demand, with more sharing, and it will provide a broader spectrum of services … Urban mobility will likely be lower cost, faster and safer, and the lines between private and public transport will be increasingly blurred.”

(c)2015 Detroit Free Press. Distributed by Tribune Content Agency, LLC.

Foot traffic streams past Uber offices on Market Street in San Francisco. (Karl Mondon/Bay Area News Group/TNS)

EPA Proposes Huge Carbon Emission Cuts For Heavy Trucks

By Greg Gardner, Detroit Free Press (TNS)

Federal regulators are proposing that manufacturers of medium and heavy-duty trucks reduce carbon emissions by 1 billion metric tons and cut fuel costs by about $170 billion by next decade.

The U.S. Environmental Protection Agency and the National Highway Traffic Safety Administration came up with the standards that will now face a period during which industry and environment groups will comment. The standards could be revised.

The agencies are asking for a cut in carbon emissions between 2021 and 2027 that would be nearly equal to the greenhouse gas emissions from all U.S. residences in one year. The fuel-efficiency targets would save more oil than what the U.S. currently imports annually from the Organization of Petroleum Exporting Countries.

“Once upon a time, to be pro-environment you had to be anti-big-vehicles. This rule will change that,” said U.S Transportation Secretary Anthony Foxx. “In fact, these efficiency standards are good for the environment – and the economy. When trucks use less fuel, shipping costs go down. It’s good news all around, especially for anyone with an online shopping habit.”

The fuel economy and emission standards would cover more than 7 million tractor trailers and other types of heavy-duty trucks that haul most of the nation’s goods. These rules will require manufacturers to use new technology that could add as much as $14,000 to the cost of making a new truck, according to the Owner-Operator Independent Drivers Association.

Mark Rosekind, NHTSA administrator, said a truck operator who bought a new rig in 2027 would recover the cost of meeting the proposed standards in about two years through fuel savings.

The standard would be defined in terms of increased freight hauled per fuel consumed, Rosekind said. The emission requirement would be set in terms of grams of carbon dioxide released per mile. Neither Rosekind nor EPA official Janet McCabe would provide a specfic target.

But the Obama administration is intent on establishing policies that will accelerate the reduction in emissions of carbon dioxide, the most common greenhouse gas associated with contributing to climate change.

“We’re delivering big time on President Obama’s call to cut carbon pollution,” said EPA Administrator Gina McCarthy. “With emission reductions weighing in at 1 billion tons, this proposal will save consumers, businesses and truck owners money; and at the same time spur technology innovation and job-growth, while protecting Americans’ health and our environment over the long haul.”

Medium- and heavy-duty vehicles currently account for about 20 percent of greenhouse gas emissions and oil use in the U.S. transportation sector, but only represent about 5 percent of vehicles on the road. Globally, oil consumption and greenhouse emissions from heavy-duty vehicles are expected to surpass that of passenger vehicles by 2030.

The United States is working with other major economies to encourage progress on fuel economy standards in other countries, which will improve global energy and climate security by reducing reliance on oil.

(c)2015 Detroit Free Press. Distributed by Tribune Content Agency, LLC.

Are Insurers Prepared For Self-Driving Cars?

By Greg Gardner, Detroit Free Press (TNS)

DETROIT — Auto insurers are unprepared for the changes self-driving vehicles will create for their business and most don’t think the technology will have a significant impact for at least a decade, according to a study released Wednesday by consulting firm KPMG.

The survey asked executives of insurance companies with about $85 billion of auto insurance premiums a series of questions designed to measure their knowledge and opinions of autonomous transportation.

Among the findings: more than four out of five (84 percent) insurance companies don’t think driverless vehicles will have a significant impact on their business until 2025.

Google is testing a fleet of 100 autonomous cars around its northern California headquarters. Audi and Delphi Automotive have teamed up on a self-driving car that completed a cross-country trip earlier this year. Tesla Motors is rolling out a software update that will enable its Model S to drive autonomously from San Francisco to Seattle.

Cadillac is planning to introduce an advanced system it calls Super Cruise on a 2017 model that will take over the steering, acceleration and braking in highway driving. Toyota plans to offer crash-avoidance technology in all Toyota and Lexus models by 2017.

“The disruption of autonomous vehicles to the automotive ecosystem will be profound, and the change will happen faster than most in the insurance industry think,” said Jerry Albright, a leader of KPMG’s actuarial and insurance risk practice. “To remain relevant in the future, insurers must evaluate their exposure and make necessary adjustments to their business models, corporate strategy, and operations.”

How quickly consumers will embrace self-driving vehicles and how much they will cost remain unclear for the near future. But most of the technology that enables autonomy was created to improve safety, such as lane-departure alerts, cruise control and collision-avoidance sensors.

Most of the insurance executives did acknowledge they need to learn more about the technology and its impact on insurance underwriting. For example, one possible channel for self-driving cars could be through taxi-like fleets where consumers purchase the service by number of trips or by miles.

So individual consumers may be driving less in their own vehicles, but more in shared transportation networks.

Advocates of self-driving cars say safety will be their primary selling point as the software and sensors that control them are refined.

“The share of the personal auto insurance sector will likely continue to shrink as the potential liability of the software developer and manufacturer increases,” said Alex Bell, managing director of KPMG’s CIO advisory group. “At the same time, losses covered by product liability policies are likely to increase given that the sophisticated technology that underpins autonomous vehicles will also need to be insured.”

Earlier this year, the Insurance Information Institute released a study that acknowledged the likely impact of autonomous vehicles.

“There will still be a need for liability coverage, but over time the coverage could change, as manufacturers and suppliers and possibly even municipalities are called upon to take responsibility for what went wrong,” the Insurance Information Institute study stated.

During the transition to wholly autonomous driving, insurers may rely more on telematics devices, known as “black boxes,” that monitor driver activity. Some drivers may object to them based on concerns about privacy.

The institute also warned that autonomous vehicle may reduce the number of accidents, but the cost of replacing damaged parts “is likely to increase because of the complexity of the components.”

But KPMG says the combination of fewer cars on the road and consumers driving less in their own vehicles will raise expectations of lower premiums.

“Assuming consumers demand lower premiums to reflect fewer accidents, there is the possibility of frenzied competition,” said Joe Schneider, director of KPMG corporate finance practice.

Photo: Google is testing Tesla’s Model S as an autonomous vehicle. Maurizio Pesce via Flickr

GM Ignition Switch Deaths Rise To 90

By Greg Gardner, Detroit Free Press (TNS)

DETROIT — The death toll from General Motors’ defective ignition switches rose from 87 to 90 last week, according to the weekly update from the compensation fund established to pay victims.

The GM Ignition Compensation Fund has 997 claims yet to review out of 4,342 filed since the company and disaster compensation specialist Ken Feinberg established the fund last August.

Last week the automaker raised the amount set aside for the cost of the fund by $150 million to $550 million. So far the fund’s staff has deemed 33 percent of the claims ineligible for compensation either because there was insufficient documentation or the claimants failed to prove that the ignition switch was the primary cause of someone’s injury or death.

GM said last week it expects the compensation fund’s process to be concluded by the end of September.

The claims arose after GM recalled about 2.5 million small cars, mostly Chevrolet Cobalts and Saturn Ions from the 2003 through 2007 models year. The ignitions switches on those cars sometimes slipped from the “on” to the “accessory” position either from the weight of a key chain or from inadvertent contact with a driver’s leg.

Once the key slipped to accessory power was cut off to the cars’ steering, air bags and other electrical features.

The recall began in February 2014 even though an independent investigation reported last June that some GM engineers knew of the malfunction more than a decade earlier.

According to the weekly update the number of compensation offers for catastrophic, life-changing injuries remained unchanged at 11. The number of claims found eligible for compensation for less serious injured that required brief hospitalization increased from 146 to 152.

(c)2015 Detroit Free Press, Distributed by Tribune Content Agency, LLC.

Photo via

Tally Of Deaths Tied To Defective GM Ignition Switches Rise To 84

By Greg Gardner, Detroit Free Press (TNS)

DETROIT — Eighty-four deaths have been caused by General Motors’ defective ignition switches, four more than reported the prior week, according to the weekly update by the compensation fund determining eligibility of victims’ claims.

Another 1,136 applications are yet to be reviewed out of 4,342 filed since the fund was created last August. Nearly a third, 30 percent, of all claims filed have been rejected for insufficient evidence or the claimants failed to prove the defective ignition switches were the primary cause of a victim’s death or injury.

The compensation fund, led by attorney Ken Feinberg and Camille Biros, was established in connection with GM’s recall of about 2.5 million small cars, mostly Chevrolet Cobalts and Saturn Ions, from the 2003 through 2007 model years.

Ignition switches on those cars in many cases could be inadvertently nudged or they slipped from the “on” to the “accessory” position cutting off power to the steering, air bags, and other features of the car.

An independent investigation by former federal prosecutor Anton Valukas found that some GM engineers knew about the problem as early as 2003, but the automaker didn’t recall the affected vehicles until February 2014.

Feinberg and his staff so far have found 11 claimants eligible for compensation for catastrophic life-changing injures. Separately, 146 claims are eligible for compensation for less severe injuries that required hospitalization or outpatient treatments.

Last year GM estimated the total cost of claims approved by the fund at between $400 million and $600 million.

(c)2015 Detroit Free Press, Distributed by Tribune Content Agency, LLC

Photo: Paul Bica via Flickr

GM Recalls 1.5 Million Vehicles For Air Bag, Fire Risks

By Greg Gardner, Detroit Free Press

DETROIT — General Motors Co. on Monday issued three new recalls separate from the controversial action of recalling 1.6 million small cars that may have defective ignition switches, the company said.

“I asked our team to redouble our efforts on our pending product reviews, bring them forward and resolve them quickly,” GM CEO Mary Barra said. “That is what today’s GM is all about.”

The new recalls cover the following models:

  • About 303,000 Chevrolet Express and GMC Savana from model years 2009-2014 that will receive new material on the instrument panel to meet federal standards for protecting unbelted passengers;
  • About 63,900 Cadillac XTS models from 2013 and 2014 to be repaired to prevent possible brake booster corrosion that may result in overheating and possibly fires;
  • About 1.18 million 2008-2009 and all 2010-2013 Buick Enclaves and GMC Acadias, some 2009 and all 2010-2013 Chevrolet Traverses, and some 2008-2009 and all 2010 Saturn Outlooks to repair the wiring harness of seat-mounted side air bags.

GM expects to take a charge of approximately $300 million in the first quarter, primarily for the cost of the repairs for the three safety actions and the previously announced ignition switch recall.

The automaker is facing four investigations over the timeliness of its reporting to federal safety regulators reports of crashes or deaths that may have been caused by defective ignition switches on 2005-07 Chevrolet Cobalts and Pontiac G5s; 2003-07 Saturn Ions; and 2006-07 Chevrolet HHR SUVs and Pontiac Solstice and Saturn Sky sports cars. Those recalls were announced in late February.

The midsize crossovers in Monday’s recalls — the Enclave, Acadia, Traverse and Outlook — are equipped with a “service air bag” warning light on the instrument cluster. Drivers who ignore the light for a certain period will effectively disable the side-impact restraint system, including seat-mounted side air bags, front center air bag and seat belt pretensioners.

Express and Savana full-size vans weighing 10,000 pounds or less do not comply with a head-impact requirement for unrestrained occupants, requiring a rework of the passenger instrument panel material.

In the XTS sedan, a plug in the brake booster pump relay can become dislodged, which could allow corrosive elements to enter the connector and form a low-resistance short that could lead to overheating, melting of plastic components and a possible engine compartment fire.

Unsold vehicles will not be delivered until development of the solution has been completed and parts are available, GM said, and repairs will be made at no charge to customers.

GM said it is aware of two engine compartment fires in unsold vehicles at dealerships and two cases of melted components.

“Today’s announcement underscores the focus we’re putting on the safety and peace of mind of our customers. We are conducting an intense review of our internal processes and will have more developments to announce as we move forward,” Barra said.

Photo: Siemens PLM Software via Flickr