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WSJ Opinion: Congress takes on the EV mandate

Republicans want to get Democrats on record on the costly rules

House Republicans have teed up a vote this week on legislation to block President Biden’s back-door electric-vehicle mandate. Democrats are spinning the legislation as an attack on public health, innovation and free markets. The debate is a preview of what we can expect in the 2024 election campaign.

The Environmental Protection Agency “is not imposing an EV mandate,” says a memo from Democrats on the Energy and Commerce Committee opposing the GOP legislation. But the EPA in April proposed tailpipe emissions standards for greenhouse gases that would effectively require that electric vehicles make up two-thirds of car sales in 2032.

The only way auto makers could meet the emissions restrictions is by producing more EVs and fewer gas-powered cars. This is a mandate in everything but name, and it’s already causing enormous problems.

The House GOP bill would prohibit EPA from finalizing its proposed CO2 emissions standards and bar any regulation that would “mandate the use of any specific technology” or “result in limited availability of new motor vehicles” based on the type of engine. This means EPA couldn’t promulgate a similar new mandate.

The Democratic memo accuses Republicans of attacking “EPA’s authority to protect Americans from dangerous air pollution.” But greenhouse gases are ubiquitous and aren’t hazardous to human health, unlike tailpipe pollutants such as sulfur dioxide and particulate matter. Some studies suggest EVs may produce more fine particulate matter—pollutants that lodge deep in the lungs—because their battery weight increases wear and tear from tires. EPA ignores this potential harm.

“American demand for EVs is already outpacing supply,” the Democratic memo says, and “auto manufacturers are independently trending toward EVs because of increasing popularity with consumers.” Then why are auto makers scaling back EV production plans? And why are thousands of auto dealers begging the Administration to tap the brakes on the EPA regulation as EVs pile up on their lots?

Telsa accounted for nearly two-thirds of EV sales last year. Battery-powered EVs make up less than 3 percent of most auto makers’ fleets, which means they’d face an extremely steep ramp-up to hit the 2032 mandate. Even with Inflation Reduction Act subsidies, the Energy Information Administration forecasts that EVs will make up only 15 percent of sales in 2030.

That means auto makers will have to raise prices on gas-powered cars to offset losses on EVs they are required to make to meet government quotas. Ford lost $62,016 for every EV it sold in the third quarter. The only alternative is to buy regulatory credits from EV manufacturers. Tesla pocketed about $2,380 in credit sales for each car it sold in the U.S. during the first six months.

Democrats say the GOP legislation would “stifle innovation,” but car makers could continue to improve battery technologies. They merely wouldn’t be forced to lose money mass-producing EVs for consumers who don’t want them. Why can’t Democrats let producers meet the market demand for consumers?

As the facts about Mr. Biden’s EV mandate become better known, and the implications for consumers sink in, it is going to be an issue in 2024. If EVs were as popular as the climate lobby claims, the Administration wouldn’t have to mandate them, and Democrats wouldn’t be dissembling about what they’re doing.

China’s stranglehold on EV supply chain will be tough to break

By Phoebe Sedgman, Jinshan Hong and Linda Lew

China’s dominance of the transition to electric vehicles is the latest source of geopolitical tension with the US and Europe, where policymakers face a costly catchup effort to avoid long-term dependency.

The European Union earlier this month heightened tensions with an investigation into Chinese subsidies for electric cars it says are flooding the market. The move brought the EU closer in line with the US, which has long had China in its sights.

Industry data and estimates by BloombergNEF show just how difficult building self-sufficiency or, more realistically, becoming just a little less reliant on China, is likely to be.

Asia’s largest economy has a deep stranglehold on battery production, leaving global carmakers dependent at one point or another on Chinese partners. The country’s battery makers supply some 80 percent of cells worldwide, backed by a mining and processing chain that increasingly resides in the country’s hands.

“Is it feasible to completely cut off the Chinese supply chains? Certainly not at the moment,” said Ilaria Mazzocco, a senior fellow at the Center for Strategic and International Studies.

With the exception of graphite, mining is the area that’s least controlled by China, though the nation’s investment in African lithium mines to Indonesian nickel producers still gives it heft. But major US automakers like General Motors Co. have joined the rush to invest in the sector, and countries can utilize free-trade agreements to meet some sourcing requirements for EV components.

The next step — refining — is tougher to crack and China has spent years building its expertise. The country processes more than half the world’s lithium, two-thirds of its cobalt, more than 70 percent of its graphite and about one-third of its nickel, according to the International Energy Agency.

The process is typically highly polluting and creates toxic waste. Growing scrutiny around the environmental cost of digging up raw materials and making EVs complicates approval processes along this step of the supply chain.

But where China truly flexes its might is in cell components — the four key parts that are essential for a battery to work.

It has about 70 percent of the world’s production capacity of cathodes (the part of the cell that receives electrons) and more than 80 percent pof anodes (the part that releases electrons on discharge), and well over half of electrolyte and separator output. Those parts come together to make a lithium-ion battery, more than three quarters of which are made in China and mostly by just two firms — Contemporary Amperex Technology Co. Ltd. and BYD Co.

That extensive manufacturing infrastructure, coupled with generous subsidies and other support that costs the government billions of dollars each year, has made China home to the biggest EV market on Earth. In several cities, electric car sales are now approaching one in three.

t’s also meant Western countries are stuck playing catch up. And in the case of the EU, the bloc needs to meet some of the world’s most ambitious climate goals while navigating the complex bureaucratic web of 27 different nations.

European Commission President Ursula von der Leyen has said China floods the EV market because it can sell cars at “artificially low” prices. There again, it’s all about the battery — the costliest part of an EV and where China best leverages its economies of scale.

China’s battery packs come in at $127 per kilowatt hour on a volume-weighted average basis while prices in North America and Europe are 24 percent and 33 percent higher, according to BNEF.

That makes battery-cell factories the most capital-intensive part of the push to diversify supply chains and, while difficult to pin down the exact spending needed to break away from China, snapshots show how quickly those costs will pile up.

Just a single lithium-iron-phosphate battery factory would cost about $865 million to build in both the US and Germany, Europe’s biggest car market, according to BNEF calculations. That compares with $650 million in China, in large part due to the country’s lower construction and labor costs.

Taking a slightly broader view, BNEF data suggest that Europe and US would need to spend $98 billion and $82 billion, respectively, on the battery-metal refining to cell-making facilities they’d need by 2030. Battery cells and packs account for most of that cost, with mining raw materials and building and fitting out the factories to make the EVs themselves adding to the bill.

The EU estimates it will need another €382 billion spent across the entire value chain to be self sufficient by 2030.

It’s not just the hefty price tag. Adding to Europe’s difficulties is the potential far-reaching fallout from its China probe.

Should the bloc impose tariffs on imports from the country, Beijing is widely expected to strike back with retaliatory measures that could target anything from luxury goods to rare earths — a group of 17 elements that are critical for EV motors and which have emerged as a flash point in the China-US trade war. There’s also the risk the EU hits non-Chinese carmakers like BMW AG, which imports the iX3 to Europe from China.

A Chinese EV entering Europe is currently subjected to a 10 percent tariff. An additional duty of around 10 percent would be palatable, with a figure close to 25 percent indicating a breakdown in negotiations, said Zhao Yongsheng, a professor at the University of International Business and Economics in Beijing.

“China-EU relations are not like that between China and the US, which are competitive and punitive,” he said. “We can achieve a tariff of around 10 percent if negotiations can stay on technical and rational terms rather than political factors.”

But with the world ushering in a new era of protectionism that’s upending global trade, the longer-term trajectory of battery and EV industries is likely to be more nuanced than a relentless pursuit of complete self sufficiency.

For a start, the West’s drive to shift away from China coincides with China’s own efforts to further exert its dominance.

Its EV sector is at the forefront of technology innovations and manufacturers are already unveiling a new generation of batteries that rely on sodium instead of lithium. In the short term, an economic slowdown is putting domestic EV demand on shaky ground, and that’s seen Chinese carmakers increasingly look overseas for sales.

Ultimately, the EU probe may even strengthen Chinese investment in the region to more easily navigate sourcing requirements or head off future geopolitical troubles. Chinese firms ramped up a push into South Korea’s battery sector to take advantage of the latter’s free-trade agreement with the US and boost the likelihood they’ll qualify for IRA tax breaks.

“There is no way the EU can do anything about Chinese carmakers coming into Europe now,” says }” data-terminal-type=”FUNCTION” data-terminal-value=”{BIO 6511846 }”>Pierre-Olivier Essig, an analyst at AIR Capital. “The battery supply chain is totally controlled by the Chinese, so good luck with that. Any tariffs on imported Chinese EVs would be a big deal and, by the way, several Chinese companies now have stakes in European manufacturers, too.”

That includes some of the industry’s biggest names. CATL is ramping up production at its battery-cell plant in Hungary. China’s SVolt Energy Technology Co. is set to expand its footprint in Europe to as many as five factories and is already in talks to supply the region’s carmakers with batteries.

The EU’s pledge to ban the sale of all new petrol and diesel cars from 2035 is also adding to pressure, and European Parliament elections set for mid-2024 will keep China’s EV dominance in focus, according to Bloomberg Intelligence. That means leaders need to be cautious about balancing political point scoring with pushing ahead with climate change mitigation efforts at a time when they’re urgently needed.

“At the end of the day, new energy industry development requires coordination through different links and different countries,” said

Car insurance rates are soaring with little relief in sight

Regulators are starting to push back against premium increases of as much as 40 percent

A 40 percent increase by Allstate in Georgia, a 32 percent rise sought by Nationwide Mutual Insurance in California, an 11 percent bump by State Farm in New York. Insurers are imposing steep increases on auto insurance rates, with state regulators doing little to stop them.

Even states with consumer-friendly laws, and the power to veto increases, are allowing rates to rise. California this year agreed to more than a billion dollars of car-insurance premium increases, according to consumer advocates.

Insurers are getting big bumps because they have suffered big losses. Car insurance premiums could keep increasing through the end of 2024. “Rates need to rise probably 5 to 10 percent in each of the next couple of years, because the loss trends have gone up so much,” said Dale Porfilio, chief insurance officer at industry group Insurance Information Institute.

Premiums are increasing faster than other inflation-hit items, such as rent and food. Car-insurance rates increased 17 percent in the 12 months to May, more than four times the 4 percent rise in overall inflation, Labor Department data show.

“Unrestrained rate hikes are hitting the pocketbooks of Americans, and those least able to pay are seeing the worst burden,” said Carmen Balber, executive director of consumer group Consumer Watchdog.

In states such as California and Florida, high auto premium increases are occurring at the same time that homeowners’ policies are getting more expensive, too.

Auto insurers say their rate requests are driven by necessity, not greed. The cost of claims has soared since the pandemic, due to more accidents, higher repair costs, bigger medical bills and increased litigation. Car insurers last year lost on average 12 cents for every dollar of premium written, according to S&P Global. State Farm, the country’s biggest car insurer by premium volume, lost 28 cents for every dollar written last year, posting a $13 billion underwriting loss for its auto arm.

“It’s probably the worst period for auto insurers it’s been in 30 years at least,” said Neil Alldredge, chief executive of industry body National Association of Mutual Insurance Companies.

State regulators’ influence over car-insurance rate increases varies a lot. Their powers range from states such as California, where increases can take effect only after they are approved, to Wyoming, where insurers don’t have to notify the state about rate changes.

New York is one of the toughest policers of car-insurance rate requests, industry executives say. The state has in the past 12 months agreed to a 6.8 percent increase for Geico, and 10.6 percent for State Farm, after the companies originally requested increases of 11.1 percent and 12.5 percent, respectively, according to S&P Global.

The New York Department of Financial Services declined to comment.

In Florida, another state where regulators have to preapprove any increases to car-insurance premiums, rates have increased 15 percent year-over-year to an average $3,183 for full coverage, according to personal finance website Bankrate. That makes the Sunshine State the most expensive in the nation for auto insurance, the Bankrate study earlier this year found. One reason: big auto insurance losses from last year’s Hurricane Ian.

The Florida Office of Insurance Regulation is required by state law to ensure rate increases are “adequate to maintain insurer solvency and pay claims,” while also preventing excessive pricing, a spokeswoman said.

A few states are pushing back. North Carolina’s insurance commissioner has set a fall hearing date to challenge a 28.4 percent increase requested by a group representing the state’s auto insurers. In Georgia, a new law will give the state increased rights to review rate requests. That follows an increase by Allstate of more than 40 percent in its rates last year, which Georgia’s insurance commissioner said “exploit[ed] a loophole” in the existing rules.

An Allstate spokesman referred to a statement from the Insurance Information Institute, saying “there was no loophole in Georgia,” and insurers had followed the rules. “Making the regulatory process of implementing rate increases more burdensome [under the new law] will make it more difficult for insurers to take on risk,” the statement added.

Insurers say states that push back too hard can end up hurting consumers, by causing companies to either pull back or impose much bigger increases than those initially requested.

California’s insurance commissioner didn’t grant any personal car-insurance rate increases between March 2020 and last fall. Under state laws, insurers can’t stop offering new auto policies if they want to stay in California.

The companies sidestepped that requirement by making it harder for customers to get policies. Some closed offices or removed their details from agents’ software. Allstate reported a 37 percent drop in new applications in California in the three months through March, almost double its 22 percent fall nationwide.

Now that California’s commissioner has started agreeing to car-insurance increases, some insurers are asking for big numbers. Nationwide has requested 32.3 percent, for example. State Farm has a request for 24.6 percent pending, having already had a 6.9 percent increase approved earlier this year, state records show.

A Nationwide spokesman declined to comment. A State Farm spokesman said that after sustaining unprecedented underwriting losses last year, “we continue to adjust…to make sure we are matching price to risk.”

Denneile Ritter, a vice president at the American Property Casualty Insurance Association, laid the blame for the double-digit rate requests in the Golden State at the door of the regulator. The big rate increases can be traced back to the long hiatus when no increases were approved, she said.

Michael Soller, California’s deputy insurance commissioner, said it was the big insurers who in effect put rates on hold, by failing to request increases until the end of 2021 or even later.

“Our department’s experts have decades of experience in the insurance industry…but they aren’t mind readers,” Soller added. “We will not accept blame for situations…when insurance companies did not step forward.”

Write to Jean Eaglesham at Jean.Eaglesham@wsj.com

Auto makers expect car sales to defy economic gloom

By Ryan Felton

Even as consumer spending cools, one place buyers continue to splurge is at the car dealership.

Auto executives reporting earnings earlier this week displayed confidence that not only would demand for cars and trucks remain resilient in the second half of the year, but also an easing of supply-chain disruptions would help power profits in coming quarters.

A customer-order backlog, historically low dealership stock and car shoppers paying higher prices for vehicles all have led to a string of profitable quarters for most global car companies.

The unique dynamic is fueling optimism across the industry that it can weather the mounting economic uncertainty better than it has done in past recessions.

The financial boost is critical for these manufacturers, which are spending billions of dollars to build battery plants and shift their lineups to electric vehicles.

Both Ford Motor Co. and global car maker Stellantis NV reported double-digit increases in their net results this week. General Motors Co.’s second-quarter was softer, mostly due to continued parts shortages, but it still delivered a net profit of $1.69 billion and reaffirmed its year-end guidance.

“Inventory on the ground at dealers hasn’t changed in really about six quarters, even as production has gone up,” said Paul Jacobson, GM’s chief financial officer. “There’s a big pocket of demand that hasn’t been met yet.”

The U.S. government said Friday that household spending rose faster in June, but economists
say overall it has slowed sharply when inflation is taken into account. Retailing-giant
Walmart Inc. and consumer-products firm Procter & Gamble Co. both warned this week that
higher prices were leading shoppers to pull back, an ominous sign for the U.S. economy.

Some auto makers are starting to take steps to recession-proof their business, including
initiating widespread layoffs, and to respond to other pressures, such as higher commodity
costs, rising interest rates and factory shutdowns in Asia related to rising Covid-19 infections.

GM said on Tuesday that it would curtail hiring and take precautions to slim down further if
economic challenges worsen.

Electric-vehicle makers Tesla Inc. and Rivian Automotive Inc. have disclosed plans to cut
thousands of salaried workers following earlier hiring sprees.

Ford has also embarked on a broad restructuring to shave $3 billion in annual costs and
bolster its transition to electric-vehicles. In coming weeks, the Dearborn, Mich., auto maker is
expected to disclose plans to cut more than 4,000 white-collar workers, The Wall Street
Journal reported earlier this month.

“We absolutely have too many people in certain places, no doubt about it,” said Ford Chief
Executive Jim Farley Wednesday. He didn’t confirm or respond directly to questions about the
workforce reductions.

Auto executives and dealers say the industry overall is in a much stronger position than it was
in previous downturns. It is also aided by somewhat unusual conditions: The prolonged
inventory crunch on dealer lots has led to accumulating pent-up demand and buyers willing
to pay a hefty premium for cars and trucks that are available.

Mike Manley, chief executive of publicly traded dealership chain AutoNation Inc., said if there
is an economic downturn, consumers’ appetite for mid- to higher-priced vehicles, including
those in the luxury category, is likely to remain strong.

“If we are going to go into a recessionary period, that’s going to be the middle to the last
demographic that gets hit,” Mr. Manley said. AutoNation, earlier this month, said as many as
50% of the vehicles that are incoming to its dealerships over the next few months are presold,
and some models, such as the Ford Bronco, are sold out for more than a year.

Meanwhile, the average price paid for a vehicle continues to nudge higher, hitting another
record in June of $45,844, according to industry research firm J.D. Power.

And more buyers are taking out bigger car payments. The number with auto loans costing at
least $1,000 a month hit a record 12.7% in June, according to Edmunds, a car-shopping
website and data-analytics company.

Stellantis CEO Carlos Tavares said Thursday that the company’s global shipments could fall
about 50% and it would still break even. He said he believes Europe is more at risk of a
recession and the U.S. would have a milder downturn.

“We have a very low break-even point,” Mr. Tavares said this week on the company’s earnings
call. “That is going to give us significant sustainability to face any unpredictable crisis.”

Still, supply-chain disruptions and a long-running computer-chip shortage continue to weigh
on the industry’s outlook. GM’s sales in the second-quarter were disproportionately hit by

such obstacles, leaving it with 95,000 unfinished vehicles it couldn’t sell during the period.

“We’ve been dealing with some of these chip issues for the last couple years,” GM’s Mr.
Jacobson said. “This one was a little late breaking.”

The supply constraints are depressing sales, which in the U.S. were down 18.2% industrywide
to 6.7 million vehicles in the first six months, according to Wards Intelligence, a firm that
tracks auto industry data.

Affordability is also becoming a bigger concern as surging car prices have pushed many
budget-conscious buyers out of both the new and used car markets. Some executives say once
dealership stock bounces back, it could be difficult for car companies to sustain the premium
pricing.

“Consumer sentiment is all over the map,” Tesla Chief Executive Elon Musk said on the EV
maker’s earnings call this month.

Tesla had its first sequential decline in quarterly profit in more than a year in the second
quarter, hurt by an extended shutdown at its Shanghai plant due to local Covid-19
restrictions. But Mr. Musk said he isn’t concerned about weakening demand for Tesla, whose
customers face monthslong waits for many vehicle configurations.

“We have so much excess demand that was really just not an issue for us,” he said on the call.

– Mike Colias, Elliott and Nora Eckert contributed to this article.

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Coronavirus Bolsters Car Ownership as Consumers Rethink Shared Rides

By William Boston in Berlin and Mike Colias in Detroit – Wall Street Journal

For years, auto makers and traders pumped billions of {dollars} into new ride-hailing and car-sharing corporations, predicting the rise of those ventures would finally lead their core enterprise of promoting automobiles to say no.

Now, with widespread concern about coronavirus contagion, some say they’re seeing a revival of shoppers’ curiosity in proudly owning their very own automotive.

The Covid-19 pandemic has brought about folks from Beijing to Boston to shun public trains, trams and buses, as they concern contracting the illness from contact with strangers in public locations. Many automotive homeowners who beforehand had left them residence in favor of shared or public transportation at the moment are taking their very own automobiles out of security considerations, analysts and executives say.

That intuition has produced a shiny spot in an in any other case bleak gross sales outlook because the coronavirus batters the economic system. Some automotive makers say new automotive gross sales in China, the place restoration within the auto trade is starting, are pushed partly by new automotive customers trying to keep away from the danger of public or shared rides.

“We have now seen curiosity from a brand new sort of buyer, these eager to personal a private automobile to flee the dangers of an infection on public transport,” Stephan Wöllenstein, chief govt of Volkswagen Group China, stated final week.

Many are first-time automotive patrons, he stated, noting that they made up about 60% of the corporate’s China gross sales final month.

Whereas auto makers say they aren’t giving up on their future bets in shared transportation, any reviving curiosity in automotive possession—at the least within the short-term—may have an effect on their investment methods.

Ford Motor Co. executives say they’ve began to re-evaluate enterprise plans for autonomous automobiles, involved the pandemic may decrease demand for shared companies long run. Final month the corporate stated it might delay introducing a business autonomous-vehicle service slated for subsequent yr till 2022.

Daimler AG and BMW AG final yr merged their car-sharing and ride-hailing group FreeNow to decrease prices. In April, hit by the financial fallout from the brand new coronavirus, FreeNow stated it might restructure and might need to chop jobs.

“In the mean time, we’re seeing that folks would quite take their very own automotive. However we will’t predict immediately whether or not that is going to final,” BMW CEO Oliver Zipse stated on an earnings name final week.

There are early indications the pandemic is pressuring such ventures in different methods.

General Motors Co. ’s driverless-car enterprise, Cruise, not too long ago instructed workers it might lay off about 150 staff, or about 8% of the workforce, as a part of cost-cutting through the well being disaster, folks acquainted with the matter have stated.

The Detroit auto maker additionally stated final month it might shut down Maven, its four-year-old car-sharing service, citing disruption from the pandemic as an element.

Auto executives first started pursuing such transportation companies across the center of final decade, viewing the impact of Uber Technologies Inc. and different Silicon Valley startups as a long-term risk to their core enterprise of constructing and promoting automobiles.

The investments, which had been highlighted in investor displays and promoted to Wall Avenue, coincided with heady instances within the automotive enterprise as gross sales boomed following the monetary disaster. The long term of profitability freed up money to experiment with new enterprise fashions and spend money on startups.

GM and Ford have spent billions of {dollars} creating driverless automobiles to supply future robo-taxi fleets or supply companies. They’ve additionally made extra modest investments on budding personal-transportation choices like car-sharing and month-to-month subscriptions companies for short-term automobile loans.

Volkswagen final yr began its personal electrical car-sharing service, WeShare, that it’s increasing in Europe and expects to turn into a foundation for a spread of linked automotive and app-based companies.

Ford, pushed by longtime govt chairman Invoice Ford, has greater than most automotive makers embraced the thought of providing prospects alternate options to automotive possession.

Within the final two years, Ford has acquired an electric scooter company and bought a startup that helps cities plan transit networks. It additionally has been working to develop driverless automobiles that would at some point help robot-taxi companies or autonomous supply.

However on an earnings name final month, operations chief Jim Farley stated Ford is reconsidering its plans, with a sharper give attention to companies that don’t require sharing the within of a automobile, resembling autonomous supply or scooters.

“This pandemic may have an effect on how prospects reside and work for a few years to return, with zero-touch now as an integral a part of their lives,” Mr. Farley instructed traders.

GM has outlined huge ambitions for an autonomous, Uber-like ride-hailing enterprise that executives have stated may eclipse income from the corporate’s car-building enterprise by 2030. Its Cruise subsidiary has attracted billions of {dollars} in exterior investment.

GM Chief Govt Mary Barra has stated there isn’t any plan to curb Cruise funding as money tightens through the pandemic.

The transfer again to higher use of personal transportation is already having an affect Uber and its ride-hailing rival, Lyft Inc. “Rider demand on our platform will likely be down for the foreseeable future,” Lyft CEO Logan Inexperiencedsaid last week.

Wolfgang Schäfer, the finance chief of auto provider Continental AG , stated final week that the corporate was pushing aside all however probably the most pressing investments to protect money. He stated some investment in autonomous automobile know-how could be postponed for now as a result of the market was up to now off sooner or later.

Mike Jackson, chief govt for AutoNation Inc., the U.S.’s largest dealership chain, stated he’s already seeing a shift in shopper attitudes that helped elevate April gross sales and that would final past the pandemic.

“They need private area in mobility,” he stated of the purchasers now heading to showrooms. “They view the car as one thing they’ll management.”

We still need kick-the-tires auto shows

By Laurence Iliff

Now that there are no auto shows — or other public automaker events — we can reignite the debate over whether they are worthwhile. Automakers have done an admirable job scrambling to arrange live-video car debuts, and even driving events, through online presentations and no-touch vehicle loans.

So, it can be done.

And it’s fair to say that some of the older show formats have become stale. Too many presentations are heavy on slick video and short on public participation. Now that the virtual alternative is real and not theoretical, it’s fair to consider as an option.

And Zoom ain’t it, chief.

Car shoppers and auto writers need more interaction with engineers and product specialists, not less. Post-coronavirus reality needs splashy debuts and eye-rolling hype and old-fashioned kicking of the tires and sitting in the seats — in real life.

Some of the virtual presentations by automakers have been very well done given the circumstances. But the real value of auto shows is what happens after the presentations. That’s true for reporters interviewing executives on the show floor or having less structured conversations outside the convention center. It’s also true for the public as more automakers focus on live demonstrations of safety and tech features.

Sam Abuelsamid, principal analyst for Navigant, remembers the last big financial crisis when automakers tried virtual presentations to save money. Once the worst of the crisis passed, automakers went back to real-life events because they made sense.

“My guess is that once this subsides, and people can start mixing again, automakers will go back to the way it was,” he said. “While the online presentation is fine up to a point, one of the advantages when you are at the events is being able to talk to subject-matter experts. And you miss out on that sitting on your couch watching it on your computer.”

________________________________________________________________________________________

LETTER TO THE EDITOR:

Thank you for “COVID-19 diary: OK, we still need kick-the-tires auto shows” (Laurence Iliff, April 20). The Auto Shows of North America could not agree more. No platform is better equipped than auto shows for connecting customers with the best that auto manufacturers have to offer.

For over 100 years, auto shows in North America have helped enhance automotive sales and increase brand loyalty, even as wars, pandemics and economic recessions have plagued our country. Indeed, as the coronavirus crisis subsides, auto shows will be front and center leading the recovery — and we want to help.

We have proven time and again that auto shows are vital to the success of the automotive industry, and we stand ready to make sure that dealers, communities, consumers and OEMs not just recover, but come back stronger than ever.

SCOTT LAMBERT, 2020 co-chair, Auto Shows of North America, West St. Paul, Minn.

JENN JACKSON, 2020 co-chair, Auto Shows of North America, Charlotte, N.C.

Finance pro’s six tips for getting your PPP application quickly approved

By Steve Watkins – Staff Reporter, Cincinnati Business Courier

Barry Peterson has some tips for Greater Cincinnati small business owners who are trying to get their share of the U.S. Small Business Administration’s new Paycheck Protection Program.

Peterson should know. He’s helped 37 companies – all of the portfolio companies in which his firm, downtown Cincinnati-based Northcreek Mezzanine, has invested – go through the PPP process.

Seven of Northcreek’s 37 companies had already received SBA approval for their PPP applications as of late last week, Peterson, a Northcreek managing director, told me.

“We’ve had the benefit of following the legislation and even helping to shape it through our industry association,” Peterson said.

Northcreek invests debt and equity to provide capital that banks typically don’t want to provide, often alongside private equity firms. Its investments focus on companies with established revenues and profits.

Most are small to midsize companies, and all are well under the 500-employee maximum to qualify for PPP funding, Peterson said.

The program enables small businesses of 500 employees or less to borrow up to 2 1/2 times their average monthly payroll. They can apply 25% of that to other costs such as mortgage, rent and utility bills to keep the business open. Loans of up to $10 million are available. The key for many companies: the loans are forgivable for the amount used for payroll, rent or mortgage, utilities and other qualifying expenses over the eight weeks after they receive the money. They have to keep all their employees on staff to get the loan forgiven. Otherwise, the loans charge a low 1% interest rate.

As of 3:00 p.m. Sunday, banks had processed $205 billion worth of PPP loan applications, according to the American Bankers Association. That’s 58% of the program’s $350 billion limit, although that amount is expected to expand.

Here are some tips he picked up while shepherding more than three dozen companies through the PPP process:

Get started now if you haven’t already. “We’ve been advocating to everybody there’s a first-mover advantage,” Peterson said.
Choose your bank wisely. Loan applications have to go through a bank. It’s key to identify which bank is most likely to process your loan. That’s usually the bank where you already have a lending or depositor relationship. “Your path will be quicker when you go where your banker knows you,” Peterson said.
Open up communication lines. Along the lines of knowing your banker, talk to that person, too, to make sure you understand the bank’s particular requirements, Peterson said.
Do what you’re told. “Follow the banker’s directions to the letter,” Peterson said. “If there’s any variation, the application is going to be set aside to be dealt with later. That’s not where you want to be. Make it easy for the banker.” Peterson said the “worst thing” that can happen is to have your application put into the set-aside pile.
Get your financial documents together. The loan application process isn’t overly lengthy, but you’ll need some financial data, particularly monthly payroll figures for either the past 12 months or for 2019. There’s some discrepancy there. The Treasury documents tell applicants to use payroll data for the last 12 months. But other information has said most companies will use 2019 data. Ask your banker which they prefer. Make sure you have that information together. The loan amount is based on those figures.
Be patient. Hundreds of thousands of small businesses are applying, many all at the same time. “Banks have been asked to move at light speed,” Peterson said. “It’s a massive effort.”

The program is an enormous step toward getting the economy back to normalcy, Peterson said.

“I think this is going to end up making the difference in how quickly we recover,” he said. “This lifeline is going to carry us to the other side. Otherwise, we’d be in a tailspin for a long time.”

Cincinnati bankers tell small business owners what not to do in applying for PPP

By Sougata Mukherjee and Steve Watkins – Cincinnati Business Courier

Cincinnati banks, like those across the country, have been inundated by applications from small businesses seeking money through the U.S. Small Business Administration‘s new Paycheck Protection Program.

But for companies rushing for cash, there are several things small-business owners need to be mindful of, bankers said.

Banks have been scrambling to handle the flood of applications since the program launched Friday. Fifth Third Bank (Nasdaq: FITB), Cincinnati’s largest local bank and the nation’s ninth-largest U.S.-based consumer bank, had received 22,000 applications as of midday Tuesday, CEO Greg Carmichael told me.

Smaller banks are getting overrun, too. LCNB National Bank had to temporarily suspend taking new applications early this week, CEO Eric Meilstrup told me. The $1.6 billion lender had received more than 500 applications.

“We would have had many more, and we didn’t want customers to be part of the backlog if they had another option,” Meilstrup said. “We have a huge desire to reopen that, and we’ll look at it early next week. We obviously don’t want to not take care of somebody. But we’re focusing right now on taking care of the customers who have applied.”

Milford-based CenterBank, a big SBA lender that has just $250 million in assets and three offices, has processed 150 PPP applications totaling $30 million, president Stewart Greenlee told me. That’s small compared with the big banks, but it’s still rising and nearing 15% of the bank’s total assets.

“We studied this ahead of time and had a dedicated group that worked over the weekend to handle this,” Greenlee said. “We wanted to make sure we could relieve anxiety for our customers as fast as we could.”

“It’s a Herculean task,” First Financial Bank CEO Archie Brown told me. “The Treasury Department and the SBA created legislation and rules and rolled it out to banks all in the last week.”

Business owners can take steps to smooth the process that’s encountering logjams at the SBA even when things are done right. Make a mistake and your application can get slowed even more.

Tips include:

Do not apply at several banks: One borrower can only apply with one lender. “If someone came to us and said they already applied at another bank, we just ask them to be patient with that bank,” Greenlee said.
Don’t turn in incomplete submissions: They will delay processing your loan. While lenders are going in with customized processes, several banks have already set up a system that kicks back the application to a banker when the form is incomplete. KeyBank has developed a list of documents and information small-business owners need when applying. You can learn more here.
Do get updates. Visit the U.S. Treasury website, linked here, and SBA’s web pages often for updates. Greenlee says that will give business owners the most current information on any changes in the program.
Do be patient: “I understand if I’m a customer I just want a response,” Meilstrup said. “We’re working on that piece of it. I totally understand it’s hard to be patient when they’re worried. We’re telling our customers we’re working extremely hard to take care of you. Don’t take the absence of a response as meaning we’re ignoring you.”
You cannot use IRS 1099 workers as your employees: While this may not be an issue in the front-end when applying for the loan and calculating the relief amount, it may become an issue when small businesses are asking for the loan forgiveness down the road. Double-check your payroll calculation and total number of employees. On April 10, the SBA will allow independent contractors and self-employed individuals to apply for the loan relief program. Typically, those entities file their taxes using 1099 forms.
Do not start new entities and apply for loan: The PPP program allows businesses to separately apply for a loan for every business where a person/persons may have a beneficial ownership. But all entities under one beneficial ownership must have been an active business by Feb. 15.
Sum of your holdings cannot go past 500 employees: This provision is complicated. Hotels and restaurant chains are exempt from this rule, and late last week the SBA added franchise owners who employ more than 500 people to that exemption list as well. The only caveat: No single outlet could employ more than 500 people. For every other business, the 500-worker maximum number is in play.
Don’t miscalculate: Complete your own calculation ahead of time to make sure you borrow as much as you qualify for the PPP relief. Remember that in the event some of your loan is not forgiven in the final calculation, it will end up being a 1 percent loan for a few years — still not a bad deal.

Stuart Sorkin Bio

Stuart Sorkin is the founder of The Business and Legal Advisors, a consulting firm specializing in the financial and legal protection of business owners, executives, and entrepreneurs throughout the United States and overseas at every stage of their business life cycle.

Mr. Sorkin works with startups and small- to mid-size business owners to integrate their personal financial and estate planning goals with the development and implementation of growth and/or succession or exit strategy for their business.

Mr. Sorkin is the co-author of Expensive Mistakes When Buying & Selling Companies…and How to Avoid Them in Your Deals. As a former entrepreneur, CPA, and attorney with more than 30 years of experience, he possesses a unique set of capabilities to assist a business owner with the challenges of growing and/or exiting a business.

Mr. Sorkin works with clients on all forms of transactional legal work, including: choice and formation of business entities; raising of capital and financing; mergers and acquisition; real estate acquisition and development; incentive compensation; federal and state income tax planning; succession and retirement planning; estate planning and asset protection; including, trusts; and, family and charitable gifting strategies and family partnerships.

Mr. Sorkin has been interviewed by the Wall Street Journal, Time Magazine, USA Today, Money Magazine and BankRate.com on a wide range of tax matters, and is a frequent lecturer on exit strategies, estate planning and asset protection to various professional and small business organizations and associations.

His specializes in business consulting, start-ups, mergers and acquisitions as well as estate planning and asset Protection