The auto industry’s dashboard is full of warning signs

This is the Theme of the Week edition of Bloomberg Opinion Today, a digest of our top commentary published every Sunday. Follow us on Instag [Bloomberg]( This is the Theme of the Week edition of [Bloomberg Opinion Today](, a digest of our top commentary published every Sunday. Follow us on [Instagram](, [TikTok](, [X](, [Threads]( and [Facebook](. Idiot Lights The first iteration of the check engine light came from Detroit’s Hudson Motor Car Co. in the 1930s. But it wasn’t called that. Instead, it went by the more appropriate name of “idiot light,” which warned drivers about major engine issues. Trouble is, they didn’t give the idiot much of a warning before the vehicle imploded. Nowadays, thanks to modern regulations, automakers install entire dashboards of lit-up symbols, none of which are especially easy to [understand](. In fact, sometimes it can feel as though [these symbols]( were designed with the expressed purpose of confounding humanity: In honor of this, I’ve made a new set of warning symbols for the auto industry — indicators of where things are going wrong, essentially. It’s a revenge of sorts, to get back at the decades of pain and confusion these dashboards have caused us all. Plus, 2023 feels like [a tipping point]( for car dealers and drivers alike. The workers are striking. The gas is getting more expensive. The insurance is spiraling out of control. And there’s really no need to have a check engine light once everyone goes electric: “The rise of EVs presents a profound discontinuity to both the companies that filled America’s roads with gas-guzzlers and the union that built them,” as Liam Denning has [written](. The truth is, if the auto industry were to own a singular car, its dashboard would be lit up like the Fourth of July. Let’s get into it. Petrol Panic Button Assuming a DeSantis administration also managed to follow through on his pledge to remove federal surtaxes on fuel — the Highway Trust Fund is structurally deficient as it is, but anyway — $2 gasoline equates to a crude oil price of about $45-$55 a barrel. Unsurprisingly, crude oil has only dabbled with those levels during the same three disasters of the past 15 years. In case it needs spelling out, those were not boom times in places like Midland. In other words, the boom in US production DeSantis envisions, supposedly delivering $2 gasoline, would be destroyed by that same $2 gasoline. Production growth would halt and the industry would see big job losses. — Liam Denning, “[DeSantis' $2 Gasoline Dream Should Terrify Texas](” You Just Got Ghosted Gauge One persistent headwind has been the tight job market. Labor costs for companies are still growing and, as we've seen with UPS and now the big three domestic automakers, significant costs still need to be absorbed in some industries. The UPS stock has underperformed the S&P 500 significantly year-to-date in part due to a new contract with the Teamsters that was more expensive than investors expected. Presumably, United Auto Workers will negotiate a contract with significant improvements to pay and benefits for its members, curtailing auto company profitability. — Conor Sen, “[Inflation or Recession? CEOs Will Decide Next Month](” Bureaucratic Control Malfunction The Big Three could be paying up more than $80 billion each over four years if they agree. Expansive structural changes, such as reinstating traditional pensions for new workers, would prove even more burdensome over the long term. Government policy is compounding this challenge. The Biden administration has offered enormous subsidies for EVs, while the Environmental Protection Agency plans to mandate that 67.5% of new vehicles sold by 2032 be electric (up from 5.8% last year). Yet even though EVs require about [30% fewer labor hours per unit](, most of them remain hugely unprofitable thanks to elevated battery prices. In other words, if the automakers are going to stay in business during this transition, they’ll need to find far more efficiencies. … You can see the dilemma. — Bloomberg’s editorial board, “[UAW Strike Exposes Biden’s Green-Energy Conundrum](” Gone in 60 Seconds Signal Sophisticated gangs are stealing prestige vehicles to order and then spiriting them across borders. … Though boosted cars are still a small portion of overall insurance claims, the grim development is contributing to soaring premiums; theft-related payouts increased 53% year-over-year in the second quarter to almost £200 million ($248 million), according to the Association of British Insurers. In some cases, owners of frequently stolen models such as Range Rovers have struggled to find insurance coverage. — Chris Bryant, [“Your Ferrari Could Be Gone in 60 Seconds](” My Back Hurts Beacon Some 45% of employees in the autos manufacturing sector are 45 years old or more, according to the Bureau of Labor Statistics. Meanwhile, union members in general skew older than the workforce overall. The average age of full-time hourly employees at Ford Motor Co. is just over 46 years old; for the 15% classified under “skilled trades,” it is 54. Typically, unionized full-time auto employees who were employed before 2007 — when retiree benefits were restructured — are entitled to retire after 30 years of working, which can mean well before the traditional age of 65 years old. — Liam Denning, “[UAW’s Old Guard Is Both a Blessing and a Curse](” What We’re Watching [Drones and Missiles Can't Solve America's Drug Problem]( The top two Republican candidates running for president are pushing a new strategy to deal with the US’s drug problem: targeting Mexican drug cartels with military action. The problem is that drones and missiles won’t disrupt the forces that have driven the cartels for the last 50 years, from cannabis in the 1970s to cocaine in the 1980s, to methamphetamine and heroin in the 2000s, to fentanyl in the present day. If Mexico didn’t provide the drugs America demanded, someone else would. In our [latest video](, Eduardo Porter, a Bloomberg Opinion columnist covering Latin America and immigration, looks at the evolution of the narcotics economy to explain how weapons alone can’t solve America’s war on drugs. Notes: Please send idiot indicators and feedback to Jessica Karl at jkarl9@bloomberg.net. Follow Us You received this message because you are subscribed to Bloomberg's Opinion Today newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](