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Despite the Cataclysm of COVID-19 Shutdowns, Automotive Operations Had Successful Reopenings

The abrupt shutdown of U.S. automotive industry in March 2020 during the COVID-19 pandemic and continued stay-at-home orders through April led to fears that the pandemic would prevent resumption of industry operations for the foreseeable future. A survey of automotive industry executives conducted last month by Dykema, MICHAuto and The Right Place confirmed that 84% of the automotive company respondents were required to shut down their U.S. operations. About 50% of such respondents reported a required shut-down of operations in Mexico as well.

Given the widespread impact of the pandemic on the industry, plans for a re-start of regular operations were threatened by anticipated supply chain disruptions, incorporation of new worker safety procedures and favorable reception by employees, and intermittent shutdowns caused by positive COVID-19 cases. Although these obstacles may have stymied the endeavor, they did not prevent the automotive company respondents from successful reopenings. Despite certain well-publicized exceptions, survey results showed that the re-start of automotive operations went smoothly. Only 20% of automotive company respondents reported having to suspend operations after reopening for COVID-19 related issues, with only 5% having to suspend in Mexico or Europe.

“The smooth restart is a testament to the strength of Michigan’s automotive industry. OEMs and suppliers were not only able to pivot to manufacturing PPE equipment in the face of a global pandemic, but that the re-opening was organized, thoughtful, and implemented almost seamlessly,” said Glenn Stevens Jr., executive director of MICHauto and the vice president of Automotive and Mobility initiatives for the Detroit Regional Chamber. “In order for automotive to stay open and continue operations, we need other industries to follow suit in employing critical and smart safety measures, both at work and at play. That is what will drive a path to recovery.”

Use the links below to see all insights from respondents on how COVID-19 affected the U.S. economy and the automotive industry.

Flash Survey Results and Summary

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Dykema, MICHauto and The Right Place will host a webinar on August 13 at 11:00 a.m. ET to review the survey results and discuss the impact of COVID-19 on the future of the automotive industry. Click here to register. Should you have any questions or if you would like more information, please contact your Dykema attorney or any member of Dykema’s Automotive Industry Group.

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The automotive industry is a critical component of the U.S. economy connecting a wide range of industries, from part and raw material suppliers to providers needed for the day-to-day sale and operation of vehicles. In July 2020, Dykema, MICHauto and The Right Place canvassed automotive executives, professionals and service providers to gauge their perspectives on the U.S. economy and the automotive industry and, particularly, the effect of the COVID-19 pandemic.

Click on the links below for insights regarding how respondents feel COVID-19 affected the U.S. economy and the automotive industry. Continue Reading Results Are In! Dykema, MICHauto and The Right Place COVID-19 Automotive Outlook Flash Survey

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Partnering with MICHauto and The Right Place, Dykema developed a five-minute flash survey to evaluate the current state of the automotive industry. Please click here to participate in the survey. The results will be analyzed to provide insight regarding the impact COVID-19 has had on businesses in the automotive industry. Dykema will also share feedback received regarding how operations could change moving forward. Your response to this short survey is anonymous.

Click here to share your input.

To sign up for The Open Road: Automotive Law Blog email updates, please click here. 

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What Do You Do When Your Contract Does Not Contain A Force Majeure Clause?

As the coronavirus disease (COVID-19) continues to spread rapidly throughout the United States—and the world—commercial relationships are being thrown into disarray, resulting in the disruption of supply chains, cancellations of events, and closures of restaurants and other businesses. Several states have declared a state of emergency (including banning large group gatherings and mandating that certain business shutter for the time being). Many companies are requiring that their employees work remotely. As a result of the substantial impact on “business as usual” operations, companies are facing decisions about what to do when COVID-19 circumstances make it difficult (if not impossible) to comply with certain contractual obligations. Will COVID-19 provide your company with a legal defense excusing performance?

If you are operating under a contract governed by United States law, the first place to look for the answer is within the four corners of the contract document itself. Specifically, check your contracts to determine whether there are force majeure or other impossibility of performance-type clauses. If not, are you out of luck? The answer differs depending on the subject matter of the contract. Continue Reading Is Your Contract Virus-Proof? [Part II]

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Michigan Governor Whitmer signed Executive Order 2020-77 today, permitting manufacturing workers to resume work as part of the MI Safe Start Plan. Manufacturing workers, including workers in the automotive industry, are allowed to resume work on May 11, 2020, one week ahead of the planned restart date of certain Michigan automakers. See Executive Order No. 2020-77, Section 10(k).

However, this resumption of work is subject to stringent precautionary measures and safeguards identified in the Order, including detailed requirements outlined in Section 11(k). These requirements include, among several other requirements: Continue Reading Automotive Manufacturing Workers Allowed to Resume Work Next Week in Michigan

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Data security is not just hackers in cyberspace. It also exists in the physical world, and some of it relates to pedestrian but necessary security protocols for nuts-and-bolts objects. A recent report of a data leak shows how focusing exclusively on active systems can lead to unexpected and potentially problematic results.

In the story linked above, a manufacturer of connected vehicles replaced a number of its data storage appliances. A white-hat hacker reported that he had purchased four of the replaced units from eBay and found that they still contained the customers’ personal data, including the owners’ home and work locations, all saved wifi passwords, calendar entries from the customers’ phones, call lists and address books from paired phones, and Netflix and other stored session cookies. This incident follows a report from white-hat hackers last year who discovered drivers’ personal information in the electronic systems of salvaged vehicles. Continue Reading Data Security: What Happens at the End of the Road?

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While the coronavirus has sent shockwaves through every service sector, the impact on the transportation industry has been especially severe. Automotive plants have shut down, new car sales have plummeted, and Uber and Lyft have reduced their workforce as social distancing has drastically reduced the demand for ride-hailing. In a world where stay-at-home orders are the norm, all forms of mobility have seen an abrupt decline and the entire transportation economy has suffered. Providers of shared mobility services like Uber, Zipcar, and Turo have struggled to sustain themselves in a world where consumers are ultra-conscious of human contact.

In a post-coronavirus world, mobility businesses will have economic incentives to deploy updated health practices to reassure their customers. But there are legal liabilities to consider as well. Lawsuits relating to the coronavirus outbreak have already begun and many more are expected. The threat of exposure-related lawsuits are of particular concern, especially as businesses reopen amidst uncertainty about the continued dangers of contracting the virus. Continue Reading Life After Coronavirus: New Challenges for New Mobility Services

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Proactive Analysis and Protocols Can Reduce Costs and Better Ensure Continuity of Supply

The extent of disruption caused by COVID-19 is unknowable at this time. However, it is likely that there will be suppliers unable to economically weather the storm. Having represented manufacturing customers and suppliers for decades, one thing is certain: even the most sophisticated entities make costly mistakes in addressing distressed suppliers without realizing they paid more as a customer than was necessary. “We only know what we know,” and preparing a customer to successfully address distressed supplier situations requires a different skill set than in representing or being a quality supplier.

Wrong moves at the very outset of troubled supplier matters can be the most costly. Immediate preparedness can reduce costs. As just one example, often a “Tier 1” manufacturer acts also as a “Tier 2” by selling product to its supplier, which the supplier then works on and sells back to the Tier 1 manufacturer. Failure to recognize that situation or have advisers that understand the resulting practical, financial and legal implications and how they relate to other customer positions can lead to losses that could have been avoided by early action. Continue Reading How Customers in the Automotive Supply Chain Can Prepare for Distressed Suppliers Resulting From COVID-19

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Insurance Claims, Force Majeure Notices and Protecting Other Legal Rights In The Wake Of Global Supply Chain Disruption Caused By COVID-19

Dykema is closely monitoring the potential threat of legal fallouts in the wake of supply chain disruption caused by the novel Coronavirus (also known as COVID-19). In the last month, companies reliant on the global supply chain have been faced with part shortages and overall supply chain disruption. Production facility shutdowns as well as halted transportation, primarily in China, are the main causes of these issues. As the virus spreads, it is expected that facilities and transportation in other countries will be impacted as they seek to contain the virus.

Practically speaking, your company should mitigate business risks caused by current and anticipated supply chain disruption, including: 1) obtaining up-to-date production information on all players in your global supply chain, both upstream and downstream; and 2) making arrangements to secure alternative parts and materials to ensure continuity of supply where possible. However, in addition to addressing these essentials, don’t forget to check your contracts and insurance policies, including: Continue Reading Is Your Contract Virus-Proof?

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The California Consumer Privacy Act (“CCPA”), Cal. Civ. Code 1798.100-199, presents some interesting questions for mobility businesses and service providers that handle data developed or transmitted by vehicles. Although the CCPA was passed with an effective date of January 1, 2020, the regulations implementing it are still in flux—and are on their second iteration. But whether final regulations are in place or not, enforcement by the California Attorney General’s office could start as early as July 1, 2020.  Because the CCPA provided only limited exemptions for information collected by the automotive industry—information collected under the Driver’s Privacy Protection Act of 1994 and certain information developed and exchanged by new auto dealers and vehicle manufacturers in connection with warranty work or vehicle/part recalls—significant questions remain as to how the CCPA will be applied to the mobility industry.

For the past hundred or so years, most vehicles did not have the electronic brains to require a CCPA “gut check.” When electronics made their debut in automobiles, tools like OBD allowed vehicles to store diagnostic codes, and eventually event recorders (now regulated by the Driver Privacy Act of 2015) recorded pre-accident conditions. Telematics began to change the picture in the late 1990s, with automobiles transmitting information to central locations using cellular (and now wireless) technology. Modern connected vehicles can collect vast amounts of data when driven—and they can pass large amounts of it to manufacturers and service providers. And even when they are not actively transmitting this information, such information can be extracted from vehicles by service personnel. SAE Level 4 and Level 5 autonomous vehicles will necessarily be more dependent on connectivity both to central data sources and to each other—and can be expected to drive an explosion in data transmitted and analyzed on a central basis. Some of this will be regulated by data privacy laws, such as the CCPA, despite the above noted exceptions for automotive information. Continue Reading CCPA: Keeping the Wheels on the Road