Honda Good morning! It's Thursday, May 14, 2026, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. This is where you'll find the most important stories that are shaping the way Americans drive and get around. In this morning's edition, Honda CEO Toshihiro Mibe wants you to pay no attention to the company's first loss since going public in 1957, Volkswagen and an Israeli defense company get one step closer to an Iron Dome production deal, China's Xpeng also wants one of VW's European factories and an oddly small number of GM full-size pickups and SUVs are being recalled for a transfer case issue. 1st Gear: Honda books $5.7 billion loss on back of EV debacle Honda We've talked a lot about the mess Honda is in right now, thanks to its mess of a gamble on electric vehicles and subsequent pullback. Now, the Japanese automaker is posting its first annual loss since going public back in 1957 — a $2.59 billion deficit that CEO Toshihiro Mibe has to make up for. At a press conference, he said the company is going to abandon its 2040 combustion-free ambitions and pivot to producing 15 new hybrids through 2030. During the presser, Mibe previewed two new hybrid prototypes, a silver liftback sedan that looked vaguely Honda Accord-ish and a red compact crossover that is almost certainly meant to represent the next-generation Acura RDX. Both of them will apparently go on sale within the next two years. Anything to distract, I guess. From Automotive News: Some of the upcoming hybrids will be updates to existing nameplates, while others will be completely new. Honda will also repurpose some of its next-generation 0 Series electric vehicle architectures and components in the upcoming gasoline-electric lineup, Mibe said. To improve margins and avoid tariffs, Honda will ramp up local procurement of hybrid drivetrain components to 64 percent in 2028 and to above 90 percent by the end of the decade. The current procurement rate in the U.S. is 16 percent, Mibe said. Mibe's premature bet on EVs drove Japan's No. 2 automaker to its first losses in nearly 70 years. Honda slumped to an operating loss of ¥414.3 billion ($2.59 billion) in the full fiscal year ended March 31, erasing an operating profit of ¥1.21 trillion ($7.58 billion) the year before. Honda also posted a net loss of ¥423.9 billion ($2.65 billion). EV-related write-offs and impairments totaled ¥1.58 trillion ($9.9 billion) for the period, he said. Honda needed to pull the plug and change direction, despite the massive charges, Mibe said. "We have to stop the bleeding as soon as possible and pave the way for future growth. That is the biggest responsibility I have," he said. "We are facing a very harsh business environment." [...] The company plans to halve development timelines, costs and workload through 2030. The fast-paced approach will kick in for minor model changes this fiscal year, and on full model changes from 2028. The company will also boost production efficiency by 20 percent. Mibe said Honda will pattern the push after Chinese automakers. But he did not give specific details of how Honda would achieve these improvements, nor did he outline new plans for reining in production capacity, trimming jobs or consolidating products. Mibe says things are looking up for the current fiscal year, which ends March 31, 2027. He projected an operating income of around $3.13 billion, and net income would recover to $1.63 billion, which is always good. There are, however, additional EV charges of $3.13 billion that carry over from the previous fiscal year that are factored into the current earnings outlook. Ya know, it would have been really cool to see what the 0 Series, RSX and even the Afeela could have been. At the very least, they'd have been interesting, but Honda's cold feet took that away. I'm sure its upcoming products will be solid, but I don't exactly expect them to move the needle when it comes to innovation or sustainability, and that's a damn shame. I guess I'll see you all in 2041, and we can regroup then. 2nd Gear: VW, Israel's Rafael near deal for Iron Dome production Hesham Elsherif/Getty Images Volkswagen and Israeli defense manufacturer Rafael Advanced Defense Systems are moving closer to a deal that would form a joint venture until the end of 2026. That joint venture would see production switch from cars to military vehicles for the country's Iron Dome air defense system at VW's struggling Osnabrück factory in Germany. Rafael Chief Executive Officer Yoav Tourgeman met with German governmental officials in Berlin and VW representatives in Wolfsburg to further iron out details, according to sources familiar with the situation who spoke on the condition of anonymity. From Bloomberg: The idea is to manufacture military trucks for the Israeli state-owned group's mobile air defense system Iron Dome and possibly also the laser-based version known as Iron Beam, according to the people. In addition to the VW factory in Osnabrueck, two additional sites could also benefit from the planned cooperation via supply lines. The missiles and core parts of the air defense system would be produced in Israel and then installed onto the military trucks built in the German factory, the people said. The new air defense systems would become an additional layer of the German-led and NATO-coordinated European Sky Shield Initiative that was launched by former German Chancellor Olaf Scholz in 2022, the people said. Spokespeople for VW, Rafael as well as the German and Israeli defense ministries declined to comment. Volkswagen CEO Oliver Blume has suggested that the future of the plant in Osnabrueck could take a turn toward the defense industry. Blume said on an earnings call last month that they were in contact with the defense industry, adding it was "very intelligent to solve overcapacities in this manner." Blume also mentioned that VW's experience in Osnabrück could pave the way for future defense collaborations. However, he added that the company isn't looking to getting into the weapons production business, saying that VW is providing "experience in serial production and automation." I guess that's a bit of good news if you're a peace-loving VW fan. 3rd Gear: China's Xpeng also wants a European VW factory MeSamong/Shutterstock Chinese EV maker Xpeng clearly saw that Volkswagen's underutilized European factories were up for grabs and decided to have a go at one, as well. It's now in talks with VW (and other automakers) about buying a factory in Europe. From Reuters: Elvis Cheng, Xpeng's managing director for northeastern Europe, told FT's 'Future of the Car' summit that the Hong Kong-listed company is in talks with the German carmaker to see if "there is any possibility we can find a location here in Europe." Volkswagen owns a stake in Xpeng, and has three joint venture partners in China – SAIC, FAW and JAC, none of whom currently have production capacity in Europe. Xpeng would also consider building a new European plant, FT reported. "We think not all the factories can satisfy the requirements of our latest or future product requirements," Cheng told FT, adding that Volkswagen's plants were "a little bit old" [...] Blume had previously said Volkswagen would check "if there are opportunities for our Chinese partners in Europe" to deal with excess plant capacity. To counter domestic weakness, Xpeng is expanding aggressively overseas. However, its push into Europe faces challenges due to tighter rules on foreign investment. The news comes days after VW CEO Olive Blume — who you may remember from the gear you just read — said VW could bring its cars developed in China to the European market or even share factory capacity in Europe with Chinese partners. 4th Gear: 66 full-size GM trucks and SUVs recalled, and that feels weird Shaunl/Getty Images General Motors' T1XX platform vehicles are some of the best-selling, most ubiquitous vehicles on the road today. So, when a recall pops up that impacts the Chevy Silverado, Tahoe, Suburban, GMC Sierra, Yukon, Yukon XL, Cadillac Escalade and Escalade ESV built between 2015 and 2026, you'd probably think it's going to hit a rather massive number of vehicles. Well, you'd be wrong, because someone GM managed to biff just 66 of them. I know. I'm confused too. Nevertheless, the recall is pretty damn serious. It's all gotta do with a faulty transfer case that could cause the front or rear wheels to lock up without warning while driving. Less than ideal, for sure. From GM Authority: According to documents filed with the National Highway Traffic Safety Administration, the issue also impacts one replacement transfer case that may have been installed in certain older GM full-size SUVs and trucks. GM has identified a safety defect in certain 2026 model-year Chevy Silverado 1500, Tahoe, and Suburban vehicles equipped with four-wheel drive or all-wheel drive, along with select 2015 through 2020 full-size SUVs that may have received a replacement transfer case. The automaker says a missing oil pickup tube inside the transfer case may prevent proper lubrication of internal bearings. Over time, that condition could cause the transfer case to fail and lead to sudden wheel lock-up. GM said the issue traces back to supplier Magna Powertrain de México – Ramos, where "standardized work processes and error detection protocols were not properly followed." If the front or rear wheels lock up while the vehicle is in motion, drivers could lose control, increasing the risk of a crash. GM noted that some owners may hear a grinding noise before the condition occurs. The automaker has identified four field complaints related to the issue, but said it is "not aware of any crashes or injuries associated with this condition." [...] Affected vehicles: 2026 Chevy Silverado 1500 2016-2017, 2019, 2026 Chevy Tahoe 2015, 2017-2020, 2026 Chevy Suburban 2026 GMC Sierra 1500 2019-2020, 2026 GMC Yukon 2018-2019, 2026 GMC Yukon XL 2015, 2026 Cadillac Escalade/Escalade ESV If you've got one of the unlucky 66, a dealer will inspect the transfer case and replace it if necessary. For the time being, GM is advising affected owners not to drive their vehicles until the repairs are carried out, and it will assist owners with a tow to the dealership if necessary. Reverse: Time to watch 'Wet Hot American Summer' again History.com It's wild to think that Skylab was only in orbit for nine years before it came crashing down on the last day of camp at Camp Firewood in Waterville, Maine, in 1981. Thank Christ, Henry Newman and the other indoor kids were able to use science to save the camp from being crushed by the massive heap of space junk. It would have been an absolute disaster. Obviously, I'm just messing around, and if you want to learn more about Skylab, head over to History.com. The Fuel Up Mario Tama/Getty Images Unfortunately, it doesn't look like yesterday's price increase is going to be a blip on the radar. Gas prices are back on their BS as talks between the U.S., Israel and Iran continue to be tumultuous at best. Elevated WTI Crude Oil Futures and Brent Crude price, currently sitting around $101 and $105, respectively, at the time of publication, aren't helping matters either. This is all to say that the average price of a gallon of regular gas jumped another two cents overnight to $4.53, according to AAA. We're now just three cents away from the 2026 record we saw back on May 7. Oh, joy. Here's where national average prices stand right now, according to AAA: AAA On the radio: Elton John - The B*tch Is Back God, I love Elton John. Am I a b*tch? Not really, but it depends on who you ask. Am I back? Not really. I didn't go anywhere. Still, this song never fails to get me going. Still, this song never fails to make me feel like a b*itch who is — indeed — back.