Auto File: Can Tesla Deliver While Detroit Strikes?

Lithia Motors

29/09/2023 17:15

Sept 29 - Joe White
Global Autos Correspondent
 
     
Greetings from the Motor City!  
 
Another Friday, another strike deadline for the United Auto
Workers and the Detroit Three. This time General Motors and Ford
will lose production of Explorer and Chevy Traverse SUVs. But
their big trucks and large SUVs will keep printing money. 
 
The UAW drama is about to get some strong counter-programming.  
 
Sometime this weekend, Tesla is expected to drop its third
quarter deliveries – Elon Musk’s factories have been working
while Detroit’s factories go dark. But is Tesla supply
outrunning demand? Wall Street is watching. 
 
Then all eyes will turn to Washington, where Congress is
careening toward a budget stalemate that could shut down the
U.S. government. 
 
Wouldn’t it be more fun to go to Paris and take a drive in one
of the cars used in the “Fast and Furious” movies? You bet. But
let’s dive in to the news first. 
 
Today – 
 
    *         UAW targets GM and Ford SUV plants 
    * Will Tesla’s deliveries fall short? 
    * Volkswagen cancels an EV factory  

 
More picket lines for GM and Ford 
United Auto Workers President Shawn Fain ordered new walkouts at
the Ford Chicago plant that builds Explorer SUVs and General
Motors’ Lansing Delta Township plant that builds Chevrolet
Traverse SUVs, rivals to the Explorer. 
 
But Fain said the UAW will not strike more Stellantis operations
after the company put a new offer on the table moments before
Fain was scheduled to start a video address. That offer moved
closer to UAW demands on cost of living adjustments, outsourcing
and the right to strike over plant shutdowns.  
 
That last proposal could be significant if it means Stellantis
will reverse a decision to shutter its Belvidere, Ill. Jeep
assembly operations. Fain did not say. 
 
It’s just as important what Fain did not do: Call strikes at GM,
Ford and Stellantis large pickup truck plants such as Ford’s
F-series Super Duty plant in Louisville, Ky. or GM’s Fort Wayne
truck plant. When the UAW settles contracts – now or months from
now – profits from those factories will be needed to pay higher
wages and profit sharing. 
 
The latest round of strikes followed a busy week in which U.S.
President Joe Biden joined a picket line to endorse the UAW’s
fight for a record contract, and his would-be replacement,
Donald Trump, told a group gathered at a non-union Michigan
vehicle parts maker that auto jobs will disappear because of
Biden’s EV policies. 
 
Amid all the politicking, there was little evident progress
during most of the week toward agreements that could bring the
walkouts to an end.  
 
The flurry of activity Thursday and Friday at Stellantis left
central issues unresolved – including how big raises will be and
what additional retirement benefits UAW members will get.  
 
Bets on when the UAW and the Detroit Three will get to a deal
have a wide range, from months to potentially another week or
so. On pay, the companies have dug in at 20% over a 4 ½ year
agreement. The UAW’s stated demand is 40%.  
 
What’s certain is that the Detroit Three’s U.S. labor costs will
go up over the next four years at a faster pace than they rose
during the last four. Labor is less than 10% of a vehicle’s
cost. But it is a significant share of the cost difference among
automakers since commodities such as steel and plastic cost
everyone about the same. 
 
Morgan Stanley analyst Adam Jonas in a note Friday asked the
next question: Will rising labor costs and steep EV losses push
GM, Ford and Stellantis to scale back the billions they’ve
proposed investing in U.S. EV capacity? Ford on Monday hit the
brakes on a $3.5 billion Michigan EV battery plant. Stay tuned. 
 
Essential Reading 
    * Could nuclear power plants produce hydrogen fuel? 
    *         Europe retreats from clean energy mandates 
    * Video zen: Bogota goes car-free for a day 

 
A hiccup for Tesla’s growth engine 
Wall Street is bracing for Tesla to disclose third quarter
delivery numbers that fall 4-5% short of expectations. It’s not
clear whether that will prompt investors to re-think Tesla’s
$782 billion market cap in a serious way – especially in light
of the narrative that Detroit’s automakers will ultimately sign
labor agreements that make their costs even less competitive. 
 
If Tesla deliveries do drop from Q2 levels, one explanation is
that the automaker throttled back output at its plants during
the third quarter to retool for production of updated versions
of its best-selling vehicles. 
 
The more important question for investors is whether demand
slacked off even faster than production – and how much more
price cutting will be required to turn that around. Tesla plans
to add more capacity – and is scouting locations in India and
Southeast Asia. Trouble selling out the existing mega-plants
could call the timing and scope of more expansion into
question. 
 
Meanwhile, Tesla has more legal trouble.  
The federal Equal Employment Opportunity Commission (EEOC) sued
Tesla, accusing the company’s management of tolerating severe
harassment of Black employees at its Fremont, Calif. factory.
The company already faces race discrimination claims by
employees and a state agency. Tesla has denied accusations that
it tolerates racial discrimination. 
 
Separately, the first U.S. trial in a case involving a fatal
accident linked to Tesla’s Autopilot partially automated driving
system kicked off in a California state court. Tesla has said it
makes clear to customers that they are responsible for
controlling the vehicle while it is in Autopilot, and that
Autopilot is not an autonomous driving system. 
 
Volkswagen pulls the plug on a new EV plant 
Volkswagen CEO Oliver Blume has cancelled plans to build a new
EV factory at the automaker’s Wolfsburg manufacturing city near
Berlin. 
 
The “Trinity” factory, originally proposed by ousted CEO Herbert
Diess, was envisioned as VW’s answer to Tesla’s Berlin
Gigafactory. Now, VW has too much EV capacity. With sales of its
first generation EVs wilting under pressure from Tesla and
Chinese rivals, Blume has decided to launch next-generation
Trinity EVs at an existing, under-utilized EV plant in Zwickau. 
 
Northolt chooses the Great White North 
    Swedish EV battery maker Northolt said it will build a $5.2
billion battery factory in Canada’s Quebec province. Canada’s
federal and provincial governments will put in $1 billion each
toward the total.  
 
Quebec was chosen over sites in the United States – but
batteries manufactured there could still qualify for U.S.
Inflation Reduction Act subsidies. The province also has a
well-developed hydro-power network to burnish green
credentials.  
 
 
Fast Laps 
Chinese EV startup Nio is looking for new investors. CEO William
Li discussed an investment by Mercedes with the German
automaker’s CEO, and offered access to Nio technology in return,
Reuters reported. Mercedes said there are no plans to
collaborate with Nio.  
 
The UAW strike did not dent September U.S. vehicle sales, but
October could be a different story, according to market research
firm J.D. Power. Vehicles sold during the past month were mostly
built before the UAW launched its limited, three-factory strikes
Sept. 15. By October and November, however, dealers could be
missing more vehicles, although inventories were building headed
into Q4. 
 
CarMax shares tanked after the used-car retailer reported
weaker-than-forecast results and said wider strikes at the
Detroit automakers could disrupt the vehicle market later in the
year – though one impact of new vehicle scarcity could be higher
prices for used cars and SUVs. Shares of used vehicle seller
Carvana and dealer groups Lithia and AutoNation dropped as
well. 
 
A $1 billion battery metal deal has fallen apart. A plan by a
blank-check acquisition group to buy a nickel mine and a copper
mine in a deal backed by Stellantis, Volkswagen and global miner
Glencore, among others, will not go through, the SPAC’s sponsor
said. Nickel and copper prices have plunged as China’s economy
has weakened. The investors wanted a new, lower price and
couldn’t come to terms.  
 
Lucid opened a factory in Saudi Arabia, home to its main
shareholder, the Saudi kingdom’s sovereign wealth fund. Saudi
Arabia has said it will purchase 100,000 Lucid vehicles over
time.  
     
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 (Editing by Alexander Smith)