Good morning! It’s Thursday, October 24, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.
1st Gear: Tesla Posts Wildly Good Q3 Results
We may all have some real issues with Tesla, but it’s hard to deny that the automaker is good at making money. It just posted its third-quarter results, and damn were they good. Buoyed by turning a corner with the Cybertruck (which generated a profit for the first time) lower material costs, an expanding energy business and sales of regulatory credits to automakers who need them, Tesla had its best quarterly earnings report in more than a year.
It prompted CEO and guy who sucks, Elon Musk, to offer an upbeat look at 2025. In fact, he said Tesla could see “20 percent to 30 percent” growth in 2025. I don’t know about that. From Bloomberg:
Musk is betting Tesla’s future on autonomy, having scrapped plans for a new vehicle that was going to be cheaper than the Model 3 sedan. By reporting an uptick in profitability and optimism about next year, the CEO assuaged concerns that Tesla’s core business will continue slipping while he prioritizes a years-long pursuit of self-driving technology.
“Investors who wanted something today got better-than-expected profit and guidance for growth in deliveries,” said Gene Munster, managing partner of growth-investment firm Deepwater Asset Management. “The long-term investors got the golden carrot.”
[…]
Tesla projected slight growth in vehicle deliveries this year, which will require a record showing in the fourth quarter after sales slumped in the first half.
The company said the Cybertruck, which started shipping late last year, achieved positive gross margin as production increased. While Tesla hasn’t said how many trucks it’s built or sold in quarterly releases, US recall documents show the company has delivered at least 27,000 pickups.
[…]
Tesla generated $739 million in revenue during the quarter from selling regulatory credits to car manufacturers in need of assistance complying with stricter pollution standards. This was the Austin-based automaker’s second-biggest haul, trailing only the previous quarter.
The company also credited its energy business as a revenue and profitability driver. Tesla has already deployed more battery storage products this year than it did in all of 2023.
In a regulatory filing Thursday, Tesla disclosed that it recognized $326 million in revenue during the quarter related to the features it markets as Full Self-Driving, or FSD. As the quarter came to a close, the company released FSD to some Cybertruck owners and deployed a feature that enabled customers to summon their vehicle in parking lots.
Tesla also raised its forecast for capital expenditures this year to over $11 billion, from more than $10 billion.
Here’s what else Elon talked about during the earnings call. As ever, it was all over the place.
Musk spent a brief portion of the webcast discussing what he might do in a second Trump administration.
After calling for a federal approval process for autonomous vehicles, the Tesla CEO said he would “try to make that happen” if appointed to a government role he and Donald Trump first discussed in August. The billionaire has backed the Republican nominee by pouring $75 million into a super political action committee supporting the candidate.
Musk reiterated that he expects Tesla to produce a robotaxi called Cybercab in 2026 and said the company will aim to make at least 2 million units annually, without specifying by when. Tesla has yet to make that many cars across its entire lineup in a year.
“I think it’s at least 2 million units a year, maybe 4 million ultimately,” he said, before cautioning: “These are just my best guesses.”
It’s hard to say what the future will hold for Musk and Tesla, but it’s all going to depend on what happens on November 5. I cannot imagine his MAGA antics will be good for the automaker in the long term, so I suppose he should enjoy these strong numbers while he can. I know investors are.
2nd Gear: U.S. Lawmakers Push Stellantis To Keep Investment Commitments
The Senate’s top two Democrats and nearly 80 other members of Congress are urging Stallantis to honor its investment commitments to the United Auto Workers union. The two sides have been in a war of words since the automaker said it would delay a planned $1.5 billion investment to reopen an assembly plant in Belvidere, Illinois. Still, Stellantis says it is committed to the plan, and it denies violating its contract with the UAW.
Stellantis is now facing another nationwide walkout from the union a little over a year after UAW president Shawn Fain led a six-week strike against the Big Three automakers. From Reuters:
The UAW’s grievances, echoed in those letters, center around product and investment commitments made during the contract negotiations last autumn. Stellantis agreed to reopen the shuttered Illinois assembly plant to build new mid-size trucks by 2027.
The carmaker this month sued the UAW in federal court over the allegations and said it was not in violation of the contract. The agreement allowed Stellantis to delay financial commitments if market conditions worsen, but the union and signers on the two letters from Congress are not satisfied with the company using this as a reason to shift plans.
“Stellantis’s recent attempt to justify delays in its contractually mandated investment and production commitments did nothing to assuage our concerns. Stellantis appears resolved to claim market conditions prevent you from honoring these commitments,” said the letter sent from dozens of Democrats in the U.S. House of Representatives.
Tensions between the union and carmaker have risen in the lead-up to the Nov. 5 U.S. Presidential election, with Vice President Kamala Harris specifically calling out Stellantis in public statements for taking actions that “break their word to workers”.
The union has laid the groundwork for a nationwide walkout at Stellantis through filing grievances and holding strike votes at its local chapters. So far, some local chapters have already voted to authorize a strike if the two sides cannot come to an agreement.
A number of Democratic lawmakers, like Debbie Dingell, Rashida Tlaib and Jamie Churches, joined a UAW rally led by Fain at Stellantis’ Trenton Engine plant in Michigan, according to the Detroit Free Press:
“Stellantis signed that contract, and UAW signed that contract in good faith because commitments made are commitments legally that must be kept,” Dingell said, noting later that “you know where Stellantis makes its money? From the United States of America and American workers.”
When is Stellantis going to realize you cannot fuck with these people. They are going to fight for what they’ve earned no matter what.
3rd Gear: Boeing Strike Continues As Workers Deny Offer
Boeing factory workers said no to a new labor contract that would have increased their pay by 35 percent over four years. Life for Boeing executives is starting to get really uncomfortable as the plane maker struggles to get past the work stoppage. From Bloomberg:
Some 64% of the union members who cast ballots on Wednesday voted against the tentative agreement, according to the International Association of Machinists and Aerospace Workers district representing the 33,000 striking workers.
“We remain on strike,” IAM District 751 President Jon Holden said after the vote count. “Our members deserve more and have spoken loudly.”
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While Boeing’s latest pay offer was a bump from its initial 25% increase, workers are still angered by the failure to reinstate their defined-benefit pension plan.
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While the opposition this time was smaller than the overwhelming 94% vote to reject the company’s initial offer in September, the result is a setback to Boeing’s efforts to get operations back on track. The planemaker has been forced to suspend work on its 737 and larger 767 and 777 airliner models at its Seattle-area manufacturing hub for more than a month, weighing on its finances and putting credit-rating companies on alert for a possible downgrade to junk status.
“Basically October is wiped out, some of November is now wiped out, and it’s going to cascade through the entire supply chain,” Sheila Kahyaoglu, an analyst at Jefferies, said on Bloomberg TV.
Now, Boeing and the union will head back to the negotiating table after six weeks of on-and-off talks. The White House even sent Acting Secretary of Labor Julie Su to Seattle to help broker a deal:
“The loss of the pension is still right at the heart of this for many” union members, Holden said. “We’re going to put all cards on the table” to see what Boeing can offer in lieu of the pension plan, he added.
The strike has derailed the planemaker’s financial recovery, and its after-effects will linger deep into 2025. Boeing expects to burn cash next year, one reason the company is preparing a potential equity sale to bolster its reserves, executives said during an earnings call Wednesday.
The manufacturer was on track to generate a surge of revenue from rising jet deliveries prior to the labor strife. With that activity all but halted, Boeing expects to burn around $4 billion in cash during the fourth quarter, similar to its outflow earlier this year, according to Chief Financial Officer Brian West. The would bring the company’s total free cash outflow to around $14 billion for 2024, its worst performance since the Covid pandemic flattened air travel in 2020.
Investors had seen the vote as a possible positive catalyst to help the planemaker turn a corner on a year of cascading crises. The labor strife is costing the company about $100 million a day in lost revenue by some estimates, and the stoppage has shut down Boeing plants in Washington, Oregon and California.
The strike is having a really gnarly effect on Boeing’s bottom line. Hell, it’s even hurting other down-the-line suppliers and airlines.
Boeing’s new Chief Executive Officer Kelly Ortberg has already instituted a range of cost cuts to weather the fallout from the strike, including a 10% reduction in the workforce alongside other measures that include hiring freezes and travel bans. Ortberg took over in August following a shakeup of senior management in the wake of cascading crises since the start of the year at Boeing.
The fallout is also rippling through Boeing’s suppliers. Spirit AeroSystems Holdings Inc. has said that it will furlough 700 workers, and that it might need to resort to layoffs if the strike continues into next month.
Some airlines, meanwhile, have had to revise their growth targets because they’re not likely to get the aircraft they had planned for next year. Boeing had previously sought to return its 737 Max model to a production rate of 38 a month by year-end, with analysts now saying that it’s unlikely to reach that target until well into 2025.
The IAM District 751 strike is the first major labor dispute at Boeing in 16 years. Hourly workers are pushing for a 40 percent pay increase and better retirement benefits. As is the case with most companies, workers are pissed that they’ve gotten shitty wage increases over the past decade while senior executives have been compensated handsomely.
4th Gear: Massive Fire At Rivian Factory Still A Mystery
It’s still not clear what started the massive fire that destroyed 55 Rivians at the automaker’s factory in Normal, Illinois. Now, the fire department is turning the investigation over to Rivian. From the Detroit Free Press:
Rivian spokeswoman Kelli Felker told the Detroit Free Press earlier this week that the cause of the fire, which started the night of Saturday, Aug. 24, remains under investigation. No one was injured and production at the plant was unaffected.
But 55 vehicles were “heavily damaged” in the fire, which caused an estimated $5.5 million in damage, according to the incident report the Free Press obtained through a Freedom of Information Act request to the Normal Fire Department.
Here’s some more of what the Normal Fire Department’s investigation says about the fire:
According to the report, the fire department responded to a call at about 9:43 p.m. Aug. 24 for a vehicle fire at the Rivian factory. When fire crews arrived at the factory, about 9 minutes later, they found that the fire had “rapidly escalated” and about 12 Rivian pickups and SUVs were “fully involved.” The fire was upgraded from one engine to a three-engine call.
The vehicles were located in the parking lot the automaker used for holding inventory, the report stated. The report said the wind was from the south, pushing the fire north through the group of vehicles.
The first two fire engines reported difficulty securing a water source because some of the hydrants were not operating. But the engines were eventually able to get water on the burning vehicles and cleared the scene around 2:30 a.m. Sunday, Aug. 25. The report stated that after confirming all fires were out, “the scene was turned back over to Rivian.”
In a section of the report titled “Ignition,” under “Area of Fire Origin,” it says “spontaneous combustion, chemical reaction.” The cause of ignition is listed as “unintentional” and under “Factors Contributing to Ignition,” it reads: “Electrical failure, malfunction, other.”
Freep spoke with Matt Swaney, the public information officer for the Normal Fire Department, about the fire and the report.
Swaney […] said those report fields are used for the fire department to list its initial suspicions of what started the fire, but added, “we don’t consider that to be the origin-and-cause report, which will be done later after the fire is extinguished and we bring in our investigators.”
In this case, the town’s decision to pass the investigation on to the company is a typical procedure, said Will Thomas, assistant professor of Business Law at the University of Michigan Ross School of Business.
“It is common practice to allow the firm to conduct an internal investigation into what occurred,” Thomas told the Free Press in an email. “The firm, meanwhile, will be expected to share findings with relevant law enforcement authorities and, potentially, face sanctions for any misconduct uncovered. This approach takes advantage of the firm’s comparative advantage — it knows its own business, can identify evidence, get employees to participate in interviews, et cetera — also giving the firm an incentive to do a thorough job diagnosing the problem and fixing the problem going forward.”
Thomas said the main incentive is that government agencies are generally willing to skip sanctioning the firm, or at least be more lenient, if the company can show it has been thorough, compliant and responsive in carrying out an internal investigation and communicating back to the government.
Time will tell what exactly happened to all of those poor Rivians.
