Joe White
Global Autos Correspondent
joe.white@thomsonreuters.com

Greetings from the Motor City!

Welcome back! I hope you did not bet anyone that by today we’d be on the brink of a U.S. government shutdown, or that the Green Bay Packers would beat the Detroit Lions. Those things didn’t happen, giving us a reminder that there aren’t many certainties beyond death and taxes.

That’s worth bearing in mind as we survey the news from the World of Cars.

What was your estimate for Tesla’s third quarter deliveries? If you followed most Wall Street analysts, you guessed high.

And after Friday’s round of angry words between the United Auto Workers and the heads of GM and Ford, it looks like a solid bet the UAW and the Detroit Three will be playing the Strike of the Week game for months.

Are you sure? Because the same UAW cut a deal with Mack Trucks on Sunday that avoided a threatened strike. What’s your bet? Put it in a sealed envelope and postmark it. No one will believe you got it right otherwise.

Today –

• Tesla disappoints, Rivian gets cheers

• The UAW gets a deal, but not in Detroit

• Japan shuts down its Russian auto sales channel

* Tesla hits a pothole, Rivian rises

Tesla dismayed investors Monday with third quarter deliveries that fell short of even diminished analyst guesstimates.

Wall Street wanted to see Tesla Q3 deliveries at about 454,000 to 459,000 vehicles. Tesla reported it delivered just over 430,000 vehicles – although Elon Musk is sticking with the previous forecast that Tesla will deliver 1.8 million vehicles for the full year. That implies deliveries of close to 500,000 vehicles for the final quarter of the year. (Tesla’s release is here.)

Tesla has a credible excuse for the sequential decline in deliveries: Its factories took downtime to re-tool to make updated versions of the Model 3 and Model Y. The restyled Model Y launched over the weekend in China.

Tesla’s Q3 results call is scheduled for Oct. 18. Musk and new CFO Vaibhav Taneja will have lots of questions to answer about the state of demand, pricing and whether Tesla can sustain its industry-leading profit margins.

* Meanwhile, shares in electric vehicle startup Rivian jumped Monday after the company beat expectations for third-quarter deliveries, and reaffirmed plans to build 52,000 of its luxury trucks and SUVs and Amazon delivery vans for the year.

Rivian is a long way from exiting the woods, but beating the Q3 delivery target is a signal that the worst of the company’s production startup nightmare could be over. While rival electric truck startups such as Lordstown and Proterra have left the stage, Rivian remains on the short list of Tesla rivals that investors still believe in.

CEO RJ Scaringe will have a chance to reassure investors again when the company releases Q3 results Nov. 7. (The webcast will be here.)

* Essential Reading

• “Peak China” may pose peak danger

• Ford CEO Jim Farley on the UAW stalemate

• From Detroit casinos to UK pubs, workers want better deals

* Detroit Breakdown ... and a deal at Mack

The Detroit Three automakers tried denial as a strategy for dealing with United Auto Workers President Shawn Fain’s demands for a record-busting contract. Now, Detroit’s CEOs have entered the anger phase.

After Fain ordered another round of strikes Friday at Ford and General Motors, Ford CEO Jim Farley held a conference call where he said Fain is holding the automaker “hostage” while he tries to compel the company to agree to pay workers at its future battery plants the same wages and benefits as production staff at Ford’s assembly plants.

Three of the four EV battery plants Ford plans will be owned by joint ventures with South Korea’s SK On. Those are separate companies not bound by Ford-UAW agreements. GM and Stellantis also plan joint venture battery plants that are not part of their master UAW agreements. But the UAW has made it clear it will fight the Detroit Three over shifting UAW powertrain jobs to non-union battery JVs at lower wage rates.

At GM, Friday’s other strike target, Chief Executive Mary Barra expressed her frustration with Fain for “upping the rhetoric and the theatrics,” adding “it’s clear that there is no real intent to get to an agreement.”

GM on Monday furloughed about 160 workers at plants that have lost work due to walkouts at GM’s Wentzville and Lansing assembly operations.

Stellantis got a pass in last Friday’s strike announcement thanks to a last-minute flurry of bargaining progress. In response, the company toned down its comments about Fain. But just the day before, Stellantis blasted Fain for making “misleading and inflammatory statements” about incidents of violence on UAW picket lines.

In the middle of Detroit’s rhetorical fist-fight, the UAW on Sunday announced it had reached a new contract agreement with Mack Trucks, now a unit of Sweden’s Volvo Trucks.

Terms of that deal hadn’t been released as the Auto File went to digital press. Just the fact that Mack got a deal gives the UAW a rebuttal to the Detroit Three line that Fain wants to torture the automakers with one-plant-at-a-time walkouts for months to come.

Analysts and Detroit Three negotiators will be digging into the Mack agreement for clues as to what it takes to get the UAW to yes.

* The U.S. auto industry’s $14 billion CO2 risk

Automakers could face up to $14 billion in emissions fines, an industry group warned, if the Biden Administration goes through with plans to push up 2032 fuel efficiency standards with the goal of shifting two-thirds of the U.S. new vehicle market to EVs.

The Alliance for Automotive Innovation, which represents most of the legacy automakers doing business in the United States (but not Tesla), said the administration’s proposed fuel economy rules “exceed maximum feasibility” – a term used for a reason. Under the law, government fuel efficiency rules are supposed to aim for the maximum feasible improvement, but not more.

The automakers’ objections to the cost of the Biden administration’s emissions rules are converging with the Detroit automakers’ concerns about how to afford the rich labor contract demanded by the United Auto Workers. The Detroit view is that emissions rules threaten to phase out the combustion pickup trucks and SUVs that Detroit needs to pay the wages and benefits the UAW is demanding.

* Chery whistles past the EU’s tariff threats

Chinese automaker Chery plans to launch SUV models from three brands in Europe and is considering a European assembly plant.

Chery is China’s eighth largest automaker, and like the rest of China’s auto sector needs new markets to sustain its factories now that China’s market is slowing down. Chery plans to send a mix of EVs, hybrids and combustion models to Europe, notwithstanding the EU’s investigation of whether Chinese EVs are benefiting from unfair subsidies.

* Japan shuts down used car sales to Russia

The Japanese government’s decision to block shipments of used vehicles to Russia is rattling Japan's used-vehicle market, which has long relied on exports to overseas markets to keep domestic supplies low and prices stable.

Russian demand for second-hand Japanese vehicles soared as Western sanctions on new vehicle deliveries took hold, creating a $2 billion a year market and lifting prices for used cars in Japan. Now, Japanese used vehicle prices are tumbling and brokers are hunting for new export outlets.

* Quebec goes for the EV gold

Canada’s Quebec province is in talks with battery makers and auto manufacturers for C$15 billion ($11 billion USD) in electric vehicle investments, a government official told Reuters. Quebec has reserves of important battery minerals including lithium, nickel and graphite. It also has a steady supply of carbon-free hydropower and designation as a friendly nation for the purposes of U.S. EV subsidies. C’est tiguidou!

* Fast Laps

-Italy could factor CO2 emissions from a vehicle’s supply chain into the criteria for EV subsidies – a move that could block government subsidies for purchases of Chinese-made vehicles. Italy’s proposal is similar to a scheme adopted in France.

-Fisker raised another $150 million through a sale of convertible bonds to an existing investor, and said it could raise another $550 million. The cash will fund the EV startup’s effort to ramp up deliveries. Fisker shares are down nearly 12% year-to-date, heading toward its Q3 results. Fisker had $467.5 million in cash as of June 30, having burned $269 million during the first half of the year.

-Catastrophic failures affecting engines in as many as 708,000 Ford SUVs are under investigation by U.S. safety regulators.

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(Editing by Andrew Heavens)