AAH #737 - DEFCON 1 on Trump's Tariffs; Preparing for the Nuclear Fallout

TOPIC: Tariffs PANEL: Edgar Faler, CAR; Paul Eisenstein, Headlight.news; Gary Vasilash, shinymetalboxes.net; John McElroy, Autoline.tv

Episode Transcript

Speaker 1 (00:00):
Hi everybody, thanks for joining us on out of line
after hours. Guess what we're gonna be talking about today. Tariffs,
But we're gonna get into the news of the week
as well in the second half of the show. Well,
we've got Edgar Fowler, economist with the Center for Automotive
Research in Ann Arbor, joining us. Paul Eisenstein from Headlight
Dot News.

Speaker 2 (00:21):
And of course Paul needs no introductions, come on, and.

Speaker 1 (00:24):
Garry, of course, So let's kick it off this way.

Speaker 3 (00:30):
Edgar.

Speaker 1 (00:30):
We can talk all day about the tariffs. We can
debate whether they're good or not. We can debate how
much damage or not they're going to cause, and if
they're going to bring back more manufacturing. But they're a
reality now. So let me make you the CEO of
a car company or of a supplier, automotive supplier.

Speaker 4 (00:52):
What do you do?

Speaker 3 (00:54):
Well, there's what can I do in the reality of
the current situation and some of that. So we looked
at at car and for me, I should say these
are my own views and not that of Center for
Automotive Research Center for Motive Research for your listening audience,

(01:16):
nonprofit independent think tank. I don't get around for decades
around for decades, but not everybody knows the name. But
so you know, we've done some analysis around how many
plants are here in the United States North America. So
if you think about what can I do as a CEO,

(01:36):
there are about one hundred vehicle assembly plants in North
America currently, about a third of them can supply or
are supplying into the US currently. So you have to
then look at just because of your supplying into the
US doesn't mean I can build it here. It doesn't matter,

(01:57):
doesn't mean that I necessarily have the platform or the
because it's got to go. It gets very granular very quickly.
Can I run the platform down my assembly line? You
get down to where there's something you could do today.
Maybe only a handful of plants can actually produce some
of the vehicles that are being exported into the US

(02:19):
and produce them here. And I say today, when you've
had guests on your show that will tell you some
of the very best that have a flexible manufacturing facility,
it can take nine months to make that that change.
So there's what can I do today. There's some limitations,
very clearly limitations around this, and then there are decisions

(02:43):
about what can I do tomorrow and out into the future.
And as you all know, and I'm sure your audience
understands that all these decisions from a product, from a
manufacturing plant, these take a very very long time. So
uh and on many of these decisions that I would
if I were to make them today, would I wouldn't

(03:05):
even necessarily see the light of day until after this
current term for the president. So the first thing I
think the industry will do will pause a bit and
try to digest what is happening. What is it costing? Ay?
Can I get the parts? Can I make an adjustment
today to my Can I pivot? How much can I pivot?

(03:28):
And as I just said, there's not a lot that
one can do immediately to pivot. And there is no
such thing as a purely domestic vehicle. There's no such
thing as a and I would venture you're really hard
pressed to find any vehicle even around the world that
is one hundred percent domestically produced, and you know of

(03:51):
one hundred percent domestic parts. And I would argue some
might say, well, the Chinese vehicle. But if as they
have aspirations to grow beyond the Chinese market, kid, I
would I think it'll be very hard pressed to build
vehicles elsewhere in Mexico and elsewhere and still have one
hundred percent produced domestic. So yeah, there's a lot. Ye,

(04:13):
it's going to take a lot of thinking and a
lot of a lot of work and a lot of panic,
you know, sort of room decisions. Can I get the parts?
I mean, I think right now folks are like, what
about a part shortage? What about uh uh am I
importer of record? Am I Can I get those parts?

(04:34):
So I think it's a very difficult question.

Speaker 5 (04:38):
All right, All right, Edgard, let me ask you. Okay,
you said there's all these plants in that's serving this country.
So okay, so I'm looking at a list of Ford.

Speaker 2 (04:47):
Plants in the United States.

Speaker 5 (04:48):
Okay, so you've got Flat Rock, Chicago, Dearborn Truck, Kansas City,
Kentucky Truck, Louville.

Speaker 2 (04:57):
Michigan, Assembly in Ohio Assembly.

Speaker 5 (05:00):
Okay, all of these facilities are making stuff right, right,
they're making So so where does Ford look at those
plants and say, hey, you know, we're building the Mustang
mach e in Mexico, We're building the Broncos Sport in Mexico.
But these other plants, they're all.

Speaker 2 (05:18):
In the Mavericks. Yeah, that's right, Paul.

Speaker 5 (05:20):
So so they're making all this so it's it's not
like there are all these plants with open capacity, that's right.
So you know, and I'm sure that if we had
the list of General Motors and Stilantis, I mean it
would it would be similar.

Speaker 3 (05:34):
Right, It's a very very small list. What I forgot
to mention this is a great, great point. Even beyond
does that plant have idle capacity, they could accept and
produce flex and build more vehicles. You get it. You
get to a very small number. Sure there are shared
platforms and some of those in those plants, and with
the right investment, with the right timeline and the right

(05:56):
uh uh, but those that decision as takes a long time.
And the other thing I would sort of superimpose onto
all of this is that I feel like, in my
own view, the clock speed by which this industry is
operating is accelerating. It's driven by a lot of the
activity we see in China and about They could throw

(06:16):
a lot of engineers at more in some cases than
some of the domestic counterparts here in the US, and
do and design faster. So if you pause, you know,
it's valuable time because it takes it could take a
long time to your question Gary about you know, flat
rock building the machee is a decision that could vet

(06:39):
to run its full course, could take two I could
take four years or whatever. The automators will give you
a much better answer to that than I can. But
it's a very long time, and it's not something that
in the approval process and all those things you go
through and do that won't happen anytime.

Speaker 4 (06:58):
There's an old phrase, no man as an island, and
you could say the same thing about no car company
is an island. We have seen in the forty odd
years that I've been covering, and we're all roughly in
the same frame of historical reference, we've seen an explosion
not just the brands and competition, but of products for

(07:21):
individual brands. I mean, you go back to the fifties,
how few vehicles did a giant like Chevy offer. Now
the list is like that. And one of the reasons,
and I'd like to get your perspective on this, but
one of the reasons I see is because we do
have globalization. There was a time when you had to
build a million cars, you had to build a million

(07:41):
copies of a car to justify it. Economically. Mary an Keller,
who you've often referenced, used to talk about you can't
make anything under one hundred thousand, and now how many
how few vehicles are in that category. You still have
to make one hundred thousand, but you have to find

(08:02):
a dozen major markets to accept all of those. And
if you are really looking to build just in the
United States, you're going to see a lot fewer products
because you can't justify vehicles if you can export them.
And significantly, and I want to get into this point,

(08:24):
you can't afford most of the affordable products that are
in this market.

Speaker 3 (08:30):
That's right. We have an affordability issue now before we
go down and put tariffs things where a large swath
of America. Some of my colleagues at CAR have done
a more detailed analysis around affordability that that's an issue now.
And this certainly doesn't solve that part of it. And
I think part of you raise an issue that you

(08:52):
may not have realized or intended to necessarily, is that
if to try to implement tariffs on a number of
these vehicles where you have fifty different configurations of the
same vehicle, And how do you put a tariff code
a tariff you know, when the content, you know, I'm

(09:13):
not exaggerating, can have three different powertrains from three different places,
can have be assembled in the in the US, be
assembled in Canada or Mexico and Canada at the same time.
Where the current you know, when you read it on
the sticker price and you go up on the ALA
content on the vehicle says domestic that the domestic by law,

(09:38):
they mean Canada and the US. How do I you
take that particular and try to ascribe and put tariffs
on that when you in fact, it's far more complicated
when you have five different, six different versions of that
vehicle that's sold here.

Speaker 4 (09:55):
And that's unusual to four. I actually call this not
liberation day. I call it the Accountant Employment Act.

Speaker 1 (10:05):
Yeah, there's going to be and to what extent can
you gain the system? And what I'm getting at is
my understanding of it is the tariffs will be put
on the non US content. I'm talking about Canada and
Mexico right now, because I think that's where you know,
the Detroit three especially are going to be focusing and

(10:27):
others to Toyota, Honda and whatnot who have got plants
in both countries, because if your US content is higher,
the impact of the tariff is going to be less.
And I think transfer pricing is an area of opportunity
to start gaming the system. So, for example, if you
make in the United States a fores cylinder engine that

(10:50):
you ship to Mexico, and let's say for argument's sake,
that engine is that the transfer price is twelve hundred dollars,
I want to make it fifteen hundred dollars. And the
transmission that was a six hundred dollars transfer price, Let's
make it eight hundred dollars. So you increase the dollar

(11:11):
value of the American content to mitigate to some extent
the impact of the tariffs. I mean, if I were
a CEO, I'd been trying to figure out how do
I gain the system here?

Speaker 3 (11:21):
Well, we as independent researchers or a trying to answer
the question about what's the terriable value on these vehicles,
just as a customs agent will be doing that as well.
So what we heard yesterday is a framework. It's not
they are allowing Secretary of Commerce needs nine months to

(11:42):
be able to answer that question about what is US
reasonable US content. It's a very very complicated question, much
more than I think.

Speaker 1 (11:52):
In fact we should I'll interject right now, as of
right now, there are no tariffs on USMCA parts coming
in from Canada or Mexico because they haven't figured out
how to apply the tariff yet.

Speaker 3 (12:02):
That's right, That's exactly right.

Speaker 4 (12:04):
Well, then, by the way, to interrupt you one second,
will there be retroactive.

Speaker 3 (12:09):
There can be too, So they they in the now
we're all reading this real time and learning this real time.
I mean that it's the ink is still maybe you know,
it's still wet as to as to yesterday. Uh. They can.
So they've given the the they're giving the the agents
the uh enforce enforcing the h tariffs. Uh. They are

(12:35):
giving them some UH. They're allowing them to determine and
to uh for themselves. Are is someone gaining that system
is are and they have the ability to uh levy
in this The penalty is the full twenty five percent.

Speaker 1 (12:53):
They say, if you overstate the value, that's right, you
you get the full twenty five percent tariff on the vehicle.
But what if I say, well, look, I've been holding
back on you know, my transfer pricing here, my material
costs have gone up, my my labor costs have gone up.
And oh, I've suddenly realized that twelve hundred dollars engine

(13:16):
is now a fifteen hundred dollar engine. And so I've
increased the dollar content of my Mexican assembled vehicle so
it has less of a tariff. Also, you know it's
the tariff. My understanding is it's freight on board. You're
paying the tariff on the value of the vehicle as
it comes across the border on a trail, a truck

(13:38):
or a train. Why not, again, in your transfer pricing
gaming system that I'm promoting here, you lower the price
of the vehicle value in Mexico. Because let's say Ford
makes the baky E in Mexico, Mexico is going to
sell it to the United States. Within Ford, why not

(14:02):
say okay, instead of I'm making up a number. Instead
of forty eight thousand or forty thousand dollars, it's thirty
five thousand dollars. So me, Ford of Mexico loses money
on every Machi, But Ford, United States marks it up
and make you know, and what does it care? You
know that it's it all goes into the Ford account.
At the end of the day. But it seems to

(14:24):
me there's gonna be a lot of gaming of the
system wherever possible.

Speaker 2 (14:28):
Okay, but what does this mean to consumer?

Speaker 1 (14:30):
Okay, so the person who consumer's going to pay more money?

Speaker 2 (14:32):
So I mean that.

Speaker 5 (14:33):
I mean so, you know, regardless of the company. What
comes down to is, you know, Paul's going to go
want to buy a new vehicle?

Speaker 4 (14:40):
Not anymore?

Speaker 5 (14:41):
Well, Paul wanted to buy a Mokey. What will all
this do to Paul?

Speaker 1 (14:47):
Give prices are going to go up, There's no two
ways around it.

Speaker 3 (14:49):
The current AALA are based on estimates before the model
year even happens. So these are based the best itself
reported by automakers best effort, and it's by car line,
and so you can get into variations around but not
necessarily it depends. There are other rules It gets very

(15:12):
very complicated, are on engines, transmissions and how that value
is determined, not necessarily by car line, but by car model.
Did you build the engine yourself or is it is
being supplied by an outsider? So it is all subject
to estimates currently, So it is one of the hardest

(15:32):
things I think we're going to see is this how
does this whole thing get implemented, and it's going to
take I can't imagine it not taking nine months to
get this all sort of sorted out.

Speaker 4 (15:43):
The other thing is how will the automakers communicate it
to consumers, because obviously they're going to want to pass blame.
They're going to want to say we tried.

Speaker 3 (15:54):
Well.

Speaker 1 (15:54):
Volkswagon's already pretty much tempted that it's going to put
on the Manroney on the sticker. P I, here's what
you're paying for the import tariff. Now, having said that,
I believe what automakers are going to do is spread
the cost of the tariffs across their entire model line
so that you don't have certain models jumping by ten

(16:16):
thousand dollars in price.

Speaker 4 (16:17):
So a Maverick, which is to a price sensitive market,
could go up even on a base model several thousand
dollars you would pay. You would swallow some of that
on the Maverick, you're saying, and then move it up to.

Speaker 2 (16:33):
What I'm saying, charge more for the Ranger in order
to deal with the Maverick.

Speaker 1 (16:37):
Yeah, So even if you know the FOURD escape made
in the US, it will go up by several thousand
dollars so that the Maverick doesn't go up by five
thousand dollars. So I believe what the automakers are going
to do is spread the pain, so to speak, so that,

(16:57):
like I said, you're going to have some trucks that
could have ten thousand dollars tariffs on them easily even
more than that.

Speaker 4 (17:03):
So that brings up one of the questions. I'm curious
what you think about this. We have had a honestly
a vindictive president. I mean he has made that very clear.
It's not something I say out of politics. He has
shown great vindictiveness. Will he punish automakers if they do,
in fact pass these tariffs on? And if so, what

(17:25):
does that mean?

Speaker 3 (17:26):
So I, as a financially honest I don't know how
they couldn't pass on a substantial portion. I can't. And
it's difficult because again, everybody to some extent is going
to have to pass something along, so's it'd be difficult
to say, you know, the industry, it's going to impact everyone.

(17:46):
As I said, there's no such thing as a domestic
a vehicle, even some of the vehicles built here with
the American Engine and America transmission still have you know,
this is a supply chain that we know evolved over
a century. Really, I mean Henry Ford was building things
in Mexico very very early on in the twenties, in
the twenties. So, and it's by cost, and we get

(18:08):
down to your question, John, it's that average transaction price
is pretty close to fifty thousand dollars now and most
and there's a huge swath of America that can't afford uh,
you know, five thousand dollars additional or more of.

Speaker 1 (18:26):
In fact, a lot of them will no longer qualify
for bank loans or lease. You know, the financial companies
are going to look at them and say, sorry, you.

Speaker 3 (18:33):
Can't do it. That's right. Can you imagine being underwater already?
Essentially before you're driven the vehicle off a lot because
you're paying you know, some kind of surplus serve you know,
tariff on a vehicle because you're not when you go
to trade your vehicle and they don't care you paid
twenty five percent or twenty percent more for that vehicle
versus it's the market price that's what you get.

Speaker 2 (18:54):
So the residual value of the vehicle is taking it
as well as which you're saying.

Speaker 3 (19:00):
No, I'm saying that, you know, if well, this could
get into a much more detailed conversation about aftermarket vehicles,
and I'm not sure the best person to talk on
all those things. But I mean, the reality is my
my vehicle when I go into trade it in, is

(19:20):
you know worth. It's the market. You know, if they
use the Kelly Blue Book and all the traditional sort
of benchmarks, and you always think, yeah, we're a little
more than that. Come on, guys, but that's what it is.
It's not regardless of if I paid twenty twenty five
percent more for it today. So that was I was
always cognizant, you know, buying a car during the COVID lockdown,

(19:42):
I mean and shutdown. I'm very very I didn't want
to payer sticker because I'm never going to get that
money back. Well, these are these are challenges, I think.

Speaker 5 (19:50):
All right, So so John John buys a car with
a tariff on it. I have bought the same model
car before the tariff went on it.

Speaker 3 (19:57):
Right.

Speaker 2 (19:57):
He and I go in the same day to buy
another car, trade it in to trade it in.

Speaker 5 (20:04):
Right, So it's going to be advantageous to me and
even more disadvantageous to John because he paid the tariff
price and they're still going to price it at like, sorry,
these cars are worth It.

Speaker 4 (20:17):
Gets even stranger if if I'm reading it right, we
know that Trump can whimsically back off of stuff in
a hurry if he just decides, well, look for whatever, what.

Speaker 1 (20:33):
The tariffs are about negotiating This is just the first step.
This is the tip of the iceberg of what this
is all about. He wants a whole bunch of other
things from the world. The tariffs are a way of
getting their attention. Give it a little bit of time.
It's going to inflict pain. This is his whole you know,
modus operandi and negotiating and then towards the end of

(20:57):
this year he's going to say, why don't we talk
about this and maybe we can give you some relief
with the tariffs.

Speaker 4 (21:04):
The problem is you get people that there'll be millions
of people that have bought vehicles to your point that
have been tariffed, and all of a sudden they're going
back to the market and they're going to be underwater.
You're going to have a real bad situation.

Speaker 1 (21:22):
Well, it already happened, like Edgar saying in COVID, prices
went up thirty percent, and I mean they went up
across the board. Everything. Dealers were charging thousands of dollars
over MSRP, and anybody who bought in that time got
kicked in the rear when it came to residuals.

Speaker 3 (21:42):
But I do agree with John, this is bigger than
the automotive. This is just the beginning industry. This is
just the beginning.

Speaker 1 (21:47):
This is a restructuring of the global trading system. That's
what Trump is after.

Speaker 5 (21:52):
That's right, Okay, So here's an economic question that you
may or may not have an answer to. Trump has
said that he expects the auto tariffs to raise between
six hundred billion and one trillion in revenue in the
next two years.

Speaker 2 (22:06):
Is that conceivable.

Speaker 3 (22:08):
It's very difficult for our analysis to come anywhere near that.
And I do have to be careful. Are economist? I
am a financial ana by economists gets after me from
playing economists every day an economy It's okay, I was like,

(22:29):
I do play economists, but well, you know, they get
into other things about what about the impact on demand
of the vehicles? You know, like you raise prices by
twenty percent there's traditional economic models that are going to
get tested. Here.

Speaker 1 (22:42):
Bank of America says it's going to shave twenty percent
off sales.

Speaker 3 (22:45):
That's yeah, that's the old the economics sort of the
elasticity some of the calculations of the models that people
run that that relationship has been thought to hold for
a long time. But uh yeah, so that's a whole
nother that's the economic side of it. But to your question, Gary,

(23:06):
from a from a financial uh standpoint, it's very difficult
for us to see how this it has to be
in concert with everything else and all this other retailitatory
talk and other TIFFs. You won't get there, you know,
on the backs of the automotive industry.

Speaker 6 (23:23):
Yeah, yeah, so you know, Trump mixes numbers and stuff
up all it was interesting. There's just like a fifty
percent delta between those terms, like right, But I think
if you look at total US imports, not just automotive,
which I think is three trillion plus and you apply
the tariff to that, you could probably get to that

(23:45):
number if everything went honky dory and at work, which
is but word auto.

Speaker 4 (23:49):
So yeah, I know he auto, but you know, he
also was surprised by the word grocery, which he found
very attractive word. I have a problem with this in
the if you look you listen to what Trump said yesterday,
there were so many errors, there were so many misassumptions.
He got it totally upside down about about the cause

(24:13):
of the Great Depression, which is a direct result of
smooth Hawley. A tariff, a radical tariff strategy identical to
what we have now. And if you look at history,
we've never seen tariff's work on a large scale. We
see individual ones work. Often when you have.

Speaker 1 (24:34):
One, I'd point to the chicken tax.

Speaker 3 (24:36):
It's off your economics textbooks. I mean, this is the
time to your point, Yeah, you.

Speaker 4 (24:41):
Didn't let me finish. But for a handful of very
narrow trade battles, and usually you just wind up working.
There's one thing shrimp or trucks or what have you,
that get affected, but by and large it doesn't affect
the broader picture. My concern is that I don't know

(25:02):
if Trump or his people have enough full understanding of
historical nature of tariffs, and that they are Oh, I.

Speaker 3 (25:13):
Think they do.

Speaker 1 (25:14):
I think I'm not see so, Edgar, have you run
into the sky. Stephen Moore Miran. Mirran am I ra
n for the name. So anyway, I highly recommend everybody
look up the sky Stephen Mirran and his paper that
he published last November, which is a user's guide to
restructuring the global trading system. It is absolutely the blueprint

(25:38):
that Trump is following. If you want to know where
he's going to take this, read it. It's your roadmap.
It'll tell you exactly where he's going at.

Speaker 5 (25:46):
Except there's one problem with his argument, which I don't
think any administration we want, is that he Mirron argues
that you don't have the reserve currency, so the United States.
He's saying that the reason that we have such trade
deficits with other countries is because we're the reserve currency.

Speaker 1 (26:06):
Right I need the world uses the dollar, right, so we're.

Speaker 2 (26:09):
The standard of the world right right, So he's saying
you got to give that up.

Speaker 1 (26:13):
No, he's not saying that, is he No, no, no, no.
In fact, his paper says, we don't want to give
that up because it gives the US enormous economic power
except instability.

Speaker 3 (26:21):
People are mobility.

Speaker 4 (26:22):
People are increasingly talking about going away from that, and
this could kick it off.

Speaker 3 (26:27):
They could.

Speaker 1 (26:28):
It's probably not going to happen, but I would read
his paper.

Speaker 4 (26:33):
No.

Speaker 1 (26:34):
But what is what he's saying is, look, the US
is the currency reserve or the reserve currency of the world.
All oil is conducted in dollars. There is actually more
demand for dollars outside of the US than inside of
the US, and that's propped the dollar up artificially high.
And that's what's gutted our manufacturing base. We can't sell

(26:55):
stuff overseas because our dollar is too strong. So that's
what's this is all precipitated about.

Speaker 3 (27:01):
And this is part of the you know, it's what
he's done. What Trump has done with a single you know,
stroke of threat to the pen is set in motion
a number of these, you know, like ripple waves both
that impact all of us in every way. Is for
you know, if there's the currency, A lot of these
things are very indeterminate, and you see Wall Street now

(27:22):
trying to reprice risk saying what does this mean for
who's the winners the losers? What does it mean for
the dollar? What does it mean for our foreign our debt?
And there's these are these are these are big questions.

Speaker 1 (27:38):
Right, And what Mirrn argues is you don't come and
drop all these terriffs down in one big bang. You
you talk all about what you're going.

Speaker 3 (27:46):
To do for a lot.

Speaker 1 (27:47):
You didn't read that, You've you phase it in over time.
And it only works if other countries value their currency,
because then even if we slap the teriff on something,
if their currency goes down in dollar terms, doesn't cost
us much anymore, any much more. And the other thing
is if other countries retaliate with their own tariffs, then

(28:10):
this doesn't work. And yeah, I think Trump has played
his hand badly when it comes to that part of
the theory.

Speaker 4 (28:18):
I think overall, it's a badly played hand. And we
saw that when he talked about Ukraine. He didn't play
a good negotiating and he has this great reputation as
a negotiator. So far, in just ninety days, I've seen
him do what you would call incredibly bad rounds of negotiation.

(28:42):
And he's just getting started.

Speaker 1 (28:43):
Well again, it's we're just at the very beginning of this.
We're going to have to see where it all goes.

Speaker 5 (28:48):
So I thought it was interesting that one of the
things he talked about was increasing manufacturing jobs. And because
I do silly things, I stumbled upon a paper that
was written by the Federal Reserve with a fascinating title
disentangling the effects of the twenty eighteen twenty nineteen tariffs
on a globally connected US manufacturing sector.

Speaker 2 (29:08):
Okay, so this is done by the Fed and in
the money the money quote.

Speaker 5 (29:16):
Is quote, we find that terriff increases enacted in twenty
eighteen are associated with relative reductions in manufacturing employment and
relative increases in producer prices.

Speaker 3 (29:27):
No jobs.

Speaker 4 (29:28):
Look what's happening already. Now, true, doge played a role,
but we had the third highest unemployment numbers just come
out that we've had period, and we're seeing first signs
that going into the second quarter it won't just be

(29:50):
cut in the federal system. Whirlpool just cut what six
hundred and fifty one jobs of the Mana plant, and
others are signaling they're going to do that. I think,
you know, you may say, well, this has to take
time to get hold and move stuff back, and obviously
you talked about timing, but the reality is it's going

(30:12):
to be a while at the very least. Well, we're
just going to take one job cup after another in
absolutely every sector. And at what point to people, including
those who were the strongest in the MAGA community, start
to say, wait a second, I'm getting hurt. I thought
it was going to be him who's getting hurt.

Speaker 5 (30:31):
And it's funny you mentioned Whirlpool because in twenty eighteen,
Whirlpool lobbied the Trump administration to put tariffs on washing
machines and they put on tariffs ranging from twenty percent
to fifty percent, and lo and behold and deserted. Gets
to your point, John, that between February twenty eighteen and

(30:53):
twenty twenty three and twenty twenty three is when the
tariff ended, the cost of laundry equipment rose by their
four percent.

Speaker 1 (31:01):
Of course, that's what's going to happen. You know, everybody's
going to.

Speaker 5 (31:06):
Raise their price, and so even even in cases where
the laundry equipment was being made here already, right, Yeah,
those prices went up absolutely.

Speaker 1 (31:16):
I mean it's like during the COVID the chip shortage.
You know, the prices of every vehicle went up, even
the ones that were not affected by the chip shortage.

Speaker 4 (31:24):
So we got we had an election that some would
say was influenced by the price of eggs.

Speaker 1 (31:31):
Now what well, now, let's get off the whole tariff
and political thing and get into the news of the week,
because we've devoted the first half of the show to
that and here, I know you've got a list of things,
but I think one thing we got to talk about
is Q one car sales.

Speaker 5 (31:49):
So it doesn't it almost seem as though Q one
car sales, especially as we got into March February, Yeah,
that it it became fictional.

Speaker 2 (32:02):
Well it is real, but I mean.

Speaker 1 (32:03):
It was just like people pulled ahead, People were worried
about getting hit by tariffs and ran out to buy
a new car before the prices went on.

Speaker 2 (32:11):
So so how does it mean?

Speaker 5 (32:14):
So is it reflective of the real market or is
this going to be a case of the first quarter
will be the outlier because the subsequent quarters.

Speaker 2 (32:25):
Will be so affected by the topic we don't want
to talk about anymore.

Speaker 3 (32:29):
Difficult for me to see how with all of this,
when prices are going up, how there isn't an impact.
I don't know if it's one. I don't know if
it's the Bank of America and the deep respective. John
Murphy does a tremendous amount of work rely a lot
of that that haircut as far as the risk to

(32:50):
auto sales for the industry. You'll hear that from others
as well. We'll see if that but it we were
I was personally operating at fifty thousand dollars average transaction price.
Things are sort of had been kind of plateauing, and
there's some talk of concern of peak auto because if

(33:12):
I'm a publicly traded company and I still have to
generate positive shareholder returns and my top line is significally capped,
and I thought that's where we were heading. Was kind
of a we're there. I would argue, yeah, we've been there, Yeah,
we've been there. That's right. So it's difficult for me,
Gary to see how we wouldn't have some correction a
number of things. I mean, we didn't talk about battery

(33:34):
electric vehicles and some of the tax credits, those kinds
of things coming off those So there's reasons for plaid
consumers are rational as much as we can be, there's
a point where become I think we become irrational but
largely rational. And that's what we saw.

Speaker 4 (33:51):
I think.

Speaker 3 (33:52):
I mean, I think although somebody, as you said, Paul,
I know others that I know, I ran out make
sure I got my car before I wanted to manual to.
It's a whole other kind of right.

Speaker 1 (34:06):
Yeah, you're you've just increased in esteem in my book there, Edgar,
anybody who drives a transmission's got to be good.

Speaker 3 (34:14):
I got one of the last golfers come in the US. Yeah.

Speaker 1 (34:19):
See. My outlook is that the Q two will probably
be pretty good because even more people are going to
rush out now they know the tariffs are real, and
they're going to rush out. And so the companies that
are quote unquote stuck with high inventory right now are
going to look pretty damn good. And the ones that
operate on low inventory, even though that's the most efficient

(34:42):
way to like Toyota, Honda, and Subaru, they're going to
be the first ones to feel the impact at the
Terrorif I.

Speaker 4 (34:49):
Got I can't say which one I promised. I would
not even remotely point a person. But of the three
manufacturers you mentioned, one senior person told me he to
start feeling price hikes, bringing price hikes on their products
within quote weeks, not months. Weeks.

Speaker 1 (35:08):
Yeah, well, you know, on the ones coming in from overseas,
not not just North America, it will be immediate. But
but you know, if you look at Ford, Hyundai has
very high inventory. Stalantis has high inventory. I mean I'm
talking over one hundred days. I mean, these guys can

(35:29):
probably run to the end of June without any issues.

Speaker 4 (35:32):
Yeah, but inventory, I think for the first quote it
was down. I read the number today and I believe
it was seventy seven thousand U It's not a huge drop,
but first quoter inventory was down.

Speaker 1 (35:43):
Yeah, but I mean we're still up around close to
three million units in inventory, so that's a lot to
work through. That's a whole quarter's worth of sales.

Speaker 5 (35:53):
But this then gets back to the question of whether
they're going to increase the prices of the vehicles that
they haven't toy because get while of getting is.

Speaker 1 (36:02):
Good, right, Well, Ford just announced discounts today, you know,
employee pricing. So I think they're going to use this
as an opportunity as others are raising prices. They're saying, hey,
we got a deal, and I think Ford is you know,
you got lemons, you make lemonade.

Speaker 4 (36:19):
So Ford during the first quarter.

Speaker 5 (36:22):
Ford was down one point three percent during the first quarter,
while General Motors is up sixteen point seven percent.

Speaker 2 (36:28):
I mean for quarter, right, that's a huge hit. So
here's the one that really struck me though.

Speaker 5 (36:33):
Is Stilantis down twelve percent? Okay, so we talked about
them like most of last year, and so John, why
is it not better?

Speaker 3 (36:45):
Boy?

Speaker 1 (36:45):
That's a great question. Gary, I I can't give you
any great insight. You know, we know that their their
product lineup is aging. They don't have the hybrids that
everybody seems to want right now. Their pricing was out
of whack. They're getting it in in.

Speaker 4 (37:03):
Line, but it's there's the mid size cheap.

Speaker 1 (37:07):
They claim they're seeing green shoots with their efforts, but uh,
it hasn't worked obviously with sales down that much.

Speaker 4 (37:17):
Fiat hasn't worked. It was up. Yeah, Fiat doesn't work.
Alpha doesn't work. Mass Roddy's not doing very well. Uh,
Jeep still needs the mid size model. Ram is recovering
a bit from some of the problems they had.

Speaker 1 (37:38):
They said retail they did pretty good with Yeah, right.

Speaker 4 (37:41):
I mean non existence.

Speaker 3 (37:44):
My concern is that some of these new models that
do have the Jeep and when the E rev come,
are they new enough in the in the from the
viewpoint of the consumer, to be you know, to drive
sales and to turn that around. I mean, e RAT
I think is its own kind of unique.

Speaker 1 (38:03):
I'm very bullish on e RAT so long did they
price them right?

Speaker 3 (38:06):
Yeah, it's a very exciting that the performance is really right. Yeah,
it's a very interesting.

Speaker 4 (38:12):
What we're wrong with Ford? Though?

Speaker 1 (38:15):
Ford claims that it did poorly with fleet sales and
that's what they're blaming it on. Also, they dropped the
edge and last year they did about thirty five thousand units.
If you put the thirty five thousand back in, for
argument's sake, they would have posted an increase in sales
just on that one of the brand.

Speaker 4 (38:35):
If I'm made, we talked about before the show, we
have to talk about now Tesla. That was a disaster
first quarter, absolute disaster, over three times the drop of
the consensus forecast.

Speaker 3 (38:48):
Yeah.

Speaker 1 (38:48):
My read though, is we've got to wait until the
end of the second quarter to really sift through what's
happening at Tesla, because we do know its plants were
down for model change over for the new why and
so the pro Tesla faction will argue, you can't judge
the sales until that gets straightened out, and I buy

(39:11):
that argument. I'll wait until the end of the second
quarter to see what's really happening here. I personally think
there's no question that Elon has alienated so many potential
Tesla buyers that it's going to hurt them. But by
how much I'm going to wait.

Speaker 4 (39:29):
To the end of the second five I would suggest
that even with the changeover, he's alienated so many people,
they're not going to get him. I had a discussion
with a reputation consultant last night for a story, and
he was saying, yeah, but what they lose on the left,
they're going to gain them the right. I just don't
see that. For one thing, Even with that sales pitch

(39:50):
that Trump did on the lawn a month ago hyping
Tesla products, he's still generally anti EV and most most
of the people in his in his cult are as well.

Speaker 3 (40:04):
I went, John, I give another quarter to see with
some of the changeovers, some of the noise, you know,
uh sort itself out. But that's another quarter of him
being the way he is and very outfront and uh
driving hard with you know, all the dosee work that
he's in disruption and everything happened in there. So I'll

(40:26):
give him one more quarter, just for the benefit of
some of this noise right around a launch. But uh,
there are there's around the world. I don't know.

Speaker 1 (40:37):
And there's another thing to take into an account to.
So much of the stock price is based on the
robotaxi business that could be potentially very, very valuable. But
if people don't want to buy Tesla's because they don't
like Elon's politics, the hell if they're going to get
into one of his robotaxis and to launch this business

(40:58):
in Austin, Texas, which is a liberal bastion within in Texas,
I think has got disaster all over it. Even if
these things work brilliantly well from a technical standpoint.

Speaker 3 (41:11):
There's a number of hurdles. Uh. You know, he will
as he does test some of the economic models around.
You know, if if, if in fact he can roll
this out, there's a regulatory uh challenges around. I mean
it's it's still would start as best as I can

(41:32):
tell regionally in places like Costin, et cetera. But there's
so many things that have to be sworted out. I
still can't when you remove the driver, there's so many
other indirect costs around maintaining the vehicle uh and things.
Uh uh you know, I bet in robot. You know
some of the test fleets and the car was in

(41:54):
terrible shape from somebody at a wonderful night out at
the bar. But you know these are costs, direct costs
that you know well.

Speaker 1 (42:02):
Rental companies face the same thing. You know, this is
not new, whether there's a driver or not, the same issue.

Speaker 5 (42:10):
So, Paul, you drive a lot of cars. So to
what extent do you think that the availability of good
evs from other manufacturers are is these good evs are
having an effect on the sales of Tesla?

Speaker 2 (42:26):
Oh?

Speaker 4 (42:26):
Absolutely. If you look at what has happened with Tesla,
it's become the stale EV car company. The Model three
refresh was way overdue and way underdone. We'll have to
wait to see what Juniper. The Model why refresh is

(42:46):
really like I have not seen it yet. You know,
they're focusing first on China. It doesn't look like it's
going to be a breakthrough, and it will still have
a lot of the issues that they have before. In
interior that is so so Oh, it's not going to
be the luxury interior that some others are trying to
put into vehicles of the same price. The image is

(43:08):
weakening there there's no entry level product. The cyber truck
has become the joke rather than the halo, and it's
rubbing off. You have people who everywhere people go they gesture.
It used to be the thumbs up, Now it's two
fingers over and it's I know people, you guys know.

(43:30):
I'll mention by name Bill Maguire from Motorology, very well
followed on Facebook and elsewhere. And Bill who used to
if I said anything negative about Musk or Tesla eighteen
months ago, I would be in a flame war with him.
Now Bill sold his Tesla, he didn't buy another electric

(43:52):
interestingly enough, but I know too many people who are
getting out of them or saying I'm going elsewhere, and
they have so many options. Hyundai GM's numbers are looking
very good.

Speaker 1 (44:02):
Cadillac more coming from more coming, Cadillac.

Speaker 4 (44:06):
Finish strove to them the Optic and Optic and Escalate IQ.

Speaker 1 (44:10):
So Cadillac finished Q one with nineteen percent of its
sales as electrics, and that's before the Optic or the
Escalate IQ. Really those they actually had sales, but they
haven't wrapped up yet. I'm very bullish on the Optic.
I think it's going to sell well. I think for
the price, it's a hell of a package.

Speaker 5 (44:30):
It's the first modern Cadillac like I can remember. I mean,
it's I think it's astonishing.

Speaker 4 (44:35):
I'd actually I think people are going to look at
that over the lyric, even if they could afford both. Interestingly,
Optic comes only in all wheel drive, where lyrics started
as rare and then added it. I think Optic is
going to be a real success story if they don't
have more quality problems.

Speaker 2 (44:55):
But you were mentioning the So I'm one of the
judges for the Words Interior UX Awards, and so I've
been driving like thirty some cars to and the interior
of the Optic is just like, it's amazing.

Speaker 3 (45:09):
Compare that to a Tesla, Yeah, it's just amazing.

Speaker 4 (45:12):
I think Tesla has a lot of basic product problems.
And I think that Musk really got distracted, not just
by being with Trump. He was bored. He bought himself
a social media giant, which suggested that he wasn't really
paying attention. And he's a micromanager. That's a problem. I

(45:33):
hear a lot of decisions just got delayed, a lot
of changes got delayed. Where is the entry level model
you're gonna have VW, You're gonna have Hyundai, You're gonna
have Kiya, You're going to have Ford in short order.
And at what point their market share is already down
below forty percent.

Speaker 5 (45:51):
So, Edgar, you mentioned in passing earlier that you know,
the notion of the incentives on evs that exists, Pratt's
going away. I mean it takes an act of Congress
for that to happen.

Speaker 3 (46:02):
That's right.

Speaker 1 (46:02):
It hasn't happened.

Speaker 4 (46:05):
The the.

Speaker 5 (46:07):
Infrastructure build out of the charging stations that's been that
has been put on hold though.

Speaker 1 (46:13):
That's been put on hold. But remember, I don't know
how many billions have already been allocated to the States.
It's now in the States. You know, lap build the
damn things. You know, it's been years. We've had so
few installed. And you know, one of the biggest problems
is getting permits. The time to get it takes so

(46:34):
damn long to do anything in this country. It's ridiculous.

Speaker 5 (46:38):
So what what what impact do you think that would
have on sales of evs going forward, especially as we're
looking at the situation where.

Speaker 2 (46:51):
The Biden.

Speaker 5 (46:55):
Regulations or mandates or whatever we want, you know, go
way in terms of emissions, and you can start building
hemis again and smiling.

Speaker 3 (47:07):
There's a lot to the charger. I was involved with
a charging startup company. I left car for a short
time and came back and we were doing at the time,
a good friend of mine, he's brilliant, Tom Waters, was
using an oontomized cell phone data to study charging behavior
like you could. You could geo fence two of the

(47:29):
same chargers and you could go to a look at
a market like Santa Clara in California has much higher
you know, density, much further along the curve, adoption curve,
and look at you know where they come from, how
much they make, how long they stay there, and you
can see problems with I appreciate the nevity that charging

(47:55):
is is one of the biggest hurdles. I mean, I
think we all talked to consumers about it's the range
anxiety and where do I charge this thing? And the
charging experience is very poor. But we could study you
can see very clear trends. It should be no surprise.
But a lot of the funding that the states are
getting there was a rush to get them out is

(48:17):
and we can talk about this for now, but a
lot of them are put using an old using traffic
modeling from you know in many states. I'm not calling
out anyone, but from twenty nineteen and before using this
is internal combustion vehicles that are you know, where do
we stop to fill up gas when we need it

(48:37):
to go up to northern Michigan. But if you actually
look at the charging behavior using cell phone data and
where are people charging outside of their home or apartments,
et cetera, you see a very different pattern than where
these are being put As far as and I'm not
trying to criticize you know, the administration or anyone that

(49:00):
these are very important issues. One of my biggest pet peeves,
and this might sound really funny about how these the
dollars being rolled out, I think you should put a
sign out that says, you know, as we're driving on
the freeway, EV chargers here or whatever.

Speaker 1 (49:15):
I've been arguing this for a year.

Speaker 3 (49:17):
Yeah, yeah, you don't know.

Speaker 4 (49:18):
Where they are unless you have the app, and it's
not always accurate.

Speaker 3 (49:21):
And my my thing is some of my friends would
already push back, well, say well I have an app,
I don't. I'm for you.

Speaker 1 (49:28):
It's for the people who don't have an EV that's
exactly who say there's no place to charge, And if
they start seeing that little icon of a plug that
indicates like there's a charger at this exit, they'll go,
oh my god, there's chargers everywhere, and.

Speaker 4 (49:42):
There are a lot more, as I found when I
did drive up north. One of the dangers of following
the patterns, trying to see where people are charging, is
that it may reflect the limitations today. I have an
F one fifty Lightning. Yeah, there are places I don't
necessarily drive. Of course I have access to gas vehicles,

(50:02):
so I can switch, but I don't go certain places
with the Lightning because I know it's going to be
more difficult to charge if I saw, if I knew
there were charges in more places, my driving pattern with
the F one fifty Lightning would change.

Speaker 3 (50:17):
Well, yeah, and it will. And so you're exactly right.
I don't And someday at some point where we have
enough of these vehicles, I mean, we don't want to
compromise in our driving behavior. Our you know, these are enablers,
as we all know, to get from point A to
point B. For someone you'd like to have a lot
of fun driving from point A to point B and

(50:38):
that's as much fun as anything else. But so I
spent a lot of time doing the research and with
an iPad sitting out in nova behind it a Walmart
at the charging station. I'm sure, and I've seen fights.
I've seen, you know, I've seen for queuing. I've seen,

(50:59):
so you can have deserved that the model is not working.
You can observe. So if I'm Walmart, I expect some
some I'm going to capture some of those EV owners
that part that that charge. Uh we measure it was
about seven percent of people actually went into that Walmart's
that's all. So the model isn't working for a retailer.

(51:21):
The I never saw anyone getting anywhere close to the
advertised charging you know, speed, power, right throttle back. I'm
talking to you know, someone with a Porsche tie Can,
and there were a couple of them part there. None
of them went into Walmart. None of them, you know,
never got anywhere close to it. So there has to
be a lot more we have to reimagine. So we

(51:42):
were looking at studying the behavior people choose like a
better retail experience. It's not it's not necessarily, I don't
I'm not trying to be glib and be uh, but
you know the way it's being rolled out in the
back of a parking lot or in the back of
a gas station. The retail model hasn't emerged yet that

(52:04):
recognizes it's twenty to thirty minutes and falling. At some
point you can you can. We did a lot of
modeling in advanced kind of looking at how many populations
wou support. We were looking at trying to establish a
new retail concept. And there are a couple of things
like Rove out in around LA that are doing some
interesting things saying, look, recognizing that I have to sit

(52:27):
here for twenty to thirty minutes at best maybe or
if maybe topping it off and going out. But anyway,
a lot of these things aren't contemplated and quite studied.
They've looked at we got money to spend, spend as
fast as we can, and when you do that, you
get what you get. And that is part of the
It's both the challenge because we have to change that

(52:49):
because you know, the minute you have Paul a good
experience with your light Year f one fifty, you're going
to tell your friends about it. And it just so anyway,
there's a lot of thought. And what really cancerns me
is that the things that are on pause, we're moving
into a period where we get stuck. And I mean
some of this is natural, it's just you know, inherently
nothing moves in a for a while. All the forecasts

(53:12):
with this hockey stick, and that's when, as an investor
in a financial annals, I get spooked. But you know,
a lot more work has to be done there, and
you know, we were thinking about it, and once it works,
it will get copied all over the place, right, And
so there's some interesting initiatives happening. But you brought up
a great point, John, and that even at the utility

(53:35):
are not set up to respond to a request a
you know, I'm a business owner. I want to put
an EV charger. I think it might be good for
my customers. I'm not calling out utilities either. But you know,
if you look at some of the data that's online,
you can see overlapping grids of you know, what power

(53:57):
is actually available at a location. I did this for
looking at for a business out in the arbor, and
so number one, you can't tell it's it's the data
is poor. Secondly, you go to the utility and any
respective utility. You know, I don't call anyone out and say, well,
what does it cost me? And they go, what do

(54:18):
you want? You're like, well, I don't know what I want.
You know, I want to level two, a level three.
I don't know, Like, well, until you know the power
or whatever, they're set up to do the install not
to help you like be proactive and establish the business
case and to do the things that are necessary to
get this to really roll out and to really take

(54:39):
because once it takes hold, I think and becomes obvious,
I don't know that it's you. Look at who was
getting the line's share of the heavy funds. Here in
the state of Michigan, there are many are gas stations
or established.

Speaker 4 (54:53):
One around the corner from me now and does Bridge Oh,
I don't know.

Speaker 3 (54:57):
The mayor is a good friend of mine, Brad Scott's.
Uh but uh yeah. So there's a number of things
that have to and and I'm worried that we're getting
bogged down and well.

Speaker 1 (55:08):
Maybe hey, hold on, because we're getting down to the
end of the show. I want to get to at
least two more topics here. Volvo dumped its CEO and
brought so.

Speaker 4 (55:17):
Uh Hocken Samuelsen is.

Speaker 1 (55:20):
Bad is back and uh Jim uh Roan out. What
do you think, Paul?

Speaker 4 (55:28):
It was interesting when Rowan came in because he wasn't
an auto guy. If you remember, he came from Dyson.
He's a technology he's a technologist, and of course Dyson
has tried to get into more technology and blew a
couple of billion dollars if I recall trying to get
into autumn and then said no. So I don't know
if they thought that Jim had enough experience from that,

(55:50):
but he clearly lost confidence of the board.

Speaker 1 (55:54):
Right, Garry, how do you read it?

Speaker 3 (55:58):
I think that.

Speaker 2 (56:00):
The momentum of Volvo isn't.

Speaker 5 (56:03):
What there is an expectation it should be at this
point for the products that they're rolling out. And I
think that the board basically said, you know, it wasn't
so bad when Somemison was here before.

Speaker 3 (56:17):
We need a car guy.

Speaker 2 (56:19):
Let's try let's try to do that.

Speaker 4 (56:20):
I'm surprised Sumuson came back in. I mean, he's what
seventy four and he's from Sweden. When you know seventy four,
you should be well into your wonderful.

Speaker 1 (56:31):
Yeah, but he probably loves volve all. He developed his
whole career to it. They went to him and said, yeah,
we need you back, man, it's your duty, and he
said yeah no.

Speaker 5 (56:40):
They backed up the Swedish version of the Brinks truck
to their his.

Speaker 3 (56:45):
Now.

Speaker 4 (56:45):
The interesting thing is he was a big believer and
I think he still will be a big believer in evs.
So if evs are the problem that Volvo's having, I
don't see him as the change agent.

Speaker 1 (56:58):
Well look, maybe he's the guy that can sell them.

Speaker 4 (57:02):
But Okay, enough of him.

Speaker 1 (57:04):
Last topic, which I think is bombshell actually, and we're
probably going to have to do a whole other show
on this, but reports came out of China this week
that the Chinese Communist government wants to restructure all the
state owned enterprises. I think this is massive news. It's
been you know, covered over by all the talk on tariffs.

(57:25):
But Edgar, I don't know if you know much about
this or what do you think.

Speaker 3 (57:30):
I don't probably know any more than what you've described, John,
but it could this be one of the ripple waves
of you know, these things are on tariffs and other
kinds of things in that it's a dogfight there. It's
clear they've strong language, but sort of poison the well.

(57:52):
I mean they can't. You know, this is this is
when there's too many players. I mean, there will be
a rationalization. You know, it's their style to be to
try to manage that. Uh, that's a that's a tough thing. Uh,
it needs to happen. But imagine I mean you can

(58:16):
think about a scenario where as we figure out tariffs
and as we we figure out these things, and it
takes time. I mean this the strong leaders will emerge.
I think there's a couple that are clearly and there's
a probably a top tier that are you know, uh
or yeah by d yeah, yeah, but those are not

(58:38):
state owned. Well that's right, that's right.

Speaker 1 (58:40):
It's the state owned ones that the central government wants
to restart.

Speaker 4 (58:44):
Remember, one critical thing about China is that there's a
there's a fundamental battle that has been brewing for a
number of years. When you say state owned, remember that
can mean any of the states in China, can also
mean the local militia and so on. It's a peculiar,

(59:06):
almost feudal structure when it comes to how the government's
operations are set up over there, and I think you're
probably seeing Chi saying enough of this, where you know,
Chian owns this and this, Sescheuan owns this and so on,
and everybody's battling one another for control, and the central

(59:28):
state back in Beijing is saying, now we want to
run this, and you guys, we have to get you
under the thumb. I think this is far more than automotive.

Speaker 1 (59:37):
But you know, to your point, Edgar, too many car companies,
with too many brands, with too many models, with too
much over capacity. Nobody's making any money or barely, and
it's only getting worse. And they've hit peak auto too,
I would argue, And so I think the central government
realizes we've got to rationalize this. Here's the problem I

(01:00:01):
see is to your point, Paul, it's not central government owned.
These car companies are owned by provinces and cities. Beijing's
got one, Shanghai's got one, et.

Speaker 4 (01:00:12):
Cetera, delicious individual regional military groups, and it's almost like
the National Guard of Michigan car companies.

Speaker 5 (01:00:21):
I mean, but I mean, isn't the point that there
I mean, one of the reasons there are so many
car companies there was because of local employment.

Speaker 1 (01:00:30):
Exactly, great, exactly, And so basically.

Speaker 5 (01:00:33):
You know, the the region or the state or the
city or the whatever it's called there, it's just basically like, oh,
we needy, so what she doesn't like?

Speaker 3 (01:00:43):
Right?

Speaker 1 (01:00:43):
So I see this policy pitting the cities and the
provinces against the central government because to your point, exactly, Gary,
these car the state owned enterprises exist to create jobs.

Speaker 3 (01:00:57):
That's what they're there for.

Speaker 1 (01:00:59):
And when the central government comes in and go, wait
a minute, we got to start closing down plants, we
got way too many.

Speaker 5 (01:01:05):
Right, I mean, well because really good things was It
was the amount of money that was being spent in
order to prop up these jobs, right. I mean, so
so the local city would borrow money from wherever, they
would sell land to whomever and get money to keep
these jobs going.

Speaker 2 (01:01:23):
I mean what happens when the jobs are gone.

Speaker 3 (01:01:25):
They're going to have to manage that's the part they're
going to have to manage, clearly, that employment component. If
they can manage that and divert them into other industries,
then we won't be talking about well, I mean it'll
they'll be leaner, even more competitive, more competitive. Yeah, that's right,
And I think what you know we didn't talk about
in all this tariff staff is that only zero point

(01:01:47):
five percent China direct imports into the US today, So
that's not as part of this tariff. Yeah, we can
talk about tariffs for a whole other show, but that's
not even part part of it today. Yeah, and so
but yeah, they've got to manage the employment piece of that.
Great point.

Speaker 1 (01:02:04):
Well, look, we're gonna have to wrap this up. This
has been a great discussion. Paul. Great having you back
on the show. Edgar, awesome to have you here. We're
going to definitely have to have you back. And Gary,
you and I are gonna keep on doing this well.
And oh, I want to make one mention to the
audience too. We're starting a membership drive. You can do
it on YouTube, you can do it on Patreon. We
really need your support and if you like shows like

(01:02:27):
this to continue, please step in. It's only a few
bucks a month anyway, that's going to keep us going.
But anyway, thanks so much for watching. We'll see you
next week.