AAH #745 - These 7 U.S. Assembly Plants Are In Trouble

TOPIC: Car Plants in Trouble PANEL: Warren Browne, WP Browne Consulting; Joe White, High Speed Rodeo; Gary Vasilash, shinymetalboxes.net; John McElroy, Autoline.tv

Episode Transcript

Speaker 1 (00:00):
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(00:21):
big together.

Speaker 2 (00:25):
Thanks everybody for joining us on Autoline after Hours. We're
going to get into it today.

Speaker 3 (00:29):
To see that We've got Warren Brown from Warren Brown Consulting.

Speaker 2 (00:34):
Is that what you call the company?

Speaker 3 (00:36):
Also a professor at Lawrence Technological University. We got our
great friend Joe White here back on the show again.

Speaker 4 (00:44):
Read his substick high Speed Rodeo. Thank you, high Speed Rodeo.

Speaker 5 (00:48):
I'm so right.

Speaker 2 (00:49):
And then Gary and I are here too. Were the price.

Speaker 6 (00:53):
Some thing's never changed.

Speaker 2 (00:54):
Man, Let's not waste time. Let's get right into the stuff.

Speaker 3 (00:57):
Because you know, Warren sent me some charts and I
looked at it and it was like, this stuff is dynamite.
How do you want to kick it off talking about
these things? I mean, you know, I'm intrigued by these
seven US assembly plants that you say are in trouble.

Speaker 7 (01:15):
Well, look, I think that the list is made up
of I think ninety percent electric vehicle plants that are
dedicated electric vehicle plants, some of which are empty today
and will be empty through twenty twenty seven, which means
there's going to be a lot of cash burn. So
my whole premise on that was calling them IRA casualties, was.

Speaker 2 (01:39):
The Inflation Reduction Act.

Speaker 7 (01:41):
Right casualties is those plants that were originally designed to
be cost reduction efficient for beevs.

Speaker 5 (01:50):
Are going to have to adapt.

Speaker 7 (01:51):
They're going to either have to have gasoline engines in
those plants or hybrid engines in those plants to survive.

Speaker 5 (01:59):
Some of them.

Speaker 7 (02:01):
Rivian's plant in uh Georgia, but that doesn't exist yet,
but they've committed and probably gotten money from the State
of Georgia that says I'm going to be there. I thought, yeah,
I haven't. The chairman say they're not.

Speaker 3 (02:17):
I thought they had started building it and then put
a pause on it. But then they got a bunch
of money through I thought Department of Energy, like a
five billion or six billion dollar loan something like that.

Speaker 7 (02:29):
So the list is contained of dedicated EV plants that
were probably given investment funds or allocated funds or commitments.
Stillanti's commitment in Belvedere, it's a commitment. The UAW certainly
thinks that it's a commitment, that's for sure.

Speaker 5 (02:50):
They do.

Speaker 7 (02:51):
I don't see them putting an electric only pickup truck
in there if that thing's going to serve, that plant
is going to survive.

Speaker 6 (02:58):
So what are the seven for the people who are
listening to the show?

Speaker 5 (03:04):
Blue Oval?

Speaker 6 (03:05):
So that the Ford Blue Oval City, Ford Blue Oval.

Speaker 5 (03:08):
Now you're making me do stuff, all right? Okay, Well, I.

Speaker 7 (03:13):
Think it's wants to pick on you, and so I
want to The GM Fairfax car line will be empty.
They took the Malibu out. That's not going to be there.
That's unused capacity. Orion Royce says he's going to put
full size electric pickup trucks in there and take them
out of factory zero.

Speaker 5 (03:34):
That seems to me to be like a lose lose uh.

Speaker 7 (03:38):
Orion's got a lot of capacity, still probably has a
great paint sho.

Speaker 3 (03:41):
You're saying that because electric pickups just are not selling.

Speaker 4 (03:45):
Correct nov Well, yeah, LARGEV pickup, we'll come tie it
back to that, right, But large bad pickup trush not
a great segment.

Speaker 7 (03:52):
Nissans plant in Canton EV plant doesn't get anything until
twenty twenty, twenty twenty eight. Uh Rivian's plant in Georgia,
vin Fast plant, we're coming, we've we're coming, so vin
Fast plant and unless they get some gas, more gas

(04:15):
or Audie the Scout plant doesn't get a product until
twenty twenty eight that everybody knows about in South Carolina.

Speaker 5 (04:23):
Yeah.

Speaker 7 (04:24):
Well I looked at them and said, originally designed, keyword
designed as electric. That got the cost out of the process.
That was the whole pitch, right, no more marriage, no more.
And now they have to adapt. And now they're looking

(04:45):
at tariffs. And I just don't see executive committee meetings
getting together saying let's now spend some more money in order.

Speaker 5 (04:54):
To adapt these But they're going to have to.

Speaker 7 (04:56):
So the the investment that they thought was complete, it's not,
and that sets the stage for potential impaired assets.

Speaker 6 (05:07):
Is this because of the decreased interest apparently in buying
evs or is this have larger economic pressures that are
bringing to bear on these facilities.

Speaker 7 (05:21):
Well, it's a good question. I think it's all three. First,
it doesn't look like the Inflation Reduction Act. In terms
of consumer incentives and manufacturing incentives, battery incentate is going
to stay, so the manufacturers are going to have to
tine that themselves. Right, the seventy five hundred dollars that
was paid for by the taxpayer. General Motors Fort Stlantis

(05:44):
are going to have to decide are we going to
take that out of our margin?

Speaker 5 (05:48):
I think that that's problematic. Okay.

Speaker 7 (05:51):
Two, it is to slow down and demand, but electric
vehicles are going to be here, There's no mistake about it.

Speaker 5 (05:57):
It just may end up being a.

Speaker 7 (05:59):
Very high portional let's call it twenty percent, BEV an
interesting powertrain option for consumers to come into the showroom.
It's not going to be the vision or the sixty
or seventy percent that the government said it was going
to be, and some manufacturers signed on to.

Speaker 5 (06:17):
That particular vision.

Speaker 7 (06:18):
And the third is the economic downturn that will happen
when you have twenty five percent duties on vehicles, a
lot of which are imported for the Detroit three, and
they have to sustain those duties across their complete portfolio.
They're not going to just increase prices on imported vehicles.

Speaker 5 (06:43):
Because the.

Speaker 7 (06:46):
Price ladder that they've established for the customer, if you
just put it on the imported vehicle, that price ladder
goes away. So they're going to take whatever the penalty is.
Mary Barros said it's five billion, they're going to take that.
They're going to spread that across all the vehicles. Otherwise
it just makes it disproportionate. So all three, the elimination

(07:07):
of the policy, the current slow down, although Gary, I
don't put a lot of weight in.

Speaker 2 (07:12):
That, but the third is I mean current slow down in.

Speaker 5 (07:16):
Ev evs uh.

Speaker 7 (07:19):
If tariffs are going to be sustained until the end
of the Trump administration, there will be a loss of production.

Speaker 5 (07:31):
There'll be a loss of employment.

Speaker 7 (07:35):
You can't My forecast is a million units will come
out of production. You can't have a million units come
out of production and not lay people off.

Speaker 5 (07:44):
No, that's that.

Speaker 4 (07:45):
Yeah, that's that's four or five assembly plants, and that's
if you're running them at a relatively slow pace. I mean,
I would add a couple of other things to to
what you're saying. I wouldn't. I mean, in terms of
loss of employment. Let's not forget about the battery plants
that were that were built by you know, GM, four
various other companies, all with an anticipation that there would

(08:06):
be a forty five dollars per kill a lot hour
subsidy coming from the government for the batteries produced there.
I did some really crude back of the envelope math
during the UAW talks, which the GM folks probably didn't like,
but they didn't say it was completely insane. And forty
five dollars to kill a lot hour basically covers their
labor costs. No, I mean, it doesn't cover the investment

(08:26):
costs of fine. I get it, but it's significant subsidy
and very unlikely to survive the current budget process in Washington.
The other thing that I would add quick and then
the sauce of OIS. But the other thing I would
add is don't forget that the Trump administration is rolling
back fuel economy standards and the Congress, both houses of

(08:48):
Congress have voted to eliminate the California EB mandate, which
would affect you know, the other states as well. So
there's those demand drivers for you know, to produce evs,
right that the fuel economy rules that were you know,
increasingly difficult to meet without EV's the mandates. Setting aside
the politics of those things, assuming those go away, you know,

(09:10):
where's the value in producing an EV even at a loss,
which used to be there? Right, you'd build an EV
at a loss because you could sell a truck. That
value goes away without that regulatory push, it seems to me.
So I think there's another thing that kind of amplifies
what you're saying.

Speaker 7 (09:23):
Oh, and I'll give you an I'll give you another
silver lining in this. Imagine now you don't you have
a CO two standard that's much higher.

Speaker 3 (09:33):
Now, when when you say higher, you mean that it
allows automakers to put up more CO two.

Speaker 7 (09:40):
Correct, Tesla is getting a whole bunch of money ooe
by four by four General Motors, and Stillanta is digging
into their pockets and paying that to Tesla.

Speaker 2 (09:54):
To buy the credits, to buy the credits.

Speaker 5 (09:56):
Correct now I am So you're saying that money is
going to go away.

Speaker 7 (10:00):
Imagine a world now where rather than giving it to Tesla,
there'll be some benefit both to ameliorate and mitigate the impact.

Speaker 5 (10:10):
Of those tariffs for the Detroit three.

Speaker 7 (10:13):
Right, and potentially give the consumers some money rather than
giving it to Tesla.

Speaker 5 (10:20):
So there is a silver lining.

Speaker 4 (10:21):
And yeah, and I'm not smart enough to do this,
and I'm eagerly awaiting some analysts who might be smart
enough to do this. Is calculate sort of the net
over under on all this, What is the net benefit
to the industry of relaxed fuel fuel efficiency CEO two rules,
no more ev mandate. You know, the potential boost from
deductibility of of car Loan interest, which is in the

(10:43):
Republican bill. And then you know, of course, the the
the red ink that comes from oh no more I
are you know, no federal substats for batteries, no more
federal substies for EVS, tariffs. I mean, lest we forget
still the big story, I mean, what's the over under
on all of that?

Speaker 6 (11:02):
But are the battery credits taken out of the house
build because I mean I know that the seventy five
hundred and the used car thing are deliberately called out.

Speaker 4 (11:14):
I have seen Yeah, well so, yeah, I should have
some humility about this.

Speaker 7 (11:17):
I have.

Speaker 4 (11:18):
I've looked at the House bill and read through it.
There's a lot of language about rescinding unspent IRA funds,
and it appears to include you know, clean energy vehicle
manufacturing and power stations and the charging stations. The premise
of your question, though, is I agree with, which is

(11:39):
that so many of these battery plants, particularly the battery
plants and also the assembly plants are in red states,
Republican states, and bill is not done, the Senate is
not done. So you know, is it possible that some
senator you know, from one of the states affected in
your list is going to say, well, time out, you're
not taking five ten thousand jobs from my state. You know,
we're going to stretch this out out. I think that's

(12:01):
totally possible. So you know, we'll see, but at least
on it seems like, you know, the general direction of
federal policy toward EV's is let them stand on their own.
If you look at the language in the in the bill,
it's like, you know, favoring working families over elites. And
the number one item under that, I think, come right
about this. The number one item under that is eliminate EV.

Speaker 5 (12:20):
Substance because it's just those rich.

Speaker 4 (12:22):
Snobs in Cambridge and Palo Alto who are buying evs.

Speaker 5 (12:26):
So yeah, I think there's So.

Speaker 6 (12:29):
I want to get back to these seven plants. So
are these like put a fork in it, they're done,
or do you think that there is a possibility that
they may be used for something else. But then you
said that we may lose a million units, And if
we lose a million units by open plants.

Speaker 7 (12:51):
Well let's let's do the other the other chart that
that that I sent in. The ones that are really
going to benefit are the flex plants.

Speaker 5 (13:01):
All the plants explain flexplant.

Speaker 7 (13:03):
Flex plant is a plant in the United States that
makes a product where the same product is either made
in Mexico or Canada or overseas.

Speaker 5 (13:16):
And what we've seen over the last what.

Speaker 7 (13:18):
Forty five days is manufacturers, General Motors, et cetera saying
we're going to shift some of that pickup out of Mexico.
Nissan's saying we're going to shift some rogue out of
Japan back into Smyrna. We're going to shift some civics
maybe into our plants and increase the proportion of the

(13:40):
manufacturer made to mitigate the tariffs. Those plants will have
a distinct advantage over the next two or three years.

Speaker 5 (13:48):
And my numbers.

Speaker 7 (13:50):
Don't even fill them yet, so they could even take
more out of Japan, more out of Mexico and more
out of Canada to put them into those flex plants.
And there's there's you know, seven six seven major ones.
But I just said the Rogue, the Civic, the RAM
coming out of Mexico going into Warren.

Speaker 5 (14:13):
Silverado, Silverado, et cetera.

Speaker 7 (14:15):
So, uh, there are opportunities for those plants.

Speaker 5 (14:19):
Those will be the stars.

Speaker 7 (14:21):
And even in my numbers, with the reduction of a million,
the overall reduction is a million in production.

Speaker 3 (14:28):
And just so the audience is keeping up with you
on this, you're saying that because of the tariffs and
prices going up, you think sales of new vehicles in
the US is going to go down by a million?

Speaker 5 (14:38):
Correct? Correct? There? And therefore productions if that's if.

Speaker 4 (14:42):
The turffs continue, I mean, you know, and and like
I mean literally as we're taping this, right, I mean
a few hours yesterday, I guess this court said no, no,
all these tariffs are illegal. You can't impose them, right,
international court.

Speaker 3 (14:54):
The car tariffs, not the steel, aluminum or car, Yeah,
they emergency.

Speaker 5 (14:58):
But the other tariffs, yeah.

Speaker 3 (15:00):
Because those were declared under National Emergency two not the
other section whatever it is.

Speaker 4 (15:06):
There's a different law, right, right, right, But I guess
my point is that tariff policy seems to change.

Speaker 2 (15:12):
You know, twenty four hour cycle yep, tariffre.

Speaker 5 (15:16):
Yeah, it's tariff fuzure.

Speaker 7 (15:17):
So but back to your question, there will be some
that die really and doesn't need a plant in Georgia.
Then fast two hundred thousand units of capacity not gonna happen. Okay,
they may happen in twenty thirty, twenty thirty two or
some some far distance. The rest of them have to

(15:40):
boot up and acknowledge that they need to be repurposed,
either with the gasoline engine in addition, bringing a vehicle
in that has a hybrid, or putting hybrids on the
ones that they were going to do electric only. And
if they don't give that, they're going to strip this away.

(16:04):
They're not gonna They're not going to reach into their
pockets and spend seventy five hundred dollars a vehicle at
General Motors to keep that volume irrespectable what John Vain says,
They're not going.

Speaker 5 (16:14):
To do it.

Speaker 7 (16:15):
So either repurpose or close them.

Speaker 6 (16:17):
So so Blue Oval City, which isn't even open yet,
is on your list, and they were planning on putting
the next generation electric pickup truck in there.

Speaker 5 (16:28):
That's all we know.

Speaker 4 (16:29):
Yeah, they may have got other stuff, but that was
all we know.

Speaker 6 (16:32):
Right, So you're suggesting that if they have this next
generation pickup truck, they better figure out how to put
a hybrid in that as well.

Speaker 7 (16:41):
Or or remember what Blue Oval has three hundred thousand
units of capacity forward selling thirty thousand lightnings today.

Speaker 5 (16:51):
That's a lot of investment.

Speaker 7 (16:52):
Okay, that's a lot of cash burn between now and
the time they launched that new lightning. What I'm saying
is then fine and other things hybrids or other product
that you can put in there in order to use
the capacity in the paint shot. Otherwise, you've taken a
three hundred thousand unit planned and kind of made it

(17:13):
a b EV orphan. It has to be repurposed or
they're going to have to close it.

Speaker 6 (17:19):
But I mean, it takes a lot of money for
retooling plants.

Speaker 7 (17:22):
I'm not saying that it doesn't well on the other end.

Speaker 4 (17:26):
And the other question I would have is that is
that I mean without an overall growth in demand, not
just within the North American market, but but globally. You
know there are all of this means there are plants
that are going to be be you know, not going
to have an economic operation. They're not going to have

(17:47):
enough vehicle's demand to sustain themselves. You look at you
look at Tesla Berlin right now. I mean, if you
annualize Tesla's European plus UK plus, what are the country's
the whole European market, what ordinary people would think it
was the European market. They sold under a fewer than

(18:10):
eight thousand vehicle Tesla vehicles in the European market last month.
If I got my numbers right, Acea just came out, Yeah,
ACA numbers.

Speaker 2 (18:20):
Down Tesla sales.

Speaker 4 (18:24):
And again, you know, viewers can certainly check my math,
and you know, but if you annualize Tesla's European sales
from April's level, which I know is not the way
to do it, but fine, if you just do that,
it's ninety thousand vehicles Tesla Berlin's capacity. And this is
from Tesla itself. They put it on their financials. It's
certain fifty thousand, okay, And I'm not good at math, right,

(18:45):
but I can tell you right that doesn't pencil. So
so you see this over capacity, this surgeon ev capacity
that you've outlined and created those plants that you're pointing at.
For if you look at a bigger context is it's
added to the overcapacity that was in the global industry
to begin with, and it's just making it worse and worse.
And now you know, and even Tesla, which flew above

(19:08):
all this stuff, I think now has got some real problems.

Speaker 3 (19:12):
In fact, let's run this video clip because we ran
it on Outline Daily last week, but one of our
viewers sent us a video clip of a bunch of
Tesla's just sitting in a parking lot not too far
from here, and it's everything. It's cyber trucks, it's says,
it's ax's, it's threes, it's wys. It's a crazy number
of vehicles just parked there. Now it turns out there's

(19:34):
a new Tesla I guess it's distribution point slash service center.
It's about a half a mile north there. But honest
to god, the cars parked in that parking lot there
are no different than the overflow from the local Ford
dealer just around the corner here that spills off into
the little.

Speaker 2 (19:51):
Strip mall next to them.

Speaker 3 (19:52):
They got all kinds of vehicles, pot so I mean this,
this inventory level is indicative that Tesla's not just got
a sales problem in Europe.

Speaker 4 (20:02):
No.

Speaker 6 (20:03):
Sons explained to our viewers this this phenomenon of OEMs
having too many vehicles and sticking them into parking lots here,
there and elsewhere.

Speaker 7 (20:14):
Well, in the case of let's let's pick on Tesla,
but Ford has done it, General Motors has done it.

Speaker 5 (20:22):
I've all don't.

Speaker 7 (20:23):
Yeah, But in the case Tesla is a little bit unique.
Scout would be the same because they've announced that they're
not going through dealers. So you imagine that you either
are going to store those vehicles at the factory right
waiting for an order. Everybody does that, they're called factory inventory.

(20:44):
Does that get reported in the day's supply number, No,
it doesn't. Only the dealer inventory gets done. So I
need to have a delivery time to the customer if
they order a vehicle. And when I'm looking the customer
in the eye across the table and saying yeah, we

(21:04):
can get you that vehicle in sixty.

Speaker 5 (21:06):
Days, they may walk out of that showroom.

Speaker 7 (21:12):
But if I can say I can get you that
vehicle here in five days, because I have a distribution center,
whether I'm doing that buy on the internet with Tesla
or in a quote Tesla showroom, if I can get
that vehicle to them in five days. The only way
that I can do that is to have a distribution

(21:33):
center in various locations where I'm going to have high volume,
and that will allow me a service deliverable to the
customer that I don't have to tell them, yeah, well
it's in Austin and I can get it to you
in New York in sixty days because it may or
may not be built yet, versus oh you want one,
I can get you out of the New York distribution

(21:55):
center in five days.

Speaker 3 (21:58):
To the difference, here's the thing. I mean, Tessa all
Along says, we build the order. We don't bank up
all kinds of inventory, which you know has supposedly been
given them a great cost advantage. What did Jim Farley say,
It was like twenty five hundred dollars. Tell me like
that it's just in the distribution Yeah, right, right, because

(22:19):
you don't have acres and acres of cars just sitting
in an inventory that.

Speaker 2 (22:23):
Are great floor plan that are just depreciating.

Speaker 5 (22:26):
I agree. When you were the only girl at the dance.
You could do that.

Speaker 7 (22:33):
Now we have twenty five more girls at the dance
competing for that volume. And if you're telling a customer
you're going to wait sixty days build the order, and
I can buy an Equinox okay, or a Rivian and
I can get them much quicker. Then you're going to
move to exactly what they're doing. You have to. You
have to deliver to the customer so they don't walk out.

Speaker 5 (22:55):
Of the shows no matter what you do.

Speaker 6 (22:56):
So isn't this basically just a marketing strategy and so
good on them for doing that.

Speaker 5 (23:00):
Yeah, I think so.

Speaker 2 (23:01):
But it drives up their costs.

Speaker 5 (23:02):
Sure, Yeah, it's a difference. I'm saying it doesn't.

Speaker 7 (23:05):
It's delivery to the customer time.

Speaker 5 (23:07):
Yeah.

Speaker 4 (23:07):
The different between what they're doing and what and what
Attritional OEM is doing has narrowed. I mean it used
to be that they were you pay the people would
pay them for a vehicle and then they would build it.

Speaker 6 (23:17):
Right.

Speaker 4 (23:17):
The cash flow kind of a nice deal, right, You
get the cash and then you spend the money on
building the vehicle. I don't think it sounds like it's
not That's not where Tessa's at anymore.

Speaker 7 (23:26):
Not any Well, no, you think, is anybody in this
room think that General Motors, Fort and Chrysler didn't stuff
dealers with inventory and say, don't worry, We're going to
give you the incentives in order to move those babies.
It's no different than having a regional distribution center.

Speaker 5 (23:43):
It's just at the dealer. So this isn't necessarily the.

Speaker 6 (23:47):
Same as you know, we saw a few years back
where there were out at Metro Airport in Detroit where
they had several unused parking lots that were suddenly full
of brand new vehicles that were just sitting there, and
that was because of overproduction, right.

Speaker 7 (24:07):
Well, but I also think it was COVID related to
they couldn't get pieces of parts.

Speaker 5 (24:11):
Ford had that problem. Ford had that problem on the
F series pickup trucks. They couldn't get chips.

Speaker 7 (24:17):
Or whatever it was, or or they could only get
certain chips so they didn't have heated seats or whatever
the particular excuse was. I think a lot of that
was COVID related. But don't think for a moment that
the efficiency system of getting a vehicle to the customer
is any different today than it was ten years ago.

(24:40):
Why do customers still roam the lots. You go out
here down to ten mile to the Ford dealer and
you'll see more F series pickup trucks in different colors
and configurations than you can imagine. But that's the American
way of shopping for vehicles. Americans want instant gratification. So
I want to drive out right now with a brand
new truck.

Speaker 2 (25:00):
I don't want to wait. I want one now.

Speaker 4 (25:03):
Right And the dealer doesn't want you to think about
it either.

Speaker 7 (25:06):
No, they don't want to walk. I guarantee if they don't,
you're hot to buy.

Speaker 5 (25:09):
We're gonna be the sale.

Speaker 7 (25:11):
So the the if the bogie is I can get
your car in five days if it's not on the lot.
Some of some of the dealers today that our mega
dealers are handling that because they have two or three
Chevy stores or two or three Ford stores, and they're saying, no,
I can get you one that's down in Monroe if

(25:31):
if you want one today.

Speaker 5 (25:32):
Just take me.

Speaker 7 (25:33):
So if the bogie's five days and now you have
twenty five new girls at the dance, Tesla's going to
have to adapt. And I don't blame them for that.
It's just part of.

Speaker 3 (25:43):
It's just that it's kind of shocking after they made
such a big deal about built order and we're not
like car dealerships, and and they're slowly inching that way.

Speaker 5 (25:53):
That CO two money goes away.

Speaker 4 (25:57):
Well that's about you all these So it's just an example.
If all these pressures on the industry, I mean, the
one point you were making about the overcapacity and the
plants that may not have that are on the books
but may not have a real future, then you we're
talking about Tesla's you know problems, you know clearing you know,
sort of clearing out inventory and turning and earning in
the way they used to do. Just listening to a

(26:22):
discussion by analysts at S and P Global yesterday, and
they were talking about how, you know, the tariff costs
that have already been incurred, and you know, you know,
the vehicles hit by those costs have not really arrived
at dealerships yet they're coming in June next month, in July,
I mean the ones that were fully impacted by the terraffs.

(26:43):
So then now these dealers are going to have higher
cost vehicles. The companies are going to be under more
pressure to figure out how do we you know, hide
the pricing. As you said, they're also going to be
under pressure, like you don't want to keep a lot
of inventory of expensive vehicles sitting there because you know,
and again we made debates this Later on in six months,

(27:05):
the president may say, well, I've just cut a deal
deals with South Korea and Germany, in Mexico and Canada,
and now the tariff is in twenty five percent or
fifty percent or whatever. The heck, it's ten percent like
it is with the UK, and it's not nothing, but
it's not twenty five. So now the next wave of
vehicles is at a different cost level, and it just
seems like, you know, it was heads exploding. How do

(27:29):
you manage that?

Speaker 7 (27:30):
Well, you don't because if you take a look at
two the two major things that happened in the US
industry relative to tariffs, the so called chicken tacks and
the voluntary export agreement that Japan had back in the
back in the eighties.

Speaker 5 (27:47):
The reason that those were.

Speaker 7 (27:49):
Effective, Joe, is because they lasted for multiple, multiple years
and behavior was changed.

Speaker 4 (28:01):
That's still tax has been with us for what sixty years?

Speaker 7 (28:03):
And what happened to small pickup trucks where did they
end up in America. But if if somebody back then
would have thought, well, the President's going to get together
with Germany and they're going to solve this whole chicken
tax thing in six months, you think that the Frontier
and the Tacoma and the Colorado and all would have No,

(28:24):
they would have still build been building the Colorado.

Speaker 5 (28:27):
And ty Land.

Speaker 7 (28:31):
So the point here is, I'm not disagreeing with you.
Trump may be the world's best negotiator and it's all
going to come off. But if the objective then is
to make more in America, then that objective gets diluted.

Speaker 4 (28:49):
Yeah, well that is the objective.

Speaker 7 (28:51):
Well, then that's why I'm on my side of the ledger.
They're going to stay because the only way you're going
to affect behavior, and those two examples are real, is
to have them on for a decade.

Speaker 3 (29:04):
Right. But you also have another chart, and I don't
know if we can get to that because and it's
a lot of numbers, but Warren, you looked at US
sales with tariffs, looking at twenty twenty five this year,
twenty twenty six, twenty twenty seven, and what you're showing.

Speaker 2 (29:20):
If I if I'm reading this, right, is US.

Speaker 3 (29:23):
Sales are going down in those years absolutely starting this.

Speaker 7 (29:27):
Year, absolutely, and John is driven from a from a
critical assumption that the customer or the manufacturer or the
dealer or the supplier is going to pay for those tariffs. Okay,

(29:48):
it's not North it's not Korea. Okay, China, it's Fundai, yeah, right, Okay,
countries don't export. Companies export, So it's going to be
the value chain, the supply chain that pays for that duty.
And all I've assumed is there's going to be around

(30:09):
an eleven percent increase in prices if manufacturers and suppliers
and dealers didn't take a.

Speaker 5 (30:18):
Price reduction or absorb some of that margin.

Speaker 7 (30:21):
I've assumed that they take four points of that eleven percent,
which leaves a seven percent increase of price, pure price
across all vehicles every year, right, because I assume that
the terriffs will la last for three years on top

(30:42):
of four percent that they normally get for inflation and
just general return on investment money that we need to
get back. So prices are going to go up by
eleven percent. You cannot sustain volume if every customer who's
now doing eighty two month loans, walks in and seize

(31:05):
prices that are higher by eleven percent.

Speaker 5 (31:07):
Volume is going to come.

Speaker 6 (31:08):
Just put that eleven percent into some context. So today
on Automotive News Cloud Theory, we've had Rick Wayinschell on
the show a few times. From Cloud Theory, they post
a number of what the today's average marketed price for
a vehicle is. And today's average marketed price for a
vehicle is forty nine seventy three dollars, call it fifty.

(31:33):
So we're gonna have fifty and we're going to add thousand.

Speaker 5 (31:36):
Thousand to that.

Speaker 4 (31:38):
Yeah, and and and and there.

Speaker 7 (31:41):
The butter won't be spread They'll spend a little more
butter on a full sized pickup truck than they will
on an Equinox or I'm not picking on general motors,
but but the butter will be spread over everything but
disproportioned well.

Speaker 4 (31:52):
And they'll and I've already, I mean, I've already seen this,
this starting to happen. I think Chrysler think said that
that the cheaper version of the Challenger than the new
Challenger will not be coming.

Speaker 6 (32:08):
All right, right, this is the electric they're eliminating.

Speaker 4 (32:11):
The eliminating So what so what's happening is they looked
at that, to your point, and they said, there's no
point in bringing this vehicle because we're just going to
have to upprice it to make, you know, make a
decent return or any kind of a return.

Speaker 5 (32:24):
Probably the heck with it.

Speaker 4 (32:26):
We're just going to saw off the low end of
this range and we'll start people. I don't know what
the Challenger starts at, but it's not you know, it's
at the higher end of the branch. And I will
fearlessly predict on this show right now that you will
see that happening among across a bunch of different brands.
And I would think especially the European brands which could
be hit. It's like, you know, the low end of
a Mercedes, the low end of just going to go away.

(32:49):
It's just they're just going.

Speaker 7 (32:50):
To happen during VR A Japanese didn't do the L
series Civic anymore.

Speaker 5 (32:55):
Absolutely.

Speaker 4 (32:56):
I bought a Toyota Starlett in nineteen eighty two. Cheap
is dirt. The darn thing lasted forever was you could
you literally could have shot it with a howitzer and
it was going to keep running. And they discontinued that thing,
like maybe a year or two after I bought it
because of the VRA, and they looked as so, why
are we selling this you know whatever it was, you know,
super cheap, you know, everlasting econobox.

Speaker 5 (33:18):
We're going to go up market. So it's eleven percent
on five fifty thousand.

Speaker 6 (33:23):
But back to this point of the vehicles going away,
I mean the vehicles will still exist, they just won't
exist here, right, correct, right, some.

Speaker 4 (33:30):
Me of those system other parts, sure, correct.

Speaker 5 (33:32):
But I want to go back to occurrence of a tariff.

Speaker 3 (33:34):
I want to go back to your charts, because what
you show is that sales goes down, I e.

Speaker 2 (33:38):
Production goes down, correct, I e. Employment goes down.

Speaker 3 (33:43):
So all this talk about bringing manufacturing back to America,
at least as it applies to the auto industry, is
going to cost jobs, not add them.

Speaker 5 (33:52):
I agree.

Speaker 7 (33:53):
And the only way that it will increase jobs is
through a sustained policy. See that everybody understands even if
it's high tariffs.

Speaker 4 (34:04):
And that does not change.

Speaker 2 (34:06):
Yes. Yeah, So Joe, what do you think tariff's going
to stay?

Speaker 4 (34:10):
Well, so, I don't think they're going to stay at
the levels that the President has announced as of today.
I do think I said this earlier, and I guess,
I guess this is my prediction. I do think that
this UK deal may be possibly blueprint the blueprint and
template ten percent, and it's sort of a vr ish

(34:30):
kind of thing where they've told the UK can you
ship one hundred thousand cars before you get hit with
a higher tariff? And I believe I was just reading
something about this. I think a hundred thousand is kind
of just a little bit over where they've been at.
So it's sort of basically the tariff is going to
be ten percent, and so you know, everybody, look, everybody
else can see that deal, right and said, okay, fine, okay,

(34:50):
that's your deal. Fine, we'll take that deal beats fifty
beats one hundred and five or whatever. Okay, fine, so
now it's going to be ten percent.

Speaker 7 (34:57):
Well, i'll tell you what happens then, because I'm a
scenario guy. That's what I do for a living, right.

Speaker 5 (35:06):
Everything, Then stay.

Speaker 7 (35:09):
If if Paul Johnson can say we can navigate through
twenty five percent, and he's gone on record saying that,
who's Paul Johnson, CFO of General Motors. I think I
got that name correctly. He's gone on records.

Speaker 5 (35:23):
Jacobs.

Speaker 7 (35:23):
Sorry, he said, Yo, we can navigate this, which is
code for don't worry.

Speaker 5 (35:29):
Yeah.

Speaker 7 (35:30):
Then Mary came out with the five billion, which is
closer to the truth.

Speaker 5 (35:33):
Right.

Speaker 7 (35:35):
If it's ten percent, the dealer's going to take one,
the supplier is going to take one, General motors are
going to take a couple, and prices are going to
go up by less.

Speaker 5 (35:45):
Than what they were in COVID. Will you affect then.

Speaker 7 (35:51):
The return of assembly to the United States.

Speaker 5 (35:55):
The answer to that.

Speaker 7 (35:55):
Question is no, I don't even have to run the numbers.

Speaker 4 (35:59):
Yeah, no, And I don't you know numbers there than
I do. I mean, I could certainly see. I mean,
why would you rip up an existing assembly and system
plus supply chain at ten percent? You wouldn't, right, right,
So if it comes to that for the.

Speaker 5 (36:15):
UK, because basically the export range rollers, I mean.

Speaker 3 (36:18):
And what's the whole thing and behind the tariffs, if
it's all going to settle in, you will bring And
I agree with that, by the way, I think that
was the plan all along.

Speaker 6 (36:25):
But okay, you mentioned two things, the chicken tax and
the vr as. Okay, the vras basically were a number
that Japan could send in X.

Speaker 5 (36:36):
Okay.

Speaker 6 (36:36):
There were no tariffs involved in that, Okay. It was
just basically they said, you can you can send in X,
and if you want to sell X plus Y, you
got to build a factory to build.

Speaker 4 (36:48):
You may be about to say what I'm going to say,
why no, you go, I'm just say I just it effects.
It acted as a tariff because of what I think
I was saying before that that it compelled or led
the Japanese to push up the prices on average prices
of the vehicles they were shipping here. I mean, and

(37:08):
you know, and then I think I think I think
I might be right about this. Lexus was conceived during
that period because in fas like okay, fine, you're gonna
limit our quota, will make the average selling price of
our vehicles not six thousand or eight thousand bucks. We're
making twenty thousand bucks.

Speaker 6 (37:25):
Yes, But getting back to spreading the butter across all
of the things, that wasn't necessarily the case of what
was happening with all the imports that were coming in
from Japan.

Speaker 5 (37:39):
No Japan.

Speaker 7 (37:42):
I once did an article for the News, and it
was originally from Ward to reprinted in the News that
said the Voluntary Export Agreement was the greatest marketing campaign
for the Japanese that the United States government could have
ever invented. Why because every year the Japanese promised that
they'd give the consumers in the United States just a

(38:03):
little more, and we were happy to publish that information
on the front page of every newspaper in the United
States for about a month. Okay, and so oh, the
quote is going to increase. I'm going to run down
to my Honda store because they were my customer at
that time. I had left General Motors and went to

(38:24):
work for Awards, so Honda was a customer of mine.
They said that they had to tell the dealers not
to mark up the prices of the vehicles in the showroom.
So Japanese offered a little more, and consumers went into
those showrooms and did it. But there was a major
unintended consequence of that tariff. Tariff there are as many

(38:47):
plans in the United States today this there was.

Speaker 5 (38:53):
In nineteen eighty five. Same mom, they just ain't through
the tree three and yeah, their owned cellarship change.

Speaker 7 (39:03):
So there are unintended consequences of of of tariffs and what.

Speaker 5 (39:07):
They mean, it doesn't necessarily mean.

Speaker 7 (39:09):
That the Detroit three are going to cough up the
capital to build those plants. Okay, as many plants today.
Go back and look as there were in nineteen eighty five.

Speaker 3 (39:22):
If you add up all the employment that the transplants have,
it's greater than the employment I'm talking hourly workers on
the line, greater than what the Detroit three have. So
it's not just the Detroit three that lost market share.
The UAW lost a lot of market.

Speaker 4 (39:36):
Yeah, that's that might be a whole other time. I've
been talking about consequences.

Speaker 5 (39:41):
No, no, I agree.

Speaker 4 (39:42):
The chicken tariff thing is interesting, and I've been trying
to think about this and the chicken tariff, which is
the twenty five percent tariff on important trucks, which was
imposed by Lyndon Johnson who got angry about the way
Europe was refusing to take American chicken. I mean, it's like,
you know, history, history repeats itself, and I'll just just

(40:05):
quick but that was aimed at a segment where I guess,
you know, compact pickup trucks definitely competitive, and you saw
the Takoman, but the large pickup truck segment, the other guys,
you know, the Europeans and the Japanese just that's not
a product they're ever going to build where they tried,
you know, the tundra and the type. But but this

(40:28):
is a segment where the US producers, the Detroit three
really have not just dominant share, but like dominant technology.
They really know how to build these things and they're
they're amazing. I'm not sure that it is that the
tariffs were quite the same way across the board. I
think I think it would have much more of a
depressing effect if you had like everything it's twenty five

(40:49):
percent and not you know, Sedan's SUVs. I just wonder
if we would have a different effect.

Speaker 6 (40:56):
So you're saying it should be more tactical than across.

Speaker 7 (40:59):
The board, Well, you were negotiating in private, as opposed
to in the Detroit News in on the Wall Street Journal.

Speaker 3 (41:04):
Yeah, okay, hold on, Yes, we got to take a
quick commercial break right now. We'll be back in thirty seconds.

Speaker 8 (41:13):
Knowing that a little rain won't slow down your day,
that's what really matters. Bridge done to runs, the biatronic
hires confident control in wet conditions.

Speaker 7 (41:27):
The automotive industry continues to evolve and so do the
opportunities to define it.

Speaker 8 (41:32):
Borg Warner, one of the world's most admired companies, gets
its partners where they need to go.

Speaker 7 (41:37):
Let's do something big together.

Speaker 3 (41:42):
Okay, we're going to pick up the conversation of where
we've been. But Gary's got a good trivia question, all right,
that we're going to get through, right.

Speaker 6 (41:47):
All right, So we're talking about plants, and we'll talk
about plants when we get done with the trivia question.
But at the Willow Run plant, Yeah, during World War
Two there are eighty six hundred and eighty five one
four is built by the Ford Motor Company. Okay, on
May twenty ninth, today's on May twenty ninth, nineteen forty
six a car went into production there?

Speaker 2 (42:11):
What was the date?

Speaker 6 (42:13):
May twenty ninth, nineteen forty six? A car went into
production at the Willow Run plant.

Speaker 5 (42:21):
What was it?

Speaker 6 (42:24):
And bonus points for whatever? For its name? Well, I
guess it doesn't really matter.

Speaker 5 (42:29):
Forty six I don't know.

Speaker 2 (42:30):
I'm gonna say the forty six Ford fair Lane.

Speaker 6 (42:37):
It was Ford or sedan built by Kaiser Fraser Corp.
Simply known as the Fraser really named after John W.

Speaker 5 (42:45):
Fraser.

Speaker 6 (42:47):
Bonus points if you can cut, well, you maybe some
points because you don't get bonus points because none of
you got the answer. Okay, So John W. Fraser named
a vehicle that went into production in nineteen twenty eight. Actually,
he named a division that went into production in nineteen

(43:09):
twenty eight. What was this division? Yeah, I don't know.

Speaker 4 (43:15):
I've heard of Kaiser Fraser, but my history on those
that one is pretty weak.

Speaker 6 (43:20):
Warren, Look, you're grinding, he's grinding.

Speaker 3 (43:23):
In fact, I'll add a little bit of trivia. Kaiser
actually built Sedan's in Argentina under the model name was
the Caravel.

Speaker 7 (43:35):
Tenth lges economy in the world at the time.

Speaker 2 (43:37):
Kaiser also was the guy who did the Liberty ships.

Speaker 6 (43:40):
Right, it's right, he stumped me. Yeah, all right, So
I will quote Walter P. Chrysler who said, quote, every
farmer in America knows about Plymouth binder Twine. Let's give
them a name they're familiar with. That's where the name
Plymouth came from. And it was because Fraser said, people
know about Helmouth binder Twine.

Speaker 4 (44:00):
Oh really, so that's where the division came from. I
always thought it was the rock, you know, the Yeah, no,
not that.

Speaker 2 (44:06):
Okay, So what other cars were built in that plant?

Speaker 5 (44:08):
Later on?

Speaker 6 (44:09):
In what plant?

Speaker 2 (44:10):
In the Willow Run plant.

Speaker 6 (44:12):
I just come up with questions. I don't have answers.

Speaker 3 (44:15):
Corvera was built there, Yeah, Corvera was built there. And
that's actually where they were going to build the Wankle engine.

Speaker 5 (44:22):
I'll be done at Goles. Wankle engine.

Speaker 3 (44:26):
Engine was going to be built at the Willow Run plant,
which then became a transmission plant.

Speaker 6 (44:31):
All right, Warren, you're going to tell me about your plants.

Speaker 4 (44:33):
Speaking of plant, and we went into the.

Speaker 7 (44:35):
Break, No, the whole remember, and it was the introduction
to the article that I did and wrote, we will
return auto manufacturing to the United States at levels that
existed thirty seven years ago. New York Economic Club speaker
Donald J.

Speaker 5 (44:54):
Trump. If the whole objective of the.

Speaker 7 (44:59):
Tariff is to bring it back, it can't be one
off negotiations. It has to be as sustained Chicken tax
VR kind of approach. And under those conditions, with all
those plants that were built and purposed under the Inflation

(45:19):
Reduction Act, there's a lot of them, There's at least
a half a dozen, right, those need to either be
repurposed by them OEMs themselves, with no carrots, no incentives
either of their own pocket. That's why the CO two
credits that they would give to Tesla will help help

(45:44):
or close them, because we have enough capacity here.

Speaker 4 (45:49):
Well, and that's the point that I keep coming back to.
Enough is those plants most I think most of those plants,
maybe all of them don't really exist, are not producing it.

Speaker 7 (45:59):
Well, sup isn't Blue Oval, isn't. Belvidere, isn't Swartstown isn't.

Speaker 4 (46:05):
These plants are not producing now. And the mart and
the market is I think we were discussed earlier. The
market is more than adequately.

Speaker 7 (46:11):
Served now if I think even if you go to
three shifts, I think it is.

Speaker 4 (46:17):
Yeah. And so I guess the Trump idea is we'll
bring back seven plants worth of production that's now counted.

Speaker 5 (46:24):
For with imports or from Mexico or Mexico.

Speaker 4 (46:28):
Canada, slash all all vehicles produced outside the borders of
the United States, I guess. But that seems like capital
that these companies are going to be really reluctant to spend.

Speaker 7 (46:43):
I submit to you, they've spent it, and they have
to spend repurpose orion. Remember they're supposed to come out
with the silver out of pickup truck what.

Speaker 5 (46:54):
Beginning of next year.

Speaker 7 (46:56):
But that money spent, that engineering money, that manufacturing engineering
money spent Belvedere.

Speaker 5 (47:02):
Maybe not, Maybe Chrystler can go to the UAW and
push that out a.

Speaker 7 (47:06):
Little bit, et cetera, but significance, the money's been spent, Joe.

Speaker 4 (47:10):
All right.

Speaker 6 (47:10):
So, as John pointed out in a piece in the
Detroit News this week, we have reached peak auto in
this country and things are going south, And so why
do we need more?

Speaker 3 (47:21):
Sales are not increasing? You know, we sold more cars
in this country a decade ago. We sold more cars
in this country twenty five years ago than we are
southern right now, even though the population of the United
States has grown by fifty eight million people. Fifty eight
million people, and we're selling less cars than we sold
twenty five years.

Speaker 5 (47:40):
Ago, even with more women in the workforce.

Speaker 7 (47:43):
Well, and the economy is one of the underlying boosters
that has at least kept it where it's at.

Speaker 2 (47:49):
So, and this is a global phenomena.

Speaker 3 (47:51):
Europe's in way worse shape than the US is when
it comes to peak auto.

Speaker 2 (47:55):
Japan is in deep peak auto trouble. So is South Korea.

Speaker 3 (48:00):
And I'll maintain that if you just look at the
domestic passenger car market in China, ie don't count commercial vehicles,
don't count exports. The market's not growing. It's bouncing around
twenty one to twenty two million a year past car
home market. So there's this phenomena that in it we

(48:20):
peaked around twenty seventeen.

Speaker 2 (48:22):
And I don't know. I think it's a confluence of
things much higher.

Speaker 7 (48:26):
I think those seven Actually no, I yes, maybe you're
looking at a global and I have too.

Speaker 2 (48:33):
Much say in US, say in US.

Speaker 3 (48:35):
But what I'm getting at is if the same percentage
of Americans bought a new car last year that they
did in the year two thousand, percentage of the population
last year, sorrow would have been twenty two million, it
was under sixteen. There's six million vehicles that could have
been built if the same number of Americans bought a

(48:56):
new car just as they do.

Speaker 2 (48:58):
By the way, the peak of the.

Speaker 3 (49:00):
Percentage of people buying cars in the United States was
nineteen seventy eight.

Speaker 2 (49:04):
That was the absolutely that.

Speaker 3 (49:06):
More Americans as a percentage of the population, ran out
and bought a new vehicle in nineteen seventy eight than
any other time since, and it's been the slowered.

Speaker 2 (49:14):
So I see a number of things. Prices have gone.

Speaker 5 (49:17):
Through the roof.

Speaker 2 (49:17):
We have an aging population.

Speaker 5 (49:20):
Older, last car, last car let.

Speaker 3 (49:23):
Older people just don't drive as much, They don't drive
as buy as many new cars. Younger PV gen z
not as interested in cars and have alternatives, whether it's
uber or you know.

Speaker 2 (49:35):
A line scooter or whatever.

Speaker 9 (49:37):
Well, and cars last a lot longer, right, So okay,
So all of this leads me to ask you guys
the question of Okay, so tariffs are basically as you
said earlier, that countries don't pay tariffs.

Speaker 6 (49:50):
Companies paid tariffs, and companies past serifs, which means that
consumers pay terraffs. Right, Okay, So given all that, aren't
applying tariffs counterproductive to getting an increased number of people
buying vehicles in a given country.

Speaker 7 (50:11):
You know you haven't come to my my Lawrence tech
trade class where I teach tariffs.

Speaker 5 (50:16):
But you're I'm going to give you a gold started
you nail it?

Speaker 2 (50:21):
Yes?

Speaker 7 (50:21):
Yeah, absolutely, it's it's an it's a diminished factor that
you have to put up on the negative balance side.

Speaker 6 (50:30):
So if the whole point is to make America more productive,
make America make more stuff, wouldn't it be more advantageous
to keep in incentives.

Speaker 7 (50:44):
For electric vehicles.

Speaker 6 (50:47):
Or give incentives to general motors to build a more
efficient factory or what have you versus penalizing general motors
in terms.

Speaker 5 (50:58):
Of just filled out your bingo card.

Speaker 4 (51:00):
Yes, well yeah, or leave I mean and against this
is a super libertarian idea which probably doesn't fly. But
or just leave the auto industry alone. Don't hit the
autodescity with double digit percentage tariffs, don't subsidize one technology
over the other. Let the industry compete, you know, sort
of based on who's got the best value for money.

(51:20):
I mean, there's lots of reasons why that might not work,
but that would be another way to go.

Speaker 3 (51:26):
I would build on that and say, why don't you
create a healthier environment for business to thrive. Why don't
we have a one year depreciation rule, so instead of
amortizing a stamping press over twenty five years.

Speaker 2 (51:40):
Pay it off the first year.

Speaker 3 (51:42):
Why not have much more generous are in D tax
credits so that, yeah, you want to put more money
into research, You want to put more money into new
model development.

Speaker 2 (51:51):
It's now cheaper for you to do so.

Speaker 4 (51:53):
By the way, I think there's some of that stuff
in I think it is in the bill that's going
through Congress, so you know, you know some of it's coming,
some of those things.

Speaker 3 (52:00):
But it's all piecemeal kind of stuff. And that's what
I'm arguing in the article that Gary's talking about is
we need a comprehensive strategy in this country, and we
can take it beyond the auto industry. But we're talking
the auto industry here. That would make it far more
competitive without subsidies, without tariffs, without voluntary restraint agreements, just

(52:24):
create a healthier business climate for companies to thrive in.

Speaker 5 (52:29):
Yes, yeah, you could do that.

Speaker 7 (52:31):
Another thing though, that I'm where can I sign?

Speaker 5 (52:34):
Yeah?

Speaker 7 (52:35):
Right, No, John, You're absolutely right, including the tool and
die industry. I know you've had harbor on here others here.
You know, there are suppliers that have told me, which
is why I started to look at this. There are
suppliers that I have told me that the Detroit three
can't make a car without sending the tooling to China.

Speaker 5 (52:58):
Yeah, can't make a car Canada to China.

Speaker 2 (53:03):
I know, China. We need the tool and dye industry
that's in Windsor right across the river from Detroit.

Speaker 4 (53:09):
And the tariffs drive up the costs of that equipment.

Speaker 5 (53:13):
Absolutely, which so.

Speaker 7 (53:16):
Tariffs are horrible, okay, but sometimes they're done for the
right reason. China has fifty million units of capacity, and
they will destroy any export potential that the Detroit three
or any other have in the United States by their
export plan that they have twenty five million units of

(53:39):
excess capacity.

Speaker 5 (53:40):
That they can export. That's a big deal.

Speaker 7 (53:44):
That's national security, that's in the strategic interest of the
United States.

Speaker 5 (53:49):
On top of the good point that you made.

Speaker 7 (53:52):
So I differentiate tariffs on our major trading partners, especially
ones that we sign contracts with called U S, m
c A. It's a contract that was violated, okay. I
differentiate that from China, so based completely.

Speaker 6 (54:10):
So it gets back to the point it should be strategic.
It's just across the board. And you know, the tariffs
exist and have existed since the first Trump administration on China.
They were kept in place by the Biden administration.

Speaker 4 (54:23):
And you know, it.

Speaker 6 (54:25):
Mystifies me as to you know, why we penalize BMW,
which has a plant in South Carolina, which is making
largest exporter of the United States, right, which which happens
to be a German company, largest export of the United
I mean, this is this is the thing that I
don't understand. Like we we keep talking about like General
Motors and Ford and and Stilantis. I mean, to what

(54:45):
extent does GM export cars in the United States?

Speaker 5 (54:50):
Quite a few?

Speaker 2 (54:50):
Quite a few.

Speaker 4 (54:51):
Yeah, the exports off at least well, they were sending
they were sending vehicles to China. The business is done.
I mean, that's which point.

Speaker 5 (54:57):
But they don't they don't out export BMW No.

Speaker 6 (55:00):
But I mean it's just like, Okay, so I looked
in to see what they were exporting and Yukondon Nale, Silverado,
twenty five hundred HD, Corvette and Catallact, Lyric, Optique and
Vistic and they're going to put you know, they put
right hand steering because like parts of the world don't
have the steering wheel on a lot of great and

(55:21):
we somehow think like, oh, everybody should drive the way
we do.

Speaker 7 (55:25):
Well, I'm sorry, you know, those are all good, good things.

Speaker 6 (55:30):
Right, I mean, I'm not saying they're bad things. But
what I'm saying is is that if you look at
the BMW plant, largest exporter of vehicles, you know, they're
they're tailoring these vehicles to the markets. We are not
necessarily doing that with these vehicles that General Motors is producing.
So why does the world want to buy them? You know,

(55:50):
it gets back to the thing of talking about the
chicken tas. Right, you go around to other parts of
the world, full size pickup trucks really aren't seen very
often right.

Speaker 7 (56:01):
Now, They're very rare, right, small cars, small SUVs.

Speaker 5 (56:06):
Okay.

Speaker 7 (56:08):
General Otis doesn't have one of those, okay, because they
abandoned the car business, left it to the Asians.

Speaker 5 (56:15):
But this is how.

Speaker 7 (56:18):
Convoluted that I think that it is in the countries
that I worked in, I had plants, okay, Poland, Russia, Germany.
If if I would have walked in and to the
press and said, you know, I'm taking a third of

(56:39):
production out of Glovitza and moving it to pick a
place because I'm trying to mitigate the tariffs that some
country has put on, I would have been in the
president of the country's office the next day. So I

(57:00):
want you to imagine the CEOs of General Motors, uh uh,
taking volume out of Mexico and taking volume out of
Canada and then going into those countries and saying, you know,
we're good local producers here.

Speaker 5 (57:17):
In those colds.

Speaker 7 (57:18):
It's yet another unintended consequence that happens when you don't
let the supply chain.

Speaker 4 (57:24):
Work well and and and and I know lots of
people made this point, but it's worth thinking again. I mean,
you talk about BMW, I mean BMW is a company
as his GM AS is for as are almost all
the global who have set up these networks are manufacturing
around the world, right and and some more than others. Toyota,
you know, Toyota certainly has done this where you know,

(57:44):
where they're somewhat flexible to the point you were making
somewhat flexible and and and they and they up until
relatively recently, we're fairly confident as BMW certainly was like, Okay,
we're build all the subs, I think, almost all the
cvs that we make globally. We're gonna build all of
them in South Carolina or virtually all of them, and
ship close pretty close and ship them everywhere. And that

(58:07):
will be you know, and and we'll have one set
of investment, right, one one set of engineering and manufacturing support,
you know, one one one supporting this huge volume of
high high value vehicles that we send to the whole world.
That whole thing is that whole idea right is at risk,
and that is a cost. It just I guess the

(58:28):
concern I have about the way policy is going. And
it's not just the United States, by the way, it's
it's around the world that companies that were set up
for a relatively open trade world and optimize their investment
on that promise, if you will, that all's going to hell.
And so now they have to figure out, well, we've
got to we've got to invest three, three times or

(58:49):
maybe four.

Speaker 5 (58:50):
They don't have the money, Yes, they don't have the money.

Speaker 7 (58:53):
No, they don't have the money because they're looking at
impaired assets for the ones that they've already spent.

Speaker 5 (58:56):
The money on.

Speaker 7 (58:57):
The current administration doesn't understand I do this in my class.

Speaker 5 (59:02):
The current administration.

Speaker 7 (59:02):
Doesn't understand the trades is a two way street. We're
not mercantilists anymore. We're not back into the eighteenth century. Right,
trade is a two way street. It's a given a
take all, right, And so I think what they're trying
to do is to say we've given too much, so
we need to take that back. I think that there's

(59:24):
more effective ways doing that than appearing on Fox News
every third day to change the tariff policy. I think
there's more effective ways to get that done.

Speaker 3 (59:34):
Right, and I wish that would happen, But it doesn't
look like we're going to.

Speaker 6 (59:37):
Get that well.

Speaker 5 (59:39):
Not well. I think we have to crash.

Speaker 7 (59:42):
Yeah, yeah, I think we have to crash first.

Speaker 6 (59:45):
I'm sorry, you mean the American economy has to crash.

Speaker 5 (59:49):
The production.

Speaker 7 (59:51):
Sean Fain needs to get about six phone calls saying
we're letting people off here. We just can't sustain this
level of reduction. And by the way, I've got shareholders too,
and I just can't eat it all. And I can't
push this. I can't push this on suppliers, and I
can't push this on to my dealers.

Speaker 5 (01:00:11):
I've got a race price.

Speaker 3 (01:00:12):
So we're getting towards the end of the show here, right.
I think we're going to see the first impact in
the auto industry. I think Joe you mentioned Jim July.
It seems to be the July sales, so early August
we're going to get July sales and they're going to
be horrific. They're going to be horrific, and then maybe
even layoffs are going to be talked about later in
the year. And then the Republicans in Congress are going

(01:00:34):
to get really nervous because I think the rally and cry.

Speaker 2 (01:00:38):
The Republicans is going to be to the midterms. Yeah,
January for the mid terms happened, all.

Speaker 6 (01:00:45):
Right, Ron, So let me ask you this question, and
it's completely stupid, but I I'm stupid about this. Why
is this happening? Why is the government doing this to
the auto industry.

Speaker 5 (01:01:03):
I don't have a good answer to that.

Speaker 7 (01:01:06):
I normally have equip or a thoughtful or a thoughtful answer.

Speaker 5 (01:01:12):
Okay, I do both of those. I do quips too.
I don't have an answer to that.

Speaker 7 (01:01:16):
I think it's a view of the world that is
promoted by certain members of his administration Lutnik Navarro, his
consul of economic advisors, who doesn't understand that a strong
dollar rules the world and a week dollar can be

(01:01:39):
pushed off to the side, especially by the Euro. But
I just think it's a it may not even be
Trump's view, is my point. Sounds good works, good on
TV sounds good on.

Speaker 5 (01:01:57):
The campaign trail, these guys are I don't have a
good answer. But what I do know is this.

Speaker 7 (01:02:10):
Everybody thought that he changes mind when the stock market fluctuated, right,
Maybe maybe not. I think that group and I'm not
just picking on Trump, Navarro Litnik, Uh don't know. Seven
man have a view of the world that they promote
to Trumph that says trade's a one way street and

(01:02:32):
we have nuclear arms and we're going to tell the
world exactly what we're going to do here.

Speaker 8 (01:02:38):
Uh.

Speaker 7 (01:02:40):
And it's a misguided But I can't give you an
economic or trade answer to that, because trade is a
two way street. You know where we export most of
the vehicles out of the United States? You know what
country we export those two it's a trivia question. Canada.
Canada is there, I guess, biggest customer.

Speaker 6 (01:03:05):
And we've just told them, yeah, yeah, I.

Speaker 3 (01:03:08):
Heard a great statistic and we're gonna have to end
the show on this. But the average Canadian buys ten
thousand dollars worth of American goods. The average American buy
is less than one thousand dollars worth of Canadian goods.

Speaker 5 (01:03:21):
Trade is a two way street, all right, Mabel Syrup.

Speaker 3 (01:03:25):
Yeah anyway, Warren Brown, thanks so much for coming back
on the show.

Speaker 2 (01:03:30):
Always great to have you. Joe Joe White always had well.

Speaker 4 (01:03:33):
Substack again high speed Rodeo substack. Look for the look
for the front end of an old Dodge truck. So
that's my logo, your Dodge truck, my Dodge truck.

Speaker 2 (01:03:44):
All right, Gary, let's do it again next week.

Speaker 3 (01:03:48):
I would like to keep going with this week, but
I want to thank all of you for having tuned in.

Speaker 1 (01:03:55):
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(01:04:15):
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