AAH #753 - The U.S. Pivots From BEV to ICE

TOPIC: Tariff Impact PANEL: Michael Robinet, S and P Global Mobility; Keith Naughton, Bloomberg; Gary Vasilash, shinymetalboxes.net; John McElroy, Autoline.tv

Episode Transcript

Speaker 1 (00:00):
Out online After Hours is brought to you by bridge
Stone Tires Solutions for your journey.

Speaker 2 (00:08):
Thanks for joining us. People got a great show today.
We got Michael Robinett from S and P Global, Keith
Notton from Bloomberg, and Derry is here.

Speaker 3 (00:17):
How are you doing John?

Speaker 2 (00:18):
I'm doing great?

Speaker 3 (00:20):
I am.

Speaker 2 (00:20):
I mean you know I'm not just saying that to
say that I'm doing great.

Speaker 4 (00:23):
We're good good because we'll need it because we got to.
We got this show with these guys now global mobility.
Just to add the mobility to Michael's global. Yeah, we
are mobile, You're mobile and global.

Speaker 2 (00:36):
So you want to kick this off with the question,
get these guys cranked up or what? Well?

Speaker 4 (00:40):
Okay, so I know Keith, who covers Ford for Bloomberg,
has has been like cranking it because of yesterday's earnings. Yes,
so give us a synopsis of what happened.

Speaker 2 (00:57):
And just to quickly interject, we're talking about second quarter
twenty twenty five forward earnings.

Speaker 5 (01:01):
That is correct.

Speaker 2 (01:02):
Take it away, Keith.

Speaker 5 (01:03):
It was this sort of good news bad news story.

Speaker 2 (01:05):
I mean they were the good news.

Speaker 5 (01:07):
Well they beat all the analyst estimate.

Speaker 2 (01:08):
That doesn't mean anything. They lost money.

Speaker 5 (01:11):
Normally it would. And the stock is up today.

Speaker 2 (01:13):
It was down three percent yesterdaday, it's up today, how much?

Speaker 5 (01:17):
By about three percent?

Speaker 2 (01:18):
Okay, so nothing happened eventually, Yeah yeah, move along.

Speaker 5 (01:23):
Yeah.

Speaker 4 (01:23):
Nothing the year.

Speaker 5 (01:25):
But anyway, so they beat analyst estimates on revenue, on profit,
on everything. I mean, profit's way down, and from a
net basis, they lost money. But on the other hand,
the tariff hit got bigger. A two billion dollar tariff hit.

Speaker 2 (01:39):
For the year is what they announced it instead of
the and it was what eight hundred million for last quarter.

Speaker 5 (01:44):
For the quarter, but their previous estimate three months ago
was that the tariffit would be one point five billion
for the year. So it's growing. And the frustration for
them that that Jim Farley, the CEO, described is that
all these trade deals that Trump is now cutting with
Japan last night, with South Korea and with the European
Union to go down to a fifty percent teriff rate

(02:06):
actually is hurting Ford. He says it has handed Toyota
a five thousand dollars car advantage over Ford's American built
cars because Japan has lower labor rates, they had lower
currency rates, and.

Speaker 2 (02:20):
They can buy stuff from China.

Speaker 5 (02:21):
And they were already making money. The same thing with
GM with its four hundred thousand vehicles that had exports
from South Korea every year. They were making money out
of twenty five percent tariff, Ford argues, and now at
a fifteen percent tariff, they'll make even more money. They said,
a Forerunner has a tenth a Japanese built Forerunner has
a ten thousand dollars advantage over an American built Bronco.

(02:43):
So they feel like they're the American company producing the
most cars in America. Eighty percent of what they sell
in America they build in America, and they're getting screwed.

Speaker 3 (02:54):
So okay.

Speaker 4 (02:55):
So one of the things that far also talked about
yesterday was the fact that because the emission standards seem
to be changing, that they'll be saving a whole lot
of money because they're not going to be baning credits.
Is that going to be an advantage for them?

Speaker 5 (03:13):
The emission credits thing is just the deregulation of everything.
As Michael can talk about here is a huge bit
for the Detroit automakers because they're trucking SHUV companies and
they sell big internal combustion engine vehicles that make tons
and tons of money. If they didn't sell those, they
couldn't have any evs. So yes, that is the good

(03:33):
news side. They can sell as many you know, big
old super duty pickup trucks and fully tricked out you know,
navigators and expeditions as they want, and they don't have
to worry about the credits anymore.

Speaker 4 (03:44):
So you know, when I was, when I was listening
to Farley talk about this, you know, I thought about
Bill Ford Junior, who has you know, long been a
proponent of environmental issues.

Speaker 3 (03:58):
I mean, how does he feel about that?

Speaker 5 (04:00):
Yeah, I mean he accepted the notion that you know,
cars caused global warming. He accepted that twenty years ago.
He was the first one in the industry to say yep,
that's right and to sort of embrace the whole climate
change thing. So clearly he's not on the same page
as President Trump, so you know. And one of his
proudest accomplishments was that first hybrid escape that they did

(04:26):
twenty or that it was, and he has that in
his own personal collection. He has like hybrid escape number
one in his garage. He's that proud of it. And
so no, I wouldn't think that this meets his philosophical worldview,
but it is certainly patting the profits of his company.

Speaker 2 (04:47):
That's right, you know, because they're still losing money on
their evs, gobs of money.

Speaker 5 (04:52):
They lost five point one billion last year and they
could lose another five and a half billion this year.
Their losses in the EV unit were larger this quarter
than the equivalent quarter a year ago. Yeah, it's there.
They're deeply in the red now.

Speaker 2 (05:05):
What they did say, though, is a lot of those
costs are accounting for the battery plant that's coming up
to speed in Marshall, Michigan to make the LFP batteries right.

Speaker 5 (05:14):
And the development of the skunkworks.

Speaker 2 (05:17):
So it's not just operationally. In fact, operationally they were
bragging about they doubled their EV revenue from a year ago.

Speaker 5 (05:25):
But here's how they did that job. They started selling
EV's in Europe correct using VW's MEB platform. That's where
all that revenue comes from. Fords US EV sales fell
thirty one percent in the second grade.

Speaker 2 (05:37):
Point.

Speaker 5 (05:38):
The revenue was not increasing here. The revenue was going
the other way here. But when you open a new
spigot of revenue in Europe, that didn't exist last year. Well, sure,
you doubled your revenue.

Speaker 3 (05:49):
So okay, quoting you because I actually have you here.

Speaker 5 (05:54):
So they're going to get the Michael on the second right, Well.

Speaker 4 (05:57):
I mean time in anytime, but I mean, okay, So
you know we're talking here about the evs and what
they're making. But you know, you make the point in
your in your story about this is the fact that
the earnings from Ford Blue, the internal combustion engine part,
are half of what they were last year. So how
does that happen.

Speaker 5 (06:18):
Well, there's a couple of ways. One tariff cost. If
you have eight hundred million in tariff costs that didn't
exist last year, most of those come out of your
largest volume unit, which is Ford Blue. And the other
part is Ford has these persistent, nagging warranty costs. They
are on a record rate. They've had ninety recalls this year.

(06:39):
That's a record. They have been the leading company for
recalls in America for four years. It's a huge problem.
Farley says over and over again that they're making progress
and they're fixing it and it's the old cars that
are causing them the problems. But that hasn't really shown
up in the numbers.

Speaker 2 (06:58):
Yet that's right, the numbers keep growing.

Speaker 5 (07:00):
Right, So so Wall Street remains very skeptical of their
claims of progress.

Speaker 2 (07:07):
One thing to quickly add in here, Ford Blue is
where all the zev credit costs were booked to. So
with them going away, that right off the bat is
going to help Ford Blue for sure.

Speaker 5 (07:19):
And the you know, the other thing is Ford Pro
their commercial unit that's surprised on the upside there. I mean,
it was still down from last year, but it was
more than expected. And Ford Credit, the money machine continues
to surprise on the upside. Thank god Ford Credit.

Speaker 4 (07:35):
You know, and I think we should we should point
out im when we talked about the ninety recalls that
Ford has, Like second place is maybe Folkswagon at fourteen
or fifteen.

Speaker 5 (07:47):
It's phenomenal.

Speaker 4 (07:47):
Yeah, I mean, so the gap between here and here,
So Michael, how does something like that happen?

Speaker 5 (07:56):
Wow?

Speaker 6 (07:56):
Well, it's it's obviously it gets it goes back a while,
but attention to detail. It's structural, you know, it's maybe
how you buy your parts, how you put them together,
any number of possibilities. And I agree, I agree with Keith.
I mean, it's it's and even the Ford, folks. This
is nothing you can fix overnight. It's not like, oh,
I'm going to put a task force on it and

(08:18):
fix it. But it it's among many different types of vehicles,
and it's just going to have to be an issue.
There is going to have to continue to focus on
and one by one fix them, and then obviously more
more actions for the future to say, hey, listen, how
do we make sure this doesn't happen again. OTA is
probably going to help a little bit of that, but
but you'd also have to believe it's if it's mechanical, Ye,

(08:41):
you have a fuel lake, Ye software, not many OTA
are you going to fix that?

Speaker 2 (08:45):
That's one thing they said too. That and OTA is
ninety five percent cheaper than having it physically fixed at
a dealership.

Speaker 6 (08:54):
It's so much more convenient for the customer, right while
it sits in the grade it gets fixed, as opposed
to well, I have to make it a or at
least the dealer are going to come and get my
car and all of that nonsense. So not only the
ninety five but also the convenience of the customer.

Speaker 2 (09:07):
You know, this whole warranty thing is a real problem
for the industry. Forward's leading, right, and they have the
worst situation. But uh, this is by NADA numbers. Last
year automaker spent twenty eight billion dollars on warranty, about
fourteen billion on parts, and fourteen billion on labor. So

(09:29):
I mean that's to me that that's my jaw drop.
When I saw that number, I had no I mean,
twenty eight billion dollars is a lot of money.

Speaker 6 (09:36):
Dealers like it.

Speaker 2 (09:37):
Dealers love it. I love it, and I'll tell you
especially why they love it because the growth of their
retail customer repairs is slowed down dramatically in the last
couple of years. And the thing that's keeping their back
shops humming is all this warranty.

Speaker 5 (09:55):
Work right, and the OTAs aren't is to full in
the legacy automakers as they are, you're correct. And so
for example, Ford has had the stop sale on their
electric Mustang Mokey because of that problem with the door
locks that could trap occupants inside. So that is a

(10:15):
software problem, and it is a software update that's necessary
to fix it. But you still had to go to
the dealer to have your software flashed. You couldn't do
it OTA. So they're on the road to getting there,
but they're nowhere near Tesla's expertise in OTA.

Speaker 2 (10:32):
That's right, Well, you need all new electronic architecture to
do that, and they're all working on but you know
you saw offtboard pretty much axed. It's Ford Network car program.
All the legacies are struggling with this because if you're
a startup and you're starting clean from scratch and you
don't have to bring this whole component load along with

(10:55):
you to make the changes and work with your suppliers
to so it's easier for the startups, it's really hard
for the legacies.

Speaker 6 (11:03):
Especially if you've got like a legacy group within an OEM,
maybe the brake team or the transmission team. Well, the electronics,
we want to control the brake electronics and the transmission
electronics is like no, no, no, no no, we'll handle it
somewhere else. We'll get your input, we'll handle it somewhere else,
because we want to make it much more efficient, much cleaner,
much easier to fix if we have to. But yeah,

(11:24):
it's a big, big problem legacy versus you know, basically
brand new out of the box.

Speaker 5 (11:29):
I also think the supplier relations factors into this warrant completely. Yes,
they notice like Stilantis and Ford have the lowest supplier
relations over and over again, and they have the highest
warranty costs and the biggest quality problems. And that's being
as exacerbated now because of the tariff stuff, right, because
the suppliers have all these higher input costs for their

(11:51):
raw materials and they're going to Ford or the other
OEMs and saying, Okay, we want to pass these costs along,
and Ford to saying no, you won't. And so it
creates more tension because of the tariff stuff in an
already tense relationship. That doesn't help quality.

Speaker 1 (12:06):
Right.

Speaker 4 (12:06):
We had Dave Andrea on the show a few weeks
back who did the working relations Index and showed that
Ford's numbers have been precipitously dropping. I mean, I'm sure
you worked on that. I mean, how do they explain that?

Speaker 5 (12:21):
Well, you know, they don't. They don't well, they don't well,
let's be honest, but you know they still use i
think fairly strong arm tactics with their suppliers, the sort
of old school methodology that Stillantis also uses. And you know,
the American automakers are kind of set up for that.

(12:42):
It's not a curretsu. Like the Japanese automakers, there aren't
these interlocking ownership relationships that help smooth out things because
you know, you're talking to your investor, not just your customer.
So I think there's something inherent about the legacy American
automakers relationships with their suppliers that creates trouble.

Speaker 6 (13:06):
I think we got to be careful not to throw
them all in the same basket. GM seems to be
doing a better job. Their leadership is pretty well the
pretty well run in that respect, and yeah, I think
their working relationship capability is getting better. But nonetheless I

(13:27):
do believe it's we got to be careful. And there
are some Japanese oms that, you know, let's face it,
don't have the greatest reputation either, and a couple of Germans,
so it's kind of all over the place. But I
think it is an important criteria in terms of the
quality of the vehicle and technology. If you're a supplier
and your only M treats you well, or your tier

(13:49):
one treats you well, you more apt to go to
them say I've got this new technology. I think it's
going to make your life easier. Customers willing to pay
up for it, blah blah blah, as opposed to having
constant issue with your customer being either an OEM or
a tier one. It's like, yeah, you know, I'm just
going to tell you the old stuff because I know
it works, and I'm going to give this better stuff
to someone else. And I think that's always another problem

(14:11):
that kind of works its way through.

Speaker 5 (14:12):
So Hot, what do you think GM does differently because
they do have better relationships with their suppliers what, but
they have the same structure that the other two have.

Speaker 6 (14:21):
Yeah, and I you know, I think that they do
have the same structure. But I think it goes to
I think their view is maybe a bit different than
the other ones. And there has been some turnover in
some of the I would say on the procurement side,
in some of the other areas, but in GM's GM's

(14:42):
team has been somewhat more stable, and I think that
that probably lends to it. And I think they all
understand you can't build a car without strong supplier relationships.
I just think that they all go at it a
bit different.

Speaker 5 (14:53):
Yeah.

Speaker 2 (14:54):
I can tell you though, several things that GM's doing differently.
It's identified a core number of suppliers. I don't know
the number. I'll just say like a hundred suppliers. They
get involved very early in a program. They are given
you know, I'm not going to say the first rider refusal,
but they're they're because of their early involvement, they're almost

(15:14):
undoubtedly going to get sourced on whatever program that they're
working on. GM has also been bending over backwards to communicate, communicate,
to communicate, you know, whether it's production changes, whether it's
program changes, whether it's design changes, whatever it happens to be.
They've really concentrated on doing it. And so we've seen

(15:35):
with the you know, the relationship study that Dave Andrey
was talking about, for something like four years in a row,
GM just keeps going better and getting better rated by
all the suppliers. And you know, if it keeps up
this rate, it's going to be knocking on Honda's you know.
So it's Toyota number one, Honda number two, now GM three.

Speaker 4 (15:53):
John, the gap is like this.

Speaker 6 (15:55):
It's a good problem to have, though, I mean a problem,
but that's a good problem to have. You mentioned something interesting, John,
about future product programs and the churn, and you know,
we submit We've been telling our clients just for a
little while, but because of all this this tariff interruption
and what's going on with the emissions legislation that finally

(16:16):
got somewhat settled, we're going to lose anywhere between twelve
to eighteen months of planning in our industry if you think.

Speaker 2 (16:22):
About it, explain it a little bit more.

Speaker 6 (16:25):
And let's go back to maybe July or August of
last year, when we knew that it could be a
very good possibility there could be a change in government
and change.

Speaker 4 (16:35):
In which we need pre election for election.

Speaker 6 (16:38):
July of twenty four, August to twenty four, that there
very well could be. It wasn't going to be a
slam dunk for the Biden administration. Obviously that changed as well,
but we knew that there could be a change, and
I submit, I know a lot of suppliers and om
is like, WHOA, if there's going to be a change.
I'm going to hold back here just to make sure,
because I don't want to start communicating things are investing

(17:00):
here and investing there when it could be really money
that hasn't been well spent. Add to that, all the
money that the manufacturers and the end of the suppliers
have spent on battery electric as we call beving. We've
turned it into a verb. But you know, as you
bev there's been a lot of underutilized capital and I
say that nicely. So add that and the change that

(17:22):
they's probably changing, and now we're still in the middle
of we don't know what's gonna happen with USMCA. We
don't know if there's gonna be tariffs on parts or
no tariffs on parts, or what the terraffs are gonna
be on vehicles, much to what you said earlier. So
all of that probably to the end of the year,
we'll have eighteen months where everybody's sitting in their hands
working on short term problems and we're not really working

(17:44):
on twenty eight, twenty nine and thirty vehicles and getting out.
We don't know what the sourcing structure should be. We
can't communicate to our suppliers. We know for sure we're
going to exactly make this vehicle, and it's going to
look like this certainty is getting better, but it is
a big, big problem. And in some respects we've let
the Chinese OEMs just, oh, you're going to take a break.

(18:05):
We're going to just keep moving and that's that's that's
our read on this situation.

Speaker 4 (18:09):
Well so speaking suppliers, I saw this quote. ZF came
out with their their numbers and they did are doing okay,
But this this was striking to me. And this is
a quote from doctor Holgar Klein, who is the CEO
of ZF from Germany. Quote, stagnating global vehicle production, the
sluggish ramp up of electric mobility, and uncertainty arising from

(18:31):
US tariffs mean lower sales and rising costs. We are
addressing these issues and accelerating our restructuring program. This is
a tough road with the right one for ZTF. And
basically what he's saying about this restructuring is there are
downsizing the company. But you get back to this thing
of stagnating global vehicle production, sluggish ramp up of electric mobility,
and uncertainty rising from US tariffs.

Speaker 3 (18:53):
I mean, how does a company deal with those things?

Speaker 6 (18:58):
It is a it is true as to be completely
honest as and I know a number of Tier one
suppliers and trust me, they are are having a hell
of a time right now. It is. It is difficult
because you go your customers come your customer in the
OM coustomer and says, I need to spend money on X.
But even they're a little squeechee about volumes, depending on
what it is. And then we've got all these what

(19:19):
we call de er delays, extensions and rescopes. We've we've
delayed BEVs or sometimes rescope them into submission and cancel them.
We've extended ice vehicles. And anytime one of those activities occur,
it's it's it's a it's either a good thing or
a bad thing for the supplier, depending on what side

(19:40):
the equation you're on. You might be building an ice
component and it get extended by two years and everybody
might say, oh, well, let's you know, pop the champagne quirks.
But if your margins already low, and then now you've
got to go back to your OM, customers say, hey,
by the way, I'm not making any money in this thing.
So and by the way, my tool's old, my machine's old,
and that square footage's hoping to do something else with it.

(20:01):
So in some respects, it's not a good thing when
these when these vehicles get extended. So you know where
we submit that North America could be the home of
slower technology turnover for at least the next six or
seven years, because we basically have told the market to
take a break. You know, we're going to keep building
some of the older stuff. We're not going to get
a we're not going to get a credit for any

(20:24):
good things we're doing on the fuel economy side at
lea it's not a lot. So we're just going to
keep doing what we're doing. It's going to be a
lot of extensions of existing technology. Yeah.

Speaker 5 (20:33):
I had one guy tell me, Uh, the US is
going to become the global leader and V eight development.

Speaker 6 (20:40):
We have been. We're just going to continue to be.
We're going to maintain that, right yeah.

Speaker 4 (20:44):
Right, Okay, So Keith, you know, Farley mentioned that in
a couple of weeks from now they're going to have
like a Model T moment.

Speaker 6 (20:53):
What what what.

Speaker 3 (20:53):
Can you tell us about this?

Speaker 5 (20:55):
I mean, this is interesting Farley is turning. Uh, they
are currently in an e desert. They have no new
electric vehicles coming until twenty twenty seven. So their last
new electric vehicle was the Lightning and how long have
we had that now? Three years? And so they've got
really old product and that's affecting demand. Not to mention

(21:16):
that mainstream buyers don't want electric vehicles, so it hurts
it even more. That's a virtue to Ford because GM's
out there with all these new evs and there's no
demand for it. That was their take.

Speaker 2 (21:30):
One point Firly made is they have to continue those
to the end of their products site, right.

Speaker 5 (21:35):
And here we come and so what On August eleventh
down Louisville, they're going to do this event where they're
going to show their next EV platform. They've kind of
already telegraphed this really for quite a long time now.
This is that Skunkworks project out in California that's being
led by the former Tesla guy, Alan Clark, and they're

(21:56):
coming with a small to mid sized cup truck in
twenty twenty seven that'll be powered by a lower cost
LFP battery made in Marshall, Michigan. We know all of
that stuff. I'm not sure what else they're going to
tell us. I guess we're going to see a prototype.
I don't really know, but we know for certain what
the vehicle is, what the body type is, what the

(22:18):
battery is going to be, and what the price point
is going to be because they say it's going to below
thirty thousand dollars. So I guess they're going to add
some more flesh to that bone. But it feels kind
of fleshed out already.

Speaker 2 (22:30):
Okah, they told me they're not going to show any
sheet metal at all.

Speaker 5 (22:33):
Okay, then what are they going to show? John?

Speaker 2 (22:35):
They're going to talk about the platform. They're going to
show the battery and talk about the skunk works and
how it developed. This platform feel new.

Speaker 4 (22:45):
So, I mean, so my question is is that, you know,
we've established that EV sales are not all that bang
up damn sure. And we've also established from what you
know Michael is saying about the extension of.

Speaker 3 (22:59):
The combustion engine going forward. So what does Ford hope
to achieve from this?

Speaker 5 (23:06):
Yeah, I mean, I think they're trying to create some excitement,
but it really cuts against what's happening in Washington with
public policy toward EV's, which is cutting the legs out
of every stimulus to sell EV's. The seventy five hundred
dollars consumer tax credit is going away on September thirtieth.
That was part of President Trump's big beautiful bill. You know,

(23:27):
they clung to the manufacturing credits, you know, barely, and
I feel like it won't be along till that goes away.

Speaker 4 (23:34):
And this is for making the batteries that they make.

Speaker 6 (23:37):
Yes, the forty five books.

Speaker 5 (23:38):
Yeah. And then of course now we're taking away regulatory
you know, impetus for regulating climate change.

Speaker 2 (23:50):
I need no fines if the CO two limits right.

Speaker 5 (23:54):
And so that means there's really no push for alternate
power trains. And there is push as President Trump has
done with everything else, with coal and oil and everything.
There is push for the old world methods of transportation,
no push for the new methods of transportation that the
Chinese are running away with.

Speaker 6 (24:14):
So it think about what you just said. It's not
only a propulsion question, but you know, new platforms were
given way to while we can lightweight them, we can
put more lighter materials, either lightweight steels or aluminums or whatever.
But if there's no real reason to lightweight vehicles, why
are they going to redo platforms. It costs a lot
of money everything of them. So you know, I'm hearing

(24:35):
out of one OEM that you know, they used to
think in five year chucks every five years or six
years we'd redo a vehicle, either a major or all new,
and in the middle would do a mid cycle enhancement.
It's kind of kind of time and material we do that.
And now they're starting to talk about eight pro eight
year programs, nine year programs where they might have two
or three mid cycle enhancements in the middle. As a supplier,

(24:57):
and if you're underneath the vehicle, you're going, WHOA, my
economics just changed. I need instead of dividing by five,
I need to divide by eight or nine or ten
in terms of, oh, my machine needs to last as long,
my tooling these fast lasts as long. What's my margin
going to be at the end of the program. This
is a major shift for the industry.

Speaker 5 (25:16):
And Farley also tied this to sort of a major
shift for the global industry. Instead of being a global industry,
he feels like we are going back to being a
very regional auto industry.

Speaker 6 (25:28):
We're reregionalizing regional because we were and we turned global
and now we're going back. And if you think about it,
China is moving in their direction on BEVs. The Europeans
are slowing down, but they're still going to move at
a slower pace and North America. Well, I guess us
just basically crawling almost.

Speaker 1 (25:48):
To a crawl.

Speaker 6 (25:49):
And so those three regions are going to continue to split,
and it's going to be more difficult to have interregional
volume going back and.

Speaker 5 (25:57):
Forth because it'reconomy going to walk as.

Speaker 6 (26:00):
So volume PRINTNY plate's going to go down, and it's
it's it's economies of scale is going to be a
real driver going forward. I agree.

Speaker 3 (26:08):
So so let me ask you, all three of you this.

Speaker 4 (26:10):
I mean, when Farley is using the Model T, okay,
which which is you know Ford talks about icons all
the time. Okay, this is like the most iconic vehicle
maybe ever, right, I mean, and it put the.

Speaker 3 (26:23):
World on wheels.

Speaker 4 (26:24):
But apparently the world is not all that interesting anymore.
But if this doesn't turn into something that's phenomenal, hasn't
he basically smirched the Model T.

Speaker 2 (26:38):
That's an interesting way to look at it. Let's see
what they show us. I mean, let's see what these
guys come out with. You know what Farley and I
think all the legacies recognize is China's getting to market
far far faster by doing things differently, really by copying
Tesla and you know, smash the silos in the organization,

(26:59):
get colo keate aid, cross functional teams, let them go
like a bat out of hell. And he knows that
Ford's got to do this, and he knows that, I'm sorry,
the organization in Dearborn could never get that done, never ever, ever,
That's why he went with the skunk works. So let's
see what these these supposedly that some of the smartest

(27:20):
people in the world that they went out and recruited
from all over the world. Let's see what they came
up with. My only question is I think they're going
to come out with a product that is sensational from
a cost standpoint and a technology standpoint. What happens when
they hand that over back into the normal legacy system

(27:41):
to productionize it and get it built. That's usually when
these things fall apart.

Speaker 5 (27:47):
My other concern, too, is not just about the propulsion
system in terms of falling behind the Chinese. The Chinese
are doing way more than just making cheap battery electric vehicles.
They're putting incredible technology on those vehicles. DYDS. What is
it their hand of God? I mean, there are all
I've gotten. Yeah, that's it, I have got. That's it.

(28:08):
They have all this phenomenal The cars park themselves over
several levels in a parking structure. You just get out
and it goes sniffs out its own parking space. They
have all this tech that is being enabled by these
software driven vehicles that are built on big batteries that
we're not doing because we don't have much of a

(28:30):
market for electric vehicles and all the oms are pulling
back from development and investing in that technology.

Speaker 6 (28:38):
I would submit they look at capital differently than a
lot of the Western world. So there may be a
a new Chinese naeplate that comes on the market and
they feel, you know, it's doing okay, but not as
well as I'd like, They'll change it the next model year.
It's almost like back to the fifties where we were
back here in Detroit, where they would change the front
of rear ends on a pretty regular base is and

(29:01):
and and we would that would be verboten in Detroit.
Why would we ever want to do that. We've got
to that's got to run for a couple of years
before I can get that fatia and the rear end
to get paid for itself, and then maybe I'll think
about changing it. They don't care. It doesn't to them.
They can they they iterate so quickly that they feel
we are our customer wants us to keep moving forward.

Speaker 2 (29:24):
But remember, almost no car company in China makes money.

Speaker 5 (29:27):
Agreed, You've got Tesla and.

Speaker 2 (29:29):
What by D great wall uh Le Auto, and I
think there's one other and all and and except for
b y D, all the ones that I mentioned make
peanuts for profits. I mean they make.

Speaker 5 (29:43):
Next government support, isn't it that Well.

Speaker 2 (29:45):
That comes back to I think what Michael was getting
at when you said they look at the cost of
capital differently. It's free there.

Speaker 6 (29:52):
I mean, you're close to free, but you're right, I
mean the lower lower cost of capital. I mean, let's
face it, everybody in Detroit is being a on lines
of credit. I'm not again, I don't know what they're
being in in in other parts of the world, but
that's definitely that goes into the equation of what we
do see.

Speaker 4 (30:11):
Well, it concerns me about what using the model t this.
This reminds me of before the Segue came out. Remember
when it was Project Ginger, and that's what we knew
this to be, and it was going to be the
you know, the most phenomenal thing transportation device that we'd
ever seen. And then the segue comes out and all
the air goes out of the balloon and I just
you know, and and whether you know, the platform is magnificent,

(30:34):
and what is the consumer going to think? Okay, is
a consumer going to say, wow, this is the most
fantastic thing I've ever seen in my in my lifetime.
The way the Model T was when it arrived on
the scene, you know, suddenly there's you know, there had
been cars before that, but suddenly I can afford to
buy one. This is something that's going to be for me.

(30:57):
And is we're going to do that? Is ford going
to change the perception of electric vehicles among the market
that you know, as we've said many times.

Speaker 5 (31:09):
Don't get any American consumer, including those who bought Tesla
in the early days, we're looking for an electric propulsion system.
They just thought it was a cool car and that's
why they bought it. And so you can't wow them
with that kind of what consumers use mundane technology just
get me there. I don't care if it's electric or

(31:30):
gas or whatever, you know. And it's also hard to
wow them with technology they haven't experienced. Yet it's the
old Henry Ford axiom that if you asked a consumer
what they would have wanted one hundred years ago, they
would have set a faster horse. So they can't understand
eye of God until they've experienced eye of God. And

(31:53):
so it's this chicken and egg thing. So I don't know,
if you show them a platform or show them talk
about their defined vehicle or all that kind of stuff,
I'm not sure consumers are connecting or wowed by that.

Speaker 2 (32:05):
Yeah, I totally agree, but I got to we got
to take a quick break right now. For her great sponsor,
Bridge Stone performance that shines even in the rain.

Speaker 4 (32:21):
That's what really matters.

Speaker 6 (32:23):
Bridge don't pretends to tires, improved grip and wet conditions.

Speaker 2 (32:29):
All right, we're back talking. I sort of cut you
off there, Keith, But I completely you agree with what
you're saying. You know, with all the incentives going away
for buying evs, now for the automaker. Look, they've put
a ton of money into these EV things. They may
cancel a program here, push another one back there, they
cannot walk away from this stuff. So now it's incumbent
upon them to come out with products where people go, damn,

(32:51):
I don't care what's under the hood. I want that.

Speaker 1 (32:53):
That's what I wie.

Speaker 6 (32:54):
That's exactly what's what's going to now. We're looking at
more than natural rate of growth for BEVs. That's what
we're really looking at now, and we're going to start
to see how much the US consumer really wants them,
especially we start to BEV in the middle of the market.
It was I wouldn't say it was easy, but we
were on the edges. We were doing some luxury products,
we're doing some pickup trucks. But now we're starting to

(33:15):
BEV in the middle where mom pas Smith from Des
Moines actually need a car, and it'll be interesting to
see how that works its way through. You know, we've
obviously had to ratchet back our forecasts, but it is
it is really, it's really interesting, but it's more of
a natural rate of growth through twenty thirty and then
you know, one might say, well, after this administration, what's

(33:37):
going to happen, But as we've seen, it won't stop
on a dime. It's got its own sort of momentum,
probably through thirty one or thirty two, before the next
administration can say, okay, I may want to ramp this
up a little bit because maybe we've strayed too far
from the rest of the world and we need to
catch up a little bit. But we're probably got about
at least five to six years of this to be completely.

Speaker 4 (34:00):
So of five to six years of what uncertainty.

Speaker 6 (34:03):
No, no, no, I would say slow emissions legislative improvement.
I would call it improvement. But basically the emissions legislation
driving what consumers are going to want to buy here.
I mean, I think it's what Keith said earlier. You know,
it's it's caveat. I mean, basically, they're going to buy

(34:23):
whatever whatever they like. If they want to buy a
V eight, they want to buy a V twelve, have
at it. It's going to be available, right.

Speaker 4 (34:28):
I mean. One of the things that we've talked about
many times on the show is the affordability crisis that
exists out there, you know, I mean with with you know,
average average transaction prices being just under forty nine grand
for a vehicle, and you know, it occurs to me that, Okay,
if you put two vehicles next to each other, you know,
compact cuvs, and one has a gasoline engine and one

(34:52):
is an electric vehicle and the one with a gasoline
engine costs ten grand less.

Speaker 3 (34:58):
What is the consumer going to do?

Speaker 5 (34:59):
It wins every time, right, But here's the thing we're
gonna have to keep ten times.

Speaker 2 (35:03):
We're gonna have to keep an eye on used evs.
I mean, the prices are way down. In fact, I
was just reading this report on used cars and they're saying,
by this time next year, used evs by far are
going to be the cheapest alternative to anybody looking for
a used car. And what was it that we reported
Sean this week you can get Mercedes EQS. I mean,

(35:27):
this is like it's an S class, right, it's an
electric car for thirty thousand dollars. So there's going to
be somebody saying, you know, should I get that used
RAV four for thirty grand or should I get a
Mercedes Electric S Class and eqs?

Speaker 4 (35:46):
But okay, but how does how does that help the
industry if people are just buying these old vehicles?

Speaker 5 (35:53):
Does it normalize electric vehicles in some way? Does it
get more electric vehicles on the road?

Speaker 4 (35:58):
Although then the question becomes, okay, I don't know how
how confident is the person going to be that the
battery is going to be fine for X number of years.
So if you buy the used Raft four, you know
pretty much that it's going to run forever, right, you
know what I mean?

Speaker 6 (36:18):
I do not think we're a little bit past that.
We that's been I wouldn't call it a wise tale,
but yeah, and there's been some horror stories out there,
But I think we're a little bit past that. Oh
I'm gonna have to change the battery of four or
five years down the road.

Speaker 2 (36:30):
I don't think I think we're going past it. It's
still a concern out there.

Speaker 5 (36:35):
I think I think we're past that.

Speaker 2 (36:37):
Yeah, but I know the general public is not pasted it,
right or in much of the junt.

Speaker 4 (36:43):
Know, they're they're familiar with with flashlight batteries, right, you
know pretty soon that flash light isn't quite as bright
as it used to be and therefore, but or you know,
on your phone, your phone goes down over time, right,
and consumers know that, and they're like, damn it, I
got to get an It's.

Speaker 5 (37:00):
Like part of the charging infrastructure concerns that consumers have,
which are legit. There aren't enough chargers out there, for sure,
but the sellers of electric vehicles will tell you no, no, no,
It's like your iPhone. You plug it in when you
go to bed in your garage, and when you wake
up in the morning, it's all charged up. It's not
the same as going to a gas station. You don't

(37:22):
need as many charging stations as you do gas stations.
But you can't convince American consumers of that. They feel like,
I'm going to be driving on vacation and I'll need
to fill up somewhere, and will it be there for me?

Speaker 4 (37:34):
But but Michael, okay, you know, with all the money
that has you know, as John's pointed out, you know,
the Oeans have invested a lot of money in evs,
but now with the change in the emissions rules, suddenly
they can they can bring back the hemmy. They can
you know, do things they.

Speaker 3 (37:53):
Weren't doing before.

Speaker 4 (37:54):
So they have a finite amount of capital to invest.
Where do they invest it.

Speaker 6 (38:02):
They're obviously being a lot more careful about where they invest,
and so you're not hearing about a brand a lot
of brand new BEV platforms that they're going to launch
in twenty eight, twenty nine to thirty. That's all been
pushed out. They're more or less redoing existing ice platforms.
Maybe they're looking at an engine and adding a hybrid
capability to it. That's something that's actually pretty popular these days.

(38:24):
They're taking BEV platforms and saying, okay, maybe need to
add a range extender to it. So they're looking at
the front packaging and as you all know, I mean
it's about the thermal but you don't and obviously crash
is a bit of an issue as well, but you
don't care so much about where the engine sits in
the front because it doesn't have to be aligned with
the front wheels. It's just the thing. I joke, and

(38:44):
Honda may not want me to hear this, but think
about it. It's like a Honda generators initting in the
front of your car. It runs, it charges your battery
sometimes sometimes it goes back to the electric motor. But
so there's some flexibility there. I make it sound like
it's easy, but you're adding a exhaust system, a thermal system,
a fuel system, and all the all the usuals are
going to be there. So it is much more complicated.

(39:07):
But more and more oms are looking at Okay, this
was a bad platform. I need to make this into
a BEV and a rev platform. And then and they're
also looking at their ice vehicles and saying, well, maybe
I'll do a mild hybrid and a full hybrid plugins
depending on the OEM. They've had good and bad situations,
so it depends on the OEM. But that is really
going to be the focus going forward. I would say

(39:28):
that lightweighting not so much, which is, you know, not
great if you're trying to substitute your material into somebody
else's and they're going to want to cut costs. They're
absolutely going to want to carry over parts as much
as they can and cut costs as much as they can.
They they got to get their ROI up and uh
and and and as we detrim vehicles. That's the other

(39:49):
thing that's going on right now is we're starting to
detrim vehicles not not putting as much leather and all
the content in. They're starting to bring it down to
bring that price down. That's also going to impact profitability
as well.

Speaker 2 (40:00):
You know, Farley talked about range extended trucks and pe
have trucks. What do you think is the consumer going
to go for that?

Speaker 6 (40:08):
I think that there are consumers that will look at
a range extender and say, god, this is the best
of all worlds. I've got the acceleration of an EV,
I've got the torque of an EV. But yet I
don't have to worry about finding a charger. I can
go five six hundred miles and I'm good and I
just fill up with fuel. Now, one would say, well,

(40:28):
you're carrying two power trains on board. Agreed. I think
that that's incredibly inefficient. But there's going to be a
pocket of consumers to say I've got the best of
all of it. I launched the way I want to launch.
It's quiet, it does all it's supposed to do, and
the engine doesn't run at like twenty five hundred rpm.
You know, you set it a light, it goes down
to seven point fifty and then you're running and maybe

(40:50):
goes up to fifteen hundred or a little bit higher.
But all it's doing is just putting power back into
the battery or towards the electric motor.

Speaker 3 (40:57):
Well, you say there's a pocket.

Speaker 4 (40:58):
I mean, how big a segment of the market is this,
and does it provide profitability for the OEM to scale
these things?

Speaker 6 (41:07):
Well, they've got the platform now, so much to what
we said earlier, we're kind of stuck between a rock
and a heart place. It's not like they're going to
shut these platforms down. They have to keep moving because
a lot of these oms are also still active in China.
Not as active as they used to be, but they're
still active. So they are going to need some of
these technologies for China, and maybe they're also active in Europe.
They're going to need them for Europe and some other

(41:28):
markets as well. So, but North America is their primary market.
That pocket is slim. I don't get me wrong, I
don't disagree with you. It's not like all the plumbers
out there are saying this is exactly the type of
vehicle I need. No, they're not saying that it is
the weekend warrior that might look at that say this

(41:48):
actually meets all my needs.

Speaker 5 (41:50):
So, you know, and finally talked about this last night.
As you said, John, U revs are a great solution,
but there's still not a great towing because that can
still drain the battery really quickly and you're you're switching
over to the you know, sort of burning more gas.
So so so what he I don't know if you

(42:10):
heard him say this last night, but he referenced, is
you know an e Rev would be a good fit
for a three row SHUV, the exact thing they killed
a year ago, this time the electric version, the electric
three row suv. And so what he was telegraphing there is, yes,
we're going to bring that platform back because they had
engineered the whole thing. We're going to bring that back

(42:32):
as an e REV. No.

Speaker 2 (42:34):
I did not hear that. That's very interesting, but you
know to your point that if you're towing, it really
puts a strain on an e REV. This is why
the ram.

Speaker 5 (42:47):
What was the charger as the erev?

Speaker 2 (42:49):
What was the e rev? It's a V six. It's
not a little two leader or one and a half
liter engine. It's a V six for the very reason
that you cite it. When when you're pulling heavy low
it's up a grade. You got to be able to
run that generator at.

Speaker 6 (43:04):
Itself like that was hardt. That was their criteria because
you could easily ask why wouldn't you have put a
two liter in there and save some fuel, save weight,
all those other things. Three six already packaged into that
vehicle kind of they've already got the thermal and it's
all done and I think that that was the mindset.
Can we can we go Pike's peak and toe something
and the engine can still drive the electric motor at

(43:26):
the speed that we needed. I hate to say it,
I'm not an engineer, but that sounds like that was
the criteria.

Speaker 2 (43:31):
Yeah. The other thing that's interesting about e revs is
because you are running them in a limited rev range,
you can take a lot of cost out of the engine.
Absolutely do need turbo, you don't need to variable valve right,
you can go to a far higher EGR for cleaner emissions,
a whole bunch of things. So what I find interesting
about e revs is it's a real interesting merger of

(43:54):
ICE and BEV technology. You need them both, and we're
way behind the Chinese when it comes to these e
REV engines. I mean, who is it? Chang'an and was
it byd have the highest thermodynamic efficiency of any ice
engines in the world and buy a wide margin too.
So I think the ice engineers are going to be

(44:17):
busy not just retooling V eights for production, but figuring
out how do we take cost and noise out of
these EREV engines.

Speaker 6 (44:26):
Those angines are not going to have to go over
two thousand and ir pm at any point in their lives.
There's been no reason to. So there all the electronics
are basically to keeping between seven hundred and seven to
fifty and up to about eighteen hundred and anywhere in between.
And so you optimize the engine where you're able to
do something like that.

Speaker 3 (44:43):
But again you said, this is still a small segment.

Speaker 4 (44:46):
So you know, I get back to this investment thing,
and Farley said, new investments in ice, more efficient, in
performance hybrids, and full electric vehicles are all on tap
at forward. So Keith, of these three buckets, where do
you see them putting their their investments?

Speaker 5 (45:02):
So they already are, they've lowered their investments in evs substantially,
like to the two to twelve billion dollars how much
twelve one to two twelve billion, Yeah, and so they
are they are trying to increase their investment in hybrids
because hybrids are now you know, for them, I think
about twenty percent of their business. I could be wrong,

(45:26):
fifteen to twenty. For Toyota, they're a huge part of
their business. Uh over fifty Yeah, but it is still
to Michael's point, it is still redundant powertrains. It's still
a more costly solution, so you're always going to get
a higher return on investment with an internal combustion engine vehicle.
And that is clearly where the legacy Detroit automakers are

(45:48):
moving money. I mean, including General Motors, who instead of
turning Lake Orient into an EV factory, is turning it
into a pickup an SUV factory. That's where Detroit makes
its money, and that's where they're going to put the
money down. That was just a matter of time. Yeah.

Speaker 3 (46:04):
So so Michael, I mean, do you see it.

Speaker 4 (46:07):
The play is to go forward on ice products and
then supplemented with hybrid products, and then over here will
be the evs and E revs.

Speaker 6 (46:22):
Yeah, I think what you're going to I mean, ice
will still be here, but it is going to decline.
I think you're going to find more mild hybrids and
more full hybrids are going to work the way into
the equation. Customers are going to look for better fuel economy.
I don't think they're going to be clamoring for it,
but they're gonna be looking for better fuel economy. I
mean fuel is still three or fifty four dollars a
gallon and probably not going to change off that anytime soon.

(46:43):
So at that rate, you know, consumers is still gonna
be looking for better fuel economy. So I don't think
that's going to go away. But I think you're right,
You're you're going to have kind of the ICE what
we call multi energy, you know, ice and hybrid in
one situation, and then the BEVs and the e revs
in another situation. And and and because they're taking all
these BEV platforms and making sure, can we throw an

(47:05):
engine in the front? Uh? And be honest, I've talked
to a couple of OMS, a brand new one, by
the way, but a couple of OMS have basically said, yeah,
that's a rework. I mean, that's a repackage and and
and that means a lot of costs. But I think
most OEMs kind of thought about this in advance, and
they're saying to themselves, you know, we'll find a way
to do it if we have to. And there are
there are a couple of new vehicles coming out there

(47:25):
are definitely being engineered for both. Absolutely.

Speaker 5 (47:29):
I talked to Scott Keel, who is the head of SCOUT,
the new electric vehicle line from Volkswagen, and you know,
they got very far down their development path and then
added E revs. And I said, did that delay you?
How much rework is that? And he characterized it as
and Michael, you would know better, as not that substantial

(47:52):
ear work. They could use the same platforms. They could
add a small engine. They have a pickup truck. That's
that's a Rivian sized type pickup truck. Medium they and
they have an suv also kind of Rivian sized. And
and so they will be launching with both E revs
and BEVs. And they didn't have to delay their launch.

(48:12):
They didn't have to delay the launch of the erevs.
He characterized it as simple as oversimplifying, but but as
not as complex as you might think they had.

Speaker 6 (48:23):
They had a little bit more realistic to deal with.
I would say, uh, smaller let's call it c r
CD platforms that are in the BEV space. Putting an
engine in front of one of those is a completely
different story room, right, that a lot more room packaging.
It's all about packaging. Where do I put the fuel tank,
where do I put this? Where do I put that?
How do you package it all? And if you think

(48:44):
about it, sorry, but you've got this you were you
have this battery that basically was completely under the vehicle,
and now you've got to find a way to move
exhaust and you're not going to put your fuel tank
in the front. Nobody really does that anymore. So you
got to move your fuel tank's got to go in
the back, and your exhaust as to going to back.
So now what do you put part of the battery
in the tunnel and make some room for it. It

(49:05):
just it does turn into a little bit of a
packaging nightmare. If you've got a bigger vehicle, you've got
some levers you can pull.

Speaker 4 (49:12):
So well, see I was just wondering, so Scout, I mean,
so here's here's a new brand to the market basically
right and coming out with with evs and eros. Okay,
so it's coming out with a product that is not
going to be as appealing as it was when you
got seventy five hundred bucks for buying one, and another

(49:35):
type of technology that nobody really knows about.

Speaker 3 (49:38):
Right, So Scott Keyo sleeping well at night, John.

Speaker 2 (49:42):
No, because besides those technological and marketing challenges, he's going
to have whopping lawsuits on his hands as he tries
to sell these things direct, and dealers, especially Volkswagen dealers,
go absolutely nuclear on for not using franchise dealers.

Speaker 5 (50:02):
He already has lawsuits. There's one in California, there's one
in Florida. From there will be at least fifty. Yeah, yeah, yeah, yeah.
That's going to be a huge challenge for them for sure.

Speaker 2 (50:13):
Look, you made your bed, now you've got to sleep
in it. You know, the old saying they planned this
whole thing. They're building a multi billion dollar plant, They've
sourced this vehicle out, they have plans of how they're
going to go forward on it all. They're going to
go forward and now whether it becomes a success or

(50:37):
maybe the Volkswagen Group does step in and say, you know,
Audi really needs some US manufacturing. Why don't we move
these Scouts aside and see how many Audis we can build.
I don't know, but you bet they're going to go
through with it.

Speaker 5 (50:50):
I put Scouts new South Carolina plant and Ford's new
Tennessee plant in the same boat. These were built at
the peak of the hype cycle, or conceived to be
three hundred thousand unit you know, pure battery electric vehicle
truck factories and turns out there isn't demand for that.

(51:14):
But they've already sunk the costs billions and billions of costs.
So they got to find a way to get some
kind of return on that investment, and it won't be
by producing exclusively battery electric vehicles.

Speaker 6 (51:26):
So what is what is it like exactly the capital
it's the loss of economies of scale. If you were
going to build two hundred thousand of something, then you know,
you divide by two hundred thousand for the development costs
and all of that. But if you're only gonna build
fifty of something or seventy five of something and it's
going to be choppy, that that is a different economic
equation that. So you've got a variable costs and a

(51:47):
fixed cost situation they do that. Both aren't very very appealing,
and it's gonna be it's gonna be a long time
until some of these projects can get you know, above water,
let's put it that way.

Speaker 5 (51:58):
And everybody talks about well, okay, so add E revs
to the line. Scout AVI or obviously already is doing
it that But as Michael was just saying, that's a
nascent well, it's a non existent market in right now,
So we have to educate consumers. So that's not going
to fill up the volume e revs. So what fills
up the volume?

Speaker 6 (52:16):
Right?

Speaker 2 (52:17):
I got a question for your Keith. So the Ford
model TeV is going into is it Lexington?

Speaker 5 (52:26):
We think it will go into Louisville.

Speaker 2 (52:28):
Oh, Louisvian. Excuse me Louisvill. Why is it going into
Louisville and not into that brand new plant?

Speaker 5 (52:35):
So excellent question, but I think it's I think it's
the same essential size platform as an escape, and of
course the escape is going to go away, and so
I think it replaces that in the cycle plan. And
if you have a plant that was already building something
with hard points that are essentially the same size, I
bet the tear up is less. I don't know. Maybe

(52:57):
Michael could reflect on that. Think it fits in that plant.

Speaker 6 (53:01):
If you go backwards into plants, and that's kind of
my specialty for good or for bad. You know KTP,
which is down the road truck France. I'll turn that
into English. Is massive, but then they work on three crew.
But for a long long time Louisville was the largest
assembly plant at least with with one line in the

(53:23):
United States, and in fact, in North America they made
explorers there, they made rangers there. It was. It was
a real melting pot, it was. It was a very
productive plant. Escape was there built there for a long
long time and we moved from Kansas City over to Louisville.
But I agree, And there's gonna be a little bit
of a hole in the portfolio there. Let's think about that.

(53:44):
So you started the portfolio, go Bronco Sport and then
and then yeah, there's a Bronco, but you know, it's
a little bit over to the side, is more you know,
rough and tumble, rough and ready kind of off roading type,
and you go all the way to an explorer and
there's not in between. That. That's and I'm sure the
Ford management looks at that and says, we got to

(54:04):
find a way to start filling in some of that space.

Speaker 2 (54:08):
Well, why would you drop Escape? And what's the Lincoln
the course air of course there?

Speaker 4 (54:13):
Yeah, I mean, don't they look at the Rev four
which is biting at the heels of the F series for.

Speaker 5 (54:20):
Sale for leadership? Right? No, I think they make more
money off of Broncos Sport and a Broncos Sport and
an Escape are the same size, and I think they
want to ride the Bronco.

Speaker 3 (54:32):
But will they get the volume well?

Speaker 6 (54:36):
And then add to your Bronco, Sport comes out of
Hermicio in Mexico, so exactly knows what's going to happen
with tariffs and all of that respect. So again, I
think similar to what we're seeing, a lot of these
a lot of these decisions were made a couple of
years ago when there were many more nons. This is
very rumsfeld in there's no nons and unknown unknowns, and boy,

(54:57):
we got a lot of unknown unknowns right now, unfortunately.
And it's so and we could always Monday morning quarterback
and say, well, that wasn't such a good decision. But
I guess with everything that they knew at the time,
this is the highest probability decision. So let's let's move
forward on this. And obviously what's with what happened in Washington,
the automotive industry is is really feeling it right now.

Speaker 5 (55:18):
Well, and they were all chasing Tesla back then. Chase
Tesla was the north star, and now, of course Tesla
is a fading star and they're all chasing byd.

Speaker 4 (55:30):
But the American consumer is completely oblivise to BYD.

Speaker 3 (55:36):
There's there is no idea that there.

Speaker 4 (55:38):
Is such a doesn't exist there, right, right, So how
does it matter?

Speaker 5 (55:42):
Well, because it will exist here someday. You know, you
can't hold back the tide forever, and eventually it'll make
its way here, whether they have to build a plant
in Mexico and ship them over the border or whatever.
BYD will get here as well. Well, I mean, Jeelie's
already here, right, So we are have Chinese evs in
this market, the Evolvo, yeah right, but they're just not

(56:07):
big sellers, so they will find their way in.

Speaker 6 (56:11):
I completely agree. What we've done is now as the
western OEMs lose volume in China and they kind of
come run running back to either Europe or North America
whatever their home market is, they obviously don't have as
much demand diversification, but they're also they've also basically told
the Chinese, well, we don't want you in North America
and we're going to make it more difficult for you
to be competitive in Europe unless you build here, just

(56:34):
go and sell vehicles everywhere else. And so export markets
that we used to enjoy in places like Saudi Arabia
and the Middle East, and in places like Africa, those
are going to decline. I mean, look at what happened
to Thailand. I mean, the Chinese share growth is incredible.
I mean I remember when Toyota was forty percent of

(56:54):
the market and it's not that way anymore. So anybody
thinks that this will be a slow path I think
has to pinch themselves. It's not going to be. And
to your point, the Chinese are going to get and
I call it as one big melting pot. There's gonna
be a lot of consolidation. There's gonna be four or
five players that really do well, and they're gonna basically
sit on the doorstep and say we're ready, and we've

(57:16):
got all this scale and we control all these other things,
and in some way sayer form, we're gonna have to
find a way to work with them in this market.

Speaker 5 (57:24):
It's just and that's what Farley was saying last night,
that they are not trying to be competitive against the
global electric vehicle makers. They're trying to be competitive specifically
with the Chinese. That's it. That's that's their bogie.

Speaker 2 (57:39):
Yeah, Well, they're at the top of the list, right
or the head of the class. I mean, as I've
said before, there's some crummy Chinese companies, but the best
of them are the best in the world.

Speaker 4 (57:51):
So so Michael, I question, you know, part of the
whole tariff thing is to bring manufacturing back to the
United States. How expensive is it for a car company
to bring something well back?

Speaker 6 (58:07):
Well, if you can find the tooling, which again I
would say, the US has some labor issues in terms
of availability of lower cost semi skilled labor, that kind
of thing. We really have a tooling problem. And I've
got a good friend who brought this up years ago,
and now I completely agree with what he's saying. We've
got a massive tooling problem. We could say we want

(58:27):
to move this vehicle from Mexico into a plant in Michigan. Well,
that's all great, but guess what a lot of the
hard tools and we got to get a lot of
that from China. So we actually asking China to help
us CO locate more production here. It's not the situation
we should be in, and that is not an easy pix.
So I say, to answer your question, the tooling is

(58:47):
part of it. I would also submit we've heard out
of a couple of wims that fifteen percent is kind
of that teeter totter. If we're at fifteen percent tariff,
we might stay where we are, and if we're above,
oh gosh, that gets a little bit difficult. I'm going
to have to start to co locate. So and again,
that's not a hard and fast rule, but that's kind
of a loose one that we've heard out in the industry,

(59:10):
and that's probably one of the reasons why we're hearing
about ten and fifteen percent. That seems to be something
that will drive longer term behaviors, not right away. I'm
going to shut this plant down tomorrow and move everything tomorrow.
I think the industry still basically adheres to the longer term.
Let's get the program to pay for itself, and then
when we need to resource it, we're really going to

(59:31):
think about what we're going to do.

Speaker 2 (59:34):
So, Gary, we're at the top of the hour, just
about you want to recap.

Speaker 4 (59:39):
Yeah, I want Keith to tell me what the what
Ford is going to be in five years.

Speaker 5 (59:44):
Yeah. I think they will be still a ice driven
in tonal combustion engine driven truck and SHUV company, and
the F series will continue to be the profit driver
for that total company as they lean more into the
commmercial vehicle business. And that's another thing Farley said last night.
They're going to put more investment in commercial vehicles because

(01:00:05):
they're getting such a good return and that's where they're
seeing the recurring revenue with the software service business. So
as you go more into commercial, that means more trucks,
more vans, more SUV's.

Speaker 4 (01:00:20):
So the normal consumer is not going to be getting
as much from the Ford mortar company as.

Speaker 5 (01:00:27):
They have in history. They practically get nothing in Europe anymore. Right,
Ford used to be like the manager's car was the
company car, you know, the Mondeo, Right, it used to
be a big car car, passenger car company. It's mostly
commercial in Europe. Now. I don't think it'll be mostly
commercial here, but I think commercial will be much larger

(01:00:49):
than it has been for them.

Speaker 2 (01:00:51):
Michael, your recap?

Speaker 6 (01:00:52):
What do you think? John? I remember when we used
to do this, when it was more at like six
or seven at night, and we used to bring beer inside.

Speaker 2 (01:00:59):
I know we needn't bring a beer.

Speaker 6 (01:01:00):
In again, and you're probably thinking, how did you drive home?
We only had one or two and my wife some way.
Sometimes we'll make cookies. Yea, yeah, we have to return
to that.

Speaker 2 (01:01:09):
I like that idea.

Speaker 6 (01:01:09):
Actually, my recap is I would say that given everything
that's going on, there's still a lot of uncertainty. They're
getting a little bit more now that the OBBBA has
been signed in in law, at least we know what
we're dealing with, But on the on the tariff side,
it's still a lot of insecurity out there, and profitability
is still going to be pretty sketchy for the next

(01:01:31):
couple of quarters until this kind of settles down. And
I think that this is going to be much like
what we said, there's going to be a low technology
turnover region for a number of years, and get ready,
we're going to have longer life cycles, lower technology turnover.
Maybe more design changes to make cars look better, but
those will be cheaper to do than a full platform redo,

(01:01:53):
and more electronics, maybe to add some content and consumer features.
But it's it's it's it's a different world that we're
going to be living in for the next five to
six years for sure, Gary your.

Speaker 4 (01:02:04):
Recap, I'm just dwelling on what he just said about basically,
the US becomes the technology backwater, and I mean.

Speaker 6 (01:02:14):
Think about we used to say China are old and
tired platforms. I'm not sure we're going to get quite
to that point, but you know, I remember someone said,
we packaged up the old an old rover and we
send it over to China because they wanted to build it.
I don't think we're going to get to that point,
but I think we're going to start losing that technology raise,
not so much with Europe, but definitely with China, and
the differences between our regions are going to grow. And

(01:02:36):
I don't like the idea of that occurring. I really don't.

Speaker 3 (01:02:41):
What do you think?

Speaker 2 (01:02:42):
My recap is all this week and a little bit
of last week, we've been reporting on Automaker's second quarter
earnings without fail all of their earnings plummeted, plummeted, without fail,
every single one. And I think the second half of
the year is going to be worse. That's my recap I.

Speaker 6 (01:03:03):
Think look forward to I'll disagree with you.

Speaker 2 (01:03:06):
Yeah, I mean, I hate you know we're talking gloom
and doom here, but I think one of the reasons
our audience watches is they know they're going to get
it straight from us. We're not going to gloss over things.

Speaker 5 (01:03:18):
Well, I think to your point, though tariffs they're supposed
to be promoting the American aud auto industry, is making
it poorer and less profitable.

Speaker 2 (01:03:27):
And I think we'll see net of everything, fewer automotive jobs,
manufacturing jobs.

Speaker 4 (01:03:34):
Yeah, so well we we go for another half hour
on this. But I mean, I mean, you know, as
I said earlier, wasn't it to bring back manufacturing to
the United States?

Speaker 3 (01:03:45):
And I would assume that would mean more jobs.

Speaker 5 (01:03:47):
But when guy say, if you're trying to move jobs
from Mexico to the United States, what you're going to
do is increase robot sales.

Speaker 6 (01:03:54):
Yes, that's right, from companies that may not be based
in the United States.

Speaker 2 (01:04:00):
Well, anyway, with that, we're going to wrap it up.
I want to thank all of you for having tuned
in

Speaker 1 (01:04:05):
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