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AAH #684 - EV Price War Forces Automakers to Rethink Everything
AAH #684 - EV Price War Forces Automakers to Rethink Everything
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About this episode
The discussion centers on the ongoing electric vehicle (EV) price war and its impact on automakers, featuring insights from guests Jeff Stout of Yangfang and Paul Waddie from AutoPacific. They explore how traditional manufacturers are rethinking their strategies to compete with Tesla and emerging Chinese brands, emphasizing the need for radical innovation in vehicle interiors and manufacturing processes. The conversation also touches on the challenges of vertical integration, the importance of user experience, and the potential for autonomous driving technology to reshape consumer expectations and market dynamics.
Topics:
ev price war
innovation in interiors
vertical integration
autonomous driving
user experience
cost reduction strategies
chinese automakers
manufacturing processes
consumer expectations
market dynamics
Cars:
Ford Taurus
TOPIC: Auto Industry Changes PANEL: Jeff Stout, Yanfeng; Paul Waatti, AutoPacific; Gary Vasilash, shinymetalboxes.net; John McElroy, Autoline.tv
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Out Online After Hours is brought to you by bridge Stone Tires Solutions for your Journey and by Intrepid Control Systems over the Air Engineering boost your game, Right, Gary, we get to do another show today. How you doing I'm
doing Yeah, I'm doing good. I am the world's most bizarre weather in
Detroit's history. I think Michigan plumb gone crazyis degree swing and tempts between yesterday
and the day before. It's just unbelievable. I don't know how how we
can deal with that. The audience tod did not tune in to hear us
talk about Michigan weather. Let's introduce our guests. We got Jeff Stout back
from Yangfang. He's going to be talking about all kinds of cool stuff like
he always does on the show. We also have Paul Waddie coming on with
us too from Auto Pacific and Paul, great to have your debut here on Auto Line after Hours. Thanks for having me. Yeah. For the audience
who has not seen you before and they had to look back at those shows, go search online to see those because they're always fun. I look a
lot younger as I was a lot younger, a lot taller, and he used to be handsome, right, exactly, everything falls apart. We're being
really played in the beginning of the show, give give us a capsule summary of the company and what your role is in it. Yeah, so Young
Fung we start there, A lot of people say Yung Feg. Technically it's
Young Fun but if you want to go with yf just as well. That's
actually a company that has a long history in China, but outside of China, it's a part of an acquisition. So I personally hired into a company
called Prince A thousand years ago, thirty years ago that got bought by John's Controls, which then got bought by Young Fung. In Europe, there's a
similar trajectory. There's a company called Hoppish that got bought by a company favorite
then Becker JCI Young Fung. So, like a lot of companies, there's
a collection of histories that all come together to this corporate. So now we're
seventeen ish billion dollar automotive interior company. Everything on the inside of the car,
seats, interior, safety, electronics. I'm personally responsible for all of
the innovation that we do globally across all of those different products and try to get new stuff into cars. So talking about innovation inside cars, the hot
topic right now is coming out with inexpensive EVS. Tesla's talking about a twenty
five thousand dollars ev Ford's talking about doing radical changes to be able to do that. What are they telling you? What are they asking you? You
know, are they coming to you Jeff and say we got to take a ton of cost out of these interiors. Yes, and I think baseline this
is my words not there. So what are they telling you? I wouldn't
tell you what they tell me, but I think as a theme, the industry is reacting at this point. I would argue in a healthy way to
the Tuessls of the world that over the last twenty years has been Okay, He's going to try to do whatever. And so there's a recognition of Tesla's
doing something that we need to be aware of it, we need to kind of address. In addition to that, you've got the Chinese automakers that are
emulating Tesla, I would argue very effectively and as part of that this sense of hey, you got to start over with how you develop, how you manufacture, how you deliver vehicles with an eye towards a value to the consumer and cost. And so yeah, Ford announced finally the Skunkworks idea to say
we need to take a whole new look. And frankly, if I was
to put words in his mouth, hundred percent not his words, to be clear, he would I would say his message to the organization is here, in Dearborn, we've we've had this established way to develop cars that's not gonna work anymore, and so we need a whole new way of doing that with an eye towards value and cost that we've kind of lost sight of over the course of years because we were able to just incrementally improve year after year the vehicle. But now that we're on this whole new thing that we don't know
that much about, we have to get educated in a hurry, and we've got to be able to model after that. VW with a scout. Scott
Ko's made plenty of announcements where we're not going to do this the Volsburg way, the v like, we're going to take our own path to develop a vehicle for this market. It's the same message, we've got to do it
in a completely different way, which ten years ago, if you had said, hey, VW is going to want to like not follow their own rules.
I would have laughed at you. VW is a very German rule based.
They've got standards and you follow them. It doesn't matter if you're Porsche
or VW RODDI to have a VW person say well, now set the rules aside, we're I'm sorry, what company do you work for? And so
that's what we're hearing from automakers is this sense of we need to change and we want you to help us do things differently. Now, the fascinating question
that will come out of that that I'm looking for is, and we've talked about this just about every time the show, a disruptive change is hard.
So if you are for word, VW or Toyota or whoever, to say, we're going to take a new look at this and we're going to do it completely differently, very easy to say, very very hard to because when you have that skunk works Farley's words doing this thing and they're told, hey, you are independent of Dearborn, you do the right thing. Do you
think everybody in Dearborn is like, yeah, that's a good idea. Like
I I'll keep my hands off of that. I don't know the answer to
that question. But I do know the answer. Hell, no, there's
kingdoms and there's this isn't picking on four just human nature says that, Yeah, I've got a standard, I've got a business process for purchasing and manufacturing and quality, and you guys need to follow the rules. These rules are
here for a reason. I'm here to protect you skunkworks people. You need
to make sure that you follow my rules. And then it'll be this fascinating
moment. In my experience, it usually comes to them. There will be
a very significant moment where Farley will have to decide do I make the skunk Works follow the rules or do I let them break the rules. And that'll
be an important moment for Ford and for VW and for every automaker that tries to do this. All right, but let's let's talk about YF for a
minute. So when you're hearing this message from these guys, A, is
this a situation where basically they're just saying, in a different way, we want you to reduce costs and B how does your company deal with radical innovation?
I wish I could say super well, but there's people who are humans who work at YF. As well, and I would argue humans don't like
change. I had an innovation guy worked for me for years and years and
years who would always say, the only person who likes change is a wet baby, and he's one hundred percent right. There's no human being out there
is like I just want to change stuff. Maybe Elon Musk, but in
general, then inside wy IF we have a responsibility my team as well as the broader WYF team not to say, Okay, how do we find a way to just make stuff cheaper? That doesn't end well. You have to
find a way to say, hey, how do I work with this automaker to give them the same value or more value, but find a way to do it more effectively, more innovatively, trying to take what you have today and say I'm gonna shave ten percent off of it, and then just that's not a path to competitive advantage and it's really not a path to long term success for the customer. So the conversations we have with customers are always in
that as soon as the customer says, tell me what rules I need to break in order to provide value at a lower cost, now we're going to have a really good conversation when they come to us and say, hey, just you need to be twenty percent cheaper, but all the same rules apply in general, we walk away because the only way to get there is to just do it in a way that's not really sustainable. You're cutting corners,
you're just making it a worse product by twenty percent in order to get the twenty percent reduction. But when there is an opportunity to say, well,
if we if you allow us to do it this way, there's always a better way to do what's being done. Okay, So at CEES, you
showed me the interior concept interior for a new vehicle that was this radical change.
I mean you guys sort of like gutted to front front seat interior area, right. You didn't show a backseat area. Crypt there was no instrument
panel whatsoever. I mean, there wasn't a steering wheel. There were pedals
that retracted into was it the floor, the firewall, into the firewall, right into the firewall. So take us through your thinking of what you just
described of taking you know, a well established company that has ways of doing it and coming up with this totally new approach to designing an interior. Yeah.
So A, it's fundamental to what the team does. Other companies have
their teams. Well, so I'm not saying the only wife could do this,
but our team five minutes away from here in No Bay, basically asking some fundamental questions A what would it take to radically reduce the amount of time to assemble our products together as well as our products into the vehicle. That
was a starting point, and some of that came from Stilanta CEO saying, Hey, I want to have a ten hour car. I think Elon Muskman,
I want to have a ten hour cars like, oh, we're hearing this kind of mantra of our assembly lines have to get to be to the point where we can just kick out cars number two from a On the opposite side, from a consumer research standpoint, asking consumers, hey, what would you want in the interior? And you can't ask a blank question, you
get blank answers. But as you ask these leading questions of what do you
have in vehicles today versus what you would want to have in vehicles in some of the feedback we got where it's like there's a lot of stuff that we do because it's always been done that way, which is the classic barrier to any innovation. So if you take away that restriction and say, well,
what would the consumer want, we clinic different ideas and that iterated into boy and this is not a new statement. A lot of people, of customers,
other competitors, I want more of a limbit. I want this feel
in my car. And so we kind of took that model and said,
well, the instrument panel has a lot of functions that are necessary heating and cooling, audio, radio, all your idi in vehicle entertainment, safety, steering, strolls. But all of that that stuff is still important. You
still have to do all that stuff. We didn't assume a level five autonomous
I just want to ride around in a robo taxi. I still need to
be able to do all the things I do today. But can I migrate
that all into a seat sled, which is what we ended up doing.
And so you have some of it is serendipity, right. You don't start
with the findings. You usually get started and go, oh, well if
I do that, then I that would enable me to do that. So
one of the fascinating findings was why do we have all of this sixty four way seat adjustment? Well, A lot of it is the fact that I'm
trying to manage my interface to the steering wheel, to the reach curves, to the center and so big person ninety fifer percentile fips, I need to manage all of that stuff. Well, if there's nothing to reach to,
why not have a fixed seat. And when I have a fixed seat,
now that gap between the seat and the floor console, that's needed because I've got two things that are moving relative to each other. Oh, that goes
away. Oh like if I could buy a car where I don't drop my
phone next to the seat. Amen, brother, I've got barely any knuckles
left from organees or whate coins or French try whatever, like the junk drawer that's next to your seat. So that then gets to be well, I
could then have the floor counsole be there and have all the floor and I could have the steering control arm be part of that sled. Well, now
the assembly of the vehicle just got really, really simple. And when you're
saying sled, and I'm bringing this up for the value of the viewer, you're talking about a module that goes just into the car. It's got the
two front seats, it's got the center console, it's got a screen on the console. The screen comes out on sort of a goose neck connection,
and now the screen is your steering wheel, correct, and then you can deploy it back so it's you can do a level three autonomous, so I can be in autos and then I can use that as a digital device to do whatever I want or if I'm driving, it's it's a steering wheel.
It's not a wheel in our case, it was a display. But still
and at the end of the day, we had a lot of customer feedback, a lot of conversations with you, John in terms of so what what prevents this from happening? Like what's standing in the way, And as we
dug more and more into it and a lot of time and energy into the engineering. The one I like to give a shout down because it blows my
mind. You can imagine if you have a display that's here horizontally and then
it's going along an arc of radio a radius of curvature, an arc to a new position, Well, that display is going to be in the completely wrong orientation. How do you create a mechanism that forces that display to stay
perfectly in landscape mode as it traverses through this arc of curvature, a ancient Chinese secret if you remember the commercial and a patent, So lots of protection on our side, but that type of assessment of how to do that, Okay, we've figured that out, but then you're left with steer by wire.
All right, that's common. We don't really kind of play in that
space. We've got to wait for the automakers and the next years of the
world to nail that skuyui. But it's common, right, so it's going
to be here. And then safety, how do I manage why I don't
have airbags that are coming and so a pretty straightforward problem statement. Then for
us, we're an air bag supplier, so let's do the development to figure out what do we need to do in the seat as well as in front of the occupant to protect them. But then it's just a matter of customers
wanting and I have to say we've presented it to several customers, range of opinions, all positive, to be honest, but literally a couple of different customers saying, so we have a small car, electric vehicle that we're really trying to stretch the rules of what's possible. Do you think you could sell
this. I didn't expect you to ask that question. But yeah, there's
nothing here that's not It's radical and its kind of consumer facing standpoint. If
anyone out there in TV land got into this car, you'd be like, whoa, this is nothing like anything. But from a technology standpoint, it's
all basically today's technology. We don't have to invent some levitating plastic in order
to make this work. It was just good design, really smart people getting
together to say, let's think about how we take out twenty thirty percent of the parts and the total mass that we took out, massive mass savings, massive cycle time savings, massive peace cost savings. And again without having to
say, well, hey, why if you just cut your margin by two percent and then I'll get it. No, we can still give you something
where we can be profitable, but you, as an automaker can save a ton of money. So on a continuum of the positive reactions to what extent
were the traditional automakers on this scale versus the new entrance. I have to
be careful here. I always need to be sent no name. Maybe it'd
be easier to do it by region, And because it's the region that shocked me was Germany. Every German customer that we talked to said I need this
vehicle in my showroom by this date because I've got a meeting with my leadership to talk about what the future of electric vehicles looks like, and I need this to be part of the conversation just across all And I expected. Again
I don't like to pick on VW, but I usually think of VW as being, yeah, it's not our idea, then it's a bad idea.
So just to have those kind of German customers say, boy, this is really compelling, I didn't expect that from them. I did expect, you
know, Chinese startup, and they did. They liked it as well,
I would say, the most tepid response so far. And it's always did
to say this as well, because sometimes there's an immediate excitement that tapers off, and sometimes it's like I'm not sure what to do with it, and then six months later they realize, oh, now I got it. Now
I know what I want to do. But right out of the gate,
I would say the North American customers have been a little more tepid. Of
that's intriguing. I don't know what to do with that, which is what
I expected the German customers to have more of a response like, but the Germans were much more eager to say, let's how do we follow up with the next step on this? Well, like what let's start talking feasibility,
Well, feasibility, like this is an idea and that's certainly important to kind of Normally when we do auto shows, you have a chance to say, here's the technology wife has to offer. We want you to buy this thing,
and it's all just in a car. This was a ground up sense
of here's just a vision of what we think the future could be. What
do you think And to have a customer say, I think that could be the future. Let's talk. Oh, we were just trying to start a
conversation and we hit the mark better than we thought we I should say the tea that we obviously was trying to hit the mark. But normally customers have
their own strategies of where they're going. But yeah, the response has been
more direct than I expected. So so, Paul, you guys at Autopecific
look at what consumers are interested in terms of interiors and things like that.
I mean, what's your sense of their willingness to select something that is as radical as what Jeff is describing. Yeah, I mean we look at North
American consumers specifically, and you know, they're open to a lot of new technologies and new ways of doing things, but they need to be presented with the opportunity to see it. So you know, this is something that they
haven't really heard of yet, so it probably isn't on their radar now, but nope, you keep showing concepts like that, you know it could start to become a reality. And don't you think it's got to be the total
package. I mean, if you just show them that interior, they're going
to go, that's weird. What do you mean The screen comes out of
the cantole and that's my steering whe It's kind of like a new home buyer.
You know, they can't envision the whole thing, you know, the finished product, if they don't see the whole thing. But what I'm getting
at is if you say, here's a real cool little electric car, man, is it affordable, and here's what this different interior is like, then I think they're more open. You know, if you say, hey,
this electric car, it's only twenty five thousand dollars, it goes three hundred miles, it charges in five minutes. Well whatever, and it's got this
radical crazy interior. Yeah cool boom. We're My thinking is if you just
sew customers the interior buck, they're going to go that's crazy. Yeah.
And I think I would jump off of that and say, because the question we get asked internally all the time of we could have made this design, made a really compelling PowerPoint with some you know graphics that and bring it to an OEM and say here's our idea. What do you think? And I
guarantee you everybody would say, oh, that's cute, sketch, like that's kind of thought provoking, but have a nice day until you sit in it.
Because even people I've talked to you who haven't said it's like, yeah, I would never like that because when you hold that display on this big long candle, leave her arm like it's gonna be too squishy, you know, it's not like once you feel it, you're like, man, this is this is super smooth, and that it takes about four seconds once you're in the vehicle. Great story. I think I told this to you.
We did of a research on the vehicle after we had finished developing it, but we hadn't shown it yet, and we brought in some families and there was this thirteen year old girl that got into the car and she sits down and she immediately crosses her legs underneath her body, and you're like, that's not how you sit in a car. That's wrong, and you're doing it
wrong. And that's when you realize, like, wait a minute, she's
not sitting in a car. She's getting into this thing that's going to take
her somewhere. And it feels and we did true confessions. We took it
an existing vehicle because we wanted to save money, so we went to the junk yard, bought something that had been so it's a Chevy Traverse. I'm
allowed to admit that chopped it up and use that so all the space.
People get in there, they're like, this is what did you do?
Is like ten times bigger than a normal car. It is a normal car
traverses. I mean, it's kind of a big car, but it's not
ridiculous. But because you took out all of that stuff, you don't realize
how much space all of that stuff takes until you get rid of it all.
Replace it with just a simple, thin profile display, and you have this sense of wow, I got all kinds of room. You know.
It's funny that you say all that, because it triggers a memory of an interview I did decades ago with a guy named Luigi Kolani. Now he's not
well known except in design circles. He was very, very famous, and
he designed all kinds of things, cameras, tennis, rackets, shoes, cars and trucks, and so I got to interview him on that, and one of the things he was complaining about was the interior of cars. He
said, if nobody had ever seen an automobile in their lives and they saw today's automobiles, they wouldn't understand how to use the interior. And I'm not
saying all the button he said, they wouldn't even know what it's. What
are all these seats and belts? And he said, we need to design
interiors like a bird's nest. He says, everybody would understand that they go
up and curl up inside. So when you talk about this thirteen year old,
you know, sitting cross legged on the driver's seat, boom, that triggered the thought she was totally comftorable and right right exactly. And I don't
know if this is a change of topic, but I think the thing that I'm watching right now you saw in the news the other day, right Apple canceled the project Titan Car. One of the high hopes I had for that
whole development thing that they had going on was that car makers are pretty good at bend and metal. We've got a fair number of people that think about
but we're not institutionally hardwired to develop the software, the hardware, the experience to say what could this be? Like a consumer product is the hardwire to
do. That's what the consumer product people do and what I see happening right
now in China. So there's plenty of people who are like, oh,
the apples get in, then we should buy get in. Shall me essentially
the Apple of China. Huawei and other electronics they're still moving forward developed,
they're not developing for the most part. Shall me is a little bit,
but Huawei is just partnering with automakers. They don't want to bend metal.
It's like, Okay, somebody else is ready figure out how to do that, really really well. I'm not going to add any value there but they
are getting involved in how do I have somebody get in this car and feel one hundred percent comfortable with how everything works. Everything's intuitive, none of it's
historical. That's the way we do an automotive. You gotta ben then you
do this. It's like, take a fresh look at it. And they're
head of Apple is just in terms of production. I don't know if they're
a head of Apple in terms of the thought process. But they have cars
on the road and everybody, unfortunately I haven't a chance to ride them yet.
Everybody I've talked to is ritten in them is like, this is the future. It's part of an ecosystem that you walk up, the car knows
who you are, you sit in, all of the UYUX using interface, user experience. All of it is so intuitive because they designed and developed the
entire experience inside that car. Now. I don't know if they're the right
people, but I think that's where this thing is going. Whether it's what
we showed at EVII a radical departure, or whether it's a more subtle one.
The winners are the ones who are going to create the bird's nest that says, man, this works like I don't know why I was driving that other car before that had seventy four buttons that I didn't know what they did.
I felt like I was a dumb figure out. How do I just
do this one thing to develop something that's seamless with their home, their phone, their tablet, their car. That that's just it's not different, it's
just part of that consumer electronic eCos. Okay. But to go back to
the Apple yeah situation, Okay, when they came out with the iPhone and suddenly there's no buttons, there's this WLID screen, right, and so there there was pushback. I mean, people did not immediately accept that, but
I mean, you know, jobs point of view was, you know, this is how it would be awesome, this is this is what you need.
You don't know you need this, but you need this. And turned
out he was right to what extent? A do you think that there's that
kind of thinking in the auto industry? And B? To what extent are
executives willing to make the sort of risks that he made? Correct? And
I think that's one hundred percent the question that the industry is asking itself right now. I've been in business thirty years. He guys, maybe a couple
more of those thirty years, twenty five at least, maybe even twenty seven of them have been automakers saying, how do I what Toyota made famous?
How do I make my next car five percent better than my last one?
In fact, every year I want to be a little like everything's about incremental improvement, more were more stable, better precision ball bearing, elector right, how do I just get a little better, a little better, a little better. In the last couple of years, I think that facade is gone,
and every automaker is saying, how do I radically transform my business to compete with what future mobility is? I'm not even sure what future mobility is?
What is that? But the assumptions of it's got to be this way?
I think every automaker on the world is said, I have to I have to rethink that I have to drop my assumptions. Even the most conservative,
the Toyotas of the world. Am I in electric? Am I not?
I think they are asking what do I need to be in order to be relevant in this space? And I don't have the answer. But the
risk tolerance that automakers have today is a thousand percent higher than it was for the first twenty five years of my career, and maybe just as a testimonial to that, we do innovation stuff. We have an investment every year that
is pretty consistent, that we develop new things and we bring them to customers and they usually say I like it. In the last couple of years,
a fairly significant percentage of my budget comes from the customer. They call me
and say, can I give you some money so that you'll develop this solution for me? Either my I ever do that before. I've never heard of
a car company doing you, never, ever, ever, ever, ever.
Whereas now, for the most part, we don't do development unless the customer is willing to say I'm willing to pay for it. Wow, Jeff,
this is a radical change. When when did this start? Would you
say four years ago? How many four years ago? Fo? Wow?
Is there a specific deliverable that they want or do they basically just say think about stuff and bring us what you came up with. No, it's it's
never that generic. It's ah, we've got an idea. It's one of
two paths. We've got an idea, and we need a supplier who's willing
to work with us to get it to be feasible because we're not going to make it. You're going to make it for us. And I don't want
to give you this thing that we developed and then have you say I don't know what that thing is. I can't make it for it. So I
need to bring you along so that you are aware of the feasible and are smart enough to be able to quote it manufacturer. Or you showed us this
thing that's half baked EBI. Let's take that as an example. There could
be a time this year when a customer says, Hey, how much do I have to pay you for us to jointly develop this so that it fits this vehicle architecture. Because I want to have an RFQ package a year from
now for a new vehicle that's going to have that type of interior. Please
spend a year working with me to make your idea feasible in my environment.
It's usually not that big of a thing. Usually it's a more tangible I
want to invent. You showed me this thing that's pretty cool. I want
you to take that thing and show that it means mice bacs and blah blah blah for this vehicle. But again, there's always an expectation of you're going
to deliver me a technology that's feasible, more feasible that I can then apply into my vehicle, and I'm willing to pay for that. And this is
legacy automakers that are coming insane and doing this follow You know, I'm blown away, literally by that statement, because they never did that in the past.
And we've always we in the industry have always said if the automakers would only work with their suppliers way upstream, they could get way lower costs, from higher quality, faster to market, all those things. And it sounds
like it's happening now, at least with you guys. Yes, although the
conversation about the skunkworks versus the mother Ship that applies to this conversation as well.
I'm not going to name the automaker. Twenty three years ago, there
was an automaker who's to remain nameless in Europe who was making a car and it was an abysmal failure. The press, you guys, were just panning
it because it was the worst car ever. So that automaker came to us
and said, hey, we screwed this up. You guys seem to have
a lot of capability. We're going to give you this bag of money.
Here's ten thousand dollars per car. This is John Strolls at the time.
Sell us the seats, the interior, you guys do it all, the design, the clay, the everything. We'll just be here as an advisor.
We did that. Three years later, vehicles on production media is like
what happened? Like this went from the worst car to the best car in
one cycle. That never happens. Holy cow. So we went to that
automaker and they're like, man, that was fantastic. We have capability to
do this. We're making money. Normally you guys are doing this. We're
not making money. We're making money. You're making money. The press loves
your car, you're selling the car. Everybody won. This is the future
of automotive. This is going to be amazing. And that automaker, I
never forget the meeting, said you were never doing that again. Everybody win.
Remember when we're talking about anybody winning? Like that was good, right,
And they were blessed their heart. They were very honest where they said,
this model removes control from us to be able to decide where things should go, and we can't be an automaker who doesn't have control over the future development of our vehicles. So control was more important than success. Yeah,
but control is important if you were protecting your brand, if you want to have in house capabilities of being able to deal with suppliers and be able to talk competently with them and not have I'm sorry, God bless you job, not the screw you because you don't know what you're talking about. And that's
a hundred sent what the conversation was another story, and we have to change people. I've been talking too much. One last story we did, John
Strolls was working with a company called v Vehicle. If that resonates with you
guys at all. There was a guy Oracle made a bunch of money,
was sailing around the Caribbean, decided this boring. I want to do something.
I'm gonna start a car company. Frank Verrasana was his name, guy
from San Diego. So his model was to say, I'm going to do
the opposite of what that automaker had done. The supply base has all the
capability. I'm going to start a car company where I have one hundred people
map so I'm going to capus at one hundred people. I'm gonna have a
leader of engineering, I'm gonna a leader of manufacturing, and a leader of marketing and small design team. But here's my entire team and the other three
thousand people, ten thousand people that are needed to design an engineer this thing I'm gonna buy. So they did, and we worked on it for two
years. Right before two thousand and nine. Two thousand and nine hits bench
Capital, and they had a really big name bench Capital that I won't name, lined up to give him money, who then backed out. Then we
go to the government. Government backs out, and so they're like, oh
my god, this great idea, but we need five hundred million dollars to tool this up and we don't have five million dollars. They were going to
distribute through a store. So you go to the store by your cereal and
I'll take one of those cars. It was a ten thousand dollars car.
Fully again suppliers, profitable, customer profitable, selling it a ten thousand dollars price. Everybody wins. That was a great model. Frankly, we developed
the car, we got to the point where the vehicle was built, the Magnet Cosma. Hopefully I don't hopefully don't mind it. They built the exterior
in the frame and we did the entire interior. All of it was built
here in Michigan. It was a driveable safety certified vehicle. We just didn't
tool it up for production. Well, if you can do that, that's
a very low cost model. Once again, it's that and I wish it
had gone to market because I would love to have known does it work?
The market is a great decision maker, Like, it doesn't matter whether you think it should work, does the market will it bear that type of a model? And we never found out, so that just kind of died.
But someone's going to figure out a way to tap into supplier knowledge as well as competency of the OEM brand to deliver a profitable ecosystem for the supplier and the customer to deliver a low cost solution. Okay, but isn't every OEM
looking to vertically integrate because that's what Elon did. No, Okay, I'm
going to stop you right there, because this is this is a great launching point. First, no, no, no, and we've got the time
to go into it. The first a shout out to our sponsors, how
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your data. All right, we're back talking all kinds of things with Jeff
Stout from Yangfang, also with Paul Waddy from out of Pacific. But we
left off with this question. Is it better to vertically integrate bring everything in
house as a way to boost profitability or is it better to outsource everything and really slash cost? The question is not so much better. The question is
whether they are doing it or because they think this is the way to do it, because Musk does it that way. But I think you have to
define your terms a little bit. And that's musk My understanding. He's vertically
integrated the stuff he really cares about the bigger stuff. I don't think he's
vertically integated everything. Look, Tesl's not going to make glass, Tesla's not
going to make tires, and there's a number of other things, foundation breaks and things like that. But to do all their seats in house, right,
I don't know how much byd he does everything in the house. Headlights,
you know, they're doing everything they don't. I think they're even more
vertically integrated than doesn't headlights. Yes, yeah, lights. So let's say
that's a clever headlight company that has all these wonderful ideas, and you know, if they took your model, lady have some really extraordinary things. But
companies are saying, now we'll do it ourselves. Yeah, And I think
I would argue, and this is probably a good time to raise I've had conversation with people say, I didn't know you thought that this was a good idea. It's like everything I talk about is my understanding of where the market
is going. It doesn't matter whether I think it's good or bad, or
whether it should go there, shouldn't go there. It's just here's my understanding
of what it is doing or why it is doing. If you look at
kind of the smaller part vertical integration, look at the Japanese historically Japanese model, the crits who supplier, they did a lot of stuff vertical it wasn't them, per se, but it was their brothers, cousins, whatever language you want to use. Just about every Japanese automaker that I've talked to at
some point or another has said, well, I sure wish we could get out from underneath this, because there's technology out there that we can't get access to because K partners and we pay them just what as little as possible to keep them alive, but no more so. They don't invest in any innovation.
They just do what the customer tells them to do. And so there's
a need for dyningism in the marketplace to be able to see, oh, the startup company got bought by them, and now that is available to me, versus the need to be vertically integrate in the stuff that's really core to your business. I would argue headlights is a step too far, I think
be ready. But seats Boys seats is a really big if. If Tesla
wanted to say, we feel like our seats aren't really competitive anymore and we feel like pick on somebody else, there's a supplier a has got a better seat that would be better for us, and they called supplier and said, hey, would you be willing to sell us a seat, probably they would, So it's you can get out of that game pretty easily. But each
automaker is deciding where they want that to be. And Tesla and BYD are
more on the but mostly battery body some really big elements that are core to their business. They still outsource most of the other stuff in the car.
Well, you know, GM and Ford and Chrystler used to be very vertically in a car, especially GM and Ford. Sure remember you know Delphi when
it was spun off of GM had over one hundred and eighty thousand employees.
Sure, but they got out of that business. GM and Ford especially did
because they had UAW labor and they had the highest labor rates in the industry, and they found that they could buy any of these components, any of them far cheaper from suppliers, who, by the way, the suppliers sold to all the automakers, so they had greater economy of scale. Exactly right.
But Gary raises a good point here, and Paul too. This now
there's a lot of rethinking, Hey, how much of this vertical integration should we readopt? What are your thoughts? I hope where it's going to go?
Right? I hope they don't do do much more. I don't think
it's it's been a little bit of a pendulum swing. I guess pendulums go
this way, a sign wave up and down over the years. We've been
around long enough where there's been more of it and then less of it.
I think at the moment there's a bit of an upswing. But to your
comment about Delphi and eight what a Viistian? What is now Vistian? What
was the internal parts division at Ford? All of that got spun off for
a reason because they weren't competitive, if they weren't in a position where they had to be market competitive. And so I think it it will continue to
evan sway and it'll come back around. Whether Tesla outsource seating or not,
that's a question for Tesla, but in general, all of the stuff that's not core to the automaker, it'll get decided back and forth. Fords may
be a good example. They used to outsource all of their seats. They
brought all their seats inside. There will come a day I don't know if
I doubt it's on the table to Moew, but they'll come a day when Ford says, hey, I we should probably outsource seating again, maybe it's ten years from now, I don't know, but well, as you know, they have job commitments to the UAW year and that's the only reason why they would insource seats. The union says, hey, hey, you got
a jobs, you got to fill those jobs, and so they insource.
That's the only way that they do that right now though, right all right, So let me so the y F User Experience Research team looks at these various elements and I want to play some of these elements to you, and I want a reaction to them. Okay, Autonomous driving YEP, which which
you're said, where are we and where are we going to be? Still
bullish that it's going to happen. I was talking to somebody just the other
day of I read an article, Oh, autonomous very trough of disillusion.
Like it's they said it was going to happen, and it didn't happen, And it's like, who said it was going to happen? The person who
said in twenty twenty four we were going to have this market penetration of autonomus vehicles. Everything that the research that we've always done a car the Center of
Autumn Research did a big study by five years ago saying it's absolutely going to happen, and there'll be examples. Wamo's doing it in Phoenix today, they're
doing San Francisco. If you've ever a chanced to ride and it's fan f
fantastic. Twenty thirty to twenty forty was always the This is when it becomes
a market disruption. Until then, it's all proof of concepts. Hey can
it work? Well, how does it work? There's gonna be step backs,
the crews all, but it's not going away Waymo's still doing what Wayne's doing. Test is still doing what they're doing. Relative to full self driving,
it's not really full Okay, the trajectory is still there. The investments
are still being made to expect for that to happen. And the reason for
that again the tide of your question, the research that we've done. As
I said, it's like, I don't care if there's some person driving me to Yeah, maybe you don't talk to a seventeen year old girl who's got to go take an uber to a club. She doesn't want pick on me,
she doesn't want me driving the car because she doesn't know who I am.
Was like the fear of bad behavior. Man, if I could get
into a car that I know is clean, I know it's gonna get me there safely and it's going to be a nice smooth ride, I would pay more for that. And the reality is, the cost of everything we've done,
the costs will be less. The driver is half the cost of the
vehicle. So when I take that out, even if I add the investment
for their light, oars and whatnot, the per mile cost will be less.
And I don't have any of that other I get to choose. This
is some specific research we head what people are asking for that they're not getting today, independent of the fact that there's a driver there, and it's different marked to market, which is fascinating. Chinese folks want different things than the
US people than Germans, but across the board, I don't want to listen to your music. I want to listen to my music. And I want
the temperature that I'm coming out of the gym. I'm hot. I want
the car to be cold when I get there. You just got done freezing,
so you're cranking the heat up. It's not for you, it's for
me. Well, it's their car. So if there's a driver there well,
it kind of is for them if it's autonomous. When I order the
car, I can set the temperature, I can set the radio, I can set everything I want. I get in that car and it's exactly what
I want, and I don't have to explain to somebody, hey, can you turn the radio down, I'm about to make a call. All of
that goes away. There's value in the autonomous vehicle proposition that consumers are going
to really resonate with, not all. I think another point to make too,
is China's far ahead of us in terms of not the technology deployment, deployment exactly right. There's now four different autonomous vehicle companies that will take you
from the Beijing airport to different downtown business districts, four hundred different pickup and drop off sites. So I mean it's happening. Okay, So you're saying
six years from now, somewhere in Detroit there'll be access to commercial That is what I said. Detroit is probably one of the last places is going to
come. We've got crepy roads, we've got creppy weather. Tuesday, Wednesday,
Thursday, we're back to the beginning of the conversation. It's going to
continue to grow, and Phoenix is going to continue to grow in California.
There's going to be deployments in Florida. There's going to be deployments in Texas.
It's going to get to the point where it becomes a market threat in that decade, be in Detroit. I live in Grandappas, is going to
be in Grendappins. Probably micro deployments, the MAME mobilities, the fixed route
Okay, I don't have to have a ton of sensors that just make sure I don't hurt anybody. There'll be that type of stuff. And again,
I think there's a bit of an individual limit thing here where it'll start at an old folks home. Let's just have autonomus vehicles that run around here,
and then it'll go to amusement parks, and then they'll go to university campuses, and it'll go from a oversized golf cart autonomous vehicle to oh now in this geofensed area, and then that geofest area will grow and ultimately I think you're going to see the impact to commercial shipping overland trucking far before you'll see in Detroit, before you'll see it. Hey, I want to take an
autonomous vehicle to the store, to the opera. What they're doing on twenty
three that dedicated lanes like that thing could be an autonomous vehicle lane real soon.
I don't think it's going to be, but that could happen. That's
where you'd see a deployment here in southeast Michigan. Okay, so you see
you guys. This sort of ties into that. The thing you guys are
looking at is shared mobility. Is that back? Is that a thing?
It's absolutely thing we're tracking. It's absolutely a thing that's coming. COVID was
the disruption that disrupted the disruption. So we're still trying to figure out what
does a post COVID world being. How long does it take before we forget?
And that depends on who you are, different people's positions, politics, health status. I got to say, we're sitting in a room talking to
each other. This is fantastic for people like me, is FANTASTICA there's other
people that'd be like man, I wouldn't sit in that room with those guys my life dependent on it, because my life might depend on There'll be a phased kind of moving away from the fear of shared mobility and as that becomes less of a more of a rear view mirror thing. Shared mobility is going
to continue to grow. Now how it grows and what it looks like with
micro mobility, the scooters versus the bikes, the shared car, the zip car model, and other things like that. I'm not smart enough to know
kind of how it all, who wins and who loves I don't know which stocks to, but the notion of shared mobility has value that's going to continue to grow. It's not going to go away. Connectivity, yes, So
I think that's where I would tie back to what's going on in China with Huawei and show me. I mean, that's one hundred percent of connectivity story,
and honestly, I think it would be a fascinating to me. This
is again not a question of good or bad, but a question of do you think it's going to happen or not? Maybe start with a funny story.
I lived in China from twenty ten to twenty thirteen. At that time,
gang Nam Style came out the ridiculous song right, I was actually watching TV and the music video came out. I'm like, in China they have
weird music videos like and then you realize No, it was a guy from Korea. So I was talking to colleagues in China at the time and they
were mad. They were so mad. I'm like crazy, like literally crazy.
I think this guy's literally crazy makes a ridiculous song and you're why are you mad? We're mad because we have one point three billion people in this
country and we can't make a single few exploitivese friggin thing that the rest of the world wants to buy from us. It's like, well, I hadn't
really thought of that. What about Lenovo laptops, Yeah, IBM, we
bought it from them. We're just making their laptop hire washer dryer. Yeah,
Korean, we just bought that. There is no such thing as a
Chinese brand that the globe wants. Now fast forward ten years, TikTok the
world kind of want. I'm an old guy. I have no idea why
people want TikTok. Maybe you'll have to explain to me later. But at
the end of the day, when there's legislations, hey, we should really get rid of TikTok because they're bad. And what does the American consumer do?
They lose their mind and they say, you can't take my TikTok, that's better than anything else in the marketplace. Again, I don't know if
that's true or not, but that's what the consumer is saying. So now
fast forward in automotive. What happens when there's a vehicle that I talked about
before that has seamless connectivity. It's connected B to V to acts, vehicle
to vehicle, vehicle to instructure, vehicle, whatever, and it's totally seamless for me. And the American consumer finds out there's a better car in the
world that you can't drive, I think they lose their minds. I think
they say, well, I kind of want that car, a twenty thousand dollars electric car that I just walk up and it seemless integrates with all of my electronics, like give it to me and so. And I don't know
from politics standpoint of whether that's allowed, whether we have terrafs we prevent that.
I can't say what will happen, but it has never happened to date that anybody in the history of America has said, I sure wish I could buy that car over there, because it's better than anything I can buy here.
Maybe you know, if you love German cars, but okay, well, then you buy a German car, you like the Japanese car, you buy the Chinese car is the only one where you could say, Man, that one's really amazing. But I can't. I don't have acting. I
don't have access to that in my market. We're America. We have access
to everything in the world, all the good stuff today. But what if
there's some thing better that we don't have access to it. That's a fascinating
question that I'm keeping an eye on to see what that looks like, Jeff.
When you talk about connectivity, and that's what everyone says, that's the big thing in China. They don't care so much about the NVH. They
don't care about you know, how many g's it can corner at, because they're sitting in traffic. They're sitting in rivers of steel that are just moving
very slowly. So when people talk about all this connectivity and you touched on
it a little bit of you know, the car interfacing with go into more detail, what does that mean? What does it mean for the Chinese consumer
where they go, I love this car and that one sucks. And I
think that's a little bit of a Tesla effect as well, right where there's plenty of people you interact with its like, ah, we did the tear down and their gaps are terrible, like nobody should buy this car. It's
like, well, it turns out people didn't care about the gap. They
cared. Another fascinating anecdote from my standpoint. I don't know if you guys
saw. It's probably a month or two ago during some of the UW stah
blah blah blah Tesla good bad. Well they're non union, okay, and
they interviewed AOC saying, hey, you got to be a fan of Generah motors. You're standing with the people. Yeah, of course. It's like,
but you drive at Tesla and her answer again, whether you like it was here, don't like Kosi, it doesn't matter to me. Her answer
was spectacular. It was like, well, Tesla's the only vehicle that does
what I want it to do. And it's like she didn't buy the Tesla
because she likes Elon Mosker, because she likes the gaps, she likes the range and the superchargers and the user interface and the over there up days of bubble and so okay. I only tell that story to transplant that to China.
China's filled with a bunch of AOC's going I don't care, like it doesn't matter to me what brand it is. There's very little brand loyalty in
China, which I would argue is from a market standpoint, is good brand mobility is good for the market. Don't buy that car just because you've always
bought that car. Buy the best car you can, because then the winner
wins and you'll have more of that and less of the stuff that's bad.
So what's the hot but with Chinese consumers. So I would say this topic
of the interplay between my social electronics, if you will, my social medium a relative to my interface to the car, that all of that happens with full transparency, that I can go back and forth between these basically Android, Auto Apple car play on massive steroids. So rather than just all my phone
is now projected on my car, my phone is now actually part of the whole ecosystem of the car. And what's coming then, from my perspective,
no automakers launching this to the best of my knowledge. If they are,
I apologize, then it would just be a guess. But it's coming that
we've been arguing in the auto space forever about what's the right UIUX in terms of just pure controls, go back thirty forty years ago, switches and ennobs, that's one hundred percent of what you do, singled in, doubled in, it's all standardized. This is everybody does it the exact same way.
And then we got to well, let's go to some I think it was GM that called the black tie and IBI and in vehicle entertainment kind of integrated screen, different shapes. Ford got to a really focus Taurus. I'm sorry.
I had the oval everywhere and they have the oval screen. And then
it moved to smart switches. Then there's voice and there now we're starting to
have this multimodality. People throw that term out all the time. I could
do voice, I could do gesture, I could do gaze. I could
But it feels like we're getting to a point where, again go back to cost, what do I really need If I had a voice control for the most functions, and then an app on my phone that's seamless links with the car that can do whatever else. That doesn't seem like my voice is doing
correctly. Roll the window down and for some reason, my wind is not
going out I can. I've got redundant controls for everything in the car on
my phone. What more do I need? Turns out the answer is not
really much of anything. I would argue being in the switch business is a
dangerous business right now, kind of like being in the fuel filter business.
Like I we need in the future, there's gonna be less and less physical buttons and knobs until we get to a balance, and we're not gonna get to the point where everything is voice because then people feel like, well, I wait, there's some things I just want to hopton there. You're still
going to have kind of that bank of here's the six big ones, but other than that, it's going to be voice, a little bit of gesture phone super simplified. So, Jeff, it sounds to me what you're talking
about. And to go back to the Apple car example. Okay, so
those of us here well accepting you probably what would think about the Apple car as being an object onto itself, meaning Okay, here's this Apple car.
It's going to compete with a Tesla, it's going to compete with Elucid, it's going to you know, but we're looking at their cars. It sounds
to me what you're describing is that if Apple were to have done this, it would be not about the car but about everything that surrounds the car and includes the car. Correct, and that this is what you're seeing developing in
China. So it isn't basically somebody is making a decision on Gee, I
really like that particular car versus Hey, that particular car is part of all this other stuff. It's like an experience powered by Apple exactly. And Apple
I think I don't think they wanted to be an automaker in the traditional sense, like actually building vehicles. I think they wanted to build a platform that
they could monetize literally everything that people do. You know, you're on a
journey, you say, oh, I need a coffee, be happy to provide. It takes you off your autonomous route, takes you to the next
Starbucks, autonomously orders your coffee. Starbucks pays Apple a commission on that,
and then it goes off on its way, you know. And so every
you know, factor of your life could be driven by an Apple experience.
And Himson agree with you. And I think where they got sideways based on
what I read when they said we're canceling the program. Some of the things
that they really stumbled on was the autonomous technology. Well, nobody wants to
buy Apple autonomy. But I don't care where you got your autonomous module from.
Just buy that from whoever. I care about the user experience. I
think where Apple got sideways. And again this is just reading news. I
didn't have a conversation with Tim Cook class right. He's like, I can't
believe Kim wouldn't recognize me. So I'm going to line up. But that
sense of they got distracted by we need to solve all of the problems when it's like solve the problems that Apple would be kind of famous for bringing the solution to maybe one anecdote on that one. I wasn't part of this conversation
either. Is fifteen quite fifteen years ago. I don't know if people know
this story or not. But our team then was looking at again trying we
are always a little ahead of her time sometimes too. We were looking at
IBI and vehicle entertainment coming off of the GM moving away from the Dans to the Black Tye, and we said, hey, we should really talk to some cell phone technology providers. So we went different companies, and one of
the companies who went to I didn't get to go on this troupe was Apple and said, hey, you guys, are you know, talking about a phone? Like, what's that all about? And they were pretty honest back
then. I don't know if they still would be today, where they said,
yeah, we took this to Verizon and Verizon basically told us absolutely, not over their dead body would they ever do this. And they said well
why, and Verizon explained it to them and this is a totally If this isn't true, there's no way to prove it. So I wasn't there,
you weren't there, so it we'll just make it potentially a true story.
Verizon told them we control this market like the phone makers. If you remember
back, this is hard for people who are a little younger. For fifteen
years ago, the people who made the phone, the Nokia's, the Blackberries, the BlackBerry like they were just metal benders. The people who were in
power were the Verizons, and I don't remember who else was there as singulars and blah blah blah. And so Apple went to all these different companies to
try to find somebody who would be willing to carry their phone, and they couldn't find anybody they all said no. For one, they went to AT
and T and said, hey, would you guys be willing to be an AT and T was a crappy cell phone carrier back then, and AT and T basically literally said, we're going out of business, like we're bankrupt.
Why not, We've got nothing that We've got nothing to lose Apple, it's all you will be your service provider, let us know when you're done.
Apple did. AT and T made a bazillion dollars until Verizon came crawling back
and said, maybe we'd be willing to let you use our service. So
I only told that story to fast forward them to say even what Apple has today was a function of them realizing, okay, they didn't get into cellular service. They realized that wasn't the game. The game was to come up
with a device that was amazing. So fast forward in the automotive space,
they I don't think they learned that lesson to say, hey, let somebody else bend the metal, bake the tires, do the light ours. We're
going to come up with the design that is so freaking amazing inside the car, and we're going to brand it as a whatever company who made car don't care with Apple inside. This is an Apple Experience. Nobody would remember that
who made the car. They would only remember this is an Apple Experience vehicle.
I'm going to get myself one of those. And they didn't go in
that direct. Well, it was a shitty car. Getting back to that
earlier point about vertical integration. Could it Could it have been that Apple was
looking to be too vertically integrated that it priced itself out of the market by saying, well, we can't have any margins in this now because we want to do everything ourselves. I think so. Again, the autonomous one is
the one that I keep hanging on because that was one that Tim Cook specifically said, Yeah, autonomous is hard. We just spent a lot of money
trying to figure that out. And then, well, why do you spend
any money's figuring out like that. There's people who have pumped tens of billions
of dollars into that. Just buy that, and maybe it's not available in
the market. Maybe the Googles and the Tessels and everybody else, all the
light our systems, somebody out there would have to you. But Paul,
what are you thinking that maybe Apple should go back at this and figure out how to take Apple car Play and just expand it. I mean, you
know, we had always envisioned that that was their true end goal to this, and I it could be a vehicle platform, a suite of different technologies that they that's what they're good at, you know, the technology game that they could offer as a platform to other automakers to build and run that car off of Apple services. I don't know, maybe we haven't heard the end
of that yet. You know, I'll just give you one example. You
know, I've got an iPhone, right, so you know I can ask Siri this that or the other thing. When my car phone is paired with
the car, I can't ask Syrie all this stuff, you know, unless I decouple it from the car and say, hey, sirih you know the car is not smart. And so I think this is what you guys are
getting at, right, is that it should just be as seamless as I don't know whether it's going through the car or the phone, it's just there for me to use. And you're seeing this in China. You're seeing that
companies are are providing this whole experience. And that's what I'm saying there.
I don't know if their technology is any better. I'm guessing it's not.
I'm guessing Apple is the leading technology provider, but they are in cars today.
So how does how does the traditional automobile manufacturer compete with that sort of thinking? I mean deep back to you know, traditional companies do a hell
of a job at bending metal. All this other stuff is comparatively new to
them. Correct. Well, A, we're kind of seeing a light version
of that right now with like the Google based entertainment systems where you log in and all of your you know, contacts, everything is loaded into your map, history is loaded into the system. So all the kind of the starting
point. I think all of these stories link go back to my European story.
The general motors will pick on them for the moment they said, hey let's get involved. Wait a minute, we've just lost control. I can't
give control of my electrical architecture to an Apple or a Google. I got
to bring that back. And so can automakers do that? I think they
can? Will they do that? I think the fear of the loss of
value add which is real, Like there's a time who's going to monetize the data? I want it to be me? Yeah, But you don't have
the mindset of the model today. To do this, you have to transform
your company into something that you aren't currently in order to leverage the ability to create a smart and Apple like interior. It's possible they could leverage if they
called Apple and say, you're getting out of the car business, but would you be willing to do my user experience. I'm guessing an automaker could convince
Apple to do an Apple inside vehicle. But they're protecting their turf right now.
They're saying I don't want those people. But you know, here's the
issue. If you talk to different people in these car companies, you're probably
going to get different answers. So what it really is coming down to is
what is core? What do I as an automaker absolutely have to control.
And so they'll say, uh, you got to make the body, Oh yeah, yeah, we got to make the body. Well do you have
to mold the front rear facia? Well we don't have to do that,
right wow? But the power oh yeah, powertrain you know engines the heart
of the thing. What about the transmission that depends you know, So it's
this whole make by thing is and it's constantly evolving as we've been talking about here. But I think the whole thing comes down to what is absolutely core.
What do why as an automaker have to keep control on and it's maybe not as much control as they think they need. Here's the thing. I
think the styling absolutely right, the design of the vehicle, the brand absolutely right, and the interface with the customer, which most legacy automakers don't do.
The dealers the face of the you know, the interface, so they've already lost that one though the legacies have. But I would say, you
know, design, brand, and customer interface to whatever extent you can get it to be, and everything else can be outsourced. I'm glad I don't
have to make those decisions, because I'm not. I'm they're smarterest people than
me. Having to decide that stuff complicated. The biggest question there, though,
is the software and the future of that as we move towards right.
Oh, so i'm software to when I said the design, yeah, software defined vehiculture, So I mean by definition you know, uh, the automaker wants to control that. Yeah. But then and that relegates suppliers to just
be in build the spec brother and ship it correct, which is a conversation that the industry is having as a supply base of how go back to the V vehicle model where they say, hey, we're not gonna do anything, you do everything, okay that works, or a customer saying hey, we're gonna do everything, you do nothing that works. But you can't do both
like you do. We need capacity or not because I my cost basis is
a function of how much overhead I have to carry and if you're not willing to if you don't need me to carry that overhead, I can't carry it.
So the companies out there, Wife being one of them, but there's bigger ones than us that have thousands and thousands of software engineers. If the
automakers are saying, hey, we're gonna bring that in house, well then well you can't sustain thousands and thousands of software engineers. Who don't, you
can't sell their services. So there's very real world implications to this in house
outhouse in terms of the hardware, the firmware, the software. I'm hoping
that we get to some kind of stability on that question that can allow us to make investments in people and technology that have a payoff a runway to be able to say, Okay, it's going to be like this for at least a few years, but right now that the future is pretty murky. The
automakers themselves are saying, I'm not sure what we're and not that they're not smart, just they're trying to read kind of the future and it's it's not a clear path like it's been, like we said, for the majority of my career. This seems to get back to the beginning the whole discussion of
skunk Works versus you know, mothership yep, And you suggested just now that it's pretty hard to keep these two ideas in mind to run a business being able to do that, and so this gets back to the point of, Okay, if you have these startup companies, they've got nothing in stall, they got nothing, you know, they basically had nothing to to lose money.
But other than that, there's no installed base. The existing companies who
have to change this mindset, change the mindset to be able to have what you're talking about in terms of an entire infrastructure around it, the ability to make vehicles that are low cost yet they're able to make money on them.
I mean, it's just like, how do they keep these two ideas in their mind at the same time and execute not easy. I think the reality
is that a company that's run really well by somebody who's got really good grades from a really good school where they got their MBA isn't going to make that switch because at the end of the day, you have to have decision making that's not purely immediate financial return. And there's been some famous people out there
that have derided to finance people have friends that are finance people. They're good
people, but I think we need fewer of them. I'm allowed to say
that. We were talking before the show about Saturn's right, a little inside
conversation. I think this is a fascinating what if. Let's just play a
what if General Motor starts Saturn whatever year that was spring Hill. They create
a brand. Brand creation is hard. They do it. They get cars
if people love it. They've created this energy. They were selling four or
five hundred thousand of those things at its peak between the SCSL and the view or it's all very many of those, and then they decided an accountant, I guarantee you as an accountant who said, I have an engineering team for Saturn, and I'm an engineering team for the Cavalier. Wow, it doesn't
make any sense. I should just have one engineering team. Hey, cavalier
people, just do the Saturn at the same time. And then the Saturn
became like the Cavalier and everybody had it. What if this is the what
if? What if GM had said, you know what, Saturn, you're
my future. Like I'm going to fire all my cavalier people, no offense
to the cavalier people, and I'm gonna let you. I had a Cavalier,
and you can grow to five hundred thousand to a million, and then from a million to two million. I could imagine a world where today Saturn
would be half as big as General Motors is today because they had momentum, they had tech, they were lean, They only had the people they need to do what needed to be done. They had none of the bureaucracy,
and GM decided to bring it back into the bureaucracy. Well what if they
had decided to go the other way. I think that's what's needed is someone
has to create a Saturn, which I think is what FOR is doing with the Skunkworks. They're gonna create a unique maybe they brand it, maybe they
don't. But once they have it, and it starts being successful and customers
consumers like it. They need to double down and say, Okay, I'm
gonna have them do all of my small and midsized SUVs, and then I'm gonna have them do all my large SUVs, and then maybe I keep trucking Dearborn, because that's the but everything else I'm gonna I'm gonna allow myself to be cannibalized. That is the question that every automaker CEO, which I don't
talk to any of them, maybe I don't if they watch your show or now, so they have to ask themselves, am I willing to let a division cannibalize the mother should the majority of my company to maintain competitiveness going into the future. And if the answers no, Oh, I can't tell you
that the CEOs watched the show, but I can tell you for a fact they're aware of what gets sat on the show. So hey, and speaking
of show, we got to wrap this one up. Unfortunately, this has
been a fabulous discussion. Jeff, great having you on here. Paul,
we're going to have to have you back as well too, so looking forward to it. And Gary, I know you're going to be off next week,
so I can't wait for you to come back the weekend after that.
It'll be a good show and all of you tune in to see him come back then, Thank you for watching excellent. Thanks guys, how do you
breach? Don't tire? Stop Shorter on what roads? Is their hydro track
technology, But you don't have to know how the science works, just where the brain is. What really matters is their bridge stone. We want to
know what drives you are testing. OTA Connected Car Diagnostics Remote Testing. Intrepid
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