AAH #740 - Is Automation the Answer for US Auto Manufacturing?

Speaker 1: This is out of line, after hours, unscripted, uncensored, unapproved.

Speaker 2: Hey everybody, thanks for joining us today. Our special guest

today is Mike Cicco, who is the President and CEO of fanoic America. Now, we had Mike on the show

back in September of twenty nineteen. The world has changed

immensely since twenty nineteen, and we want to get into it with you about automation and its effects on how we can become more productive in the United States. And

so joining me for this discussion and conversation is Steve Plum, who is the editor in chief of Manufacturing Engineering Magazine.

Thanks for joining us, Steve, and our old friend, researcher extraordinary Brett Smith, old old friend. So all right, So, Mike,

in the years since we've had you on the show, give us a snapshot of the change of robotics. I mean,

what's going on there where we at now?

Speaker 3: And then we'll well, I'll tell you it's like, where do we begin with that? Twenty nineteen It seems like

it seems like a lifetime ago, doesn't it. We had COVID,

we had supply chained. Now we have a tea word

that we're probably not going to talk about today, but a lot's been happening in robotics since then. You know,

robotics have been around for a long time, within twenty nineteen, but really since then, I think one of the biggest areas that we've seen is the adoption of robots amongst such a broader array of new businesses and new industries, even including automotive. A lot of people would say that

automotive is the most automated out of the industries, which it is and has been, but we're even finding new ways to automate within automotive, and a lot of that is because of what happened with the workforce through COVID, through supply chain, and as manufacturers have become more willing to give automation a try, we've seen the adoption rates of robots really really increase across a lot of different industries.

And we can touch on that.

Speaker 2: So basically, auto is about a third of all the robots sold in the United States.

Speaker 3: No, auto is about half of the robots that are sold in the United States right now. Yeah, it's about

it's about half. The last year, the last couple of

years was the first time ever that non auto actually eclipsed auto, but only slightly that that non automotive was that But the last few years now it's about been equal about fifty to fifty. But I see that changing

where the non automotive side of our business is growing at a pace that's going to continue to eclipse auto.

So I think in the future you're going to see auto remain strong. It's still a very huge industry for

us for robotics, but I think a lot of the non automotive business is going to continue to grow.

Speaker 4: What non automotive sectors are growing and why.

Speaker 3: That's a great question too. I'll run down the list

of some of the biggest ones right now. E commerce

is probably the fastest growing one because it's growing from nothing that you know, the inside of a warehouse. And

when I say e commerce, it's not just you know, buying stuff and receiving it just like you would on e commerce, but this is also any sort of things in a warehouse. And this exists even in automotive, where

you have warehouses full and full of goods. And right

now there's just a lot of people that drive pork trucks around and are very inefficiently kind of gathering goods from various spots and putting them into boxes and shipping them to people, and so that's a big one in terms of automation. Another recent one is whatuld you call

primary food, So that's touching raw food. Secondary food is

when it's already in a package, but it's not yet in a box, and then secondary packaging is when it's already in a box. So touching primary food something that

COVID really grew quite a bit because of the point about having people really close together and then people touching your raw food and food borne illnesses and diseases and things like that, and so there's been a pretty big push to automate that.

Speaker 1: How much crossover is there between industries you talk about that primary foods versato, But are there applications that the same robot can basically they perform.

Speaker 3: There are a lot of applications where you have, say the same size robot, where say you have a robot that's the size of my arm that can be used in automotive in various areas, and it can also be used in primary food. But for a robot that needs

to go into primary food, they actually like an automotive, you work a three shift day. So like in a

big plant, they'd work all three shifts, and primary food you work two shifts and then the third shift is just for cleaning. So they literally take the whole plant apart,

bit by bit and then clean everything and then start over.

And so the the the way that robot is made, it's the same size and it's and it works the same way, but it would have a lot more stainless steel, it needs the lubricants on the inside of it have to be rated for food, and so it's it's different in a way, but it's basically the same size.

Speaker 2: So so Mike, here you mentioned a robot about the size of your arm. Now, now you guys, make a

robot that can pick up a car, literally pick it up and move it around. You know, give us give

us a sense of what robots can do. I mean

we we often just you know, think, oh, robot, but we don't know what that is about.

Speaker 3: Yeah, that's a good that's a good question too. Uh,

it's grown quite a bit. Where when when when robots

first got invented, really, they they took they took something.

The reason why they call it a robot arm because it was generally shaped like a person's arm, right, or it was really size like the person's bodies to do various tasks. And then as time went on, we realized

that we could make them a lot small to do really smaller complex things, and we can make them bigger and in this case really big, where now we can pick up over two tons of weight with a robot that's constructed in the same way. And so really it's

it's it's all what your mind can imagine a robot could do. We have everything now in agriculture, there's robots

that are out picking tomatoes and strawberries out in fields all the way to what like what you said in some of the car plants, where they used to say you had a like what used to be a hard automated elevator where you you'd be assembling the car and then you'd go from where it elevates up to where you're working on the bottom and you're working on the top.

That's almost all automated with robots now, because we have robots big enough they can literally pick up a car and move it around. So we categorize robots into whether

they weld, they paint, they assemble, they handle, or they we say palletize or they stack boxes, they can move material.

Now there's additive manufacturing where they can add material. So

we start to break down each of those different applications.

So there's different applications all of those, like I said, and then there's different industries, and that's what I was getting into. In terms of food and pharma and agriculture.

Speaker 1: You mentioned some uses welding, painting are the common ones we all know about, but what are the fastest growing and some of the unique applications out there.

Speaker 3: I would say this is one of the fastest growing ones.

Now this involves automated or artificial intelligence. Would be previous,

let me rewind previously in terms of a robot, you would traditionally teach the robot. So if you wanted to

go pick this thing up over here and move it over here, and it would always do the same thing.

One of the fastest growing things is where that robot using cameras and AI, it would actually seize this environment and a different brain for the robot really tells it what to do dynamically, so it's not the motion of the robots not fixed. It's totally dynamics. So for example,

you are you're trying to take material off of a component that you're going to you know that just got machined or something, and that component's in a different location, you might see that, and then the robot is going to dynamically change it's its positions based on what it perceives in the in the in the environment. And so

that's a really new and kind of growing area where we have a lot of high end software that tells.

Speaker 1: The robot what to do, like a lot does it take to train the robot to do that task?

Speaker 3: Well, that's the big that's the beauty of it really is what we're trying to get towards, is that we want to bring down the skill level that it takes to program the robots in the first place, and maybe more importantly, bring down the time it takes to do all those And so in some way you could say that it doesn't take any time at all because the robot already knew what it was going to do and there's no teaching at all. It just it just it

just did it once when it saw the part.

Speaker 1: So we're almost to that point of out of the box where you know, plug it in and it goes.

Speaker 3: That's exactly right that that's in many cases that's already happening, and then we're trying to push that further down the line and a lot new a lot of new applications.

Speaker 2: So one of the things since twenty nineteen, it seems to me that has been a big change is the collaborative robot cobot. So for our audience that don't know

what one of those is, give us an explanation and why they would be important in an auto plant.

Speaker 3: That's a great that's a great question. Cobots or collaborative robots.

The word cobot or collaborative robot is really intended to talk about how that particular robot is made. So in

a collaborative robot or the way a collaborative robot is made is there's sensors that are kind of built into the robot itself so that as the robot's moving around, if the robot feels any external force, it stops. And

in that case, there's a big safety standard that is published that says that then that robot is actually safe to work alongside a person, because if the person ever touches it, then the robot stops. There's a whole extra

layer of safety about that. So, like we always use

the example if the robot is holding a knife, like, it's not safe no matter what, even if it stops, if it touched you, you can't. It's true, Yeah, you

worry about that. What that has done since twenty nineteen

is that has really changed how we apply robots and where we can put robots, and more importantly, how we interact with the workers inside of a factory. We're previous

to this. In many cases you had to segregate the

robots and the people with big fence is and big areas where you decided, I'm going to do this robot thing over here. Well, maybe I'll do the robot thing

over here, and then you're going to do your person thing over there, and we're separated by a big area.

And in that case, it made the plant really big, and it sometimes made it inefficient because you couldn't mix those two things together. You had to decide all the

stuff the robot can do and all the stuff the person can do, and then you had to separate them. Now,

with collaborative robots, what you can do is you can bring all of that closer together. So say I was

say I was doing something on this on this you know, this cup holder, and then but you needed to do something on it too. So I'm the robot and I'm

doing something robotic, and then I can literally just put it here and then you can take it and do the person thing on it, and then you can move it down there and or another robot can do it, and everyone's just standing next to each other, and everyone's doing the things that they're best at. So there's things

that robots are best at, there's things that people are best at, and now it can all happen in the same space.

Speaker 4: So this is a perfect lead. And then the follow

up question of you've got robots, cobots and humanoid robots can bring Yeah.

Speaker 2: Sorry, John's I was waiting for you to ask the question.

Speaker 3: Just a popular topic. We always see you guys talk

about his humanoids.

Speaker 4: Yes, it's a fascinating one for made some people a lot of money without making any but it's true. So first,

kind of your perspective on on that transition, and and then why would a bipedal robot be better than something else?

Speaker 3: Yeah, so I'll give you my personal opinion. So speaking

from my Chico personal opinion, Uh, I don't think that a bipedal robot is better.

Speaker 2: I don't save that on the tape. I want to

play that for John. I agree, I want you to

stay forever.

Speaker 3: I thought, uh My, The way I expec laye it is is that, however you want to think about how we are made, whether it's God or evolution or whatever, but we're made. Our bodies are made to do an

infinite number of things where I can drive a car, and I can pick up that water bottle, and I can point and articulate, and so our bodies are made to do an infinite number of things. And when you

get into automation, you don't need to do an infinite number of things. Now you have to do a finite

number of things. Now that finite number of things might

be a thousand things, but it's still finite. And so

the idea of trying to recreate a human body that can do an infinite number of things where you never need the automation to do that, they should do a finite number of things. We strongly feel that we can

use more traditional automation. That is, that is not to

say that it's hard, because our automation hard meeting fixed or or limited. We're making extremely flexible automation today. But

for example, if I wanted to pick up that water bottle and that coaster, I wouldn't necessarily make something that has five fingers to be able to do that. I

might make a very unique thing, one thing that has a suction cup that shoots out of the center of my hand, and one thing that has a gripper. So

I could do this and I could suck it up, and so now I can really invent all these different ways to do what I need to do. And you

start to see some companies do that, and then when you get to bipedal, I mean wheels and tank treads, and I mean just seems logical, there's way better ways to do that.

Speaker 5: Not the smartest guy in the room, but it seems as far as the integration with the workforce, are there advantages or disadvantages of going with a bipedal modle.

Speaker 3: I think why people are so enthralled with it is because you can see it in your mind, and you can see it very clearly as a replacement the person was doing this. I'm going to make something where that

the person was doing that. And then as you move

away from that, then you have to start really thinking differently about your manufacturing process. So with collaborative robots, we

do feel like there's better ways to do that. So

you can have a fixed mounted robot, so it sits on the ground and it doesn't move. But now you

can put a robot on top of a mobile robot, like another robot that drives around autonomously, and now you can kind of walk around like a person, and you can put two robots on there if you need two arms.

You can put three robots on there, if you need three arms. Not that a three armed person exists, but

you could do that as well, And so we really want to look at that differently and more. Maybe the

key part of it is we're working now with the automotive companies to rethink manufacturing again, maybe for the first really subsistence substantial time in a long time, where let's start to design things for automation so that so that we can it's not about people reduction really at all.

It's about making everything more efficient so that the people don't have to walk around as much and they don't have as many hand and neck and back injuries. And

we're just trying to make everybody more efficient and so I think more than ever now people are starting to really rethink how we manufacture, how the manufacturing's done. Where

previously it was there wasn't much paid to automation.

Speaker 2: So basically, if we think about it that, you know, the assembly line gets created and as time goes on, it gets improved by things being tacked onto it. Right

that suddenly you go from a situation where you know you have instead of ropes moving vehicles down the line, you have a machine that is powering that moving it down the line. Then we get to the point when

robots come in in the early sixties and begin building out.

But then it's just like we can stick one there on the line, you know, and I mean it's it's not designed for using the equipment and the automation to its utmost. It's sort of a cluge of over time.

So you're suggesting that maybe now car companies are saying, hey, what can we do with this stuff? And maybe the

way we go about it will be different.

Speaker 3: That's right. Yeah, So example, you know, we didn't have

to think about it before, but you get to a point where there's a box justice just a complete jumble of parts and they're all tangled up and the people that are there sitting there untangling things or you know, sorting things. And it kind of worked before because you

didn't really have to worry about it. But what if

you had a robot upstream that was organizing all that stuff, And so now the person has something that's completely organized for them, that is presented to them in a way that now it makes their job extremely efficient. And what

that does and you speed up the line a little bit faster and get more cars out at the end, and every inch of floor base becomes more efficient and things like that. So I think that's a lot of

where the industry is headed, where we're rethinking some of those things.

Speaker 2: So according to the International Federation of Robotics that the United States has two hundred and ninety five robots per ten thousand employees. Meanwhile Germany has four hundred and twenty nine,

which is pretty good number, China four seventy, Korea one thy and twelve. How do you explain we've got to

ninety five and Korea's got a thousand.

Speaker 3: Sure some of that. So to clarify the stat that's

how many robots are used by per manufacturing employees. So

that's how many people in manufacturing, and those numbers get skewed quite a bit, but by how many industries are considered manufacturing in your country. So if you start to

segregate out just automotive, it starts to normalize the numbers quite a bit. Where for the most part globally, between

China and Germany and Korea, we're all in the US, we're all really using a pretty pretty normalized amount of robots in automotive. Some of that is because of actually

how much manufacturing we still do, not that if you read the newspaper today, you'd feel that we do as much as we do, but we do a lot, but a lot of that still doesn't use as much automation as is used in the automotive business, and so there's still a fair share of you know, the human to robot ratio is still a little bit different. Where you

look at some of those other countries, their industry, their manufacturing is a little bit more primarily either in like Korea in particular electronics and automotive, and so that those are very highly automated now. And so you see that

China is a little bit I mean, it's not surprising, it's just impressive. Maybe more than anything, because they still

have a lot of really non automated manufacturing businesses as well, like furniture and fabric and things like that. So I

see that as a positive thing for us because it means that we still have a lot of improving to do, and in today's climate, there is a lot more acceptance and emphasis on all of this being good and okay.

And we continue to work to teach young people that manufacturing is cool and you can make a lot of money doing it, and you get to program robots or you get to fix robots, or you get to design robots, and it's all really cool. And so we have a

big emphasis on that and has.

Speaker 4: A pretty strong academy or training program. Can you talk

about that as we get into a more jobs in America kind of idea, we're going to have to find ways to get people into those spaces. I've spent thirty

years of my career and that labored discussion on training, education and such, yep, And it always comes back to a lot of folks don't want to work in plants.

Speaker 3: Yeah, yeah, And I think that's something that COVID when we were talking about what's changed since twenty nineteen COVID took a lot of people out of manufacturing, whether they switched careers all together, they retired, or god forbid, passed away during COVID, but it fundamentally changed how many workers we had in manufacturing. It accelerated something we've been talking

about for a long time is that there's a lack of skilled labor in manufacturing, and it just ramped it up.

We sensed that, we realized that a long time ago, so since two thousand and say ten, timeframe where we really started to lean in heavily. We recognized that we

needed to, in basic terms, bring back shop class into high schools and community colleges. But it was around advanced automation.

So it's still shop class, but instead of teaching woodworking and things like that, we brought robots into schools and SEE and C machines into schools, and we're teaching the next generation of worker. All of these things really trying

to reshape the mindset of what manufacturing is and what it looks like and what it could be. And so

today I'll break the education piece into two pieces. One

is new workers that are coming into manufacturing, and from that regard, we have now placed robots or automation SEE and C machines into sixteen hundred different schools just in North America, including over four thousand products robots and C and C machines. This is mostly in community colleges. That's

the number one percentage. Second is high schools, with universities

being the smallest piece of that. And so we're really

focused on looking at the next generation of worker and then so those kids are coming out with those kinds of skills.

Speaker 2: So, Okay, a lot of discussion going on about bringing more manufacturing in the United States. I think we can

pretty much all agree that there may be a problem in getting those jobs filled, given that we basically have full employment right now, right, I mean, it's not like there a whole lot of people not working. So my

question to you is, to what extent can robotics help generate the sort of manufacturing capability that people are seeking.

Speaker 3: I think two ways. Number one by bringing manufacturing back

to the US, which I think is a good idea.

I think we have lost a lot of things that we should be manufacturing here and that this is a very good effort that we should be bringing manufacturing to the US. But we can't do it. We can't manufacture

things in the same way that they're done in low wage nations. It's just the math doesn't work out to

be able to do that, and none of us are going to be willing to pay for what it would cost have we made it that way. So we need

robots to help that. We need to supplement the lay

so that we can make things with an efficiency where we can try to keep the cost at the same that it's made in other areas. What I hope is

going to happen is is all of these training efforts that we're doing, and we're talking about with four thousand robots, we're training hundreds of thousands of kids now that are seeing a robot in high school each year, that that problem that we have of lack of people is going to then change, and so now we have more people that are going to want to get into this. Secondarily,

I see that if now we start to see that manufacturing isn't the thing that people don't want to do, it's the thing that people want to do because it is cutting edge and cool and not super dirty and dangerous and all that stuff. That we see people starting

to shift from other industries that maybe they thought were a better place to go and then come back to manufacturing or try manufacturing. And in that case, we have

training classes. We have training centers all over the United

States within FANIC that we use in addition to the schools.

Speaker 4: So those words sound so familiar to me thirty years ago. Okay,

same words I used in reports and discussions with governments.

What are the skill sets now that you need to convey to these people. These are the things you can

do that are useful but also engaging.

Speaker 3: I tell people this as an example. I have a

bachelor's I have an engineering degree in electrical engineering. I

went to a school called Bucknell University in Pennsylvania. What

I learned in school to do my job. I started

PANIC as an electrical engineer. I programmed robots when I

started PANIC. The skills that I used to start my career.

At FANIC, they're currently teaching sophomores in high school and I have a bachelor of Science and electrical engineering. So

I will say that the skills required is a basic level of math and then a passion or a desire to really utilize or harm it kind of hone in on those skills. So we're not talking about a huge

barrier that now we are we are still developing some of the greatest AI minds at you know, at Berkeley and MIT and Carnegie Mellon and some of the really University of Michigan in particular, really high end robotic schools.

But to bring people back into manufacturing, we're looking at high school graduates and community college graduates and and it's it's a fundamental understanding of robot programming. But it's not difficult.

We're not there's a mindset that maybe it is and it's not.

Speaker 1: So how fast are things progressing? Robotics isn't a new field,

but it's still high tech, especially as you get into AI machine learning. What's the development cycle and how far

are you looking at? How far? How quickly do things

become obsolete?

Speaker 3: Yeah, we were talking before we came in here that you know, the first bit of the robotics renaissance in the eighties, we saw this huge beginning adoption and it kind of leveled off for a while and we're in the second wave of that where the business is growing exponentially.

Speaker 4: Now, what is that growth, what's causing that spurt?

Speaker 3: Well, it's the thing that we've been talking about for twenty years of that there's a lack of skilled labor in the marketplace, that it's finally hitting now and everyone's realizing, oh my gosh, I can't find people, and so the conversation of robots takes jobs away. That story it doesn't

really exist. We've been saying it doesn't exist for a

long time, but now people are really starting to realize it doesn't exist because people are actually experiencing job growth and a rebirth of manufacturing.

Speaker 4: Parallel with the cost of robotics has come down, but the capabilities have gone.

Speaker 3: That's right too. Yeah, that's right too.

Speaker 1: So the Deloitte studied the last year of the one point eight million of manufacturing job shortage by twenty thirty or so. I don't know how much that took into

increased adoption of automation. Maybe you would know, But how

much can automation offset that? And where do you see

it going? Carol mentioned two hundred and sixty five robots

per person per worker. Where do you see that going

in the future.

Speaker 3: Yeah, I see that continuing to grow. For sure, it's grown.

If you look at the history of that number over time, it hasn't grown as fast as I've wanted it to, but it's grown. It's growing around the world as well,

so it's not just here, it's growing around the world too.

So those things are all going to continue to happen.

Speaker 4: That the.

Speaker 3: Technology within the robots, how much the robot can do, is going to get better. They're going to continue to

be more cost effective, and we're going to continue to see that growth, and we're going to continue to touch industries that we never have seen before. And I really

do feel that it's going to continue.

Speaker 2: So what do you say to somebody who is in a trade union who wants jobs for people, and you say, well, you know, robots can help, and that person says a word that I will not send in the air.

Speaker 3: So I think that to that, we really need to focus on a re education of the existing workforce. I

really wanted to touch on that, so I'm not just talking about kids in school that are coming into manufacturing.

It's an important part of the solution, but maybe a more important part of the solution is the re education of the existing workforce that's out there and the barrier to do that, and how do we educate someone that's been doing something for a very long time and try to teach a new skill, and that is a big challenge.

I'm not going to sugarcoat that it's not a big challenge, but it's something we need to focus on and have efforts to retrain that that workforce so that we can go to those areas and say there is this opportunity and if you learn this skill, then you can make this much. And if you learn this skill, then you

can make this much, and there's a ratcheting up effect I think in the pace scale too.

Speaker 2: So do you see this as being a public private partnership that's necessary to get this done? Or I mean,

so I'm running a plant for General Motors. I think

that the people need to be retrained. Is this my

responsibility or do I say, kayfanic or fill in the blank, should you come do this? Or does the government say, hey,

this is important that we have manufacturer. We need to

train these people. Therefore we need to in some way,

shape or form subsidize this.

Speaker 3: I think it's all of it, to be honest, I really wish if I if I were to have a stronger voice in Washington, I'd say that we absolutely need government programs to help further educate existing manufacturing workers on that and some states are doing it out of their own state funds. Alabama in particular, has an amazing program

where anybody that lives in the state of Alabama can go take robotics training for free and it's a wonderful facility, all paid for by the state. So at the state

level and then public private partnerships within the school level, we're playing those games all the time, not really gain we're we're creating those connections all the time. Where someone

comes to the phrase I hear a lot is is Mike, we want to we want to start our automation journey.

That that's what That's a really popular thing I hear.

Now a customer will come to us and say that.

And the first thing I'll do is say, where's your plant and what community colleges are around that plant, and let's make some connections so that every new employee that you hire should come from that school and that then that helps everybody.

Speaker 4: So for a community college that has multiple plants, multiple different companies operating in their space, how do you provide the resources for each plant individually or do you provide that base level and then the plants take that responsibility.

Speaker 3: Then the plants we do at the base level, so the community colleges do a really wonderful job kind of understanding how much industries around them, and they can scale much faster than at the university level. And so if

two more plants pop up in the area, well they double or triple the size of the robotics training that they do and and now they can they can educate, but.

Speaker 4: It's it's more of a core level training and then going to the on the job training or company training specific that's correct.

Speaker 3: Yeah, we create stackable training, so you have base level and then you have maybe like you start adding PLC and control work, and then you had cameras and vision work and IoT but it's all at a common level.

So then if you want to go, you know, uh to a chicken plant, or if you want to go to a car company, or if you want to go to an e commerce company, you have that baseline skill.

And it's all accredited too. So the training that we

offer is all accredited, so it's a certificate that they can use then within uh, within their resume and things like that.

Speaker 2: All right, so final question, Okay, I have you back on in six years where will we be.

Speaker 3: Maybe I'm going to be a robot here, No, I think six years. I think we're going to We're going

to continue you to see how I guess AI or artificial intelligence is going to make robots easier and easier to implement. That the barrier of entry is going to

come down so much that we're going to be able to place robots into areas and and I don't know, for lack of a better word, they're going to figure out what they need to do on their own. That's

that's not exactly where we are today, but I think that that's where we're heading is is that that the robots are going to start being able to not think for themselves is not the right word, but be pre trained ahead of time to know that you can you can put a robot in and have it be functional very very quickly without a big, drawn out process.

Speaker 1: As long as they remember that first rollover robot.

Speaker 3: That's right. Yeah, yeah, yeah, that's not getting broken.

Speaker 2: They're not that smart, all right, Mike Sicco.

Speaker 3: All right, nice to see you guys coming all right, Absolutely sounds good. Enjoy the rest of the talk.

Speaker 2: Thank you, okay, And I would say we're back, except we never stopped, so we keep going, all right. So

I was delighted to hear him say that bipedeld robots are not the future, despite the fact that we heard Elon Musk say this week that he is going to have his plants full of Optimist robots. So, Steve, as

a manufacturing guy, what do you think about that?

Speaker 1: So unprompted, I was on a call immediately before those about a panel discussion or upcoming regional show, and one of the panelists mentioned Optimists specifically and said, you would consider it. He admitted that I think the current price

is like forty thousand dollars is what they're talking about.

He said it'd probably be twice at at least, but I don't know. I didn't have a chance to follow

up on why he would be interested in that a robot.

Speaker 2: That just strikes me that it's sort of a novelty act.

It's like in the early days of robotics that companies used to buy robots the stick them in their lobby, so then people would come in and say, who, you must be advanced, you have a robot. I mean, the

thing wasn't doing anything, but.

Speaker 4: It's hard to deny that Elan is really smart and it's really good at creating futures. But this one I

don't understand why other than it's really cool. There are

certain very very small narrow ranges. Okay, that makes sense,

but as as Mike pointed out, stability, moveability, things that we do sort of naturally well, but not as well as some other things.

Speaker 1: Right, I could possibly see some sort of high broad but you know, why recreate a human?

Speaker 4: Why so?

Speaker 2: In more interesting news, Tesla's revenue in Q one fell nine percent year over year. It's profit was down seventy

one percent. The company blamed a sharp decline in vehicle deliveries,

partly tied to its model why redesign for the disappointing results.

Do you guys think that is the cause of the disappointing results?

Speaker 4: I got in trouble last time trouble, But.

Speaker 1: Weren't sales down last year for Tesla? Didn't they have

a one percent the first.

Speaker 2: About the first quarter? We're starting fresh?

Speaker 1: I would say no, that was not the only reason.

In fact, profits were even less or in the negative if you took out the credits that.

Speaker 2: The credits they sell for carbon emissions, so get in trouble.

Bret's say something.

Speaker 4: I think clearly they've got a brand issue. They also

are going through a change in transitioning product that makes a difference, but they've clearly got a brand issue, and they're also facing a lot more competition. Exactly, it's going

to be a lot tougher ands if you look at it from the outside, you look at they talked about the model too is they was being referenced being this low cost, high volume thing where the Chinese play. It's

gonna be tough to play in that market. So that

went away. Now it's kind of just a read decontented

Model three, which means less profit per vehicle. Even if

they do sell them, it's going to be a tough time.

You know what. They remind me of a car company,

just a good old fashioned car company.

Speaker 2: So expand on that a little bit. You just can't

say it's like a good old fashion car.

Speaker 4: They're they're they're facing competition, they're facing cost pressures, and they're facing this idea that maybe there are other alternatives competition.

But it's all of a sudden when you stop talking about full self driving, when you stop talking about human robots, all of these things and just look at the automotive part of it. It's an automotive company, and that's kind

of where we all thought it would end up at some point because the other stuff is you know, he.

Speaker 2: Says it's an AI company, so by your time.

Speaker 4: AI company, all of those. Again, dude has a phenomenal

track record, but it's tough to build cars in this market, in any market.

Speaker 1: Yeah, maintaining market share was untunnable. I mean, he had

so much for so long because they were almost the only player in town. But as you mentioned, new companies

coming in new models. So I saw stat sixty three

sixty five evs offered last year in the US, Twenty five percent of them were new from a year before.

That didn't exist prior to that. So of course they're

going to lose out. And as you noted, as as

you ramp up production, have more more diverse models, you're going to get more recalls, have more problems.

Speaker 4: What he's done politically probably doesn't help though.

Speaker 1: How about that is that but he did say that he's going to spend more time at Tesla is only I'm only going to spend two days a week working on the government a third all.

Speaker 2: Right, But if if if we go to what Brett is saying that it's it's pretty much a car company.

I mean, on the earnings call, they talked about the unboxed assembly, which is you know and and but it wasn't flushed out so much. It was just basically, make

a car every five seconds. Well, okay, you can make

a car every five seconds, but if nobody's buying your cars, you got a slight problem there. You certainly have you know,

big inventory, So you know, I think your point is well taken that it is just becoming a car company, a.

Speaker 4: Very innovative car company, a company that pushes the envelope, which is really good for the industry in a lot of ways.

Speaker 1: In addition to two humanoid robots, most Costles said that they wanted to focus on automated vehicles too.

Speaker 2: And right and how they're driving themselves out of the robot it sort of thing.

Speaker 4: There are I think there are actually other vehicle manufacturers whose vehicles can drive out of the planet. You know,

they probably don't talk about as much because they don't want to bump up their stock.

Speaker 2: I don't know what, or they don't think it's a big deal.

Speaker 4: Maybe that's it.

Speaker 1: Yeah, do the tariffs actually help TESLA once they produce more.

A lot of the other evs are still being imported, you know.

Speaker 2: Well, I mean even even Elon admitted on the call that you know, not everything is from here. I mean,

they're highly vertically integrated. But you know, components come from

other places, right, And you know, I think people lose sight of the fact that, you know, if you're building a car, you need all the pieces, you know what I mean. It's just like you can't leave that one out.

Speaker 4: The old story of just down the airport down here in Detroit, there was a big group of one navigators sitting there without seats. Can't drive off with those seats.

Speaker 2: They have a problem, right, And so you know they will have to pay the tariff. They won't have to

pay as much as companies that are are you know, having to pay the full vote. But you know this

this I sort of wonder. I mean, so yesterday President

Trump was talking about, you know, increasing the tariff on vehicles that come from Canada, and he said, and I want to find this so I quote this accurately because it would.

Speaker 4: You don't want to misquote the president.

Speaker 2: Well, you could I put tariffs on Canada. They're paying

twenty five percent, but that could go up in terms of cars when we put tariffs on All we are doing is we are saying, quote, we don't want your cars in all due respect. Okay, so the thing I

sort of wonder about is that we don't want your cars. Well,

aren't those cars like cars that are being made by I don't know, General Motors Ford.

Speaker 4: I mean, Toyota's got a pretty good investment in North America in US.

Speaker 2: And they build cars if they're Hondas.

Speaker 4: Four is kind of a big car, small big car, right, So interesting.

Speaker 1: There's kind of an ongoing war words with the administration and BMW in South Carolina saying that you know, it's all smoking mirrors, that BMW is just assembling things, that all all the content comes from from overseas, and all the South Carolina governor all the officials really hit back hard on that.

Speaker 2: Well, I mean, it's it's the biggest SUV plant that BMW has in the world, you know, big, big, big investment, and.

Speaker 1: They poured billions of dollars into into the state to employ many people.

Speaker 4: We can leave it here and realize that we're not going to solve this industry's got mis challenge ahead.

Speaker 2: Well, so we had one of your former colleagues, Edgar Feller, on the show three because I believe it was and he had done a study which he could only hint ad for us, and the numbers came out this he would even share it with me right now they're out?

Speaker 1: Now?

Speaker 4: Would he still won't give it to me?

Speaker 2: Now? We won't really? Obviously you pissed him off somehow, Okay.

So Center for Automotive Research said the increased costs to all US automakers as a result of the tariffs will be one hundred and seven point seven billion dollars. And

if looked at the D three alone, so this would be four General Motors a Stilantis. That's forty one point

nine billion dollars.

Speaker 1: So is that just this year?

Speaker 2: Yes? Yes, and the impact to the D three production

volume of six point eight million vehicles. Okay, Brett, we're

going to get rich.

Speaker 4: So what I hear? Who's we America? Richester? Well, we've

ever been how I haven't figured that part out?

Speaker 2: So okay, I mean seriously, so sorry you've been studying this year. You mentioned thirty years you've been doing this

and you're looking in this auto industry, how does the D three automakers sustain a hit of forty one point nine billion dollars?

Speaker 4: First off, I think Edgar does amazing work and he did the best he could with what he had. As

we've talked about previously, this is really a flexible moment.

Things are going back and forth so quickly. We don't

know tomorrow what's going to happen. We don't even know

what happened and now we've been in here. If it

is a long term, as it's been said, permanent, this is a gut wrenching moment for the industry. It changes

the industry. There are companies that won't survive over those

five ten years. We'll see where. We'll see though that

production be back filled by others maybe, But it's a transitional period for the industry if those numbers that Edgar quotes are reasonably accurate.

Speaker 2: All right? Transitional? Is this like transitional like going from

your house to the funeral parlor in a box?

Speaker 4: Well? For some for some yes, for others, it's a

great opportunity to grow in five to ten years.

Speaker 2: In five to ten years, and what happens in between, then.

Speaker 4: Cars get more expensive choices go down again. If this

is the permanent solution, it's going to take the industry five years to a decade to respond so fully.

Speaker 1: Back during the recession of two thousand and eight two thousand and nine and the natural disasters that were happening at the time, said okay, this is a learning moment.

The industry learned from that, we worked this supply base became more efficient. Same thing during COVID. This is a

learning moment. Did the industry actually learn anything? And how

do we move forward.

Speaker 4: That don't end up in a box? Yes, it's I'm

not sure what the lesson is other than opening opportunity for others, and I think understanding supply chain better. But

I'm not sure how a better supply chain can help you here. This is an industry that needs scale, that

needs the volumes built regionally, not just countrywide, and even globally at times, and to do it flip a switch like this for an industry that invests in ten to fifteen year cycles is really challenging.

Speaker 2: So okay, this sort of plays very nicely. A letter

was sent to the administration that was signed by the heads of the Alliance for Automotive Innovation, American International Automobiler, Automobile Dealers Association autos Drive America, of you'll, the Vehicle Supplier Association MMA, National Automobile Dealers Association, and American Automotive Policy Console, a group that.

Speaker 1: Basically the whole industry.

Speaker 2: Yeah, but usually they don't get together, right, you know, I mean the dealers have their things, the OEMs have their things, but they got together on this. And a

couple of quotes from that which are germane to what you both just said. Quote, most auto suppliers are not

capitalized for an abrupt tariff induced disruption. Many are already

in distress and will face production stoppages, layoffs, and bankruptcy.

It only takes failure of one supplier to lead to a shutdown of an automaker's production line. When this happens,

as it did during the pandemic, all suppliers are impacted and all workers will lose their jobs. Ain't pretty.

Speaker 1: Yeah, And we don't reverse it or find some sort of middle ground that you know, I think it's ineviilable. Uh,

that's gonna happen. We're going to go down that path.

Speaker 4: Three or four months ago, I sat in that chair and said to John, who I think was sitting there.

We all think that manufacturing is bring it is a good idea, bringing it back. We understand that over the

decades we've given up on some of those really fundamental things for defense, for other things. But the reality is

it's going to be incredibly painful. It's not going to

be a we're going to get rich, everybody's the richest you've ever been. It's going to be painful as hell.

And this is what you've just described. This is what

they've described. I go back to this part where there's

a lot of statements as to what is going to happen, what is starting to happen, and what is permanent. But

the reality is is it a question is is it really permanent? How long does it last? How much of

it's rhetoric to scare the others, how much of it's bargaining, how much it's that sorry, you.

Speaker 1: Know from an economics standpoint, and you're much well more well versed than Garrier me on those what China is famous for their ten year plans. Other countries have these

long term pet plans. Could it and eventually, you know,

work out down the road where this is about our way.

Speaker 6: For our I'm sure our patience that you're sitting here shaking like they can't see that.

Speaker 4: I only listened to this Andy, and so it would be like, Okay, I'm imagine myself shaking. I think, what

the hell do I say here? It's a really, really

tough transition. I don't think we have unless we have

a totalitarian government like China. I don't think we have

the wherewithal to follow through on ten year plans. We've

proven it over the decades. I'm not endorsing that idea,

but that that the ability to follow through for decades is something that is found in its atalitarian government. Yeah,

without that, we are not that. I hope we stay

not that.

Speaker 6: It's really hard, all right, So let me ask you guys this, all right, with all of this stuff going on, all this politics and so on, what are the consequences on.

Speaker 2: The ability for the D three or just Ford and General Motors just just just have those two. How How

does this impact their investments in electrification? How does this

impact their investment and automation?

Speaker 1: And I don't mean robots, well, they're gonna have to change that dramatically. I mean a lot of the evs

that Ford and Stillanis and GM are producing are not in the US, and the ones that they are rely on a lot of components that are coming from overseas.

Speaker 4: So I would I would go back to the Biden administration and they believed going down a pathway to electrification.

Whether you agree with it or not, that was their vision.

They supported it with an enormous amount of funding for those industries. The automn industry was very fortunate to get

a whole lot of money from the Biden administration. Now,

you may agree with that or you may not, And I certainly love to talk about that have mixed emotions, but this time you don't seem to have that. You

don't seem to have someone saying we know this is going to hurt like hell, and we're going to get you through it because we think it's fundamental. Instead they

say not much on that pathway. And I think that's

where whether it be you talked to talk to the Chinese Tenure Plan or even Europe, there's a much more willingness to understand that there is a transition cost, and that transition cost has to be paid by somebody. And

we have a government right now that doesn't want to admit that. I suspect they know it, but they don't

want to admit it. And we had a government previous

that probably a mid too much and said we're going to give you all of this money to do this.

Speaker 1: Well, what is the support plan to China? And China

and the ten year plan, they had R and D support programs all along the way. I mean, it's kind

of like the you know, the natural disaster where the governor of it was Arkansas was asking for FEMA relief and they had already pulled the program mat Her.

Speaker 4: So I'm I believe again personally is make point out personally, we grow building stuff in this country is important. We

need to do better at her We've lost it. I

don't want to sound at all like I'm saying we should give away manufacturing, but to do that, we have to think about all of that stuff we lost and how it cost us jobs and the pain of that and realized that's the kind of transition we're gonna have to go through to get it back.

Speaker 1: And you know, that process had started in the last few years with the reshooring initiatives, some of it jump started by by Covide but there is a lot, but it's.

Speaker 4: Going a different direction, and now we want to go in different directions and in certain terms of not supporting evs. Again,

the idea of supporting or not supporting EVS good topic for discussion. Not What I'm trying to get through here

is is getting this pathway to where you want to go.

And the pathway now seems to be we're going to tell people that there's gonna be no pain. We know

there's gonna be pain, but we're not gonna do anything to help the pain. And that, to me, that's the

disconnect I see here and Garyot's it's not by October it's gonna be better because everyone's gonna be resolved. Moving

stuff from China, moving stuff from Europe, moving stuff from Canaden to Mexico takes a long time. And oh, by

the way, as you do that, there's gonna be a cost of moving it, and it's gonna be more expensive to produce it here than most other places.

Speaker 2: Okay, so basically fifty percent of the cars thereabouts that are sold in the US during a given year are imported from somewhere else. They're not made here fifty percent.

So you take a percentage. I mean, not all of

them are not going to be sold here, right, I mean, it's not going to be like, oh, suddenly we're left with half the number of cars that you know, half the number of cars, but with the same number of people who are looking to buy them but probably can't afford them, because even the domestic ones will be more expensive because we haven't even mentioned the tariffs on steel and aluminum, which are sort of important to the manufacture of a car, I mean just a little bit or less, right, And so that's there too, right, So let's let's just say whatever percent So let's say of the fifty thirty

percent are coming here, right, but they'll they'll all be more EXPENSI you're you're making faces here right again our podcast audience on that listening. I'm just thinking, Okay, so

we know that right now, cars average transaction price is about forty nine grand. Okay, what do you guys think

the transaction price would be Let's say, a year from now.

I mean, let's not worry about ten years. A year

from now, what will it be?

Speaker 4: So let me go answer that by going a little bit different direction. How about this in three months from now,

President Trump has negotiated with those other countries, and they do come back with a more tenable tariff exchange ratio, and we do get some of this free er trade and instead we're actually getting opportunity to sell more vehicles other places. And it's still gonna be a little more expensive.

But maybe it's not. Maybe it's again. I keep coming

back to this idea that if it's permanent, it's gonna be I can't even imagine what that cost is, Okay, but if it's a bargaining tool.

Speaker 2: All right, bred devil's okay. So what cars do? What

vehicles do the Detroit to make better than anyone else in the world, And should Corvette full sized SUVs?

Speaker 4: Okay?

Speaker 2: Sure, okay, now that's what we do the best, right, I would agree, you agree, right, okay? So where in

the world are consumers looking for full sized pickup trucks in full size SUVs? And yes, I know that General

Murtors sells a lot of SUVs, as does Forward in the Middle East where they like big vehicles. So where

are these So.

Speaker 4: Okay, I'm trying. It's really hard to try this.

Speaker 2: I mean, so this this whole idea of like, oh, you know, people are are just other parts of the world of just waiting for our vehicles. I don't think

that's the case. And how long did it take companies

like Honda and Toyota to be able to build vehicles that really were desirable? Why the America customer in big numbers?

Speaker 4: Okay, you're right, it's hopeless. I tried, it's hopeless. No,

it's your points are really important. And you know, we

talked to our friend Oliver Schmidt. Oliver used to tell

me long ago when I said America is becoming an island, he said, no, you are an island. You've always been

an island. You're completely separated from the rest of the world.

Are products for the most part, very most much most part don't sell overseas. That's okay. They work wonderfully here, right,

we love them here. Those trucks you talked about are wonderful.

I heard on facts that the only reason they're not selling god DRAMs in Europe is because of the terraffs.

I got to think the facts. Folks got to get

to Europe. Ons in a islands understand this. You know,

maybe they've stayed in Georgia too long or where. I

don't know. Where they're from. But it's just we don't

make products that are fair there because we have a great market between the US, Canada and Mexico.

Speaker 1: To answer your question, though, I think it's abundantly safe to say the average transaction price will be above fifty thousand dollars, maybe four to six thousand.

Speaker 2: I would say for six thousand more.

Speaker 4: I won't even guess because just so.

Speaker 2: Well, I mean that the four to six thousand seems to be what most analysts are saying. I mean that,

and you know, at some point I guess when you're getting a seventy two month loan that it doesn't look that bake.

Speaker 4: But yeah it does. I've seen the numbers.

Speaker 1: Yeah, I mean, it's still bottles in my mind that the average transaction prices forty nine.

Speaker 2: Thousand, well, you know, I mean. And the other thing

is is that we even go down the road of like, you know, parts, I mean, things do break on cars and they need to be fixed, and you know, and only that they have.

Speaker 4: It, by the way, that reads insurance rates because you're gonna have to fix those parts that are more expensive.

So again it's I go back to this idea that maybe it is just a really you know, maybe he's playing three deck chests and the others are not, and he's gonna get He's going to get agreements from them that are more fair and more reasonable. Long term. That

helps a little bit. It doesn't help tomorrow, but it's

that's all I got.

Speaker 2: Well, as your retirement state is going, that's.

Speaker 4: Why I'm here. All right? Are you getting paid for that?

All right?

Speaker 2: We got to end this on and up note, yes, please?

So what about the Tigers.

Speaker 4: I was so glad the Tigers didn't play today because every day I wake up and listen to Tigers as I'm doing stuff. It's like I can't believe they're winning.

This is so great. I gotta take a day off tomorrow.

Good day off today.

Speaker 2: See, everybody thought that Detroit was down and out. We

got the Pistons in the playoffs. Lions did incredibly will

last year. Tigers are on a great start hockey team

not so much so.

Speaker 1: I don't know if you remember those, Carrie, but for the past nearly thirty years, some of my high school friends and I go to an out of town Tiger series.

Last year we completed our last major league city Houston, so I actually got ridden up front page of the Free Pros.

Speaker 2: Really.

Speaker 1: Yeah, but so this year we went down to spring training, the first time I've ever been to spring training, and those are positive vibes.

Speaker 2: Yeah, so you're attributing their success to you and your boys, seeing.

Speaker 1: That it only took us thirty years.

Speaker 2: Day, okay, all right, so with with happiness about the Tigers after all of this stuff. The robotic stuff is

very interesting. I thought that was, you know, it's encouraging

that there's possibilities and they've got good jobs that people can get assuming that they're willing to take the training and doing the work and put that in. I think

that's that's fantastic. Yeah.

Speaker 1: One thing I didn't get a test to ask Mike was how much it's spreading down to the tier two, tier three supplier as we know what level of automation do they have and will they be able to afford it and will they be able those that don't get left on?

Speaker 2: All right, Steven six years. I'll have you back when

we'll ask him. How so sorry, I went out to

thank you for tuning in. John will be back next week.

We'll have another show. We appreciate your what watching the

show go to YouTube, go to the website, join, put thumbs up, do the patron thing, just support this show so we keep going on. And and if you know

about work, here's bread. He needs help. So anyway, thanks, thanks, I.

Speaker 4: Won't work in a manufacturing plant though I'm an American.

Speaker 1: Yah,

AAH #740 - Is Automation the Answer for US Auto Manufacturing?

Chevrolet Corvette

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