AAH #757 - Regulation Revolution: U.S. and EU Could Share

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Want to welcome all of you for joining us here on AutoLine After Hours.

Gary's here.

John, how are you?

I'm doing good.

This is the last official show of the summer with Labor Day coming up.

I mean, it's just...

Well, look, not official, because remember, summer doesn't end until the equinox.

We're not talking planets here, John.

We're talking Labor Day, so I don't want to lose the summer.

I'm just trying to drag it out as much as I can.

We got Jeff Gilbert here.

Thanks for being here, Jeff.

No problem.

I didn't bring anything pumpkin spice, so I guess we are still summer.

All right, we're good.

Next time you're in, you'll bring it.

And then we've got to let everybody know our special guest today is Ramiro Gutierrez.

He's the president of ZF North America.

Some people say ZF.

I guess you don't care, right?

I don't care.

I mean, ZF, CF, the important thing is to send the message across with companies.

Thank you for having me.

A pleasure to be with you today.

Yeah, Ramiro, we've got so much that we want to get into with you right now, but I'll

just kick off the discussion by saying, you know, probably in the audience, a lot of people

know ZF for its transmissions, but you guys are making a big push into chassis right

now.

Why and what are you doing?

And why are you pushing into chassis?

Well, first of all, I mean, CF or ZF, both TRW 10 years ago, TRW was a big

chassis supplier, and this is from where the chassis thing is coming.

Then why is now a renew therefore on the chassis area is because of the software-defined vehicles.

The chassis components, call it braking, steering, suspension are becoming a by-wire technology.

Therefore, it's becoming an intelligent component rather than being just a mechanical or linkage

element into the car.

And that provides a complete different set of functionality that is exploding and the end

customer is going to benefit out of it.

I would say one thing too is EVs, E-Revs don't need transmissions.

When you're in chassis, it doesn't matter what the powertrain is.

You're right on that.

I mean, so far, every car needs braking, steering, suspension, but you know, even

on that area, you know, we have development ongoing on how to stop a vehicle with an electrical

motor.

If you have an electrical or a battery operated vehicle with an electrical motor, you can actually

get the motor to slow down the car to a point that the use of the braking components

is going to become a minimum element into that dynamic.

So there is a lot of room into that technology to evolve over time.

Now, if we'd have had this conversation a year ago, we'd be talking about how the world

is marching toward electric vehicles.

Things have changed a lot in the past year, particularly in the United States, but also

to a lesser degree in some other countries.

How does that affect your planning for chassis for other things like that?

Because you know, you might have thought EVs would penetrate X percent of the market

in the next 10 years.

Now maybe you're projecting Y percent of the market.

Correct.

And the Y is way lower than the X.

Yes.

That's the problem.

And especially the timeline into that happening has been extremely short.

So we have made, we have deployed a lot of capital into electrical vehicles.

And we are now at the time where a lot of those programs should be hitting the start

of production.

And I tell you what, we have beautiful lines installed and the lines are not running.

And they are not running because volumes are not there.

Why are end volumes there?

Because on the one side, regulation has been brought down.

We roll back regulation.

And then the OEMs are not basically pushing those cars into the market and customers

are not buying them.

So the problem is that all that capital has been deployed, all that the engineering

effort has been made, and we have all that debt out there, right, that we are paying

at a very high interest rate as per the Fed holding on this very expensive money out there.

And that is a struggle for the industry.

So we have a big problem with that.

And as I said, all these things has happened very late into that process.

If we will have seen this happening two years ago, we may have slowed down the

deployment of that capital.

We may have slowed down the engineering effort, the validation effort for those solutions.

But the reality is that everybody was marching full speed to hit the SOPs that were

scheduled, and those are not happening.

So I suppose the good news, though, is that you guys still have those wonderful 8-9 speed

transmissions that you're making.

So it seems that what you may lose on one side, you're going to be gaining on the

other side as they become more popular and as you guys make improvements there.

Now, one of the things that I think is very interesting about your company is

that you're talking about the chassis 2.0 and making it a smarter thing is that the company

that's all the rage right now out there is NVIDIA.

And you guys were actually working with NVIDIA years ago before anybody even knew about

that stuff.

So I mean, your level of software intelligence is probably a cut above many of your competitors.

Can you talk to us about that?

So you're right.

And we were with NVIDIA together in developing controllers for ADAS, for active driving systems.

And we deployed or we launched in the market those units.

And in terms of our software capabilities precisely connected to this new chassis by

our technology, what we have developed is a platform that we call Cubix that basically

coordinate all the longitudinal, lateral and vertical movement of the car.

And now with Cubix, you can basically, I mean, Cubix is software and it's agnostic.

So we can use our own components, our own hardware, or we can use somebody else's hardware,

but it makes extremely easy, well, nothing is easy in this life, but easier, let's

put it this way, or we can shorten the development time to validate new solutions in terms

of vehicle dynamics.

And also by the ability of managing through software, the vertical, the longitudinal and

the lateral movement of a car, you can develop a lot of new functionality that we cannot

even imagine.

I mean, you can go to now these software engineers that may not have any good idea

what a car is, and then tell them, here you have this tool, go play with it and

develop functionality for the end customer that nobody has predicted or imagined so far.

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Ramiro, you're right about all this investment that's gone into EVs.

It's kind of stranded investment right now.

I'd like to get your thoughts on extended range EVs, because it seems to me they're perfect

for the American market, especially if you've got a full-size pickup or a full-size SUV.

You can plug it in at night and pretty much drive in electricity if you want to take

a long distance, especially if you're towing a heavy load or carrying a heavy

load.

You can stop at any gasoline station.

Is it possible that if E-Refs catch on that you would be able to use some of those stranded

EV assets, whether it's assembly battery packs, electric motors, inverters or the like?

What's your thought on E-Refs?

I think they are a great solution, especially when you have developed an electrical vehicle

platform and then you have a situation where your customers have range anxiety

or they don't like the range.

Let's say you have a customer that is going to the market to buy a car and they are looking

for a 400-mile range and what they find in the affordability price is a 200-mile range

and then a generator, which is a range extender, can give them that extra mileage and can

give also the peace of mind that they can keep going on gas if they run out of a

charger or cannot find a charger.

I think it's an excellent product.

To your point, a range extender is basically having an electrical motor and it's having

an inverter.

So you can actually reuse some of that technology.

Then in some of the cases we have deployed very automatical lines to produce electrical

vehicles and modifying those lines is also very expensive because, for example, we have

a big factory in South Carolina, we've been going full automation on those lines.

So is possible, is cheap, probably not that cheap but certainly cheaper than producing a

complete new line.

But as you're talking about this, we're talking about expense, we're talking of course EREV,

you've got the gasoline generator as well as the electric battery and earlier before

we went on the air we were talking about affordability being a big issue for customers.

So how does this work from the supplier level to make a vehicle more affordable for customers?

Because obviously somebody who's cut off on the entry level isn't going to be able to

afford an EREV but we're seeing so many people who are cut off at the entry level.

How do we balance that?

That's a very good question.

Actually, we're learning things out of our customers in China.

They were the first ones and we had in production in there with range extenders

and they have been the first ones figuring out where the sweet spot is in saving money

in the battery of the vehicle and spending some of that money into the range extender

and have a combination of the two that hits the sweet spot in terms of affordability.

So the range extender can be used, you have the electrical vehicle with a big battery

pack and then on top of that you put the range extender or you can actually reduce

this big battery pack that is quite expensive and then get a bigger generator and the combination

of the two gives you the range that you still want.

Certainly the pure electrical range, well the car is going to be moving electrically

all the time but the range that comes from the plug-in, the loading of the battery,

the charging of the battery is going to be lower versus the range that you get out

of the generator but the combination of the cost, I mean at the end of the day

our customers in China are feeding three cylinder engine 1.5 liters that they run at

that very constant RPM providing a super low consumption and that combined with a small

battery pack gives their customers 700 miles of range and that is the solution for that

because again they don't need to spend the big battery pack cost, they get a very

cheap three cylinder 1.5 liter engine in there that they run at a very constant rate, optimal

RPM and that the consumption is just extremely low and they get the perfect combination.

So what is the input that you have into those vehicles?

What do you mean by the input?

What are you selling the Chinese OEMs that their range extender?

So we actually develop a solution where we can put in one pack what you would

call the generator itself with the drive unit so one assembly has the two

functionalities and you can put that on the axle provide the drive unit

movement and at the same time generate the electricity to load the

battery that is sitting on the vehicle.

So it's a module that is integrated?

Yes.

Romero have you had a chance to drive in or ride in any of these e- revs?

Yeah, I'm just curious because I have not and I'm wondering does the engine come on at

odd times?

Is it at a high RPM?

Is it noisy to you?

What's the experience with an e- rev?

So to be clear the car is going to be driven electrically so you still enjoy all these

noise free environment then there's going to be these little zzz in the background

which is going to be this small 1 liter or 1.5 liter engine that is going to be running

at very low RPMs, 2000 RPM, 3000 RPM that is going to be there in the background but

it's a very silent generator it's not a noisy one.

So I think in terms of the experience you're still going to experience the electrical

driving with all that torque and massive feedback on how powerful the vehicle is

and you will not get a lot of the disturbance of the noise or the NBH issues that you may

think are there.

Also there is not going to be any transition between the one engine and the battery pack

because again the vehicle is going to be driven electrically 100% of the time.

So as you're having these smaller engines which would mean less cost you guys have

an integrated system that I'm sure is very competitive to Jeff's point about affordability

I mean does this lend itself to making more affordable electrified vehicles that would

find use here?

I think it's a combination of convenience and cost right I mean if you can get a

very cheap battery pack and you can run out of that battery pack 400 miles then

you don't need to worry about anything else but the reality is not there today.

So then what is your solution?

You still need a customer that comes into the dealership who still wants the 400 miles.

What is the cheapest way to give that guy the 400 miles is still using an electrical

drivetrain and the solution is the range standard.

You can go the opposite way and go into a hybrid.

You have a traditional powertrain system and then you get a hybrid right?

You put the electric machine next to the engine to combine with the main powertrain

which is still combustion.

So you have the two solutions but if you are let's say going back to the discussion before

you are in a business where you have already put all your engineering in developing a platform

of vehicles that are electric your way to go is probably the range standard because

you can downsize on your battery pack, you put the generator, your customers are going

to be happy, their experience is exactly the same and just to be clear in this

market that we are in convenience is the key because people for the most part they don't

like to plug in.

You give a guy something that still behaves like the same car that they have forever so

they put gas when they need to.

They put in gas on a generator but they don't care.

I mean at the end of the day the car is moving, they have the convenience of the

generator that they may not plug in the car at any time or for a month but yeah

so it's just pure convenience but you need to hit the price point right and the way in

China they've been hitting the price point is reducing those battery packs, getting the

generator and the combination of the two giving the customer the price point and the

range that they wanted to get.

So would it be more cost effective for an e-rev or a hybrid?

So this is two different solutions right if my view if you have already developed

an electrical platform you are an OEM you have a platform of vehicles that you have an

skateboard right with different top hats or different bodies and that is already developed

the way to go I think is with a range extended.

If you haven't done that maybe with the new regulation you stay with the combustion

engine and then you go to the hybrid solution then you plug a module or a new transmission

into your existing combustion engine and then you get a better fuel economy but

again what the market is telling us is that hybrids are growing the market share

of hybrids are growing the plug-in hybrid market share is not taking off that is

telling us.

Not in this country.

In Europe it's doing very well.

Correct.

But in this country people don't like to plug in and that is the convenience

factor into this that's why hybrids.

Another issue in this country in that the government is no longer pushing people

toward electric vehicles so do you run up with an issue with an e-rev where somebody

just goes well hey I don't need this I can still buy my good old fashioned internal

combustion because California is no longer pushing me to buy an electric vehicle the

government is no longer giving me a rebate to buy an electric vehicle so why should

I even worry about an e-rev I'll go back to my you know what I'm used to.

I don't think for the most part we are petrolheads but the average customer is not a petrolhead

they move by convenience.

I go into a dealership I need a new car and then I go and look at the fuel economy.

I mean basically if I can behave like I've been behaving all my life putting gas when

I need gas then the pure convenience kicks in oh is the price point right yes is

the range right yes I like the car yes let's go but I don't think the average

customer have a lot of thinking about whether it's a hybrid whether it's a

range standard or what it is they they check range yes price yes I like it

yes let's go so when you force them into plug it in this is when the

problems just start to happen because they don't like to do that and the market

is telling us they don't like to do that what's interesting if you think about it

that you know when you bought your first several cars did you even think

about range I mean it was it was a non-issue right it was maybe miles per

gallon but it's only with electric vehicles my first car I thought of can

I start it this morning so range is this new metric that is you know if

you do if you do the math on how far you can go in a you know f-150 you know like

it's amazing you know 400 miles right but nobody ever says oh I'm gonna buy that f-150

because I can go 400 miles on it right it's it's well I think is how easy you

can get range on an electrical vehicle getting range is not as easy or it

takes longer than in a normal other normally in a combustion engine vehicle

right and is that that situation more than the overall range but I mean if

the electrical vehicle will give you the equivalent in range then probably you

gonna be fine but it's not the case I think the psychology of a consumer when it

comes to range is what's going to happen when I run out of range they don't

worry about it as much with the gasoline car because they know there's you

know a gas station every couple of miles right they worry about a more

with an EV because they don't know if there's a charging station they don't

know if it's gonna work they don't know if it's gonna have to wait so

that's right what the difference is in my experience talking to people who

are EV owners and have owned them for years they don't have range anxiety

they've already figured this all out they're plugging in at home you know

just like you every night or you know what before you go to bed you plug in

your cell phone I'm doing the same thing they're plugging in their car

they have zero range anxiety even the ones who travel especially those who

own Teslas they'll go all over the place they don't they don't have

any worry about it it's mainly the people who don't have EVs have never

experienced an EV haven't lived with an EV they're the ones with the range

anxiety so I you know part of it is just biting the bullet and jumping into

the ecosystem of electric cars and and seeing how it does but to your point

Ramiro people aren't gonna do that they're you know they're they know

what works and they're gonna stick with it I agree 100% with your logic

but the market is telling us something different and you know the customer

talks and when they talk you want to be on you want to give them that's rule

number one so I got another topic I'd like to ask you about Ford Motor Company

showed this very intriguing assembly process that they're going to use in

a couple of years where they break a vehicle into three modules they

assemble the module separately front center rear put that together what are

your thoughts on this and you know especially as you're going into chassis

controls does a new assembly process affect what you're doing I think first

is a very clever idea then I think modular assembly is nothing new it

has been out there for a while I think these solutions seems to be innovative

in the way they want to do it but it makes absolute sense when it comes to

our components I mean naturally we are the coupling the mechanical so the

hardware from the software and in cases like for example the steering system now

you don't have a steering column that goes through the firewall from the

occupant into the engine bay right so that is a big advantage in terms of

assembly it's even an advantage when you have a left-hand driving versus a

right-hand driving now you don't you don't worry anymore about where the

pedals go how I got I get the steering column through the thing it's even a

safety element you the now don't have a steering column that will collapse in

towards the occupant in a crash so there are fundamental advantages same on

braking now you don't have you have break by wire now you don't have an

hydraulic fluid that is highly corrosive into the environment even in

the customer plants at the OEM plants they now don't need environmental

protection to manage these kind of fluids into the plant we have new

customers that are going with those solutions that are setting up new plants

and they are super happy having no having a break by our system because they

don't need to worry about how to deal with these environmental constraints and

the setup in the plant so there are fundamental advantages in the by wire

technology and then for the end customer as well I mean as we mentioned

before the extra functionality that customers may get out of it so you

mentioned steering now you guys are also going to the rear steering as a

possibility for more correct so we are in production with rear steering

it's interesting because rear steering I think is a fantastic product

but so far the market maybe because of being integrated in a package that is

bigger didn't understand the advantages of the

technology the technology is not only great for

as low as low speed moneyovers when you park in because obviously your

turning ratio is way smaller it's especially incredible

during the dream cruise a couple of weekends ago right

we put a car out there and we open it up to people to go test it

you would be amazed how how people like it I mean we put it in a big

full-size truck and they were amazed how easy it was to money over in a

parking lot but it has fundamental advantages as well

in terms of safety I am driving a lot up north

and I can tell you that the number of incidents that I see on the road with

people trailing while with rear steering trailing

is way safer this sway movement that you have on the trailer when you have a

high speed moneyover is going away with rear steering

then you have advantages in tire wear tire wear is way lower you even

have advantages in motion sickness the rear passengers on a rear steering

equipped vehicle they don't get motion sickness

so again I think is one of those products that are great

but some ways on how we are failing to

show the people how good of a product it is no I totally agree with that I

add one more feature of rear steer in a truck or an SUV

if you're backing up with a trailer correct it's way easier

you don't have to turn the steering wheel opposite to the way that you want to turn

so intuitively it's just a lot easier but uh

yeah I mean you know General Motors was the one that pioneered rear steering on

pickup trucks this goes back I don't know 25 years ago or something

but it was a very expensive option because they packaged it in a certain trim

level the people who got it absolutely loved it

but there were very few of them and it was dropped how do you get people

to understand it because I agree I think it's a fantastic

technology in cars so General Motors have rear steering

from us on the Hummer and the Silverado EV but for some reason

they are not putting that option into the mainstream

gas powered Silverados and and that is something that we need to convince them

to to do I recently I was talking with a GM

executive and she was telling me she was dropping her hammer

that she had for six months and she was telling me

without me asking the feature that I love the most in the Hummer was

my ability to park that monster anywhere I wanted

she said I even went to Detroit Metro and I parked the Hummer inside the

parking lot that's I couldn't get out of it

I've been able to put it inside the parking lot and it was super easy with

the rear steering system so I think we need to make an

effort to I mean I actually directed my team to get into customer

clinics to get the end customer to understand the system to understand

the benefits and try to drive more market penetration through that

because for some reason the OEMs don't feel comfortable

in pushing it harder well you know this is a industry that's got a long

memory and they remember GM tried it and it didn't work

and we need to break that paradigm because it's a

terrific technology. How are OEMs doing in terms of wanting to

deploy steer by wire because you've been demonstrating that for a while

it's very impressive but you know we don't see it rolling out that fast on

production vehicles are we going to see a fast roll out in the coming years?

Yeah we have been first to market in North America we have been first to

market in Asia we are launching in the next

six months another two programs this is rolling out fast

I mean like everything initially you see a cost that is a little bit

higher but as well the functionality that you can get out of it we are still

scratching the surface as I said before as soon as you

get into the software domain define vehicle and you start to explore

different ways of using those actuators through software

you can develop a lot of new functionality out of it

that customers are going to see value I mean let's go into an example here

let's say you drive up north right and then you have a cottage

somewhere in upper Michigan and you drive from

75 and you want your steering to be highway

all right no performance just stable just going

then you get out of the highway in Grayling and then you go into the

into the normal road and then you want your steering to be more direct

because there is some turns and maybe you're passing another car and so forth

and how good is that you don't need to do anything

your car detects that you got out of 75 then

automatically your steering tunes into that direction

and then when you get passing Traverse City you get into a gravel road and then

the vehicle automatically changes your steering to

I'm less direct because you are on a gravel road and all that happens without

you doing anything not to mention that you go

into the M1 concourse one day and you want to go kind of

go racing and then you can on purpose go say

I want a super direct steering and then you basically have a complete

different feeling of a car in each of those cases

so I'm assuming that the drive to 75 get off at Grayling

on the 72 is sensor based I mean how does the steering

well the GPS is going to know that okay then the problem is that before

your GPS cannot get action into your steering column

and move your steering wheel from one that's a great point with a

software-defined vehicle no problem so real quick because we're getting down

towards the end here same with brake by wire I mean a lot's been

talked about it that's going to be coming too

yeah I mean I know it's coming but do you see a lot of it coming soon

yeah we have secured an order with with an American OEM with a Detroit OEM

for a very large vehicle that is hitting very large volumes and this

is going to go it's going to go 100% penetration so yeah it's going to

happen now is this pure by wire or is it a

combination electric and this particular full size

vehicle is going to have a hybrid system where they're going to have in one

axle by wire and in the other axle a traditional

system that brings some advantages for the

system the way they want it but yeah it's going to be 100%

at least on one of the axles fantastic because

yeah I I know for a fact assembly plants don't like dealing with all that

brake fluid you know anytime you change the

pads or anything you have to bleed the brakes and all that's going to go away

right I mean we have a customer that is 100% electric on the west coast and

they are developing a new factory and you can I can tell you how happy they

are in going into that technology because they don't need to worry about

that fluid look we're going to have to wrap this up but

Ramiro it's been terrific having you on the show we're gonna have to have you back

and talk oh okay let's go audience questions yeah

rear wheel drive please asks how well do electric brakes work when the

alternator dies and the battery is of marginal health okay so to repeat the

question for those you know what happens with

electric brakes when electric brakes break by wire when the alternator

isn't working well or the battery charge is very low

well you still have a fallback solution with

like you have electric park brake today is still an electrical motor that isn't

there so there are redundancies built into the system

for those cases right and and I'm sure the same goes with

on any kind of steering by wire steering

there's a redundant system for that that is correct okay Sean other question

just one more robert fostered and just writes active suspension question mark

so I don't know if that means does your tech that you your software tech that

you have will allow active suspension or whether or not you're actively working

on active suspension yeah so the question again to

repeat it what about active suspension I think active suspension is a great

problem we have them in production in multiple

customers a big one for example is Porsche

and and the things that active suspension can do for you

some people associate active suspension to sport driving

you can get a sport driving out of active suspension but you can get a heck of

of a of a comfort out of it and there are some interesting videos on

on youtube that you can see this situation where a car is going through

an uneven pavement and isn't even on the left and on the right

and and and the car just basically floats over that

like no effort and and when you drive it you love it

real good we out of the viewer questions okay we are

Ramiro thanks so much for coming on the show really thank you for having me we're

going to take a quick commercial break right now we're going to come back and

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and uh boy there's some good stuff to get into

here gary i i'm sure you got topics i want to do

you got topics and we're gonna pummel jeff with questions well no i was you know

jeff you're mentioning that you know the the affordability thing and

and so uh today i noticed an automotive news where cloud theory has their

average marketed price for a vehicle and today it's 49678

dollars

how can people deal with prices like that well

that is the question that we've all been asking i mean of course that's the

average so that means there are ones that are below that but

the biggest problem isn't so much the average the biggest problem is some of

those below it are starting to disappear you know

especially when you know a lot of them are not made in the united states don't

have a lot of us content so there's going to be a lot of

pressure from that in with tariffs going forward

so you know as we have seen you know you guys have been covering this

longer than me but throughout my career we've always been talking about a

certain number of people are cut out of the new car market every year it's more

and more and more so that continues to happen

look this is why car sales have gone nowhere for a decade you know we sold

more cars in this country a decade ago than we do now

and i think the the major culprit is just that what you're talking about

jeff it's people can't afford these new ones i mean

there's at least 16 million people who will come into the market this

year maybe a little less than that uh who can afford it

but none of them are happy about prices everyone's complaining about the

price of cars but the industry also got a little euphoric

about the high end of the market a few years back with the chip crisis

when people were paying anything to get every last thing that they wanted

and you know i had a conversation with a

certain executive certain brand that has gotten

blamed for having vehicles that weren't affordable and he said oh you know we

all right it was jeep and yeah you beat it out of me yeah and i said oh i just

spoke about you know eighty ninety thousand dollar grand

Cherokee so people are begging for those people are wanting those well that

was the industry attitude a couple of years ago

then things change and now people are begging for mid-size models and

things of that nature so i think there was a little bit of industry euphoria

that pushed these fully loaded vehicles because you know as well as i do

you know that's where you make a lot of the money is on the extras

so is it your sense as you're talking to people in the industry

that they are willing to adapt their product plans in order to address this

lower end of the market or they just basically gone you know what

it's it is going to be what it's going to be well let's look

at just just look at the product lineup for GM

and Ford over the past two or three decades

so much has disappeared at the low end and we keep

adding more on to F-150s F-250s Silverados heavy duties etc so you

know small cars mean small profits as you've

often heard so you know i i don't see a huge push

remember Bob Lutz was always quotable remember the Tata Nano came out

and somebody asked him is anybody going to make a $2,500 car and his answer was

we already have them they're called used cars

so in many cases that's the auto industry's answer to that because

they're not going to make a ton of money off of these smaller vehicles

yeah that's right Gary another news item that broke this week

is European automakers and suppliers sent a letter

to the EU saying enough of these co2 regulations already

there's no way that we're going to meet them we've spent 250 billion euros

developing electric cars we've launched hundreds of models

the market share is stuck at 15 percent we're supposed to be at 55 percent by

2030 100 percent by 2035 enough already what

do you think is going to happen well you know i think that when i was a little

kid i wrote a letter in a Napoleon solo and said you

know would you send me a man from uncle badge

never happened i i think what's i think what's going to go on here is

is because of the roiling of the international auto industry right now

that the EU may step back and say hey we'll give you an extension on this

but that said if they spent that money i mean are they

basically are they going to basically want to walk away from it or they're

going to say okay we want to be able to get some advantage out of that

so maybe it's not 2035 but maybe it's 2038

i mean i don't see 2045 or something i don't see but that that that becomes

science fiction at that point right no i think they're going to get relief

because number one jobs are going to start going away

it's already started then you're going to have the unions in europe screaming

that something's got to be done about it

the thing that i keep pointing out is the auto industry is the only

industry or industry sector economy sector that's facing all these massive

co2 rules and massive fines nobody else in the economy faces

that because everybody can see a tailpipe well i know they can't but you know

in in this country uh i'm going by epa data

co2 emissions from cars greenhouse gases from cars because we got to look at the

big picture it's more than co2 account for 16

one six percent of total emissions so you you

we're we're throwing all of our regulatory effort

into a rather small piece of what's going on out there

of course because we follow the auto industry we see

what they're doing on the auto industry i think if we were following the

energy industry or something like that they would say

you know they're putting a lot on our back as well look i've looked us up

there there's nothing on trains there's nothing on planes there's nothing on

ships there's nothing on agricultural equipment there's nothing on

motorcycles there's nothing on residential there's

nothing on business there isn't anything out there

there's talk of collecting data and and guidelines and

future goals there are zero regulations zero fines

except on the automotive industry and some of those are backing off

and in this country but that's what i'm asking

is is this going to happen with the european industry i think it has to

i mean if people will not buy the vehicles what what are you going to

do and i was in europe on vacation not

that long ago and of course it's dangerous to judge things

based on just what i see on roads but you hear a lot about europe

leading the way with electric vehicles honestly

as i made it a point to look at roads

in france england switzerland and italy and it didn't really seem there

were a ton of electric vehicles out there honestly i felt like i saw

more evs on the road here in detroit which is not a big eva market

than i saw on the roads of european cities like london and paris

because you still have the ton of the small cars ton of small suvs

that things of that nature but i didn't see the wide variety you saw a couple

of volkswagens here and there a few teslas

because they're now hitting in that market but not quite the wide variety

but as percentage of sales i mean the e-u is is vastly right but that's

supposed to be leading the way and i think

countries like norway that heavily incentivize evs

kind of skew the the percentage i think if you're looking in italy or france

and places like that it's probably not a whole lot different to the us

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terms apply yeah so

it you know it it's that issue you know we've been sort of

talking about of whether there'll be um homologation of safety standards

between cars that between the us and the u yeah well

will europe accept us uh certified cars will the u s accept

european certified cars quite honestly our emission standards and their

emission standards are pretty close our safety standards are extremely close

to me it would be an easy thing to just say for the united states

look if if if the euro you meet euro end cap you meet euro emissions come on in

conversely europe could say hey look if the epa certified emissions and it's a

certified the safety come on in you're good to go and pay a

tariff and pay a tariff that's right

um but to me it would be pretty easy to do it would obviously benefit the european

manufacturers more because they ship vastly more

vehicles to the us than the us ships to europe

but uh or we would or we should say we buy more european vehicles

than europeans buy us vehicles so it's not like they're like

shipping them over and saying hey buy these things it's like you know it's

it's demand which somehow gets lost in in all of this economic discussion

yeah you know but you know catalax got a big push into europe right now

it's very small numbers but something like that would help them

a lot uh it would probably help companies like uh rivian and lucid as well

you know on on the us side but yeah you're right that for for the legacy

automakers legacy you know look europe's not going to go out and buy big

american pickups and s e v's not in any big numbers

so ford had another big recall um which one today or yesterday yeah

i mean i see you know i believe i and i haven't counted these

those bolts on the the back axle no this is uh the brakes fuel leaky brake

uh fluid lines and this is according to automotive news number 105 for the

year that is staggered and according to them

stilandus is second with like 23 man so i i've i've got that slightly different

as general motors with 17 and um that ford is 104 okay okay so here's my question

to you guys okay so you know you you you talked about you know ford's new

production system and ford announced today that they're you know opening new

charging stations at dealerships and you know what a wonderful company it is

can people really feel comfortable about buying ford's when they're having this many

recalls a lot of people are going to be very

scant at you know thinking about buying a ford my question would be what

what do you know what the cause of uh the brake fluid leakages there was a hose that

a hose with rupture or something so you know those were 2013 to 18 models something

like that yeah but so all right so they're so they have one it was announced yesterday

355 thousand trucks in the us with the instrument panel display now they can fix if it's an ota

but again this is um and these are 2025 2026 models yeah so see this is not good they just

had a big call on a bolt and a in a rear axle so it's a rear axle thing and these are uh

f150 pickups um 2023 2024 and 2025 so you know it's not like yeah it's ancient history but what I'd

like to do is is trace down what's the root cause here I mean when a bolt fails was the bolt not

put in was the bolt not torqued right was uh did you know uh engineering go through all their

their validation you know give their blessing to these sets of bolts and then maybe purchasing

went and found a cheaper bolt that had not been valid you know what's going on because and and then

when you say leaky brakes or a hose blows out same thing did you purchasing buy something cheap

was it twisted in a way when it was installed at the assembly plant was it under engineered to begin

you know what's the root cause and I would love to get to the bottom of right but anything

about it I mean the guys who work at Ford are no different than the guys that are working

in a slant or some of the guys who are working at General Motors you know but it's it's not a people

thing it's it's a process and procedure thing whether it's you know engineering procedures

whether it's purchasing procedures whether it's manufacturing ones you got to follow the rules

you got to make sure that things are getting done and double check it and it sounds like that's

not happening so I thought they had the Ford production system I thought they had that too

I mean if you listen to their last conference call Jim Farley was saying oh this has been fixed on

the newer vehicles it's just the older vehicles but what did they take as a charge against earnings

in the last quarter was like half a million dollars or half a billion dollars well last year I can tell

you that I'm just talking last quarter last quarter it must have been more than that because

last year they spent nearly six billion dollars I think it was half a billion in the last quarter

so I mean this is an issue I mean we'll just have to see whether they have properly

properly dealt with it but I'm sure they're asking the same questions in house that you're asking

because this is this is money for them and reputation that's right exactly right I just

wonder about the reputation part I mean well come on you remember the old joke one of your

kids about fixer repair daily so you know people have issues like that I actually did an interview

with somebody on another radio station where they brought up that old abbreviation so I you know you

got to assume that they are working on it they're trying to do the best they can will they fix it

I don't know I can't tell you well look it's not getting better by the just this recall count

and that tells me there's no end in sight I mean I think they're seeing some things in their data

because they've got access to stuff that we don't but as far as what's ending up in the

customer's hands we're not at the end of this not even close all right John so 2025 you're of autonomy

that's it baby okay so we're here here's our entry for today's you're in a time so Stalantis

decided that it's going to pull the plug on its level three hands-free and eyes-off driving system

that it has long been developing this would be integrated in other EV technologies like Stella

Brain and Stella Smart Cockpit so they put all this money into this and they're like this is

ain't working out so look you got a new CEO Antonio Filosa comes in knows that the place is a total

mess I think North America lost two billion dollars last year he's got to cut cost as fast as

possible what's the fastest way to do that get rid of people close down programs delay programs

that's exactly what I think you're seeing here because just in the last week or so

GM came out and bragged how many people are getting super crews and and and actually using and signing

up when the free period and Ford came out and bragging about how many people are using blue

crews and they now have a million vehicles on the road with blue crews and that's level two

it's level two plus yeah right I have driven Stalantis's system with level two plus they don't

advertise it they don't push it right like GM or Ford and it's pretty good it's it's on I believe

some of the ram pickup some of the newer ones and maybe the grand Cherokee it's not on a lot of

vehicles but their system is really comparable to blue crews I think supercruises on a level of

its own and you know people I've talked to who are experts in in the field you know like Semmable

Samadate telemetry who who study these things feel it's just as strong so you know in terms of level

two they've got a pretty good system yeah so level three as as you guys know once you declare

that it's a level three system you run into a buzz saw a more regulation so nobody wants to

call their system level three I think you could arguably say that uh blue crews and supercrues

are you know they call it doesn't level three mean that there there are periods where you can just

pay attention eyes off no it's eyes off yeah eyes off hands off that is like a big hurdle to

read the new you're reading the newspaper and nobody likes newspapers anymore so listen to the

radio the only legal place for eyes off I think is Nevada is it California too

it's not a 50 state yeah it's like a one or two state option so if you're looking at that and thinking

man I got a cut cost and I can't even deploy this legally except in one or two states forget

about it close the program down yeah so he didn't get the memo then about this being the year of

the autonomy no I think I don't think he got it but I I still stick by my guns this is the year of

autonomy didn't you know that for 2010 no I was talking more like 1987 when I really got into

this stuff so Gary I got a question for you uh we knew this was coming now the war has started

the Honda dealers in California are suing Honda sony afila well for direct for them trying to do

direct sales what's gonna happen this episode is brought to you by peloton the new cross

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term supply if this were another period in time I would say that the dealers will win I'm not so

sure anymore wow I think that there would be sufficient examples of direct consumer sales

that are happening by other vehicle manufacturers that precedent has been set therefore it's not

going to be that big a problem and you know and if the afila vehicle is identified as being

a brand onto itself and not a you know not what Acura is to Honda right and sony doesn't have

any cars so this this is an entirely different thing so I think that the sony Honda people

are going to win what do you think well let's ask Jeff first could have I don't know what that

with that much depth but could this be a shot across the bow just essentially saying the

Honda look we've got our eyes on you we're going to draw a line in the sand right here so we don't

have to draw a line in the sand further back if you're at some point deciding you might want

to sell a more mass market vehicle direct to customers so we will just say right now we'll

put it on record right now this is something we don't want to do yeah I would say this is the third

shot so they they they sent a letter to Honda saying look you don't want to do it then they

filed a cease and desist order now they have filed a lawsuit so that's why I say the war has

started now it's in the courts and I think what does Honda get out of this it's a small very

small niche vehicle correct so what do they get out of it well you know what they would say is

that it's a lot cheaper to sell a car directly than sell it through a dealer franchise network

I wonder to what extent this goes back to what we were talking about earlier and that is once

upon a time everyone thought that EVs were going to be selling like mad and so what was it three

CESs ago when Honda and Sony came out and made this announcement that they're going to make this

wonderful car that'll have all of this Sony infotainment and screen content and you've

got the engineering prowess of how it Honda how can it fail right and now they're probably

you know is to your point so it's gonna be an expensive car that's going to be very limited

volume and you know you'll probably see I don't know through your forum on Santa Monica and

call it good well I think you know if I were Honda and they're probably already doing it

I'd call Volkswagen and say hey you know what are you guys doing what's your strategy you know because

we want to sell our car our scouts direct and I would be sued as well scout scout I don't know if

that lawsuit has been filed yet it will it will and so to answer your you asked me what do I

think is going to happen it's going to depend on how much stick to witness the car companies have

because it's going to trial if they lose will they appeal it to the circuit court of appeals

if they lose there will they appeal it to the supreme court so it's just a matter of how

deep are they going to reach into their pockets to pay these legal fees okay but this would be

supreme court of California well yeah but I believe this is ultimately going to the US supreme court

I don't think it'll ever get there okay so Sean's telling us uh uh that California and uh what was

the other one Florida dealers have sued Volkswagen and look they're gonna face lawsuits in every

one of the 50 states because franchise laws are there's no national one every state has

a different set of franchise laws and those dealers in those states will sue those companies

their dealer organizations well far better that you take this one and keep appealing it up until

you get either you win or you lose so the question though becomes okay if if as we suspect

car sales are going to go down right this basically means that dealers will make less

money right so if if you're a dealer making less money do you necessarily want your trade

is a trade association to be spending a whole lot of money against a corporation I don't know the

size of sony which is humongous oh yeah no no the dealers will take this to the mat you

they say this is an existential threat they will spend the money and remember you know the

NADA the national auto dealers association I believe is the most powerful lobby in Washington

okay but but do you think that okay that is it going to be the new automakers that will go with

the direct model or will existing automakers go with the direct model we saw that Ford tried it

in in Utah and they said nah screw this doesn't work out so well look franchise laws are pretty

clear if you're a if you're a car company and you've used dealers you have to use dealers you

can't go and start selling cars on your own and compete against your own dealers that's against

the law the real question is if I come out with a all new company that's never used dealerships

can I go and do that well that's what tesla came and ran into and state dealership

associations all 50 states put up roadblocks there are still states that ban tesla from selling

cars there are other states like here where we live in michigan that very much limits

how many outlets and service uh stores it can have and so I mean tesla is still kind of fighting

with one arm tied behind its back when it comes to selling vehicles so that's where it's going

to be can an all new company have cart wants to sell cars as it wants and then the question is going

to be is scout really independent of volkswagen is afila really independent of honda and uh so

so when you ask me what's going to happen I don't know my own personal opinion is of course

they should let them do this I mean come on why should there be a law that says you can only buy

cars from franchise deal like I like to say that's like saying you can only buy hamburgers from a

franchise fast food restaurant so it almost seems to me that you know in the case of scout I mean

so scout is a subsidiary of volkswagen group right so I mean it's it's clearly identified but

if you look at afila is is it a wholly owned subsidiary of honda or does it

sony let's say sony owns 51 percent so then it would be owned by sony which has never sold cars

right so if i were if if if it's a joint venture like a 50 50 right now

this i'd be selling a lot of people are going to get rich on this and most of them are lawyers

no all of them are yes that's right so we're getting down towards the end here you got a burning

one i got one of my all right good but so catalac announced it's uh formula one drivers this week

valteri botas from finland uh sergio pares from mexico there's been a little bit of buzz and uh

you know out on the web there that hey they didn't pick an american driver how can this american

brand not have an american driver because it's a standard of the world

yeah and american standard for the world any thoughts i don't know enough about the drive

teams of the drivers and formula one to have a thought but yeah i think of it as an international

event so i think catalac is trying to show the world it's a global brand and it's

not just depending on having to have an american if the best drivers or somebody else they'll

choose them yeah they're not going to have an american engine no that's right they're

starting with ferrari so so for the the first two three years a couple of years they'll run ferrari

engines and then catalac's own engine is brand pit available he retired oh that's right so okay

here's my question to you guys so what will success look like for catalac in formula one in

its first year well the holidays have come and gone once again but if you've forgotten to get

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per month when that work is busy see terms um i think it'll do rather well because when you look at

new teams coming into racing especially formula one they've been building these teams for several

years the catalac team's been building for three years now three years concentrating on that first

race and that first season they've probably planned out everything to the absolute minutiae

you know where the transporter trucks go where the hotels are going to be for the crews that go

there where the flights are going to you know they plan out everything i'm sure they've run

multiples multiple multiple simulations of their car running on every single racetrack

so the point is they hit the season next year with three years of preparation just for that

season meanwhile everybody who's running in formula one right now has had to concentrate

on this season now probably you know mid-year just recently they said okay enough concentrating on 2025

now let's move to 2026 so catalac's going to hit the ground running with three years of preparation

most everybody else is going to hit the ground running with about six months or so of preparation

so there's no way the catalac will win i doubt very much it will even hit the podium for

second or third but uh throughout the entire season or just the first race uh throughout the season

so you don't think it'll have a podium probably not okay so will mary barra sustain the spending

for that good question but i mean they want to be known as a global brand so this puts them with

all the other global players so okay they don't hit the podium but at least they don't embarrass

themselves that's a victory yeah no i would agree with you on that jeff and i think that will

be success we didn't suck you know we didn't fall flat on our face and uh so millions and millions and

millions of dollars okay billions i'm i'm sure gm's commitment to formula one is at least a billion

dollar bill so so just not sucking will be just not sucking for the first three years it's look

you know it's like saying let's go go start an nfl football team let's let's get all good players

how long do you think it's going to take to build up to be a winning organization it's going to take

you at least three years to get there or or in detroit i was that was just like hanging curveball

over the place so uh yeah i mean the the reality is uh look you're going up against teams like uh

mclaren ferrari uh red bull i mean uh red bull red red bull is really good out of the box um red

yeah i i don't recall how that all but remember they were buying i they they bought an existing team

renamed it and uh i'm not trying to make excuses or anything like that but i mean uh look at the

Haas team other american team in formula one to reason it surprised a lot of people its first year

and then they they always have what they call the sophomore year every team falls flat on its face

the second year because it hasn't had three years of preparation to get to that point so uh

yeah if uh if catalac doesn't suck for the first three years people are going to go oh this

is good and if gm doesn't pull the plug you know if it sticks to it uh catalac could rise again to be a

standard of the world look at it this way it's still less money than what they spot on cruise

that's true because i was gonna say they maybe didn't get the man this is the year of autonomy

in fact maybe that's why cruise got asked they had to pay for the formula one after now that

there you go something so okay let's wrap it let's wrap it up jeff gilbert thank you so much for

coming on the show always good to see you jerry you're going to be gone for the next two weeks yep

you have a terrific vacation count those he's when you're in europe i will okay all right and we

invite all of you back next week if you're the purchasing manager at a manufacturing plant

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AAH #757 - Regulation Revolution: U.S. and EU Could Share

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