AAH #759 – Detroit: How to Save a City That Relies on Legacy Automakers
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Hey everybody, thanks for joining us on the show.
We've got a very interesting discussion to get into today.
As most of you probably know, Gary Vassilash, my co-host, is out gallivanting somewhere
around the world right now on vacation.
We also have Sandy Monroe who's going to join us, but he called me earlier just before the
show started to say he's stuck in construction-related traffic.
He'll show up in another 15 minutes or so.
But we've got Joe White from High Speed Rodeo, and we'll get into explaining that in a second.
We've also got Sandy Barua, the head of the Detroit Regional Chamber of Commerce.
I say head, you're CEO, right?
Apparently so, no one else will be.
No one else wanted the job, right?
So High Speed Rodeo.
High Speed Rodeo on Substack and also Tully of Sino Auto Insights, so I think it's been
on the show before.
Tully and I have started a podcast called At the Wheel, and we are spooling that up.
I think we're now out of soft launch and into launch launch.
You can find that on YouTube.
You can find that on Substack, and I write every week High Speed Rodeo on Substack.
Yeah.
Yeah, cool.
Good stuff.
I highly recommend reading and listening to it.
So let's get into the topic.
We have a headline for today's show is Detroit.
How is it going to be able to survive depending so heavily on legacy automakers?
And Sandy Barua, you talk to so many companies in town, they're part of the Detroit Regional
Chamber.
What are you hearing?
What is the feedback that you're getting of what's going on in the Detroit industry?
And I say Detroit, but let me preface this because we've got listeners, viewers from
50 different countries around the world.
So any problems we're talking about in Detroit vis-a-vis the auto industry pretty much apply
to any region of the world that is dependent on legacy automakers.
But back to my question, what are you hearing?
Yeah, no, it's absolutely true.
So we represent the region and the state, and when you look at it at a state level, the
automotive slash mobility industry for the state of Michigan is $350 billion.
It is 27% of our employment and it's roughly the same percentage of the R&D that takes
place in Michigan.
It is huge.
And I don't want to make a statement about the current administration's trade and tariff
policies, but whatever's happening at the national level where the direction of this
administration is going has a disproportionate impact on capital intensive manufacturing
industries, which obviously is prominent in Michigan.
It's our biggest thing.
Also, trade tensions, we are all, we're literally spitting distance within the Canadian border.
Canada is our closest trade partner, our closest social partner.
It's actually much faster to get to downtown Windsor than it is for me to get to downtown
Ann Arbor.
And the trade tensions are really adding up.
So it is a really scary time right now.
And industry is, I don't want to say they're paralyzed, but they couldn't be more cautious
right now because it's hard to make long-term CAPEX decisions in an environment when you
don't know what's going to happen next week, next month, or certainly in the next administration.
Yes, Sandy, I'm curious, and I'm just curious, are you aware of companies that maybe we're
looking at investing or expanding in the state of Michigan, adding something new, whatever,
that have basically hit the pause button or the stop button on that?
And regardless of what they told you as to why, but I mean, are you seeing that?
Because it's certainly true that manufacturing employment nationwide is basically flatline.
Actually, it's down 44,000.
Yeah, it's down a little.
Yeah, right.
But anyway, back to my original question, I mean, are you seeing, you know, things that...
Absolutely.
Yeah.
Yeah, Joe, the answer is yes.
You know, we have seen nationally, but also, you know, right here in our own backyard in
Detroit and Michigan, companies that were kind of on the move, you know, looking to
either expand or relocate either an R&D center, a headquarters, a, you know, a manufacturing
facility, kind of say, whoa, you know, we're going to wait.
And I know what you guys are also seeing is, I mean, we are seeing, and let's give credit
where credit is due, we are seeing a return or at least plans for return for manufacturing
in North America and particularly America.
But 99% of that is utilization of excess capacity, right?
Because there is, I mean, there's excess capacity in the automotive industry globally.
So what you're saying, they're not building new plants, they're just filling up plants
they've got.
Absolutely, right.
And you look, I mean, just, I mean, obviously, you know, we're seeing a big shift in EVs,
and I'm sure we'll get into that, but you know, GM's, you know, Spring Hill facility and their
factory zero facility, they've basically killed or about to kill their second shifts, because
Lord knows what's going to happen at the end of this month when the EV tax credit expires
because everyone's literally lined up at their dealerships right now.
I will say that we all know what's going to happen.
There's going to be, and we can get into this, John, if you want to, but yeah, there's absolutely
going to be, I mean, look, they don't take the shift off because they've looked into
their order pipeline and seen it's all going to be fine.
Yeah, right.
They took the shift off because they looked in the order pipeline and they saw, you know,
parachutes out.
WTF.
Yeah, right.
Yeah.
And we can talk later, I suppose, about, you know, whether that's a permanent situation
or, but it's certainly going to be the next six months.
Yeah.
Something like that.
Well, I mean, all, everyone, and actually our family, you know, Lisa and I just picked
up another EV, just kind of, you know, part of the rush, you know, before, you know, before
the end of the month.
So everyone is pulling these purchases or leases forward.
And I imagine starting October 1, you know, you're, you know, you can see a big slowdown.
You might get a deal on an OPTIQ or a blazer EV, but that's because GM or, you know, we'll
try to incentivize the heck out of them, you know, to move them.
And we can get into this later in the show, but go back to what you were saying, Sandy,
that, you know, everything that's going on right now, trade policy, tariffs and things
like that are putting the Detroit automakers at a disadvantage.
Yeah.
I mean, so, you know, first of all, you know, and again, your viewers know this, you guys
certainly know this, even the most American made car has 30, 35% foreign content in it.
Right.
So, you know, and the since, since these tariffs were introduced, the domestic automakers,
just our, you know, traditional big three or Detroit three, whatever, whatever you want
to call them, have paid $12 billion in tariffs.
Right.
And so that either goes to corporate bottom line, you know, reductions in employee profit
sharing checks, or is adding cost to the consumer.
It's, I mean, there's no other place for that to go.
It's a little bit like water in a house, right?
It's got to go someplace.
There's only a handful of places that that's, that's going to go.
So that is basically $12 billion of US innovation stranded capital that has kind of walked out
the door, not to, not even to consider the opportunity costs that's been paid.
Think of the billions of dollars that Ford and GM in particular invested in EVs, right,
that they now can't, you know, is now it's going to sit on the shelf, right?
And who knows how that's going to get resolved.
Then you have, you know, just the cost involved in redoing your supply chains, you know, and
there's a reason why those supply chain guys and gals, you know, make a lot of money because
it is the most complex industry on the planet.
And again, when you have these capital intensive industries where, you know, it is a three to
six year runway before you can get a new product off the line and engineered and produced and
approved and yada, yada, yada.
You know, there's no wonder that the, we're going to see a slowdown in innovation in the
automotive industry, just because the money's not there and people don't, you know, companies
don't know how and where to invest.
You're also seeing, you're already seeing it now, a huge slowdown in new model name
plates coming out, right?
It just, you know, Ford in particular, right, has really kind of said, well, you know, we'll do
new versions of this, that or the other thing.
And obviously you're going to see very few new EVs over the next 24 months, right?
Right.
So Sandy, and I don't want to make this too abstract, but I'll try.
I mean, I think I heard some time ago that in Michigan, R&D and the technical and R&D aspect
of the auto industry is as big or bigger an employment, the source of employment in the
state as the production and much more valuable, right?
And higher, and higher value across the board wages and all that.
So that's, that's one.
And it, I wonder how worried you are.
And I call this the, the Havana syndrome that because of the United, you know, sort of the
step back from pushing electric vehicles and sort of incentivizing new technology.
Because of that, and sort of like, you know, yes, it's fine to keep selling internal combustion
vehicles that kind of based on technology has been around for a hundred years, that the
state could, you know, people in the state could wake up in five to 10 years and, and
Michigan's kind of status as one of the innovation hubs in the auto industry globally, that's
not going to be there.
We're, the Michigan will be the place where people still, you know, people are still doing
combustion engines for an ever shrinking market.
I, I, you could give my speeches for me.
I'll be at the bar.
You might regret that.
I mean, we look so much alike.
No, no, seriously, you're saying, you're saying exactly what we're saying, you know, myself
and my colleague, Glenn Stevens, who runs our automotive unit, it's called Mishado.
What we're super concerned about is that obviously the automotive industry is global,
right?
It's the most technologically complex advanced industry, certainly that consumers
utilize, but also probably just the most complex industry out there in total, right?
If we are the last market standing selling, you know, two liter turbocharged ice engines,
you know, to, to everybody here locally, you know, locally within, within North America
and the rest of the world has moved on, you know, then our industry is going to get less
and less global.
We're already struggling with that already, right?
And yes, we're going to see, you know, this flatlining of, of EV demand because the first
adopters already have their EVs.
They're going to hang on to them a little bit longer, but, you know, both E and Y and Bank
of America, John Murphy, who just, who just left Bank of, Bank of America, you know, are
all predicting pretty significant spikes after about 2027, 28, you know, for even just North
American EV demand, because, you know, it's not about, you know, for those of us who have
both ice engines and EVs, yeah, saving the planet's nice and all, but it's just a better
driving experience.
Exactly.
Yeah, exactly.
Yeah, I mean, that's what you've been saying.
Yeah, look, I'm a hardcore enthusiast, right?
You know, I grew up building engines and, you know, rebuilding them and I'm a pure enthusiast.
I race cars and everything.
I love the sound of an internal, a good internal combustion engine.
But I'm telling you, driving an EV is a better driving experience.
You know, everyone talks about, you know, all that great torque, you know, it's not
even so much that, because for everyday drivers, they don't care about zero to 60 times, sub
three seconds, right?
What they want to do is drive down the car, down the road, the highway.
If they see an opening in traffic, what they want to do is just pull right in, not mash
it down, have the engine rev up, the transmission kick down, make all this noise and get in.
It's like, no, boom, you're right in there.
And you get that one pedal driving.
Yeah.
And we've got Sandy Monroe is in the house.
Sandy, put put your mic on and get ready and get ready.
Right.
Right.
But I'm just explaining why I think EVs are a better driving experience.
A lot of people love that one pedal drive, you know.
And oh, absolutely.
You'd never get me.
Well, let me rephrase that.
If it's a race car or if it's a classic or something like that, I'll drive, I'll drive ice.
And by the way, I'm an engine engineer.
I know that was my job.
Anyhow, at the end of the day, I couldn't dream of the performance characteristics
you can get out of an EV versus anything that pumps gas.
Right.
And and quite frankly, I'm also a cheapskate.
For the price of three gallons of gas, I can fill up my electric car.
Yeah, hard, hard for me to ever go to a gas station and I don't even I don't even have
to go to a gas station and meet, you know, strange new people.
And sometimes that's fun, Sandy.
Come on, don't be so antisocial.
That's right.
Actually, you know, if it's exactly.
Well, I go to on this and and then maybe switch.
But another thing that I've been thinking about, I've been sort of reading everybody's
kind of discussion about this whole question, like, what's going to happen to
EV market, you know, post September 30?
And I've been wondering, I mean, so it does seem to me, I mean, Sandy, you're a good example.
I think everybody's now we got to be careful.
There's two Sandys here.
Well, I'll tell you Sandy.
Well, actually, I think we even have the same birthday, April, right?
No, January 19.
There was something else we had.
Well, I'll do I'll depersonalize the point and then we'll move on.
Yeah, I do think, especially as the vehicle market as a whole, because of the price
increases that have apparently proven pretty sticky is becoming more and more
of an affluent Americans, at least in this country, an affluent person's market.
You know, and I think a lot of affluent people who have, you know, are going to have,
you know, OK, fine, I do road trip three times a year where I pull a trailer
three times a year where I got to have the combustion pick up until further notice.
Fine. For everything else, I'm going to have an EV for all the reasons
that you all have just said.
I mean, the driving experience better technology, you know, the infotainment
all the all the technology is better, all that stuff, the electronics.
And I do think that that to bet that that won't happen is a bad bet.
Right. And then we're just going to get further behind in this market.
So, you know, the, you know, the EV market, you know, by the end of the deck,
globally is going to easily be 20 percent, right?
Well, 20 percent is the market for full size pickups in North America, right?
And, you know, who in their right mind would walk away from a market like that?
And again, I think, you know, we need to be careful here, you know, we're not saying,
I don't think anyone here is saying that EVs are right for everybody, right?
They're not, right? I mean, it is exactly what you're describing, Joe.
You know, you know, middle class and above households, single family,
housing, ability to charge at home.
That's, you know, that that's absolutely key and you have two or more cars, right?
And so, you know, you have the suburban and you have the Maki next to it, right?
It's easy breezy, right?
And then once people, and I think there's going to be, you know, two avenues
that are going to get us to this spike that B of A and E and Y and others are
looking at in terms of EV demands going beyond 2027.
And that is, you know, again, affluent people, you know, who, you know, go for the EV
because once you start driving in the EV, you very, very rarely go back.
I mean, I know of one person personally that did that.
And that was only because she couldn't find the EV that she wanted.
It was taking too long for it to arrive.
And then, but, you know, with, you know, the terrible resale value of EVs,
you know, they're great used cars.
They're cheap. They're cheap.
I mean, you can get a Mercedes E-Class, EQS, for like 32 grand
that has 30,000 miles on it.
You're going to see a lot of people get into EVs that way.
And they'll get hooked.
And I think that eventually will start to stabilize the resale values of EVs.
It's probably five, six, seven years.
I haven't seen EQS is that cheap.
But I have seen them at $40,000 for 30,000 miles, which is unbelievable.
Yeah, but it's basically half off after two and a half, three years.
So Sandy Barua, going back to what we started about is how do regions
that rely so heavily on the legacy industry deal with all the changes that are going on?
What's your RX?
What's your, you know, what am I trying to say?
Your prescription.
What do legacy regions need to start looking at?
Well, it's, you know, it's tried to say, you know, diversification,
but it is diversification is part of it.
But you have to diversify off of your base, right?
I mean, this is what, I mean, you know, this like, you know,
I grew up in the Pacific Northwest, right?
And, you know, it started out as timber country.
Then they became aerospace, right?
Particularly, you know, particularly Boeing.
But people forget that, you know, the first airplanes were built out of wood, right?
There was actually kind of a competitive thing.
And then the aerospace industry, Boeing led to what's now known as Silicon Forest, right?
All the tech that's out there, right?
And so you have to diversify off your base.
And ours is mobility.
It's the technology and it's the skills around moving people and goods
from point A to point B cheaply, safely and efficiently, right?
That is a core skill for us.
And so much of that is software, right?
And, you know, so, you know, and actually Sandy and I talked about this a few months ago
when I was visiting him in his office, you know, it is very much an and strategy.
We have to keep our manufacturing base.
We have to have the, you know, the skill trades to be able to fill those jobs,
to, you know, get people interested in those jobs.
But, you know, we have to have, you know, more of our citizens going into
some sort of post-secondary education.
Yeah, I don't care where you go, but you need both, right?
You know, you can't just do one.
You know, we can't build our future on just telling kids, you got to go to college.
That's not going to work, right?
My son didn't go to college.
I wish my son would have done what Sandy wants more of is gone in the skill trades.
But you need both, right?
So Sandy, here's my question, because you and I have talked about this,
the need to diversify.
But I love what Sandy Peru is saying, is you got to build off your base.
Well, how does a region like Detroit, but, you know, I'm saying there's other regions
in the world that rely so heavily on legacy automakers face the very same issues.
But back to the question, how do you, what do you diversify from the base we've got?
Okay, diversification for me, well, there's got to be two things.
I'd like to address the education diversification first.
You heard about 400 and 300 odd people being rounded up by ICE.
Yeah. Why?
Well, these are the Koreans that you're talking about working down south.
Well, I'll be just a further, because I'm reading about this.
And because they were here, the Korean, they were technical people who were doing things
that at least the company said could not be done by available U.S. citizens.
That's what they said.
Now, there's a whole thing, a whole show about that, but that was the reason I didn't have the skills.
Yeah, I've been, I've been phoning around to find out.
And you know what, when the Chinese wanted to get into the battery business,
they brought over tens of thousands of Americans that knew what they were doing.
And said, go to work and said, here, show us how to do it.
Yeah. And if you look at some of these statements that these guys have put out was,
oh, well, we're coming here.
I've got a six month or a six week or whatever, three month visa and blah, blah, blah.
I get everything going and I'll train them on how to make them work.
I'm telling you what, we are losing every day.
Good night, good, good people every day, because we are not putting them in where they need to be.
There's two hands, so there's one education system.
I call it the eye system.
I, I thought of it.
I like it.
I'm good at it.
I'm the teacher.
You get what I want.
But really, we have a 40, 40, 20 kind of a system or kind of a population.
The eye part on the first arm of education, if you look at it as a you, guess what?
That's the guys that like the eye system.
They're good at it.
They're great spellers.
You mean like the academic, traditional academic system?
Personal academics, I'm talking about K through the end, OK?
Yeah, K through nine, all sitting there saying, oh yeah, I like that.
That's only 40% of the population.
Over here, you've got people who are basically good with their hands and like I was.
How'd I get, how'd I get into high school?
I bluffed my way in because I never got out of grade school.
You know why?
Because I was a shitty speller and still am.
But you know what?
The guy that was the smartest guy in the class, Gary Porter, yeah.
He used to say all the time, oh, Sandy, so stupid.
That was a spelling bee day because it was the first one out.
But at the end of the day, I got a spell check on my computer
and he lives literally in a shack.
And I know that because he lives real close to where my wife lives
and she didn't do real well either, my ex-wife.
At the end of the day, you've got 40% of the people who really excel at this part of the you.
And you've got another 40% that are totally ignored.
And then you've got 20% on the bottom that you're never going to.
It's going to be what it's going to be for them.
But really, we have got to start looking at this is not the only answer, the I answer.
Oh, I think it's wonderful.
That isn't working.
And if we don't get back into technical high schools, we're going to have a real shit show.
Now, we talked about automotive.
I'm talking about the defense group as well.
This right here, this is the arsenal of democracy.
And you don't see it, you don't hear it.
But the redesign of the of the bullets right here, 6.8.
The redesign of all of the armament that we're supposed to be getting into it right here.
New ships, where are they going to come up with new ideas right here?
That's where we need to really start focusing our attention.
So, Sandy, what you're saying is there's a lot of work being done right here.
If we get the education done right, we're going to be able to feed the workforce
that can diversify so that we're not so reliant on a legacy industry.
Right.
So I just got my automotive news magazine.
Okay.
And it says 90 years of the union and whatnot.
And so some people had a lot of problems with the union, not me.
Why?
Because I had a journeyman's card.
And when I was working at Ford as an engineer, first day in, I buy six or eight boxes of doughnuts,
slap that down, pass around my tool makers journeyman's card, pass that around.
Let's be friends.
Look, I need to get the job done.
I need to do this.
I need to do that.
I need your help.
Is that going to work?
I didn't stay up in the office.
And suddenly I went from a six to almost a 13.
At the end of the day, when you've got that kind of skill set or that kind of talent,
you're in a club.
So let me ask you both the Sandys this question.
So, and I've, look, I mean, as a journalist, I've heard people say, Sandy,
actually both, what both of you have said about the education system and the disconnect
between the education system and the needs of the industry and the needs of the workplace
and kind of what the economy ought to be like.
And, you know, how do we fix that?
Because, you know, so China has fixed it by having a super top down, you know,
extremely state planned approach, which at least from this distance looks like it's working,
although I'm not pretty darn sure I wouldn't want to live in China.
But how do you do it?
How do you, how do you do it here?
And I guess, Sandy, I'll start with you.
But I'm just curious, like, how do we, we know you both have defined the problem,
but I wonder what you think would work as a way to actually kind of make the connections
that aren't being made today.
So we're trying to work on that right now.
And, you know, we're doing, you know, trying to do like focus groups and polling,
because what we have in Michigan is a little bit of a cultural challenge, right?
It's actually not so much of a policy challenge.
I'm going to get back to what Sandy is talking about in terms of how education is delivered.
That's a whole different topic.
I think it's a really valid topic.
But regardless how education is delivered, and, you know, we need to focus on what is the output?
What are we getting for our education dollars, you know, for those of us who pay taxes, right?
The other thing is how do you change the culture where, you know, in Michigan, you know,
like we were talking earlier, John, about your early, early days, you know, on the factory floor,
right? You know, it was practically in Ravana, right?
I mean, it was hard, hard, hard work, but you could graduate from high school, you know,
walk into a Chrysler plant, walk into a Ford plant, get a good job, take care of your family.
If your kid wanted to go to school, there was money to do that.
Now, those traditional factory jobs don't pay at the same level that they did, you know,
in the 1950s and 60s, right? So, yeah, exactly right.
So, you know, you're not taking one of those jobs and sending your kid to school or getting a,
you know, a vacation cottage, you know, and a lake up north, right, that, you know,
they're priced out of that kind of market.
So, but those jobs do exist, right? But, you know, it takes skills.
So, how do you get Michiganders to think differently that, hey, you know, the automotive,
manufacturing, mobility industry is just as exciting today, if not more exciting today.
It's solving the world's problems. It's allowing people to, you know, get from point A to point B
to go to work, go to school, you know, go to dinner, go shopping. It's basically for them
to spend money and make money, right? I mean, talk about a huge valuable service.
You can be part of that industry and it's so exciting. It's so technologically advanced,
but unlike your grandfather, you just can't have a high school degree. So, we're calling it K-12
plus two. We don't care what the two is. Is it two years of community college? Is it two years of
skill training? Is it, you know, two years in the military? I mean, it is something beyond
high school. So, you've got to change that culture. You've got to change high school.
That's what you've got to change. The I guys that go to a normal collegiate high school,
good. There's all set. If you're technical, you've got squat. Nothing. I started in grade nine,
okay, at WD Low Technical School. Remember that school, cast tech? Wow, whatever happened.
Anyhow, at the end of the day, I'm telling you right now, if there's 40%
want to go to some sort of a collegiate, there's another 40% that don't. They don't spell. They
don't get along. They find everything boring. They don't want to read the next great novel.
They'd rather build a birdhouse and they'll do a great job. The I guys, no birdhouses. They don't
want anything. These guys all day long, anything, anything to work with their hands. And we have
totally, totally demoralized those types of people because, oh no, you don't want to touch poop.
I mean, if you're a plumber, you'll be able to be touching poop. You don't, and that's, and I can
tell you for sure about this because I've given a bunch of speeches and a bunch of big organizations
where it's teachers, some teachers, mostly it's principals, people who are in charge of school
districts and whatnot. Man, when I get done with them, it's a spanking that they can't forget.
And quite frankly, at the battery show, I was talking to Jim Farley about some stuff,
and he is also very unhappy about the way the school system is going. And this degrading, oh,
well, you're a treason. That's never going to work. Let me, I'll tell you what, I don't want to
monopolize too much of this. And I don't want to kill my little speech that I'm going to be doing
at the battery show. But a kid came to my house. I didn't, I don't want to do any more plumbing.
Kid came to my house because we had a leak in some pump system. And I can't remember his
first name. I'm not going to give his name out anyway, because I got to get permission. But
anyways, this kid comes in. He's 24 years old. He's a plumber. He's a licensed plumber. And that's
kind of, and I said, how long you've been working at this? This is, I guess, my fifth year.
Fifth year as a plumber? Oh, give me a little, how did you get that? Well, I was failing in
high school. And my girlfriend, now my wife, she helped me out. But the real big, big boon for me
was my uncle was a plumber. Couldn't find anybody that wanted to be a plumber. And I went to work
for him. And in four years, I was a plumber. And now I have a house,
two motorcycles, and two cars. Geez. On my speech, you're going to see what I did,
because my dad pulled me out of working on a farm, which is crap, pulled me out of the farm.
I was 18 for three years in a row, working at a factory for my journey miscards. So I was an
apprentice. 19, I got my ticket. 22, 21, 22. And I'm driving a Morgan Supersport. All my friends
that were in the I type of world. Yeah. Well, I'm going to college. What did you get? Man,
I'll tell you what, look at the real statistics. The real statistics. And by the way, I learned a
new term, milking the moron. That is what they call secondary or tertiary. I guess now it'd be,
so you got grade school, you got high school. And now you're going to, you know,
Yeah, I just want to throw one thing in there too, which is, and maybe this is more of a marketing
comment about about manufacturing, one of the things. And again, I know you both know this,
but I just put it out there. One of the things that's been striking to me over the last several
years is, you know, you walk into a factory like I went, I went two years ago, I did a tour of
Kentucky truck as they were launching this super duty, the new generation of super duty.
And, you know, make a long story short, among the things that I saw there, you know, they were
talking about how they're applying AI to the quality control and manufacturing processes.
Pull that thought throughout the auto industry, especially with electric because of electric
vehicles. But I think because of, you know, any vehicle, you have this in this whole material
sciences aspect to the auto industry, which is, you know, super important, super critical. And,
you know, every other day, right, we're hearing about own, you know, rare earth minerals and
all these critical materials that there's not enough skills in the United States were to hold
into China. And, you know, so it just seems like it's not just, I mean, I agree mobility and
transportation is a big part of the equation. But the auto industry also brings in all these
other things. I mean, what's, you know, what's good, what's good is AI? Well, you can apply it to
complex manufacturing environment. That's one of the things that it's good for. And if you know how
to do that, you know, you get your fancy car. I mean, it seems like that's the kind of thing that
doesn't really get explained. Hold on one second. We got to take a break here. We got to close up
this segment. We got to give a shout out to our great sponsor Bridgestone.
Performance that shines even in the rain.
That's what really matters. Bridgestone Potenza tires, improved grip and wet conditions.
All right, we're back. We're talking all things automotive. Let's get into news of the week
kind of stuff because that's one of the favorite parts of the show. One more thing.
Yeah, one more thing. Yeah. We get everything from China. Okay, so I'm not going to get into
any political thing. But putting up tariffs and stuff like that is forcing people to buy
from this part of the world. That's the other reason we need high school. High schools that
are technical. I don't want to go back to school for two more years. By the way, the other thing I
just found out, when are you the smartest in your whole life? What age? Probably not.
Your brain at the most? We're most able to learn. Yeah. Yeah. I would say in your teens and 20s,
early 20s. One month after you're born. That explains a lot. So we both peaked.
We peaked a long time ago. Okay. And the other thing is 13. 13 is a magic age.
If you don't have skill sets that you need for the rest of your life,
buy your 13. Excellent point. Excellent point. So where do I want to have tradesmen made?
Where do I want to have anybody that wants to be technical? And I know you want to move on,
but I'll just say this one thing. Or give kids a sense of what the options are and what the
possibilities are. Because I know, I had a pretty vivid memory when I was 13. I had no idea what
to do with my life other than what I saw before me, which was that my dad was a writer and a
newspaper guy, which is what I turned out to be, because that's what was modeled for me.
And I have no complaints. It worked fine for me. But if you don't know, what are the avenues I
could pursue? It's kind of what I'm talking about. You've got to give people, especially
young people, a vision for what the future is and how they have a role in it that they don't
have to go to college. But there is a pathway for them to live a great life in an interesting
career, in an interesting industry, and do well. Because let's face it, Michigan lags when it comes
to both educational attainment and per capita income. As recently as the early 1980s, Michigan
was considered not quite in the top 10 of wealthy states, but pretty darn close. Like in the top
dozen, we are now in the bottom dozen in terms of per capita income. And if you look at where
per capita income is, it's all based on skills. Yeah. No, excellent point. But like I said,
I do want to get into some of the news. And Joe, I want to get into something that you've been
reporting on or commenting on, writing about in high speed rodeo, your sub-stack. I don't,
you call it station sub-stack. Oh, there's a small newsletter. There you go. That's how I'm
coming out of it. I mean, the Chinese are dominating that show. Yeah, they crashed the party.
So I didn't go. I wish I had. Me too. Did you go up? Okay, fine. So we both have that handicap,
or we all have that handicap. But yes, I mean, I read a lot about it to write about it in my
high speed rodeo newsletter. And yeah, I mean, basically the Chinese brands crashed the party.
They basically said, not only do we have all these new models with all this fancy tech,
but we're going to invest in R&D. We're going to invest in production, localized production,
localized R&D, BYD. I think it was BYD was talking about they're going to build their dealer network
to like 300 and beyond and some of the other brands in the same way. And the German brands
brought out from what I could tell were some pretty decent looking new vehicles. I mean,
the Neue Class, the IX3, which is the new generation BMW electric vehicle, huge role of the dice for
them, as a friend of mine said, it was remarkably un-ugly. Which has been proven. And I'll tell
you why, because they shrunk the grille. Yeah, yeah. So, you know, they didn't do this silly
things. And Mercedes has a new electric, a new generation of the electric GLC, which from what
I can tell happens. Yeah, looks really nice. Looks like it has kind of all the bells and whistles
and their new operating, their new technology operating system. That's good. But I would say
that a lot of that was a reaction to the pressure being put on them by the Chinese. And the last
thing that I'll call out is obviously a lot. But my former colleagues at Reuters did a pretty cool
story with the headline, The Party's Over. And this was Oliver Bloom, who's the, at least for
the moment, Check Your Watch, the CEO of both Volkswagen Group and Porsche. I don't know how
long that's going to last because, you know, he was basically saying, yeah, I mean, Porsche is
getting hammered in China, which used to be one of their biggest and most important markets.
They're getting slaughtered there because their technology and their cars aren't where they
need to be. You know, the industry in Volkswagen Group, they're under this huge pressure from the
Chinese that are coming in. And yeah, I mean, so there was a lot of angst, kind of, I'm not under
the surface, on the surface. The thing that's supposed to be, you know, the sort of semi or
biannual or annual, you know, party showing just how wonderful the Germans are. And so,
yeah, it was a really interesting, it was a really interesting event. I mean, I guess good news is
auto shows are back, at least in Munich. At least in Munich. Well, if you want to go look at Chinese
cars, yeah, they're back. Right. And so, and I just think it's interesting, and I kind of want to
you both have to say about this. But I look at that, at that event and kind of the way it played
as, you know, a glimpse into the future for North America. Because, and I've said this on your show,
and I'll keep saying it, eventually maybe I'll be proven wrong. But I just think that if anyone in
this market thinks that the Chinese companies are never ever going to figure out a way to
localize production and get over or under the wall, I just feel like that's wrong.
You know, what you have to do is you have to look backwards. So, I'm old. Real old. And I remember.
Those, I'm not going to use the terms, but these nasty terms we don't use anymore. They'll never
get into the market. Japanese, right? Right. That's okay. Say that. And I remember watching
the first cars come into the Detroit Auto Show. They had, I don't know, about an area as big as
your studio here. Virtually nothing. Virtually nothing. And then people started to drive them.
And one thing leads to another. And they're inexpensive. And they last forever. And they,
they're squeakers when it comes to gasoline. I mean, on and on and on. So GM's got, at that in
those days, GM had about 60, 50% of the market share. Now they got 14. Toyota's got 14. Where's
it going to be with BYD? Because I'm telling you what, okay, Trump is doing the best he can
to fend off these invaders as quickly as he can. But I guarantee you he's a businessman.
This is all done for one reason. Just like Toyota came in and Honda came in. And then later,
Hyundai and Kia came in and all the other guys came in and built their cars here.
We're going to see BYD, Chile, and everybody you can imagine is going to eventually come here.
And everybody will have a part, but it ain't going to be 60% or 50% anymore. It's going to be
in the low teens. We already have Chinese cars on American streets, right? There's a Buick,
there's a Lincoln, there's Polestar. They're already here. The other thing that's going to happen,
or the two other things that are going to happen, very much to Sandy's point,
the governor of Mississippi, the governor of Alabama, whatever, you pick the state, right?
They get an offer to do exactly what Sandy's talking about. Hey, we're going to build a $30
billion plant. We're going to employ all of your citizens. Here's the investment that we're going
to make. Governor's going to say, okay, fine, we're going to do that. And then all of us travel,
and our friends travel, the number of people that, because they know I'm a car guy, right?
They'll say, hey, we are in Europe, and we rented whatever, whatever. And it was the most
beautiful thing we've ever driven. And they all sent me videos. I mean, how easy the tech
connectivity was, how intuitive it was, the lines. I mean, these Chinese cars have become
gorgeous. I mean, there's some ugly ones like the dolphin and things like that that sell for
$14,000. But the ones that are kind of mainstream are really, really well done.
Joe, another thing that broke this week, Mexico is now talking about putting 50% tariffs on Chinese
cars. And what do you read into that? And before the show started, you made a very astute observation
of who it's going to affect. Well, yeah. And again, so apparently under pressure from Washington,
from the White House, Mexico said, okay, we're going to put 50% on imported Chinese car and
vehicles and also, I think, parts and other stuff. And my first thought was, wait a minute,
isn't, aren't the Detroit three like significant importers to Mexico of Chinese cars? And you're
both nodding because you both know that you all know the answer. The answer is yes. I looked
this up on Google, if it's wrong, may a couple, but apparently 65% of the Chevy's that are sold
in Mexico now are Chevy's made in China, or if not China, South Korea. And so, I mean,
I looked at a couple of things. One is, it's another effort to kind of put a finger in the
dyke, stop them. And I think somebody was quoting the story that I read about this,
stop the Chinese from using Mexico as a backdoor to get into the North American market. Okay,
good luck. But second, it seems like the short-term impact of this is going to be yet another
blow to the Detroit three and yet another bite out of the profit margins that are already taking
a pounding from tariffs. And I just sort of wonder, I mean, kind of back to the beginning
of this conversation, I wonder kind of what that is going to do to the capital that's available
for investment in jobs in the United States, capital that's available for investment innovation.
That was what I thought. It seems like it looks great from a headline, keep BYD out,
Mexico. It's going to hurt the domestic brands. I mean, let's face it, the last time this country
a hundred years ago played with tariffs, everyone, we all know the term, you know,
smooth holly. Actually, one of those representatives came from my home state of Oregon,
lost in the next election. But actually, everyone did. Hoover lost,
Smoot lost, Holly lost, right? It started out as protection for farmers. That's how the smooth
holly tariffs kind of kind of were birthed. Then it became kind of an all things, you know,
oh, every, every under industry. And Henry Ford himself said, this is a really, really bad idea.
And you see Jim Farley kind of echoing that now, you know, he's kind of channeling Henry Ford,
saying that, yeah, this is a, you know, Mary Barra GM has been a little bit more nuanced.
Well, she don't want to get in Trump's crosshairs again. She already caught that on the Lord's
Founder. Yeah, she learned her lesson, I guess he could say. Yeah. But yeah, and it does see,
and again, let's see what, I mean, backfires. Yeah. And inflation numbers came out today,
and they're not catastrophic, but the direction of inflation is up again, up, you know, and up's
bad, okay? Okay, it's not 8%. Look, and the job numbers are bad. And the job numbers are not.
It's going to get worse because so far, the Detroit 3, it's not just them. Most automakers
have not passed on the cost of tariffs. Not just automakers, everybody, all businesses
are eating costs right now. But this, because, you know, one, no particular company in any
particular industry wants to be the first to say, I'm bumping prices 13% or whatever it's
going to take to cover that because they don't know what their competitors are going to do.
The other thing is, is that, I mean, it is such a uncertain market for a policy market, right? We
don't know what, what's 15% today could be 40% tomorrow, right? So everyone is just kind of
sitting there taking their lumps for as long as they can, eating as many costs as they can,
you know, to kind of protect their market share until they absolutely can't.
But I don't think they can hold much longer. Look, Ford Motor Company lost money, lost money last
quarter. General Motors, what, what did they claim? They had to pay out a billion dollars?
Yeah, they said it's going to cost them $5 billion for further year, right?
Anderson Economic Group put out a study, I think, kind of first on LinkedIn, but now I saw there
was an official study today. And they reckon that the automakers, I think it's all not just the
Detroit three, but automakers serving the US market in July, one month, paid $1.4 billion.
It's $12 billion total since the terror started. Right, right. And as you said, yeah. And I don't
know. I think, I guess it'll be interesting to see whether the, the reckoning and sort of the
parties over, you know, can't play, they can't fake it anymore statements come in the third
quarter calls or the fourth quarter calls. But, but, you know, I bet a 20, it's one or the other
of those two that where they say, okay, part, you know, we can't do this anymore. Well, we have to,
we have to adjust. We're deep into the third quarter right now, right? And sales are up.
Sales are up. Why? Because pricing's pretty good right now, relatively speaking.
Maybe I should have more courage and say, I believe after the, after the end of the fourth
quarter, after we see the payback, right, because the board, but people are, you know, and it's not
just EVs, people are pulling ahead purchases, not just for vehicles, but for appliances,
things that are expensive that, you know, if, you know, if the tariff pricing starts to bubble
through to the consumer, right, you know, people are smart, you know, they know what's going on,
you know, they want to get ahead of that. So how much of kind of the, you know, the, you know,
the sales, you know, you know, holding up well, how much is that just advanced purchases that are,
that have been pulled forward? Because, you know, what I fear is, okay, tariff's going to add cost,
that's going to reduce demand. You have all of these purchases that have been pulled ahead,
which is going to reduce future demand. So I think you're right, Joe, I think those fourth
quarter calls are not going to be fun. I'm going to, this is not my, I'm not a financial guy.
However, I did read The Art of the Deal. This is right out of his book. All he's doing is he's
beating everybody up. He won't get what he wants. He's going to give a lot of stuff up.
He's going to walk away from a lot of things, including tariffs, but at least he's caught
everybody's attention. And that's all he's looking for. I'm telling you what, by second quarter
and next year, everybody, how do you spell tariff? That's kind of like, it's just going to, it's,
it's here to scare the crap out of everybody. What's working? And then it's going to,
and you know what? So you got to give him a credit. If everybody's afraid. I'm talking about me.
Yeah. We'll hold hands later. But at the end of the day, by mid next year,
I don't know. I'm telling you. I'll invite you guys back next year because we'll see the
how the goes. It won't be news then. It's going to, I'm telling you what. Let's see what the economy
is doing. Let's see what unemployment is doing. Let's see what inflation is doing. Save the tape.
Save the tape and we can play it back and see how well we do it.
Standing Monroe, let me come back to you. Ernst and Young, they don't use that name anymore.
They go by EY, came out with a study this week that said they think EV sales in the United
States will hit 50% by 2039. What do you think? Okay. So EV, that's one of those misnomers. Is it
Bev? No, Bev. Pure Bev. Pure battery electric. Okay. Well, that was my prediction was 2035.
I said that it would be 5050 and that included plug-ins and everything, hybrids, whatever.
I said by 2030, we're probably going to see a 5050 situation where you've got pure ice and then
you've got some derivative electrification. Right. Okay. So that was for the world. Right now,
I'm off because like you look at some of these European countries and they're already at 60 or
so percent right now and you look at Norway. I don't know if they sell gasoline anymore.
Massive subsidies. Massive subsidies. At the end of the day, it's not just that. Norway's
electricity bill. I mean, it's like free. I know, but look at the tax on ice cars. It's 100%.
Look at the tax on gasoline. Yeah, and gasoline too. So that's what I'm talking about. Massive
subsidies. But Sandy Barua, what do you think? 50% by 20. I quoted that E&Y study earlier. Yes,
you did. Right. And I say, I think it's ambitious. I don't think we get to 50% by 39.
You know, now, I mean, are we at 35, 40%? Absolutely. With a nice mix of electrification,
either HEVs or PHEVs in the mix with obviously some kind of pure ice, especially people who
tow horses. Right. Yeah. Or campers. Well, actually, okay, so one of my guys is a horse person.
And he's quite well known. His wife is for sure. Jennifer Foreman is a big, she's big stuff.
I'm talking a Rolex training young girls and whatnot to do whatever they do.
They are now using his lightning. Why? Oh, that'd be ridiculous. Can't possibly make that work.
Well, one of the other guys that's a horse person at Monroe, Ken Cutler, or sorry, not Ken Cutler,
but one of the other guys. It doesn't matter. It doesn't matter. But at the end of the day,
he's been using his lightning, or actually the company's lightning. To tow horse trailers.
And this is big stuff. I mean, you look at the Foreman's, like Dave Foreman's trailer,
holy crap, it's got everything in it, plus a couple of three horses or whatever.
The problem isn't, can they tow it? Of course they can. I mean, EVs have got for how far.
It's how far. That's the whole question. And that's the thing.
But Joe, wait, wait, wait. Joe, what do you think? 50% EVs in the BEVs in the US by 2039.
Well, it was 14 years from now. I'm not sure I totally buy it, but I would say that I would say,
I mean, I think it's going to be regional and lumpy, right? I mean, in the center of,
between the mountain ranges, not so much, right? But on the coast, where most of the people are,
yeah. I mean, especially, I mean, I get me thinking about this. I mean,
as you see these sort of second and third, I mean, Tesla would be a third generation, I guess,
but as you see these sort of second and third generation EVs with the range, and the range
really kind of worked out to a point where it's not an issue, really, for most people.
The charging is standardized, right? I think that's a big deal. I know you've talked about it,
but when we get to like a standardized plug, when we get to, you know, so all the stuff that's
happening sort of now and isn't fully rolled out, I'm not sure I can, I would put a whole lot of
money on 50%, but I could, I think Sandy, Sandy, you said 35, 40. Yeah, I could go for that,
especially in the urban areas. You're thinking like you, right?
Yeah, yeah. What about your kids? What about your great children? That is where nobody is
putting any stock. Well, you're right. No, you're right. Well, I'm the smartest guy in the world,
and I would never, okay, but then go and talk to their kids. Now, I'm probably going to do,
I've been talked out of this like about 85 times, but I'm probably going to be putting on something
where I had a kid, obviously a lot smarter than I was when I was his age. I'm guessing he was like
between eight and 10, something like that. And he came up and I was loading lumber into my,
into the back of, I had the Rivian at the time, loading lumber into it. And this kid walks up
and he said, he puts his little hand out. Do I have the pleasure of meeting Mr. Sandy Monroe?
I'm going, where are you from kid? You know, I shook his hand and then he goes on and on.
My father is such a disappointment. He just doesn't quite get the electric vehicle.
My colleagues, my colleagues and I watch you at our lunch breaks.
That kid in 14 years. Tell me what he's going to be thinking.
Well, no, you're right. That's the problem. Everybody's thinking about me is the I thing.
Yeah. I think baby boomers and Gen X fill the windshield to a great degree when it comes to
the timeframe of that EY is probably why they made the prediction they did, right? Because
they're smart enough to look around. People who are filling the windshield right now.
And I, yes, you're right. I think, I think, I think that's right. I mean, I think there's going
to be a niche, I again, I mean, this is very much me talking now. I mean, we have a travel
trailer. We have a camper. You know, that's what we're, you know, we're running around in the
country with a teardrop trailer. I have not seen an electric vehicle that will pull, you know,
even a relatively lightweight trailer for the distances that I think will work.
So I'm out. I need, I need a Jeep Grand Cherokee to do that.
I would say we're, we're on the same page in terms of the estimate and we are EV converts.
Yeah. Right. You know, so I, I'm not speaking for me because I know that we're going to have EVs
going forward. I think the X factor, Joe, is are EVs still a political issue? Because right now,
part of the depression in EV demand is politics. Correct. As it, as politics is now part of it.
No, that, well, that's a great, no, it's a great question. And, and I guess one way to look at what
Trump is doing is sort of putting maybe, and the Republicans have done and just puts a positive
spin on it. Is everybody said, or not everybody, but a lot of people would say, look, you know,
at some point EVs are going to have to stand on their own in the marketplace, you know,
sink or swim in a free market on their own. Well, guess what? That's where we're going to be.
We're going to find out. And, and don't you think that the, that at some point in the industry will
say, okay, this is a valid product line that has a lot of people who we want as customers who want
to buy them. We better figure out how to make them profitable and competitive, right? I mean,
isn't that what they're going to do? And, and quite frankly, one of the people that said, why are we
getting, why are we taking, because I am a cheapskate, why are we taking taxpayers' money
to fund something that's like kind of industrial? It's, it's not supposed to be that way. The
government is supposed to put money out to do things, but not to, not to subsidize somebody's
transportation, not for me, unless it's like a bus or something. So here's the deal. I've been like
that. Who else, who else has said those same thing to things? Elon Musk. Yeah, well, yeah, I'm
telling you flat. And now we're looking at battery packs. And let me, let me rephrase that. We're
looking at systems, a car system. And if you're around 100 bucks a kilowatt hour, regardless of
what it is, you're in, in the money. Well, the last couple of cars we've done, we've analyzed,
that gets you 300 miles of range. Well, guess what? The battery systems and whatnot, they don't
cost as much anymore. There's a lot more people making them. Okay, no, it went back up because
we couldn't get them from China. But at the end of the day, there's, there's German guys, I don't
know if you've heard, but, but a German Canadian company. They're, they're mining and refining
lithium right now. We've got other guys like EnergyX sucking big, giant salt pools in California,
but even more importantly, the triangle there in Chile, Chile, Bolivia, and, and Argentina.
That's where all of the, these pools are. Take a, you take a ton of, of sea water or whatever the
kind of brine water that they've got, and you get two kilograms of, of lithium. And guess, and you
still have to refine it. But at the end of the day, that's a whole lot better than scraping rocks off
the, off the whatever. Hey, look, we're going to have to wrap the show up. But I, I, I get the final
words. Oh, there you go. Here's one quick, quick, go ahead, Sandy. We didn't, the federal government
back, back in the day, we did not subsidize the purchases of the original cars that were on the
road, but we subsidized the holy heck out of the oil and gas industry. And the highways. And the
highways, right? I mean, there was a lot of taxpayer money that went in to the oil and gas
industry so they could go outside of America to bring oil and gas back into America so people
could drive their cars for cheap. So my prediction for 2039 is we're going to laugh at the idea of
range anxiety. We're going to laugh at the, we're going to say, you know, remember back when people
were so worried, it's going to be like saying, remember back 100 years ago when people would not
give up their horses because they didn't trust these new fangled things called the hoarseless carriage.
And the other thing too is I'm not sure if it'll be 50% because I think E revs are the next step,
extended range EVs, which I think are perfect for big trucks and SUVs that are pulling trailers and
hauling loads. So but I think when the EV rebates expire in the United States at the end of this
month, EV sales will go down. I don't think it's going to go to the 4% that some are quoting right
now. But I think EY is probably not too far off the mark when it comes to 2039. It's we're going to
see a lot more electric vehicles on the road. Well, I hope we're all around to see it.
And they've gotten so attracted. Let's hope that there are still a lot of options out now, right?
No matter what you want in an EV, it's out there for you now. That's right. So let's wrap it up.
Joe White, High Speed Rodeo, Sandy Barua from the Detroit Regional Chamber and Sandy Monroe,
awesome to have you back on the show. Thank you. And I want to thank all of you for having tuned in.
AutoLine After Hours is brought to you by Bridgestone Tires. Solutions for your journey.
About this episode
A deep dive into the challenges facing Detroit and other regions reliant on legacy automakers, featuring insights from industry experts Sandy Barua and Joe White. The discussion highlights the impact of trade policies, tariffs, and the shift towards electric vehicles (EVs) on local economies. The guests emphasize the need for diversification beyond traditional manufacturing and the importance of education in technical trades. They also explore the future of EVs, predicting significant growth in adoption, while addressing the political landscape's influence on the automotive market.
Original notes
TOPIC: How to Survive Change PANEL: Sandy Munro, Industry Expert; Joe White, High Speed Rodeo; Sandy Bahruah, Detroit Regional Chamber; John McElroy, Autoline.tv
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