A global reduction in force means that a company is laying off a lot of workers all over the world to save money. This usually happens when the company is not making enough profit.
EVs stands for electric vehicles, which are cars that run on electricity instead of gas. They are better for the environment and can save money on fuel.
The Sprinter van is a large vehicle made by Mercedes-Benz, often used for businesses to transport goods or people. It's known for being roomy and practical.
Stellantis is a large car company that was created by merging two other companies. It owns many different car brands, including Jeep and Dodge, and aims to make cars that are better for the environment.
Floor plan costs are the fees that car dealerships pay to borrow money to buy the cars they sell. They have to pay interest on this money until the cars are sold.
Incentives are discounts or special offers that car dealers or manufacturers give to help sell cars. They can make buying a car cheaper or more appealing.
A floor plan cost estimator helps car dealerships figure out how much money they spend to keep cars on their lot. This can help them decide how to price the cars they sell.
Ford is a well-known car company that makes many types of vehicles, including trucks and sports cars. They have been in business for a long time and are famous for models like the Ford F-150 truck.
Initial vehicle quality is how well a new car works in the first few months after someone buys it. It looks at any problems that new owners might have.
Transparency means being open and honest about things like car prices and safety issues. It helps customers know what they are getting when they buy a car.
LIVE
It's noon here in Ventner City, New Jersey, and our nation's capital, Washington, DC,
and this is Car Eng Live for Thursday, February 12th with your hosts, me, Ray, here in my condo
inventor and Zach. Well, in his apartment in Washington, how are you today, Mr. Handsome?
Mr. Handsome, wow, I'm feeling really good now that I know I'm Mr. Handsome. Thanks everyone so
much for tuning in on this Tuesday, February 12th. Today's show, for those of you that don't know,
is brought to you by CarEdge.com. Car sites show you fake prices. We'll get you the real one for
those of you that don't know. Back at CarEdge.com, we provide car buying services that take care of
dealer research, outreach, and even negotiation. We learn what matters to you. Contact those dealers,
compare real offers for you, and help you get the best deal without the stress. Now, we recently
launched, and it is fully in beta, CarEdge.com slash dealer dash ratings. I encourage everyone to
give this a quick peek because I need your feedback. There may be some bugs, there may be
some inconsistencies, but at the end of the day, what we're trying to do here is provide you with
information on dealers who are transparent and dealers who are maybe not. For example, here,
we could click into this particular dealership, and we can see that on average, they are adding
a lot of add-ons. What are those add-ons you might ask? They are adding Triton,
CarXF, and Freedom Package. Not the Freedom Package, the Freedom to Overpay, ladies and gentlemen.
You can see it right there. So yeah, please, folks, use this website. It's again in beta right
now, CarEdge.com slash dealer dash ratings. Play around with it. Share your feedback in the comments
and in the chat. I really, really appreciate it. Now, the big news this morning, Dad, Nissan
and Mercedes-Benz, and quite frankly, the Chinese auto market. We're going to talk about all three,
but we'll start with Nissan and Mercedes-Benz. Nissan, Dad, they've made it seven for seven in
their factory exits. They're planning huge job cuts, and they're anticipating big, big losses at
the same exact time, Dad. Volvo, excuse me, Mercedes, excuse me, has earnings that have
been cut in half, excuse me. And another one is Volvo. Volvo had a terrible January,
and you know what? We're just going to go into all of it right now. China, Dad, actually changing
the way they do car pricing after 20% sales drop in January. It seems like a little bit of a Black
Thursday, excuse me, in the auto industry this morning when it comes to some of these automakers,
news headlines, and obviously what's happening internationally.
So it's not just here in the United States. It is in China as well, and many of the major players
and manufacturers are struggling because, well, their earnings aren't what they had been due to
any number of additional expenses that they've incurred in the past year. You have got to be
kidding me. Really? You've got to be kidding me. Yeah, Dad, ultimately what's going on here is
Nissan has been going through a period of time where they're trying to get back to some level
of profitability, and to do that, they are ultimately shutting down factories nationwide,
or excuse me, globally, because they have so much oversupply of capacity. This is leading to a 20,000
person global riff reduction in force, and that their profit fell in their most recent quarter,
44% for the end of last year. So Nissan is showing some real, real, real challenging
circumstances here, cutting back production obviously, a big, big decline in profits,
and they're having to lay off a ton of their staff. And you know what's interesting? Nissan,
along with several other brands, have plans to resurrect themselves, and those plans for a
number of these manufacturers is to somehow increase sales this year by 10%, while the industry is
expecting new car sales as a whole to decline about 2.5 to 3.5%. So one has to wonder how the
brands that are struggling the most are going to be able to acquire a 10% growth rate when the
industry itself is contracting. How are those things going to play out? In my mind, they're not.
Yeah, and obviously, these automakers are starting to show signs that maybe it won't be the case.
Mercedes-Benz, Dad, their 2025 earnings, like I said, they were cut in half. You read through
this article, and it's very, very clear that it's by a couple of circumstances, but higher
tariff costs are a huge piece of all of these companies' woes right now.
And there's a great article, I guess I will show this screen again. We'll pull it back up
over here on Car Dealership Guy News. Automakers are resisting wide-scale MSRP increases despite
huge tariff costs. This article talks about exactly how much these automakers are footing the bill
of increased tariff costs. So it's like, who's like some of the most famous welterweight and
heavyweight boxers, like Mike Tyson and Sugar Ray... Leonard was one. Sugar Ray Robinson was.
Muhammad Ali, it's almost like these automakers are in the corner and they're taking a left hook
and then a right hook and then a jab and then an uppercut that just punches from every direction.
Well, I will tell you that I was literally at the Sugar Ray Leonard Tommy Hearns fight in Las Vegas.
And I remember Angelo Dundee slapped Sugar Ray Leonard, I think, between the 12th and 13th rounds
and he looked at him and he said, you're blowing it, son, you're blowing it. And well, he did come
out and then knocked Tommy Hearns out, well, TKO in the 13th round or 14th round, one of the two.
But it seems to me that a lot of these manufacturers, well, they're blowing it, son,
they're blowing it. They have these grandiose ideas and grandiose plans that after you have
run your companies into the ditch, that just because you say, well, we want sales to increase 10%
this year when the industry is contracting, that's like me saying I like to be six foot tall,
okay? I'm what, five, five and a half, five, six on a good day, when I feel limber.
What's the end date here, Dad? Seriously, what's the end game? And I will share one more piece of
info from that article about China because auto industry, while we care about it domestically
here in the United States, our audience here wants help, once help, excuse me, buying cars here in
the United States, it is a global business. And it's in a perspective here in China,
1.4 million vehicles were sold in January compared to 2.2 million sold in December.
Okay, so this is a huge, huge, huge slowdown happening globally and that's down 20% year
over year. So a huge slowdown happening globally. What's the end game? What's the end game if they
can't lower prices because they have higher expenses? We talked about it yesterday, they actually are
not increasing their incentives in Nissan, Mercedes-Benz and others as much as they need to to sell
the image. What's the end goal? There's only so much money you can, you cannot make per vehicle
sold, okay? And remain in business. So what's the end game? The end game, I think for many of these
manufacturers is that there will be consolidation and some of these brands, as we know them,
independent brands, as we know them, might either a, go away or be consolidated with another
manufacturer and lose their independence. But there is no long-term plan for long-term losses
due to tariffs and other things where a company can just continue to lose money and absorb
all that extra cost and be profitable. At a certain point, you have to make a decision.
Right now, the decision for most of these manufacturers is to eat as much of the tariffs
as they can. That will change in time because at a certain point, it's going to be, okay,
we need to make money again. How do we do that? We have to raise the prices to cover the expenses.
It's pretty simple and then some are going to be so far behind the eight ball that they're going to
go out of business altogether. So I want to take this down to the dealer level because I want to
back to that. Remember the time we went to a Mercedes-Benz dealership to film some content?
This was years ago. And the lot was just jam-packed. I mean, there were so many vehicles.
I want to look at a Mercedes-Benz. So many EVs in my life.
Yeah, exactly. So actually, I want to do this really quickly. So I'm going to use our new,
again, it's very much in data, but we've got this Mercedes-Benz, so let's search for a Mercedes-Benz
dealer here. And sure, Mercedes-Benz Foothill Ranch. Let's click on this one. All right,
I'm going to click on it. Different one actually because I want the little shop inventory button
to pop up here. Okay. Again, beta might not actually work. We shall see. There we go. Shop
inventory. And the reason I want to do this is because then I want to come over to the car edge,
car search. Okay, the joys of beta. Can't find Mercedes-Benz van behind. Let's just find one
here quickly on the car search. Let me do dealership. Mercedes-Benz and North Scottsdale. Sure.
I know that dealership. Yeah, they have 250 vehicles on their lot right now.
New. We're just looking at new. And then I'm going to sort it by Dazon Market Oldest.
Okay. These are Sprinter vans. They're not cheap though. It's very clear here. They're not cheap.
No. But most of them are getting ready to celebrate a birthday.
I mean, this is expensive for a dealership or sitting on this Mercedes-Benz CLE for 293 days
or this one for 293 days. The reason I wanted to pull this up is because this feels untenable at
both levels. This feels untenable at the OEM level. It also feels untenable at the dealership
level. How long can I just sit on $60,000 plus pieces of inventory, $80,000 plus pieces of it?
I mean, this costs the dealership money every single month and four play expense.
Lots of money. Not like little bits of money, lots of money. Obviously, it depends on the
dealership group and how successful that dealership group is. But yeah, you're looking at it and
you're looking at expensive vehicles and they aren't selling quite as well as they had been.
Mercedes' problem for them as the manufacturer is that they are trying their best to absorb as much
of the added expenses as they can and it is negatively impacting their profit.
As I said earlier, at a certain point, all these giant-ass corporations are going to do what they've
always done, which is to pursue profits and profitability. I mean, if you want to believe
that the reason they exist is just to build cars, then I've got a bridge for you. The reason for
existence is to attain world-class profits. If you've halved your profits due to added expenses
that you haven't felt as if you could pass on to your customers, that can only go on so long.
Your stockholders are going to insist that you find ways to become even more profitable.
You're trying to serve a couple of different masters here, but ultimately, you have to
please your stockholders. They're the ones that are propping up the value of the corporation.
I honestly believe there's only so long all of these companies, Volvo, Nissan, Mercedes,
Stalantis, there's only so long they can eat the added expenses before they say,
okay, the hell with that, we need to figure something else out.
I think Dylan's got the right question. That is a question. How long can a dealer hold on to all
these vehicles and eat the floor plan costs? It looks like we're headed back towards, I mean,
Dad, you've been doing this for what, six years now? There have been periods where dealers very
much were desperate for customers. It's when they were sitting on inventory for significant periods of
time. Then there have been periods of time where dealers didn't care if they had customers because
there were people lined up out the door. There were wait lists to buy cars. If you're a Mercedes
dealer, if you are Mercedes North Scottsdale and you were sitting on all that inventory,
which is millions upon millions of dollars worth of inventory and you are paying huge floor plan
expenses to do that, you're going to do what Stalantis dealers did, which is to insist that
they come up with programs to bring customers back into the dealership. Those programs might be
incentives to the dealer themselves. It could be increased incentives to customers,
but at a certain point, even Mercedes of North Scottsdale is going to go to their factory rep
and say, we can't keep going down this road. We need to see something and do something different.
Maybe we should add, let me know what you think of this idea, Dad, and everyone that's with us.
What if we added to the vehicle detail pages a floor plan cost estimator? No, I'm serious. As a
user, you can see the estimated cost that this dealer has had in floor plan for holding onto
this vehicle for two, three days. I think that'd be hilarious. If you show that to the dealer,
you show up to the dealership, you're like, hey, I've estimated your floor plan cost on this vehicle.
Do you want to settle it?
Yeah, I would imagine they would. I mean, something's got to give, and ultimately it will.
Even if that means raising MSRPs again and then increasing incentives to bring the
ultimate transaction price back down to where it was, because a lot of it for people was perception.
If you perceive you're getting a great deal, because the size of the discount got bigger,
it's going to just playbook forever. Yeah, but the only reason the size of the discount seemed
to get bigger was, well, the asking price went up, the commensurate amount of the size of the
discount. But people fall for that every day. That is the beauty of, well, not doing homework.
You are easily fooled. Perhaps that's what we'll see moving forward.
We shall see. Interesting time for Mercedes-Benz and Nissan with their quarterly earnings
coming out. Obviously, the Volvo had mine as well. Pretty similar. Hey, we're struggling.
Please tell me one thing. I just saw that brief headline about Volvo, and in order to
accomplish what it is that they need to accomplish, well, they want to drive to 200,000 annual sales.
What size sales increase is that that they're expecting for a brand that doesn't sell
presently in a contracting market, and then suddenly you expect your products to
become more desirable? How and why? I mean, really, how and why? I know Nissan,
their goal is to get back to a million sales annually. How and why in a contracting market?
How? How the hell are you planning on doing that? Stalantis. We're bringing out new product to
increase sales. The market's contracting. How and why? Why do you think your sales are going
to go up significantly enough in a contracting market that you're suddenly going to take
market share from the brands that people are buying? All this information comes from
when you were at NADA. It is as if these manufacturers and these dealers are living
in some type of fantasy land where, well, if we say it, it must be. I mean, we wouldn't
suggest a 10% growth in sales if we didn't think it were possible. I want to bet. I don't know how
many times I've seen it where the manufacturer anticipates. I mean, I was with Acura for like
ever, and it was always like, well, this is the year we're going to hit 200,000. Why? Because,
well, because we just said it. Now, it's your job as dealers to make it so. It doesn't work like
that. It's just interesting to me when you look at what the manufacturers are saying, how in order
for them to be successful, they have to have 8% sales growth or 10% sales growth when what they've
said is 8% the sales declines. How are you suddenly going to turn it around in the contracting
market? I ain't buying it, but that's just me. Hey, man. A little bit of capitalism is optimism
and saying you're going to accomplish incredible things. Speaking of accomplishing incredible
things, Dad, we need to turn our attention to recalls. Does anyone take a guess at who is
leading the league in recalls so far in 2026? I think it's a four-letter brand. I think it
starts with an F and ends in a D. Starts with an F and ends with an O, yes. So it's not fiat,
ladies and gentlemen. So here's what's interesting. So Ford is off to the races and was leading the
league. Compared to history, yeah. Leading the league in recalls. Now, what's interesting is
carscoops, Dad. They did a little bit of investigative journalism here and this, I find,
to be so fascinating. So thanks to Michael for doing this. Yes. Ford set a recall record. So now
everyone gets a bigger bonus for improved quality. I read that headline. I was like,
huh, what could possibly be going on here? You ready for this, Dad? Okay. All right. So Ford
issued 153 recalls last year. We all knew that. Yes. Now, even though there are all these red flags,
partly told employees to expect a company-wide bonus of 130%. Now, when they were asked,
when the executive was asked to explain this, it was due to improved initial vehicle quality,
which is measured during the first 90 days of ownership. So employees at Ford, which you know
what? I like employees getting a bigger bonus. So I'm pro that. The justification, though,
that we have improved our vehicle quality, initial vehicle quality at the same exact time
when what was it? It was a $500 million recall just for a fuel injector. Uh-huh. And to be clear
here, the recall record that they set last year, it wasn't even close. General Motors had had the
previous record at what, 69 recalls? Yes. And Ford with over 150. Yeah, 153. So what that indicates
to me is if you're an employee of Ford, you're going to see to it that that recall doesn't happen
until the 91st day, instead of within the first 90 days. Exactly what I thought when I read that.
I was like, are you serious? Trust me when I tell you, people figure out how to work a pay plan.
Okay? Sales people figure out how to work a pay plan. Sales managers figure out how to work a
pay plan. General managers figure out how to work a pay plan. Trust me, the employees that would
be able to participate in that bonus, they will figure out how to work that pay plan so that
whatever recalls happen don't happen within the first 90 days. So expect all those recalls to
be delayed, ladies and gentlemen, but they will be there. And it is, well, it's the same type of
fantasy of, you know, we need to increase sales 10%. You know, one of the ways we're going to improve
quality, or at least the perception of quality, is that we'll limit our recalls and we'll make
them happen later as opposed to sooner. Well, it's still gonna happen just the way it is.
Incredible, man, that this is what goes on in the world. And yeah, I mean, Ford obviously,
off to the races, they are, again, leading the league thus far, so far this year in terms of
recalls. A commanding lead, almost double as many as the next automaker, which is Hyundai,
who have four, so I want to be clear. Hyundai has a decent amount of recalls so far this year, but
crazy, man, absolutely crazy. But I do like, I want to be clear, I do like seeing the employees
of Ford making more money. That makes me happy. You know, there was an interesting, I was just on
LinkedIn, and I was reading something by a gentleman you know, Andy Wright,
yeah, who keeps calling for transparency when it comes to how these websites,
these third party websites allow dealers to advertise pricing. And what Andy was talking
talking about in his comment today was how much the total amount of write downs and write offs
associated with EVs, all these major manufacturers have accumulated to this point.
You sitting down? I'm sitting down.
67 billion dollars plus, okay, in write offs and write downs due to the failed attempt at EVs.
So if you look at that number, you know, you try and figure out, well, how they're going to
increase their sales 10% when they're not, but how do they recoup some of that money? Now,
obviously, it'll impact taxes that are due and things like that because, you know,
they're losses. But, you know, what if there were an actual attempt to get that money back?
How do you do that? You know, I've said it before, you're not doing it by building less expensive
cars. So I know we keep seeing headlines that say the manufacturers are trying to hold the line on
MSRPs and things like that, but they are only to a degree to where it benefits them, not where it
benefits customers. They will continue to mass produce the high profit margin, high price point
vehicles until they can recoup some of that 67 plus billion dollars. And you know who's going to pay
for that? You and me and every other consumer out there. And if it's not you and me and every
other consumer out there, then it could be the government coming in and helping them out, which
is still you and me and everybody else out there who pays taxes. So we will underwrite these bad
decisions for years and years and years to come. I only wish that the bad decisions that I've made
in my lifetime that the government was willing to underwrite those for me as they are for these
industries. All right, folks. Well, we're back for another episode of Car Edge Live. We'll wrap up
the week tomorrow. So please tune in at 12 p.m. Eastern Time, 9 a.m. Pacific. We appreciate
everyone doing that. I appreciate the feedback on the dealer ratings. Again, big beta project,
work in progress. So keep sharing your feedback. Really appreciate it. And dad, enjoy the afternoon.
It's almost going to be warm here today. I think it's going to be above 40 degrees.
You know, I saw in the future forecast, I think one day next week, it's actually supposed to be
50 degrees here at the shore, which is, and you know, the shore is significantly cooler than
where you are this time of year. So I might run around shirtless that day and probably scare the
hell out of the people that I run past. But whatever, it will be excited to feel 50 degrees again.
It will be indeed. Folks, we'll see you here tomorrow. We look forward to it. Pops, love you,
enjoy the afternoon. Love you too, handsome. Thanks everybody for being here. We'll see you tomorrow.
If you liked the show, please take a moment to rate, review and subscribe. It really does help
the show to grow. Thank you for listening.
About this episode
Nissan and Mercedes-Benz are facing significant challenges, with Nissan announcing major job cuts and a 44% profit decline, while Mercedes-Benz has seen its earnings cut in half. Both companies are grappling with oversupply and rising tariff costs, leading to concerns about their ability to increase sales amid a contracting market. The discussion touches on the broader implications for the automotive industry, including potential consolidation and the unsustainable nature of current dealer inventories. Insights into dealer operations and the impact of global market trends provide a comprehensive view of the current automotive landscape.
Today on CarEdge Live, Ray and Zach discuss the latest news from Mercedes-Benz & Nissan. Tune in to learn more! Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com
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