Major shifts in supplier contracts are reshaping the automotive landscape, with GM implementing new terms that provide more flexibility but create uncertainty for suppliers. The episode discusses the implications of these changes alongside the potential introduction of tariffs on robotics and industrial machinery, which could further strain the industry. Rivian's CEO emphasizes the necessity of software-defined architectures for future survival, highlighting the evolving technological demands on automakers. Insights from industry experts provide a deeper understanding of these pressing issues.
"...Rivian CEO says automakers will need software-defined architectures to survive in 10 years."
Software-defined architectures mean that a car's features and functions are controlled by software, allowing for updates and changes without needing to physically alter the car. This is important for modern vehicles as technology evolves.
Software-defined architectures refer to vehicle designs where software controls various functions, enhancing flexibility and enabling over-the-air updates. This trend is becoming essential for automakers to stay competitive in the evolving automotive landscape.
"General Motors is making a major change to its purchase agreements."
General Motors, or GM, is a big car company that makes many different types of vehicles. They are working on new ways to do business to keep up with changes in the car market.
General Motors (GM) is one of the largest automotive manufacturers in the world, known for producing a wide range of vehicles under various brands, including Chevrolet, GMC, Buick, and Cadillac. GM is actively adapting to market changes and challenges in the automotive industry.
"Ford is pausing production next week of the F-150 Lightning Electric Pickup in Dear Board Michigan. That's after a fire in New York State at a novellis aluminum plant that supplies the automaker."
The Ford F-150 Lightning is an electric pickup truck that is part of Ford's F-150 series. It's designed for those who want the capabilities of a truck but with electric power.
The Ford F-150 Lightning is an all-electric version of the popular F-150 pickup truck, known for its performance and utility. It represents Ford's commitment to electrifying its vehicle lineup and competing in the growing electric vehicle market.
"That's after a fire in New York State at a novellis aluminum plant that supplies the automaker."
Novelis is a company that makes aluminum products, which are used in many cars to make them lighter and more efficient. They also recycle aluminum, which helps the environment.
Novelis is a global leader in aluminum rolling and recycling, providing a significant amount of aluminum to the automotive industry. Their products are essential for manufacturing lightweight vehicles that improve fuel efficiency.
"And Rivian CEO, R.J. Skaringe, says he believes software-defined vehicles will be critical for automakers' survival in a decade's time."
Software-defined vehicles are cars that use software to manage many of their features, which means they can be updated and improved over time, similar to how apps on your phone work.
Software-defined vehicles are cars that rely heavily on software to control various functions and features, allowing for updates and changes to be made remotely, enhancing flexibility and efficiency.
"He touted Rivian's technology architecture and the upcoming R2 model slated to come out in the first half of 2026."
The R2 is a new electric vehicle that Rivian plans to release in 2026, and it's part of their effort to make more affordable and versatile electric cars.
The Rivian R2 is an upcoming electric vehicle model expected to be released in 2026, designed to build on Rivian's innovative technology and appeal to a broader market.
"He touted Rivian's technology architecture and the upcoming R2 model slated to come out in the first half of 2026."
Rivian is a company that makes electric vehicles, like trucks and SUVs, designed for outdoor adventures.
Rivian is an American electric vehicle manufacturer known for its innovative technology and focus on adventure-oriented electric trucks and SUVs, such as the R1T and R1S.
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The lightning plant will go idle in the wake of an aluminum plant fire, and Rivian CEO says automakers will need software-defined architectures to survive in 10 years. Plus, the Trump administration looks like it's moving toward new tariffs on robotics and industrial machinery. Alex Partners, managing director Neo-Ganguly, joins the show to talk about what that would mean for the auto industry.
As we stand today in the United States, robotics and industrial automation manufacturing, we cannot fulfill the capacity the demand that is needed in the United States. We can only fulfill about 75-80% of the capacity.
Let's run through all the news you need to know to keep up in the auto industry. General Motors is making a major change to its purchase agreements. It's joining its Detroit 3 competitors in trying to tighten supply contracts for more operational flexibility
as rising costs weigh on the industry. According to an analysis by our sibling publication Crane's Detroit Business and legal experts, GM has inserted a new clause into its purchase orders in recent weeks giving GM the ability to extend contracts indefinitely and dictate pricing adjustments.
The extension clause breaks with GM's traditional fixed-term contracts, which gives suppliers clarity on program end dates, better allowing them to plan their business as well as leverage for better pricing.
We'll have more on this story in a minute with Crane's Detroit Business reporter, Kurt Nagel.
Ford is pausing production next week of the F-150 Lightning Electric Pickup in Dear Board Michigan.
That's after a fire in New York State at a novellis aluminum plant that supplies the automaker. A memo shared with workers at the plant viewed by Reuters says the Rouge Electric Vehicle Center will be off next week.
Ford declined to provide specifics on any production adjustments.
And Rivian CEO, R.J. Skaringe, says he believes software-defined vehicles will be critical for automakers' survival in a decade's time.
He says legacy automakers have depended on inefficient and inflexible technology architectures and their vehicles for decades, which will increasingly become a problem in the coming years.
I would say emphatically that it's inconceivable to me that a car company can exist and maintain market share by 2035 and not have a software-defined architecture.
Skaringe was speaking during a fireside chat with the Automotive Press Association at Rivian's offices near Detroit.
He touted Rivian's technology architecture and the upcoming R2 model slated to come out in the first half of 2026.
In those are today's headlines, you can find more details on all those stories at autonews.com.
Joining me now from our offices in Detroit is Kurt Nagel of our sibling publication, Crane's Detroit Business, who broke the story about GM's new supplier terms.
Kurt, welcome to Daily Drive.
Thank you for having me.
So, Kurt, what do these new terms mean for GM suppliers from a practical and financial perspective?
I think what it means is just more uncertainty for suppliers.
There's always been this push-pull relationship between the OEMs and the suppliers.
Automakers want more flexibility within their operations.
Suppliers need certainty so that they don't get hosed on investment and capital equipment decisions and the like.
What these terms are seeking to do is give more leverage, more flexibility to GM as a result, less clarity, certainty, and leverage for suppliers.
And Kurt, why did GM do this now?
So GM did not indicate exactly why, but there's some pretty obvious clues.
The automakers facing $4 to $5 billion of tariff costs this year.
At the same time, they are overhauling their supply chain with a strong emphasis on resilience and ensuring the like.
And that costs a lot of money.
Not to mention all these EV cancellations.
GM invested very heavily in EVs, asked their suppliers to do the same, left a lot of stranded capital, a lot of sunk investments, lack of ROI for suppliers, and now suppliers are seeking some help from GM.
So if I had to guess I would say that GM is seeking to maybe put their foot down a little bit and tell suppliers say we're going to help you, but at the same time we need to make sure that we protect our business and tightening up those legal terms is a practical way to do that.
Good stuff, Kurt. Thank you so much for joining me. Thanks again for having me coming up.
Alex Partners, managing director Neil Gangouli joins the show to talk about what new tariffs on robotics would mean for automakers and suppliers.
That's next on Daily Drive.
Automotive news shift podcast brings you the latest on automotive technology trends and transformation. I'm Hannah Lutz.
I'm Molly Boygon. We're the new co-host of shift and we're excited to bring you new conversations with experts and industry insiders, like this one with Larry Dominique, president of LD Management Consultant.
Do you believe the legacy OEMs are falling into a trap? They've got to find a way to, in some ways, build new airplane while they're still in flight.
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The U.S. Department of Commerce is setting the stage for potential robotics and industrial machinery tariffs.
While tariffs are not guaranteed, duties on industrial machinery and robotics would create another cost for automakers and suppliers already dealing with tariffs on vehicles, parts, steel, and aluminum.
Neil Gangouli is managing director of Alex Partners. He spoke with our own Molly Boygon about the possibility of robotics tariffs and what they would mean for the industry.
Neil Gangouli, partner and managing director at Alex Partners, thanks so much for joining us.
Thank you for having me.
So for someone who has not been following this latest development, what exactly did the government release on Friday and what did it say?
It's been in the works for a little while. While the announcement is recent, it's been in the works for a little while.
And the reason I say that is because the section 232 tariffs on the metal steel and aluminum already existed.
And when this was announced earlier this year, I think in February or March or that time frame, it was already mentioned that there would be more derivative products that would be under the tariff regime at some point in time during the year.
And that's what we're seeing is incrementally sort of that being acted upon.
And the robotics and the industrial equipment announcement that just came out with the Federal Registry on Friday is just a continuation of that regime announcement earlier this year.
Right. So the government is saying it's going to investigate the possibility of imposing section 232 tariffs which are tied to national security on robotics and industrials.
And that is a derivative product of steel and aluminum, as you said.
Right. And whether it's a derivative or not, it's now under investigation to put it in the section 232.
Now, the closest link we have is it is and but it's got a lot of semiconductor in it. It's got a lot of copper in it.
As you know, semiconductors and copper and other commodities that have also been considered under section 232.
So it's under the overall umbrella of section 232 tariffs.
Now, what rate applies and how it's considered, right, will depend is remains to be seen.
But it's a matter of, you know, how the all these products are perceived where they come from and what rate is applied if it if it is.
And the government is seeking more information about the nation's reliance on imported robotics and industrial manufacturing products.
What do you expect the government will find in terms of where different manufacturing industries are getting this type of equipment?
Yeah. So in terms of, so, so industrial, so sticking to robotics and industrial automation, I think that's kind of what we're talking about.
You know, that space in the United States in the, in 2024, there was about 750 million of robotics just imported, just robotics imported, right.
This does not include industrial equipment and machinery and other things that that may or may not qualify under this particular federal register claim.
But off that 750 million of robotics that were imported about 40% went to the automotive industry, right.
So you're talking on an annual basis, maybe just taking 2024 as a data point, about 300 million of that came in, right.
And the impact of that is that when a new program is announced or launched and when plans are upgraded in the automotive suppliers and OEMs and ecosystems, right.
These are needed in terms of the automation that is put in the plant.
We always know that there are labor shortages that the industry is already dealing with.
These obviously can go a long way in terms of alleviating that shortage and bringing in production efficiencies to the automotive ecosystem.
And therefore, it is an important component of production, more and more production being insured, right.
And therefore, what we're going to look at potentially is, hey, what is the impact of this in terms of costs in terms of the feasibility to have US manufacturing comp at the same time and so on and so forth, right.
Today, as we stand today in the United States, robotics and industrial automation manufacturing, we cannot fulfill the capacity, the demand that is needed in the United States.
We can only fulfill about 75 to 80% of the capacity.
And so what countries are we relying on to manufacture the equipment to make up that shortfall in our domestic manufacturing capacity?
The largest centers of these, of course, China ranks number one in a 10 to one above the United States in terms of robotics installations.
Germany has a lot of robotics and industrial automation manufacturing. South Korea is a significant hub driven by some of the companies out there.
And then from the global players who have put in capacity in North America, a lot of them have gone to Mexico, which is another place.
Now, the United States, I don't know exactly where, but it is among the top 10 or so, but these are the four or five top ones.
And I think that's interesting spread of countries that you just mentioned because it's a much more complex picture diplomatically, you know.
As you say, there is reliance on China, which the administration has indicated it does not have a problem with terrifying, you know, pretty intensely.
But in terms of Europe and South Korea, those are regions or countries that the United States hasn't historically had a much-friendly trading relationship with.
Do you think that that type of dynamic impacts the likelihood that the government is actually going to impose these tariffs on the importers of robotics and industrial manufacturing equipment?
It'd be hard to speculate whether the government will or will not, right?
I think the question becomes, you know, for the industry, for the automotive industry and for the industrial players to say, hey, am I planning for the right set of scenarios to evaluate?
To evolve, right?
If the tariff is indeed imposed, do I now have the right set of options and choices in my supply chain for industrials and tooling and robotics?
Or am I dependent on tariff regimes?
The good thing about the announcement coming out before the actual tariffs are levied is there is some time for companies to actually plan and look at the scenarios that could evolve and how they want to handle or deal with that.
So, while it's really difficult to say whether it's going to come or not, I mean several have come, several have not.
I think the industry needs to be ready, no matter what the outcome is.
And it's interesting that the domestic manufacturers have, as you said, somewhere between or around 70 to 80% capacity to manufacture what's necessary for the country.
Is that gap driven by labor shortages? Is that gap driven by a lack of capital?
Can you try and explain why 70 to 80% is the majority, so why is the domestic industry unable to manufacture the full suite of necessities that the nation requires?
Well, they potentially could, the capital hasn't gone in and the capacity investments haven't gone in to date, possibly because of some of the reasons as you mentioned, right.
Well, it was maybe the technology was already existing in a certain country, one of these, you know, Japan, South Korea, China, Germany.
The company or the set of folks that made the decision to go with that, it was, it was better business case at that point in time.
So part of it is historically what decisions have been made, right, whether you want to tool up and manufacture your own tooling or not.
The second factor is technology availability, as we know, robotics itself is a category, right.
It's a product that has electronics, it has metallics, it has advanced materials.
So the supply bases related to these components that go into the robotics system that you're going to use and import are based in other countries, right.
Maybe the semiconductors, you know, China, Taiwan, South Korea, Japan, there were technologies available there, you know, Germany, as we know, high precision, you know, manufacturers.
So for historical reasons, the choices of whether to manufacture or buy have gone one way or the other, but as we stand today, if all the capacity was used, you said about three quarters of it could be done in house.
Not that it is being done today, but it could be.
And, you know, as you said, this is just an investigation, there's no guarantee that the tariffs will be applied.
The next step is that there's a 21 day public comment period whereby the government is going to be seeking comment from companies, from industry groups, from other stakeholders.
I know you don't have a crystal ball, but what types of comments do you expect from the industry? Is this a tariff that would be welcome to encourage that domestic manufacturing that you described or is the cost impact, you know, going to cause alarm.
Two or three points on that, right? One is it is going to be a cost item for folks that are dependent on, it is one more line item that they now need to worry about an automotive industry suppliers and the ecosystem and OEMs need to worry about when they're looking at importing certain products that they want to use.
In this case, this doesn't happen to go on a vehicle, it is, it goes into their factories, right?
Number two, if we want to grow U.S. manufacturing, you're going to need a lot more of this investment, right?
So, whether it comes from outside or whether it comes from, you know, we can build the capacity domestically remains to be seen, but if we want to rebuild and re-shore and onshore, this is going to be a very, very important factor.
The labor issues that we're facing today aren't going to go away anytime soon.
And so, it's not that we're going to make choices that are less automated in the factory, we're going to continue to make choices that are more automated.
And as a result, we foresee that at least that the demand of four robotics, four industrial machinery and automation machinery is going to continue to rise.
And therefore, the businesses are going to have to, like I said, deal with that into your question, you know, the common period is going to probably, the folks are going to focus on those kinds of issues.
How are we going to, you know, address the cost issues, how are we going to address the labor issues, and how are we going to address the access?
Neil Ganguly, thank you so much for joining us.
Pleasure talking with you.
That's daily drive for today. I'm Kellen Walker.
Before we go, make sure to check out our new downloadable future product pipeline supplement.
The guide is an updated compilation of our ten-part series that began July 21st and includes a seven-page timeline listing each brand's plans through 2029.
You can find that at autonews.com. Thanks to automotive news executive producer Jake Near, as well as our own Michael Martinez for his reporting for today's podcast.
We also have reporting from Kurt Nagel of our sibling publication, Crane's Detroit Business.
You can get the latest news on tariffs, supply chains, and everything happening in the auto industry at autonews.com.
We'd love to hear from you. Let us know what you think of the show when the topics we cover today.
Send us an email at dailydriveatautonews.com or leave us a voice mail at 313-444-2774.
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