AAH #803 - A 4-Day Week, Pensions For All and Other UAW Demands

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0:47BorgWarner, one of the world's most admired companies, gets partners where they need to go. Let's do something big together. Hey everybody. Thanks for joining us on Autoline After Hours. A special thanks to our sponsors for making the show possible. And Gary, great to be sitting next to you again. We missed you last week. I know, I know. I would say we had a great show, but you weren't here, so I guess I won't say we had a great show. We had a pretty good show. So let's let everybody know who we've got. We've got Merrick Masters. Do I have this right? Professor Emeritus from Wayne State State University.

1:23And we've got Kaylee Hall back on the show from Reuters. It's great to have you here, Kaylee. Thank you. I think the last time you were with the Detroit News. No, I came in March. Oh, yeah. You did. Okay. Yeah. Great. Great to have you here. So, Merrick, obviously, the reason we got you on the show, I consider you one of the foremost labor experts in the industry. And, boy, what perfect timing. because I find it fascinating what's going on at the UAW right now, where we had three former presidents come out very publicly and essentially say, don't reelect the guy who's in there. Go vote for somebody else.

2:02Have you ever seen anything like this before? Well, it was somewhat expected given the last election where you had a slew of candidates opposing the incumbents. the administrative caucus had won of the elections by overwhelming majority under the old convention system but when you move to a direct election in 2022 and 2023 that opened it up to a lot of oppositional forces which broke a trend within the uaw for about 40 or more years of consistent administrative caucus landslides in the election of the president but you now have oppositional forces. Fane came in as an outsider, even though he was inside UAW, but he was an unknown quantity.

2:50He's had record successes, according to him and others, in the contracts he negotiated in 2023, which gave him a lot of gravity within the UAW and outside. But his position has eroded since then because of the constant allegations that have been made against him by some of his colleagues and others that have been reviewed by the Monitor and led to several condemning reports, I think, to his conduct. Nonetheless, I think he's the favored candidate at the present time, and there are those who oppose him. Three former presidents got together and said, you shouldn't vote for him. You should vote for one of the alternative candidates, Tricia Geiger, who is a very impressive person running.

3:37I think she's very knowledgeable and seems very sincere and focused on good management and good negotiating. But whether that's enough to overcome Fane's advantage by simply being well-known, well-equipped based on the staff that he has to run a campaign and his past record. I don't know that that's enough to be a tipping point, but they could throw him into a runoff and, you know, a good strong candidate, if that were to come in second, could put him in some danger. So does incumbency sort of make it impossible to lose in UAW elections?

4:18I wouldn't say it's impossible, but it's difficult. It isn't all union presidents elections because they just have so many advantages. They have the staff and they have the infrastructure to support their campaign. And they usually have more, unless there's a strong issue on what somebody can run to undermine their, the membership's confidence in them, they have the distinct advantage. I would say it's more so than union presidential elections, more so than it would be in any given election that an incumbent president would have an advantage. There are times it would be against you if your record is bad, but if your record is pretty good in negotiating contracts, members are not terribly dissatisfied with anything major that they can wrap their arms around, then they're going to win.

5:09But these are not normal times. It's a very unusual situation with the monitor and an unusual situation, I think, with the turbulence in the industry as a whole and the uncertainty that people have about their futures. So, Fain got the 23 contract, as you mentioned, which I think was fairly well received by the membership. And he got Volkswagen into the UAW. I mean, doesn't that like, okay, he wins. Well, a lot of the people are saying that that contract wasn't as good as it could have been. You know, I think that's his biggest advantage. And those are two strong points that he has in his favor.

5:52and nobody is going to be able to say, I have a record better than that. And that's the position that I think he's in of strength outside of being well-known and having an infrastructure to support him. But all the other opposition ones, really, they fell short on one thing. I watched their forum and they fell short on one thing. What specifically are they going to do that improved upon things? that were actually doable. Anybody can say, well, we need retiree to find benefit plans. You're not going to get those. You're not going to get a lot of other things. So I think you have to be realistic.

6:36And when people were asked, you know, what would you do differently? They'll say, we want a corruption-free union. We want people that don't retaliate. All those kinds of things. And Sean will say, well, look, I didn't retaliate. I wasn't doing it for that purpose. he's going to be heard before a grand jury and they'll decide where to go. And the monitor has all the evidence. He can make any recommendation that he wants to. He's been holding it at abeyance because of the grand jury investigation. But he could come out with a report that says, really, I don't think Sean Fenton is fit to stay in office.

7:09He can't force him out, but he can recommend that the union perhaps consider some changes. What do you think some of the demands will be? because when I looked at some of the policy statements that the different candidates running for union president were espousing, it was sort of a Christmas wish list of things. A four-day work week or six-hour days, as you just mentioned, pensions for everybody. Even retiree health care, which they kind of have through the VEBA, but it sounds like they want to throw, or at least some of the candidates want to throw it back in the lap of the car companies. What do you think they are actually going to go in, what is it, 2028?

7:56We're going to see the contract renegotiating. What do you think some of the demands will be on the table? I think that's going to depend on what happens in this election. And if John Fain is hold to be more accountable for some of the more extreme positions he took, then I think you might see some change. But right now, if Sean Fain gets in the direction that I see the union moving in, it's sort of aligned with the direction of the Democratic Party. And if that party moves increasingly to a socialist position and the pressures within the union, that sort of faction within the union gains additional momentum, I think you're going to see a very militant posture.

8:37So those issues that you mentioned, retiree health care as it used to be, retiree pensions as they used to be. You'll have greater demands on restrictions on employers right to close plants, greater pressure for more investment domestically, and other kinds of things such as the four-day work week and restrictions on management power with respect to discipline. I noticed that there were some grievances filed recently that reported about grievances that they think have been suppressed by some companies. And whether that's the case or not, I don't know. But this is a standard union tactic to file grievances, pressure them when they think that management is trying to be a little bit more forceful in disciplining the workforce, which they need to be given all the quality issues that they have and the need to make certain that their workers adhere to standards with respect to drug use and integrity in the workplace.

9:40But all that remains to be seen. I think you'll see a very polemical and very aggressive posture taken by Fane if he's elected. And I think it will be a time that is less right for that to be withstood by the auto companies. Explain that. Well, they had record profits. That's the only way they could afford to give the UAW what they wanted. The UAW, if you really look at it, gave its membership, you know, if you extrapolate the trends from 2000 and pre-2008, they would have been in better opposition than they are right now. You just continue doing what they'd done in the past or even brought it up to where they were in 2007, 2008, relatively speaking in real terms.

10:29But they succeeded in doing that somewhat. They had to overcome a lot and they couldn't overcome the benefit issues they couldn't overcome. A lot of the other opposition to changes they wanted to see in the work week, overtime, and just management practices in general. I think that they're in for a real Donnybrook in 2028 if the thing continues along these lines. Yeah, because the record profits are no longer there. No, you had four of the, well, you had three of the four U.S.-based companies. I add Tesla to that. They ought to call them the big four now, not just the big three. And Stellantis is not a U.S.

11:15company. They ought to call them, really, the big three are Ford, GM, and Tesla. and say these are the companies that represent U.S. auto manufacturing, and they are significantly non-union. The market share of these four companies, including Tesla, is about, it's less than 30%. Well, it's more than that. Well, no, in the U.S.? In the U.S., I know. We just reported that today. So the share of the big three is 37%, you know, which is still not good. Yeah, no, you're right. You're right. It's about 39 % when you add Tesla to it. Exactly. That's right. Kaylee, ask something because we're going to dominate this and that's not fair.

12:10I'm just wondering, Merrick, like what do you think in terms of, you know, and I talk to a lot of workers. How do you think this whole situation with the Monitor, with Margaret Mock, with Rich Boyer, you know, I'm sure the audience is somewhat aware because it's been in the headlines, but there's just this ongoing fight and fighting. And I'm just wondering what you think, how how how members really feel about that. And if you think that's going to have a. A say in the election. Well, your your average auto worker would look at this as this is inside the beltway stuff. This is inside the union.

12:46This is politics as it is. And a lot of it seems to me really is, you know, and I've criticized the monitor somewhat. I've been trying to be very careful in doing this. But in some podcasts that I've done, I've said, you got to be very careful how much you interfere with the internal politics of the union. Because a lot of what Sean Payne has done, I could see any president doing saying, I disagree with them on this. They should do this. I think they were wrong. and I'm going to take a retaliatory action. That's the nature of the business that they're in. But they're under a different set of rules with the monitor, and I think they have to be more careful.

13:22I think most people would say, as long as we're getting one in our contracts, as long as we're focused on keeping our jobs and delivering the bacon, so to speak, they'll be happy with who's in the office and wouldn't want to change the candidate for that purpose alone. unless something more egregious emerges that they could get their arms around, like they called them, you know, taking piles of money from a company or something like that. I don't think that you're going to see this having that much of an impact. But I would say one thing, it's that the three former presidents endorsing Geiger gives her something on which to build a campaign and maybe gain some momentum.

14:06And if they were able to throw it into a runoff and she were able to get in a position to run against him, I think she'd give him a run for his money. The other thing that with Sean's campaign, you know, when after he won, there was a lot of discussion of, OK, now we're, you know, after the record contracts, the organizing efforts, they were very aggressive. And, you know, it seemed like they lost a lot of momentum after the loss at Mercedes. Do you think that that's going to have an effect or the win at Volkswagen is enough? No, I don't think the win at Volkswagen is enough. That was a starting point.

14:43Yeah. They had a long history of trying to organize that and had come close previously. I think that they have no win behind the sales in their effort to organize non-union plants elsewhere. They will face tremendous opposition from all the companies. And given the state of the industry, I think a lot of the workers in those companies would simply say, why really would we want the UAW with all that baggage to come in and represent them? So, I mean, as a percentage of the membership of the UAW, isn't there an increasing number that are in service-related industries versus manufacturing industries?

15:28Yes. So doesn't that make, you know, an effect? It complicates it. And in fact, one of the big issues in the campaign that came up in the forum was the extent to which you're going to represent all those factions within the UAW, all those industrial segments. they need equal representation is what people would say and that you got to focus on the public sector the health care sector the gambling casino sector and elsewhere to make certain that you know all those gambling casino workers are members of the uaw yes yes and higher ed really yeah higher ed and that's where their growth in membership has come from from auto and graduate students too I don't have to throw them into the mess.

16:14I shouldn't have known that when I was a grass student. And that's a whole different, you know, wing ideologically and practically speaking in terms of how you represent them in the workplace. You know, representing graduate students, representing faculty is different from representing nurses and representing people in the casino industry or wherever else you may have them. And certainly from an auto plant and the skilled workers that you have there, as well as the assembly line production workers. I think that they're going to be in a very diffused situation where if they don't, you know, if they're not able to continue to build in the auto industry, they will be become increasingly non-auto for membership.

17:03and that will have, I think, significant implications going forward. And that's where the pressure comes for the positions that they've had to take on the war in the Middle East that has produced a lot of controversy. Let's talk about some of the future of labor then, because new technology is coming to the fore. Humanoid robots, artificial intelligence, even the way that Ford has designed this new modular EV pickup truck that it's coming out with. I'd love to get some of your thoughts on that. Let's start with humanoid robots. Well, humanoid robots are a small part of the overall robotic industry.

17:41In the United States, you have about 400 ,000 robots that are in use in the economy-wide in various sectors. Forty percent of those are in auto. It's very heavily concentrated. worldwide china dominates the robotic industry south korea dominates it on a per employee basis in terms of having a large number of robots per employee that's true in the auto industry but in the auto industry in the united states we have a lot more robots per employee than the chinese do per employee it's most of them are industrial repetitive kind of things that do You know, they screw bolts. They do a lot of simple tasks that are difficult for human to perform over and over and over again that still require a high degree of tolerance.

18:38You know, you want to get if you're going to screw the bolt in eight times, you want to make certain you do it eight times. And strip the thread eight times. Yeah, but the future is in collaborative robotics and in humanoid robotics. And, you know, Tesla has made the most strides, perhaps, in advertising its work in humanoid with the Optimus. And it's going to be producing the Optimus. It's got, you know, a factory that's supposed to start producing sometime this year, according to its latest estimates. and then another one that will start in 2027 that could scale up to large amounts of robots produced.

19:22You know, 1 million to 11 million humanoid robots produced at full capacity at some point in time in the future. But the Optimus is a difficult thing to produce. It has 10 ,000 parts. So it's not something you just throw together overnight. and to produce on scale with the level of tolerance that you have to have, you have to have a lot of precision that they're not at right now, I think, in terms of doing. But robotics do a lot. They will do a lot more in the future. As wages go up, companies look for those alternatives as well as other alternatives that they can get, such as universal EV platforms that will be very much, I think, involved in trying to reduce the overall costs and get the companies more scale in terms of the benefits.

20:14I would say BMW did a pilot program with the Humanoid Robot at its Spartanburg plant, and their figure, I think,.02, which they've now retired, humanoid robot was involved in assembling and screw driving and a lot of other things like that. And they typically get them to work at a station where humans would normally work doing the operations that they can do. Relatively simple operations, but they were involved in producing 30 ,000 BMWs over a 10-month period and moving about 90 ,000 parts within the facility. So it's a big potential, and we're waiting to see what happens. But that's the wave of the future, and AI will only magnify that.

21:04Generative AI, as companies try and get their bang for the buck in the investments that they've made in AI, want to see more of the practical application in robotics and elsewhere so that they can start doing things the practical effect of which will be to reduce human input, among other things, in the workforce. So the first industrial robot used in the United States was used in a GM plant in New Jersey that no longer exists in a die casting operation in 1961. Okay, so we've got decades of experience with industrial robots in auto plants. Do you think that the companies and the labor have kept pace with the technological developments that this represents?

21:57I think it's a continual challenge. It requires more and more investment. And the fact that you have a robot doesn't mean that it's being wisely used. The fact that you have a collaborative robot doesn't mean it being wisely used. The fact that you have a humanoid one doesn't mean that it's being wise. I think it's the interface. And, you know, collaborative robots require human interaction. The repetitive ones are autonomous. The industrial robots, they call them. They're autonomous. They can function on their own. They need some supervision and maintenance and all those kinds of things. But you could have other robots do that.

22:32Humanoid robots could do that at some point in time in the future. But, you know, the goal is to introduce them on a scale that will supplant the need for a lot of human input in jobs that are unsafe, highly repetitive, and ergonomically difficult and challenging. You think about that positioning a window when you're trying to get it, install it, how difficult it is for a human to do that, to move it around. But a robot can do it much more precisely if it's properly programmed. And that's where you have to work a lot on getting the software right. Not like the famous Poltown plant window breaking.

23:16that uh oh yeah no i i saw a mercedes plant where they were smashing every window and back light that they put in the car until they got the programming right now now it runs smoothly but you know the economics of this can be really compelling because some of the estimates i've seen on what these humanoids will cost and you figure that they can work two shifts easily one robot two shifts it you know some of the back of the envelope calculating i did look like these things could work for five to six dollars an hour equivalent. I mean, you think about it, just the positioning, installing, screwing, welding, painting.

23:54Welding is a difficult job for a human to do for a long period of time. If you can have a robot do welding for hours and hours and hours on end, then you're going to save a lot of time and it's not going to get inefficient over time. And so therefore, I think you're going to realize a lot of potential advantages. And that's what you're going to see. You're going to see it in a lot of industries where artificial intelligence and, you know, there are something like worldwide 120 ,000 professional robots in the world. There are 17 ,000 medical robots that are being used. And other industries, you have them using and performing a lot of different kinds of functions.

24:35So I would imagine you'll see surgical procedures being done by robots in the not-too-distant future. They use a lot of equipment to help now with it that is almost like robotically controlled. But I think that that's the wave of the future. Companies have made the investment. They want to get the bang for the buck of their investment. And they're on that path inextricably. There's no turning back. So when there's the reshoring that people talk about happening in terms of manufacturing in the United States, will much of that work be done with automation versus human labor? Oh, yes. Particularly where your labor costs are high.

25:19Like here. That'll be by design. Yeah. And I'm not, you know, there's all this talk about, you know, manufacturing is coming back. And, you know, we've got all these countries and companies that have said they're going to make major investments in the United States. I want to see the proof is in the pudding when that actually starts. A lot of commitments are made by companies to make investments. And then they back off for one reason or another. They showed this recently with the EV backing off on some of the promises that were made in that regard. And, you know, things change very rapidly in this industry.

25:59And I'm not certain how much a commitment that's made on a piece of paper or even if it's not on a piece of paper as impractical value of circumstances change. In fact, one of the biggest problems for companies that want to reshore here is getting the skilled workforce. whether, you know, it's not easy to get people to work in factories, especially a younger generation of people. And then there's a critical shortage of skilled trades. Arlie has been talking about that at Ford, I think, very forthrightly for a long period of time. Despite what they pay, the great salaries, the great wages that you can make in those positions, there aren't people clamoring for them.

26:42It's not the kind of job that most people want. A factory job is just not what people are looking for when they go to college or even if they go to trade school, they want to go to something that may be an electrician, a carpenter, those kinds of things. But that will force more emphasis on making those robots do what humans can do in a broader scale than they can right now. What are the consequences on manufacturing in the United States of the roiling that's happening with USMCA?

27:26Well, I think that's very difficult. MCA is still in effect. You're talking about the Mexico-Canadian Free Trade Agreement. This hasn't been renewed for 16 years. Yeah, but it's in discussions to be renewed and it will stay in effect until some point in time in the future when it doesn't. I think this is a strategy on Trump's part to renegotiate certain trade practices in Canada and in Mexico, but particularly in Canada about getting jobs, getting Canada more receptive to purchasing U.S. made automobiles. If you look at his executive order on forced labor, which came out, it talked about, no, on the Canadian tariffs of 50 % for unfair labor practices.

28:20He said that that was basically because of their practices in the motor vehicle industry, that they don't allow a lot of U.S. cars to go in there because they've got quotas, trade restraint agreements in place that you can't import certain number. And he wants to see that changed. So he's using this as a leverage. That's what he wants to get to see them change their policies with respect to importing certain U.S. goods. And I think with Mexico, I think what he'd like to see is these U.S.-based companies produce and bring their plants back from Mexico to the U.S. and wants to see more of that happening on a bigger scale.

29:05But that's not something that happens in a year or two. And I think one of the disadvantages that Trump had coming into a second term is it's only four years and people will wait it out. And that's what they're going to do. Exactly. You're not going to make a major plant decision today based on Trump's policies in 2028 when he won't be there in 2031. January 30th. You'll have a new president, whomever they might be, will face a whole new set of pressures. You're not going to turn U.S. manufacturing around in a dime. It's going to take a long period of time with a lot of changes and many different things that we've done than we have succeeded in doing so far.

29:51You have seen some movement of the production. You know, GM is moving its Buick from China to the U.S. And just yesterday, my colleague Nora broke the story on Lincoln bringing over Nautilus from China. Yeah, you do see some movement, but you also see that manufacturing employment is declining. Auto employment is declining. There is movement, but still there's a lot of automation that's going on. There's a lot of repositioning and there have been a lot of delays in starting up things. because of the slowdown in EVs. So it balances out in the sense that you don't see the growth. You know, it's about, from Trump's perspective, it's about jobs.

30:38And from the auto workers' perspective, it's about jobs and what those jobs pay. And if you don't have that, if you don't see that change occurring, then it's nice that they bring a plant back here and there, but that doesn't mean you're changing the landscape any. But you said jobs are going down in manufacturing. And so general manufacturing or auto manufacturing or both? Yes. I recently looked at the data over the Trump presidency. And there's been it's been very, very small. It's almost negligible percentage wise. But I mean, it hasn't gone up. You haven't seen this upward shift that, you know, Trump promised he going to bring manufacturing back.

31:25they could ratchet up production more and produce a, you know, full capacity if they wanted to, but they wouldn't be able to sell them. Car sales are down this year. So that's going to drive, you know, everything about how much gets reshored or how many people get hired. If car sales flatline, like they've been doing all bets are off. Yeah. I mean, that's exactly right. And things right now don't look, you know, the economics don't look too favorable. to having a major turnaround in that from the demand side. People saying, oh, well, the economy's turned around enough. Now we have enough disposable income to want to go out and buy these cars.

32:06I think the people that could take advantage of the EVs, you know, took advantage of the tax credit for as long as it was there, and it's no longer there. That's right. Merrick, we're going to have to wrap up this part of the show. It's been terrific to have you on. I always love your insights and your thoughts about what's going on. And we'll have to have you back again in the future. Thanks for having me. I appreciate it very much, John and Gary. And it's also good to see you. Yes. Very much. And hope things are going well with everybody. And I look forward to talking with you in the future.

32:40Okay. We're going to take a quick break. Give a shout out to our sponsors. And we'll be back to talk about some of the news that's been going on this week. The automotive and industrial sectors are undergoing a historic transformation. Electrification, digitalization, supply chain reinvention, regulatory shifts. The pace is accelerating and the pressure to adapt is real. This is not a time for hesitation. It's a time for bold decisions backed by fast, effective execution. You need a partner who understands complexity from factory floors to boardrooms and delivers measurable results. That partner is Alex Partners, when it really matters.

33:31The automotive industry continues to evolve and so do the opportunities to define it. BorgWarner, one of the world's most admired companies, gets its partners where they need to go. let's do something big together performance that shines even in the rain that's what really matters rich don't potenza tires improved grip and wet conditions start that hey we're back and guess what gary's got a quiz he's gonna stump at least this chump I don't know. I think that you may get this one. Okay, so this is August 13, 1941. A vehicle was introduced that gave rise to a photograph that is immensely famous, at least amongst trade journal editors or trade journal editors.

34:31Got any ideas, Kaylee? she's not a former trade journal editor you are i i am 1941 1941 so this is just months before pearl harbor yeah four months before four months before pearl harbor so i gotta ask is this a production car no okay and my guess is going to be the buick y job no uh i think that was earlier i think that was in 38 or 39 okay i could be i'm probably wrong but it was just i was thinking some sort of g-product or something at the g-product yeah no give up i give up the ford soybean car oh yeah so that's the one where there's the picture of henry ford swinging an axe and hitting the soybean car and not leaving a dent elon musk couldn't even do that with the windows of the baseball you know it's interesting henry was gaga about soybeans and really oh he He believed so much in soybean.

35:34If anybody visited his house, this is based on stuff that I've read about him. You know, anything that was milk, it was soy milk. He had soy ice cream. He was ahead of Starbucks way ahead. He was, you know, people hated going to eat at his house because it would be all the soy. And I remember, look, when I first got into the business, you know, where the Ford headquarters is in Dearborn, the old glass house. north of that by michigan avenue when i got into the business was still soybean fields that went back to henry ford so during lunch hour they'd go out and pick that's all they pick the beans but uh but you know you mentioned the war and so you know i looked at like whatever happened to this thing and because the war started and then the following year in 42 car production ended right because then they just started you know doing uh work and we should we should talk about war stuff you saw some war stuff last week yeah but let's get to the news first and um so then it just the whole the whole thing petered out and then plus i mean here's the real reason the soy stuff was more expensive than steel well but but part of the thing too was it took a long time for it to cure right so you know steel yeah you just bang them out you bang it out the stuff So this car was made out of soybeans?

36:57Yeah, they made the exterior body panels. Oh, my gosh. Yeah. It was like early Saturn, right? I mean, you know, actually, it was a brilliant idea. You know, Henry was the greatest industrialist of his age. Yeah. But he was also sort of in horror at how he was destroying the rural landscape and always tried to do things to get farmers involved. You know, so all around Michigan and other parts of, you know, the Midwest, there's all these little Ford plants. You know, there's a famous one in Northville and even in Livonia and the like that made parts, engine parts, largely pistons, piston rings, connecting rods and stuff like that.

37:38So that when in the, you know, the farmers would go out, they'd plant their fields, then they'd go work in the factory and they'd work in the factory during, you know, after harvest all winter long. and the soy thing was the same thing he was trying to encourage you know all this farming stuff so that you could make car parts out of it so speaking of speaking of Ford they made an announcement of the they didn't make an announcement it's it's been rumored that there will be a four door Mustang well it's not rumored I mean they showed car dealers at a dealer meeting that they've got this four-door Mustang coming so yeah it's a certainty what do you think for a while right would you buy a four-door mustang um given that i have a small child and two standard poodles no i need a bigger car but it's a cool concept i think it's it's interesting um i i want to understand why was there a desire from folks to have a four-door mustang for some reason do you think okay so so for what i read in automotive news that the people who've seen it describe it as being like a Porsche Panamera.

38:49Okay. Now, isn't it likely that this is being called the Mustang merely because the name? Because of the name. Like the Mach-E, it was like they just put Mustang. Yeah. And you've got a lot of equity in that name. So just keep the name. And I mean, if they make a really cool looking sedan, people buy really cool looking sedans right now. They just happen to buy the really cool looking sedans from Toyota and Honda and Kia and Hyundai, right? Right. Yeah, they have them. Here's why I think this makes so much sense in the world. Number one, current gasoline powered Mustang is built at the Flat Rock plant in Michigan.

39:34If they're lucky this year, including exports, maybe they'll make 60 ,000 of them. that plant can make$220 ,000. I mean, it's not even operating at a level that can justify one shift, even though they've got it going. I'll bet that plant is losing money. And so if you can get it to, let's say you double sales, and I think they can more than double sales with a four-door, you at least get that plant to the point where it's at a minimum break-even, maybe even making money. So they need the volume. And I seem to remember this, but I was talking with Chris Theodore, you know, who used to do a lot of the advanced engineering at Ford.

40:15And he said when Vic Doolin, I don't know if you guys, you probably won't remember Vic Doolin, but Gary, you might probably weren't born. Yeah. Vic Doolin ran Volvo North America, but before that he worked at BMW. And when Ford bought Volvo, Vic Doolin told him, why don't you guys do a Ford or a Mustang? Because when we were at BMW, we had a big argument in-house as to whether we should do a four-door version of the 3 Series. When it first came out, it was only two-door. Why? Because the BMW 2002, which all enthusiasts love, was only a two-door. And he said, but when they pulled the trigger and built the four-door, sales took off, absolutely took off, and they dominated the mix.

40:59And so Ford, with a high-performance, grand-touring kind of car, Mustang built on a stretch platform in the flat rock plant makes all the sense in the world. Although, you know, I mean, it sort of strikes me that if you go back to 2005 when they brought the Fusion out, right? Great looking car. People loved it. They've still got those great designers, got new fresh ones since then. And they could do this. And I think that, you know, by calling it a Mustang sort of diverts from the importance of what this thing could be. And I mean, and think about it. Okay, you have a three series, but the name isn't, you know, so they were able to have a five series and a seven series.

41:49And, you know, you change the number. Okay. So it's a different name versus taking a name and extending it out. Okay. I don't know that brand extension works so well in the auto industry. I mean, you can have multiple Jif peanut butters. That works. No, no. Brand extension absolutely works in the industry. And, you know, look, the Mach-E did not hurt sales of the internal combustion engine version of the Mustang. Didn't hurt it at all. well but the person who was buying a mustang mach e probably wouldn't have bought an ice mustang it was it was a different thing so i'm saying if you have a different thing name it differently maybe not fathom but you know look you know some years ago we had jack telnack on the show jack used to run for design he told the story that when the original mustang came out they had a prototype and they got henry ford ii to sit in it and he got in the back seat and he told the engineers it's too small you got to make the back seat room bigger so they added a couple of inches of wheelbase reluctantly because they wanted more of a performance version but tell that tell that described the mustang the original mustang as a family car and he said henry ford ii absolutely made the right decision forcing them to make the back seat room bigger He said it just opened up the market.

43:16And that's what's going to happen with the four door. There is, you know, two doors don't sell well. And let's let's get it, you know, right. The Mustang is really a two seater. You guys have seen the backseat in that. It's an inky dinky thing. You know why you throw a backseat into that? Because your insurance rates are a lot lower. If it's just a two seater, you pay through the nose. So by adding more room, adding in this new Mustang, adding a couple of doors, you watch sales, sales, I believe will easily double. Right. But I mean, why don't you just call it the Taurus?

43:54I still think brand extension is going to work. You know, it's like them doing the Bronco. You know, I think you can expand the Bronco range beyond what it is right now, two models. I think John's right on this. I think putting the Mustang name on it, as long as it looks like a Mustang, it just happens to have two more doors. If it's got a V8 and a five or six speed manual, watch out. Okay, but if it looks like a Porsche Panamera, it doesn't look like a Mustang. Well, you know, they said it looks like it. Who knows? That's one person's opinion of what it looks like. Maybe it's got a roof line that's more like the Panamera.

44:33I'll bet this thing looks like a Mustang. drives like a Mustang, but they double sales. Well, so you know what you're talking about. So through the first half, they sold 28 and change Mustangs in the United States. So let's say they sell 60 ,000 this year. So to your point, like doubling sales won't be that hard. Doubling sales will not be that hard. But like I said, then you're talking 120, 130 ,000 units a Now you can put one shift, you can make money on one shift in that plant. But let's not lose sight of the fact that that plant hasn't been making volume for a number of years. Forever. And they would have lots of cobwebs to have to remove.

45:18Remember, Mazda built that plant. Right. That was the Mazda plant here. And they had, what, the 626 in there. And that plant has never been at capacity. All right. So speaking of Ford, so you mentioned Norak did a story on Ford announced that Lincoln would bring back the Nautilus from China. Yeah. So the automakers, including GM and Ford, GM makes a Buick in China. And earlier this year in January, they said they're going to bring their Buick over to the U.S. for production in 2028. And we were kind of waiting to see how Ford would respond, like at some point, because they're paying a very high tariff.

46:04I think it's like 50%, right? No, 100%. 105 %? 105 % from China. 105%. 105 %? Oh, wow. There you go. Sorry, I have a lot of numbers in my brain. But, you know, so at some point, something's got to change. And so Nora got the scoop yesterday that she was actually able to interview Ford CEO Jim Farley and Howard Lutnick about it. um you know let me be in the treasure or the transportation secretary no he's um commerce secretary commerce secretary yes so yeah we had that yesterday and um but it's not until 2030 correct so a bit of time and you know like merrick was talking it'll be interesting to see you know when they do that transition what it actually means for employment here in the u.s you know because that's quite quite a bit off you know how many more robots are they going to have inside the factories by then and you know what's that really going to look like i think that they did say that there'll be obviously um an increase of some amount of employment um you know uaw represented employees so and we have the uaw contract talks in 28 so i'm sure whoever is uaw president will be trying to put in put some language in the next contract around robots and tech because that's a big concern right now among auto workers I talk to.

47:27I thought it was very interesting what Merrick said about how people will make these announcements and somehow they'll never come to fruition. He's not wrong. I thought that was sort of fascinating to think about. Well, you think about during 2019 on, there were so many EV battery factory announcements and a lot of them, I mean, just this week GM sold its stake in this battery plant that it had, the JV it had with Samsung to have a battery plant in Indiana. And they'd paused construction of that in May. And it's just sitting there. So we'll see what Samsung has, what plans it has for that. I'm sure they're evaluating the energy storage system market.

48:11So I think there's a lot of that that's happened, right? A lot of plants that either didn't even get built or half built or you know i think hyundai you know they have the plant in georgia that was for evs and i they're making it flex manufacturing hybrids there yeah too so everybody's kind of reconfiguring their strategy there's a whole lot of robots down there too it's amazing yeah twice and uh i was just like blown away at like how automated this place i think hyundai is the company i think they're the automate that has a plant in singapore that's like one of the... It's an auto manufacturing plant that's like one of the most highly automated.

48:51And it's fascinating, yeah. So we'll see how things progress here with that. The Lincoln Nautilus, that's not a big volume thing. What do they sell of that? Isn't it like 30... Was it 38 ,000 or something? Is it that high? That's more than I would have thought. Yeah.

49:12So through... For the first half, they sold 18 ,182 Nautilai. That said, however, that is by far their biggest selling vehicle. Yeah, right. Oh, for Lincoln? Yeah. It's a nice looking vehicle. Oh, no, it's terrific. I've talked to owners of it and they flip. It's gorgeous. I just think it's Lincoln. I don't know. People have a thing about Lincoln. They're not looking. If you're in the market for that, are you looking at Lincoln? I think that's the question. That's Lincoln's problem. No, I'm serious about it. But what I find interesting is it's going to take three years for them to do it. So that got me guessing what plant are they going to put that in?

49:55And I'm thinking the three years is it's going to go through a redesign that I'm guessing it ends up on the same platform as the expedition. and what's the the lincoln uh not the expedition the explorer yeah i was thinking the exploration and um what's the lincoln equivalent of the explorer aviator i think it i think it's the novelist oh is it so anyway i i think they want horse there but that's gone right yeah then you Navigator, right? Giant. And then I think you have Nautilus and then Aviator. But anyway, I think they're going to put it on the same platform as the Explorer and put it in the Chicago plant.

50:53That's my guess. But I think they need the three years to make sure everything goes together. All right, so three years from now, you think it will be here? Yeah. So that would be, yeah. You think it'll be here? Where do you think it'll be? Yeah, right. No, I think maybe Shea Yang. Isn't that who makes it in China for them? Chang 'an, yes. I think it'll still be over there. You think? No, not with a 105 % import tariff. That's, that's. When's the presidential election? Yeah, you watch. Even if a Democrat gets in there, I don't see the tariffs coming off. Yeah, I feel like the Democrats and Republicans are kind of on the same page with China.

51:34Yeah, I agree.

51:39I can see them all sitting in a room making that noise. Let's get away from it, is their opinion. All right, before I start picking on Cadillac, you can talk about another topic. No, no, let's pick on Cadillac. Oh, boy. So they announced this week, curated by Cadillac. And this is for people who are going to be buying the Escalade IQ, the electric version of the Escalade, which has a base price of$127 ,405 base price. So you go into this, you say, you know what? I just don't want an Escalade IQ like nobody else I know in my neighborhood because no one else has bought one. I want to have this made specially for me.

52:27So you pay them$54 ,995 and you have a concierge work with you and there are more than 160 available premium exterior colors and finishes. There are an expanded palette of 44 colors to create an expressive interior for yourself. these cars will be hand painted in warren for you there'll be a unique vin marked on your vehicle oh i can see you rolling your eyes with each sentence i mean what's going on here trying to be fancy they have this really nice house in the tech center where you know for the celestic celestique however we're pronouncing it i always mess it up but you So I think maybe they're trying to build off that.

53:23Yeah, exactly. No, you're exactly right. So do you have sales numbers for the Escalade IQ, or as we pronounce it here at Autoline, Escalade-ic? Well, so they don't break. Yeah, I guess I do. Yeah, they do.

53:423 ,203 for the year, for the first half. Okay, for the first half. So they're not even going to sell 10 ,000. So, by the way, that's down 15 % from last year. So, you know, you're at Cadillac. Wait a minute for a minute. Wait. So you think like they'd sell a whole bunch in the first year, right? And I guess it would be dropping 15%. What about next year? Yeah. So you say, okay, you know, the market for this is, I'll make up a number, 7 ,000 a year. 7 ,000 a year. And we're losing our ass on this car. Jeez, are we losing a lot of money? how do we get those customers to spend more money i got an idea we're gonna be able to curate it and let's say we charge them 55 000 55 000 are you absolutely great these people will spend the money you watch okay what what percent what percentage of the 7 000 will spend money on this uh yeah i think if you already have the money like that then probably a good percentage of them no well i mean people aren't tripling over themselves to buy this vehicle first of all right but you know it look it's you do a program like this to make money that's why you do a program like this and if which one the escalator q or you know look that didn't work out for him let's paint it differently right no no i mean i'd have chip foos come over and paint it then i'd pay$5 ,000.

55:10And maybe they should do something like that. But it's all about making money. And you know, here you got a money losing program and you're trying to figure out ways of boosting your revenue and profits. Yeah. And, you know, look, they already have this house they can bring people to and they already have it. Right. And that's very special. Didn't they have a place in New York that they closed? Yeah. Well, they closed this house. Well, they had the building. The building was there. The building was there and it wasn't being used. So they can do that. And then look, it's something special when you have a designer assigned to work with you so that you can curate a very special car of your own.

55:47And you guys got to realize a lot of people who walk into luxury stores, whether it's BMW or Mercedes or even Cadillac. This happens already. I want everything. Give me a, you know, I, you know, check every single box, you know, and I want it fully loaded. I want everybody to see that I'm driving around in something. Okay, so to be fair to Cadillac that Mercedes already does something like this. Porsche already does something like this. BMW already does something like this. Okay, trying to get into the game. So are they in the game or are they trying to get in the game? They're trying to get in the game.

56:23Yeah, they're not there yet. So when will they be in the game? I don't know, but it's like you're never going to get there. Formula One will help, but you're never going to get there unless you try. I mean, I think the Cadillac products look a lot better than they did. I just saw a CT5, and I turned my head because it was, like, beautiful. Sharp. Yeah. Totally agree. Really. That front-end three-fourder view is especially good. And I'm not really, like, a car geek, but I turned my head on that one, you know? So. Okay, I know another one that you wanted. 7 ,800 sold, first half. That's a CT5. Yeah.

57:06Volkswagen came out and said, yeah, we want a pickup, too, in the American market. 2030. What do you think? It's a big year. There's going to be a lot happening in 2030. Everybody's having a pickup. I mean, we'll see on that one. A Volkswagen pickup. Well, in Europe, it was the Amarok. Amarok, I'm pronouncing it wrong. Which is actually built on a Ford Ranger. I know their dealers here don't care. They want whatever they can get because they have very minimal product and they are just very stressed out. But I mean, aren't Hyundai and Kia supposed to have their pickup trucks around the same time?

57:45Right. Right. So what happens if the market sort of sours on pickup trucks? Let's say it doesn't sour. Let's say it stays right where it is. It just gets slightly smaller for everybody. Was there a time it soured? The 1990s that it soured? Well, in the 2008, 2009. Yeah. I mean, it basically collapsed. Yeah, that's true. So the question becomes, okay, if$4 gas continues to the end of the year and it just sort of becomes baked in. Count on it. It will. That's my opinion. Okay, so it's baked in and that becomes the expectation. Okay. At what point will people sour on pickup trucks, full-size pickup trucks?

58:32I don't know. I've been asking this. I mean, I'm just amazed that they're still buying them when you think about the price of them. And then you think about the price of the pump too. I mean, they're still doing okay. And I think part of it is I know that the inventory levels have been lower, especially at Ford. So I talked to a Stellanis the other day, say Ram pickups are, you can't get enough of them, you know. They're up over 20%. Right. Yeah. So it's a good question. Now we have GM coming out with the next gen truck later this year. And I think that's I think we get another truck war story coming very soon.

59:13And then you have the gas price situation on top of that. So it's going to get interesting. Then you got Ram supposedly going to come out with an E-Rev and this year. and that might, will that entice enough truck drivers to go, you know, there's four bucks a gallon. Yeah, I'm ready to try an E-Ref. You're shaking your head. I might agree with you. It's a change. So. Anything else, Gary, or we're at the top of the hour? I got nothing. Okay. We're going to wrap it up. You think? Or we could talk about that amazing, you know, the cost to buy a truck and the cost to buy gasoline. The New York Fed came out with numbers saying that auto loan originations picked up$211 billion in the last quarter.

1:00:08Now the auto loan balance is at an all-time record of$1.71 trillion. And that's a lot of debt. And it's a lot of 84 months. Yes. Which is crazy. Average loan term, 69.5 months. Yeah. Average. Monthly loan payment average,$777. Ouch. I mean, how are people doing this? I don't know. They're crazy. I mean, you don't have to buy the super expensive. There are reasonably priced cars that you can go out and buy there. But people want. And you might not get a concierge to. Just saying. We'll be waiting to hear about your experience because it sounds like you're going to be the first customer. Something like that.

1:00:58Yeah. Okay. We're going to wrap it up. Kaylee Hall, thanks so much for coming on the show. Thank you, guys. Really good to have you again. It's been fun. And Gary, we'll keep on doing the show. Absolutely. I want to thank all of you for having tuned in. AutoLine After Hours is brought to you by Alex Partners. When it really matters. Bridgestone Tires. Solutions for your journey. And by BorgWarner. The automotive industry continues to evolve and so do the opportunities to define it. BorgWarner, one of the world's most admired companies, gets partners where they need to go. Let's do something big together.

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