AAH #812 - When U.S. Sales Fall to 8 Million A Year

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0:56Gary Vasilash: Gary, we get to do another show. We do. In fact, it feels like we already did the show before the show started. We've been talking so much before the camera started rolling. That's exactly right. We've got to let everybody know we've got Chris Theodore with us. Let's see if I know Chris was at Ford. I know Chris was at Chrysler. I know that Chris was at American Motors. I think American Sunroof as well. American Sunroof, AS Cars and Concepts.

1:24Perry Stern: What have I forgotten? I worked with DeLorean.

1:27Chris Theodore: It's not because you couldn't keep a job. It was because you were good. So let's make this clear. Let's make this clear. Come on.

1:35Perry Stern: I didn't want to be stuck designing one part of an automobile. I love.

1:40Gary Vasilash: But you got some good cars under your belt.

1:43Perry Stern: Good cars and learn from a lot of people in a lot of different companies and different cultures. And I want to share that with what I was taught in over 50 years in the business.

1:55Gary Vasilash: And we'll get into that, but we also got to let everybody know we got Harry Stern back on the show again. So, Harry, tell everybody where you're at.

2:04John McElroy: Well, my site is AutoNXT.net, and I've been doing this since the late 90s when I started at Microsoft when they decided to start this thing called the Microsoft Network, otherwise known as MSN. And I've been writing about cars ever since.

2:20Chris Theodore: Do you have an MSN account? I don't anymore.

2:25John McElroy: But I did for a very long time.

2:27Gary Vasilash: So, Chris, let's talk about the book that you've written, all about learning from the masters, the mentors in your career. And so you take it. Just give us a thumbnail sketch. Well, I knew a lot of companies,

2:46Perry Stern: worked with or for over a dozen of Automotive Hall of Fame members. They all taught me things. thousands of engineers and others in the industry. And you learn by working at different companies. You mentioned some of the companies, supplier companies. I've been on both ends, being in the OE and then being a supplier to the OEs. And I want to share what other people taught me because mentorship is something that has kind of died with, you know, all the COVID and the bankruptcies and everything else. And I see we've got talented people in the business, but they don't necessarily have the experience, the history, and so on.

3:34Perry Stern: So I at least want to share the lessons that are stuck in my head, and I try and tell them, copying a trick from one of my great mentors, Bob Blutz, telling stories. Now, these aren't tell-all stories. These are stories that hopefully keep your attention and they're memorable about what the lesson is that you've learned. So we're trying to share. And I guess the other important thing is there are thousands, hundreds of thousands of people in the industry know far, far more about any aspect of the business, any specific aspect of the business than I do. But very few get an opportunity to see and sample multiple companies share and understand best practices and mistakes.

4:23So I'm trying to download that just as a reference point.

4:28Perry Stern: And I hope other people can take this and actually modify it, comment on it, and take it into the future. Because I think it's important. Mentorship is something that just kind of disappeared in the last 20, 30 years. It used to be you were trained. And as we were discussing earlier, I mean, when I got to college and I was a car guy from like four years old, but when I got to my first job and had to design my first part, I had the fundamentals from engineering school, but I was shaken, you know, to design that first part. And I had people along the way that started to teach you the different things that are really important.

5:11Perry Stern: And it's not there now.

5:12Chris Theodore: So, Chris, you know, we need to make it clear that your background is in engineering. You're not a business guy, per se. You're not somebody who's going to be, like, running corporations as a businessman. You were in the trenches. You were working. You were designing parts. you were leading teams that were making things. Is that different than somebody who's just pursuing an MBA and is more interested in the business of the business rather than the hardware of the business?

5:50Perry Stern: The point of this, really, yes, I'm an engineer, and I wanted to be a designer. I'm a frustrated designer because I had been sketching cars since three or four and working on cars ever since. So I love cars, wanted to be a designer. Long story, but ended up being an engineer. And I love engineering and I love the sciences too. And I always wanted to design whole cars. Now, the real point of running a company is these different functions. I've got my MBA because I didn't want to be BS'd by certain guys is running numbers past me that I didn't understand. And moving around these companies, you come to realize how you can want to be a finance guy, you can want to be a purchasing guy, a manufacturing guy, but it's how these people work together that is critical to the success of the corporation.

6:48Perry Stern: So part of this is to tell stories in each function. So let's say you happen to be an expert in engineering. far more in whatever part of the vehicle than I am. But you need to understand and have empathy for what the other functions need to do and how you need to work with them. So actually, I'm encouraging people not to just read the lessons learned in engineering or design or whatever. No, seek out the areas where you don't have that experience, and that may be very, very more useful to you than what you already know about in the engineering world or the manufacturing world. So it's kind of a broad cut.

7:32Perry Stern: And really, it's important that these different functions learn how to work together as a team, as a unit. So that's the purpose of it. I'm getting a little long-winded.

7:44Gary Vasilash: That's not very common today, I don't think, where different organizations within the company work together. it's so much siloed. Everyone's talking about trying to knock down the silos and flatten out the organization. But it goes in cycles. I mean, they get it right and then it drifts out of control.

8:07Perry Stern: Well, we talk about that. One of the chapters is everybody's, every manufacturer, of course, starting with Ford Motor Company, you have one product team. And everybody's had set off skunk works and groups to develop products. And then they laud their successes. and then what happens is the big bureaucracy sucks them in, sucks the blood out of them instead of learning from them. So you can name them all at every single company, whether it's the Saturn experiment.

8:40Perry Stern: It's a cycle because it never gets ingrained into an entire culture of a corporation. So having a team working on special projects, that's fine, But then what you get out of that and that teamwork and that concept has to, good, I can't say has to, in my opinion, has to grow throughout the corporation. And that's when they're most efficient. Even Toyota has modified their systems, which, you know, if you read the MIT and UM studies at one time were very traditional and functionally oriented, they've created platform groups, if you will. So they have front-wheel drive, body and frame groups, and so on, where they get more synergy as well.

9:23Chris Theodore: So to the point of things like skunkworks or special projects, do you think it's possible for that to be taken into a large corporation and proliferating throughout it? Or is the large organization too fixed in its ways such that there may be some probes that work, but by and large...

9:50Perry Stern: Well, historically, most have not integrated. So I used Chrysler as an example, and that was led masterfully by Lutz and Francois Castagne to create the platform teams. And you had the huge monolith like everybody else. And basically, Francois, we're going to take a bite of the elephant one piece at a time. We first formed the first platform team was the LH, and it was cross-functional, engineering, purchasing, manufacturing, finance, product planning, design, all working together on the same team. And got that one launched. And, in fact, the second one was the Viper team because that could move faster.

10:36Get that one out to show how successful it could be. and as the first LH team took hold,

10:47Perry Stern: then carved out another bunch and created the next team, created the next team. We go through this in one of the chapters on how you can transition to a team-oriented structure and what the risks are. It's not all, there are downsides to it and then what are the countermeasures to having a team orientation. You have five different teams and they do it five different ways and you don't have in common parts and you don't have a strategic plan for technology, those are the downsides. There are methods to counteract that. And I talk about the other organizations as well because each of them and management styles have advantages and disadvantages, ones that I found the best after working in all these different environments.

11:33Chris Theodore: But when you guys were doing the platform team, I mean, people may not realize this, but I mean, I would say that they were the hottest company in town. Absolutely. What they were doing. I mean, it was just, you know, the kick-ass product, and it was coming out quickly. And making money. And what the hell happened?

11:50Perry Stern: Well, the wheels came off the wagon. Well, Daimler-Tripsler happened, and that all got frittered away. Here's a simple example, and it's an important one. Purchasing, who would think about purchasing? But Chrysler developed with Stahlkamp and Francois and the gang, a different model for purchasing program was called SCORE. And how you work, you don't try and beat the hell out of the supplier to get the lowest price. How do you work together to increase the value of the product basically by cutting out the waste in the system and working together and sharing the profits? And we have an example in the purchasing chapter then where if you take a look when Daimler-Chrysler, when Daimler took over Chrysler the day after, they send a letter to every supplier saying, you're going to give us a 10 % reduction as of today.

12:50Perry Stern: So much for working together. And if you don't, you are desourced. And here's the check for 90 % of what we owe you. And, oh, by the way, we expect another cost reduction in the future. And then if you track corporate profits between that and then Fiat, Chrysler, well, no, they go through Cerberus where that gets even worse. And then you get through Cerberus and you come up the other side with Fiat Chrysler after the bankruptcy. They start to adapt some of the old practices. And then you go back into Stellantis and down the slope again, if you look at purchasing or supplier satisfaction with its absolute pits.

13:34Perry Stern: And then if you track corporate profitability, It follows the same curve. Those glory years up until 1997. Was it 97? Yeah, 97. That's right. And then it slides down, down. FCA a little bit tick up, down. Now Stellantis is starting in the recovery mode again. The two track each other, and I've got the charts in that chapter to show it. So, you know, there's things that have been invented, and why not take advantage of them if you see them? Actually, there was an announcement, I think you probably saw it three, four weeks ago, an announcement from Stellantis that Chrysler is reinstituting the SCORE program.

14:25Perry Stern: Did you see that? We'll have to pull it out. And I wonder if it's the same SCORE program or not. But there's recognition. You cannot, this whole thing is about partnership and people working together. And when you figure, you know, as much as 80 % of your costs are incurred by your supply, it comes from your suppliers, better have a strong relationship with them. That's just one example. And that was an example that came out of studying Toyota Coretso system. How do you replicate a Coretso system without having a Coretso? That's where it came from.

14:59Gary Vasilash: Chris, how do you institutionalize? this stuff? What's your advice? So, for example, Chrysler had, like Gary was just saying, coming out with these tremendous products. And I mean, not only did you do the Viper, you did the Prowler, you did a really interesting product that came out quickly. It made good money. In fact, I think at one point, Chrysler on a per unit basis was one of the most profitable in the world in the 90s. And when I think back to the original Ford Taurus program, there was a guy named Lou Viraldi.

15:31Perry Stern: Yes, I write about him in the book.

15:33Gary Vasilash: Yeah. And he started what he called Team Taurus. Absolutely. And so I didn't care who you were in the organization. If you had anything whatsoever to do with the Taurus, you were part of Team Taurus. I mean, even if you were, you know, an administrative assistant, you were considered part of Team Taurus. And he created this team mentality. And when that car came out, I mean, it knocked the socks off everybody.

15:57Perry Stern: I went up to my former Ford boss at the SAE dinner where they presented Team Taurus and congratulated him on it. And I wrote Telnac and everybody. I was a Chrysler at the time, but it was a magnificent project. And if you read Peterson's book, oh, yeah, we took Team Taurus and then we enhanced it on the next program. But the fact of the matter is, no, they didn't enhance it. they took that methodology and it, it morphed into the mainstream organization again. Right.

16:29Chris Theodore: So does anybody remember what the next program was?

16:32John McElroy: Well, that's the thing. I mean, it seems like no, you know, it seems like the, the common theme is no lessons ever seem to be learned. I mean, it's, it sounds like, you know, eventually it's almost like a generational thing that eventually people look back and realize, Hey, it was really good. You know, 30 years ago, we should try doing that again.

16:51Gary Vasilash: I'll just interject. Lou Viraldi, the guy who created and ran Team Taurus, then got sick and died. Right. And so that leadership under him went away. And that's why I'm asking, how do you institutionalize this stuff? Why does it have to rely on one leader?

17:09Perry Stern: Well, it doesn't. It's you have to. Well, two things. The one leader is interesting. And the second thing is culture. First, you have to establish it. But people are going to sit, every chapter we talk about culture. And it's incredibly critical, and yet we kind of poo-poo it because we don't really know what culture is. And then you talk about the manager at the top. You've got to have the right culture. You've got to have the right manager at the top. And we talk about that where you have a change in management. And I think this is a Western mentality. Whenever you change CEOs, the first thing to do is to denounce and initiate a new direction for the company.

17:54Perry Stern: And if you think about the Toyotas of the world, and there was a consultant that talked about sailboats versus motorboats. You know where you want to go, and you're a motorboat. You always work in that direction. And yet, it's somewhat the short-term Western mentality is, oh, got this thing, I'm heading this way. The new guy comes in and I talk about my favorite joke about the three letters. We'll save that for later. Next guy comes in and says, no, no, we got to go work on this. And you're tacking back and forth and losing sight of the objective. and so you have to the important thing is succession planning and we talk about that too at the top and if you just keep changing styles and changing hats you're going to have this change in direction that is really wasteful you're telling the truth, some move this way go the other way and that's all waste which gets to lean production but we'll talk about that

18:59Gary Vasilash: but what it also gets to what you're talking about is, I mean, this all starts at the board of directors. I mean, they're the ones bringing in the CEO and saying, here are the objectives that we want you to meet. And we talk about that in corporate management.

19:15Perry Stern: We talk about boards that are supposedly more proactive now. I don't really see it. Now, I'm out of the business for a while. I know they've gotten more proactive, but in general, they're not proactive enough. I've been in board meetings where they get a presentation, okay, here's how we're fixing this problem, and they come back to the board meeting three months later, and they still have this problem, and then there's a new plan presented on how we're going to fix this problem, and nobody ever says, well, why did the old plan not work? And so the boards have a lot of responsibility, and it's not just compensation and financial reporting.

19:57Perry Stern: It's how the company is being run. And I think we need more active board members that really understand the business. You can have parallel units, you know, parallel manufacturing are companies and new technologies to be on the board too. But, you know, they have to be able to relate to the business and provide direction and perspective.

20:22Chris Theodore: I mean, isn't it basically that by and large now their objective is purely fiduciary. They're purely looking at the money. They're purely looking at the way that things can be made so there is greater profitability versus looking at the product and the product development and the process. And you need more of this perspective and maybe less of the fiduciary one because if the product does well, LH cars,

20:55Perry Stern: The other part takes care of it. Yeah, it is. Yes, I mean, everybody looks at the numbers, but the numbers, when you look at our short term, too, and it's make the numbers in the short term. And yes, boards do put in quality metrics and bonuses for meeting your quality objectives as well. But there's not this, again, there's not this holistic understanding of the business and how the parts in relate. Any company can jigger the books for a short-term gain and a long-term loss and vice versa. It's really putting together a holistic business plan that's going to build greatness that I think needs a more balanced approach.

21:42Perry Stern: I'm not saying you don't worry about the fiduciary, but you think about profitability is a reward that the consumer gives you for doing a good job. It's not for beating the last nickel out of your suppliers because you're jealous of their profitability or shortchanging your dealers or whatever. Or cutting quality, hoping that it doesn't show up in long-term warranty. it's got to be a more holistic approach in my mind by people that understand you know the whole business not just one of the functions of the business my opinion no i i agree with your

22:22Gary Vasilash: opinion and it's uh uh always been a puzzle to me that most of the board members pick your company i don't care which one it is legacy automaker uh the vast majority of the people on the board have zero automotive experience. Now, I understand why you might want to bring in different viewpoints. Absolutely. But by and large, the only knowledgeable automotive people on the boards tend to be company executives, and they're going to jealously guard the way that they're doing things.

22:54Perry Stern: And I had an example in one of the chapters on one of the boards. At least it was a parallel industry. It was a former head of an aerospace manufacturer. And we make a presentation on the vehicle we're producing. And we've got it so that when a car starts the line, 24 hours later, it's out of the plan. And at the end, we ask for questions. And the board member says, I just have one question. How do you get the paint to dry so fast? He was a technical guy. A technical board, you know, we're just flabbergasted. That's, we need more than that. That's all I can say. That's all I have to say about that.

23:43Perry Stern: Yeah. That's Forrest Gump would say. Yeah, right. Chris, you've got, what's 10 chapters in the book?

23:50Gary Vasilash: 10 chapters. Any favorites amongst the 10? Because you get into literally every discipline that there is that an automaker gets into.

24:02Perry Stern: Well, each one I think has a, I try to get, I also try and wrap each one up with a forecast of the near future. How you can apply some of this to the near future. And there's a couple of items there for fresh thought. So, you know, the manufacturing chapter, well, that one pretty much gets lean, talks about lean, but you really want to make the impression, how do you get lean across? You can't be lean without being lean across the entire corporation. How do you do that? How do you maintain it? Purchasing was really interesting because here's this example of how, you know, if you work properly with your suppliers, you can reduce waste, reduce costs, and be more profitable by not taking stuff away from the customer or from your suppliers.

25:01Perry Stern: The sales chapter is kind of interesting. will give a little surprise, but I won't tell you how we're going to get there. But if I told you, and you can disagree with me and the audience can disagree with me.

25:16Chris Theodore: I never disagree with anyone.

25:19Perry Stern: Gary, when have you agreed with anyone? And I think by 2050, and you can move the year whenever you want, we talk about, I think, the retail US market will be 8 million units. And nobody's talking like that.

25:41Gary Vasilash: Right. Now give some of your thinking behind.

25:44Perry Stern: I'll give the teaser and hopefully people will tune in later. But basically, if autonomous vehicles, basically robo-taxis become as ubiquitous as I think. If they take 50 % of the market by 2050, you pick the year. by 2050, if we're 15, 16, or 16 million car a year now, if you do the math, if you understand the time that these robo-taxis are going to be operating, the mileage usage that they're going to accumulate from typical customers, you work through the miles, basically a robo-taxi, conservatively, the estimates I'm giving you, is it replaces four to eight vehicles. I used five to come up with this 8 million number.

26:34Perry Stern: Nobody's talking about this. Hopefully I'm wrong. I don't think so. It's going to happen. It's just a question of what year. How are the manufacturers going to handle this? Are they planning for this? No, they're not. I can tell you right off the bat. Nobody is.

26:50Gary Vasilash: In fact, we are right now in this country building, I want to say, or bringing online, either building Greenfield or converting existing seven assembly plants?

27:02Perry Stern: Well, some of them are starting to be canceled now. I saw one or two has already been. I can't remember which one. I think it was Toyota's backing out of one recently. Oh, interesting. Yeah.

27:16Gary Vasilash: But Honda's talking about one. Rivian's building one. We'll see if VinFast ever goes through with it. Ford's building one. Hyundai is going to add another plant. Toyota is expanding San Antonio. Right. And so I think what you're saying is critically important. And I believe you're absolutely spot on. Because the point I like to make is somewhere around the year 2017, for whatever reasons, car sales stopped growing in all the major markets of the world. I'm talking North America, South America, Europe, Korea, Japan, China. stopped growing. Sales were bigger back then than they are today. And people go, well, it's affordability.

27:58Gary Vasilash: And I look at China, I go, you can buy new cars for$4 ,500 there, not$45 ,000,$4 ,500. And China sales are in a tailspin right now. And so I think demographics are going to play a role in this. Population growth in the U.S. is the slowest at the history of the country. Europe is losing population. Korea, Japan, and China are losing population. And so, I mean, if car sales have already stopped growing now and population declines coming in, and now you hit not just robo-taxis, but, you know, whether it's electric scooters or VTOLs or whatever, you've got a younger generation not interested, not as interested in getting a driver's license, I mean, I'm with you.

28:44Gary Vasilash: I think this market's going to shrink.

28:45Perry Stern: I just got back from Greece, you know. And I mean, the generation, when you talk about demographics, the generation, it's not that they don't love cars like a, they just like this instant ability to get what they want when they want it. And I'm being passed by, I,

29:09you know,

29:11Perry Stern: food service businesses, motorcycles, just swarming around me, delivering food to all these people. And this is a new generation that they don't go out, they stay at home. If you look at what's going on, I saw some statistics just yesterday on how our socialization has changed so dramatically worldwide in the last 20 years. there's a huge change coming and it's going to be, it's going to foster this RoboCab thing when it happens. And I talk about why the technology is going to take longer than we think and so on.

29:48Chris Theodore: All right, Chris. So, so John intimated this at the top of the show. I think we need to get this out there. You've worked on a number of amazing vehicles. Now people are listening to you now and they're saying, who's this guy? He's, he's just talking about all this stuff. Tell the audience some of the vehicles that you work on.

30:07Gary Vasilash: You know, let's come. We got to take a quick commercial break. Give a shout out to our great sponsor. Let's do that. Write the list. Yeah, yeah, yeah. So you think about it. We're going to give a shout out to our sponsors right now. We'll be back in just a sec.

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30:53Gary Vasilash: Thank you, Alex Partners and Bridgestone, for making this possible. Okay, back to it, Gary. Give us your list, Chris. Tell us. I've had some clinkers, too. Okay. Oh, well, let's get into those.

31:04John McElroy: What are the thoughts of the good ones? Now we know the cool stuff.

31:08Perry Stern: Well, there's some that have been less successful, some that got me wrong. So let's take some good ones first. But I do give examples in the book where, you know, the best lessons you get are when you do something wrong. Oh. All right. So one of the clinkers, and not all anyone's fault, was the Ford 500 that we did. The program got delayed. I never was comfortable with the design. I rationalized the research because we did clinic better than the Toyota Avalon, which was the target car. but it was kind of a low bar vehicle to critic. And I rationalized this would be for a conservative banker type.

31:56Perry Stern: The car came late, wrong engine. The styling was less than accelerating. And then you had my former peers at Chrysler, you know, because it was delayed in the Ford program. The Chrysler 300 comes out with a Hemi and just...

32:11John McElroy: That one's a hard one to battle.

32:13Perry Stern: Yeah. Decimate. So, and by the way, we had a show car three years before the Chrysler 300. It was called the 427. Look at it. It's in the Ford Historical Museum now. That's the car we wanted to do. That's the car we should have done. Okay, good cars. Well, a Ford 2005 Mustang. My personal baby project was the Ford GT. Back at Chrysler, worked with the Chrysler team, ran the Chrysler team for a little bit. Yes. I think the most impactful vehicle to the consumer was the second generation Chrysler minivan. Worked on the first, but second generation, I led the team on that one. The fourth door and all the features really defined that market.

33:04PT Cruiser, I know people laugh at it now, but most profitable, only profitable small car in Chrysler's history.

33:13John McElroy: Wow.

33:14Perry Stern: I only sold a million, two of them. And then when we Daimler took over, it became unloaded. And the changes that we had planned to morph the design and change it with the times and cuts and didn't happen. So very successful in this time. And I'm proud of that. All sorts of show cars. I don't know.

33:36Gary Vasilash: Go back to the PT Cruiser because we've talked about it in the past. And what you said is you needed a challenge. You were a challenger in the marketplace. And so you came out with this design. But the idea was, and you take it from here, was to modernize it over future generations.

33:55Perry Stern: Absolutely. We had to change. We knew there was a market for a mini minivan. The problem is, in fact, Chrysler, after they did the original minivan, designed a mini minivan. and they clinic that and it failed miserably. And so they gave it to Mitsubishi and they built them. I think it was, what was it called? The summit? What's the sliding door? Yeah.

34:18John McElroy: The summit or the expo LRB or something like that. I can't remember.

34:21Perry Stern: And they sold it for us. It was a good car, but didn't sell. And you had, uh, in the U S market, you had Toyota doing the, well, the Pontiac vibe. It was a Toyota matrix. Yeah. And they were okay, but they weren't selling. Uh, Because the exterior of the vehicle is not something that the customer base longed for. Yet we knew the functionality. They needed a two-box vehicle, a mini-mini venue that could carry their goods. So the idea was, how do you come up with something that's attractive from the outside? I call it candy-coated medicine, but it's good for you on the inside. and we did a lot of research and in one of the chapters we tell you how you get inside the customer's head to get an emotional reaction a reptilian response you see it you love it you gotta have it how do you get that and how do you marry that with the functionality of a vehicle so we created a market and believe it or not the Petri Cruiser outsold the Pontiac Vibe and the Toyota Matrix combined by a lot and made money.

35:37Perry Stern: And allowed Chrysler to sell more pickup trucks too because we classified it as a truck.

35:43John McElroy: It was amazingly popular when it came out. I remember everyone was a press car and people would swarm around it.

35:49Perry Stern: It was unloved by management though. So after Lutz and I and Castagne left, it was really left to languish for a while.

35:58John McElroy: Which was really too bad. I always wondered what would have happened next because it did just kind of die a slow death. after being one of the most popular cars on the road. Yeah.

36:07Perry Stern: The idea was, I think the successor, and we write about this, is in fact, which has just been dropped now, the Kia Soul. And it had a marketing campaign. What happened with PT Cruiser is we knew there were two markets, and obviously there's the retro hot rod boomer generation. But actually when we market tested this, the youth responded to this thing. But the marketing campaign never addressed the use market. And if you think about when the sole was introduced with the hamsters, I mean, that gave that product life. And then they dropped it, and then they tried to mature the vehicle. And just last year, they finally built their last sole.

36:50Perry Stern: But they sold a lot of them.

36:51Chris Theodore: So what did you guys think when the HHR came out by Chevy, when Brian Nesbitt loved it?

36:57Perry Stern: Well, Brian and I worked together on the PT Cruiser. loved Brian dearly, and we passed sketches back and forth. And, of course, when Bob went over to General Motors, he brought Brian over, and then they did the HHR, which aesthetically to me, functionally, probably a little bit better than the PT Cruiser. It had a little larger cargo area and so on. And it sold well, too. And there were a lot of people at GM betting that it wouldn't. But it had a shelf life, too. and then the market moved on, and neither of those ideas really got carried forward because I don't think anybody else kind of got the idea of how you could take, you change the proportions of the vehicle to create a new vehicle design, but once you've changed those proportions, then you can modernize it.

37:50Perry Stern: And it was, again, it was, let's taught me this lesson, taught the designers this lesson. And he said, you know, you look at sketches and they lay the windshield back further and further and further. Finally, you're looking through the edge of a glass. And you have to change it. And so he had the designers put together a series of slides. I still have them somewhere in my files to show how there's a fashion cycle. So in the design and the marketing section, we talk about the fashion cycle. Because, you know, skirts get shorter, longer, ties get wider, narrower, watchers go. wider, thicker, and back, you have this cycle.

38:29And what is it that drives this cycle?

38:33Perry Stern: And again, it gets to what we call this product pyramid, where it's more than just demographics. It's how do you know what's going on psychologically in consumer groups' heads? What impacted them with their first pleasant images? If you think about it, when you were a teenager, or whatever you lusted after, whether it was a car or a song or whatever, that resonates with you the rest of your life.

38:58Gary Vasilash: And this gets back to what you were saying before, because I know the audience is going to wonder, the reptilian response.

39:04Perry Stern: Yeah. And so if you think about who your target customer is, and you think about what are those pleasant memories, and how can you bring them back, whether it's color or music or form, that you had these first pleasant memories in usually your early teens. The first time I saw a Jaguar XKE, I remember the cover on the Road Track magazine to this day. I mean, you just can't forget it. That's the response you want to get. Design a car so you serve their functional needs, but you also get this reptilian, you know, love it or hate it, which was the other thing comes up to marketing was Lutz that said, Hey, I don't want cars that are best average score.

39:53Perry Stern: I want more love than hate. And I want, and that's where the Dodge Ram came from. Well,

40:00Gary Vasilash: that wasn't necessarily more love than hate. I mean, more people hated that design, right? But the ones who loved it and to have it.

40:07Perry Stern: Yeah, it was, well, it wasn't, I don't think it was more. It was 18 % love. and I think it was about 18 % hate. But Dodge only had 6 % to 8 % of the market at the time. So the average score was like 50%, right? It was 18 and 18. And the clinic response was, well, you lost the clinic. GM and Ford are both got higher average score. Well, no, they had 6 % of the market, 18 % of them loved it. Sure enough, Ram, when they did the new look or the tough look Ram, the market shot up to 18%, almost like that.

40:51Chris Theodore: So, you know, going back, right now the Paris show is going on and Perry knows more of the cars that are there than I certainly do. But the thing that struck me was the fact that there are a whole bunch of concept cars being shown at the Paris show. There was Renault did one, Citroen did one, Alpha did one, Peugeot did one, Fiat did one. And back in these earlier days, the domestics, the D3, were all doing concept cars. They've all seemed to have disappeared. Yet here we have these Europeans that are putting out these clever, imaginative, fashion-forward vehicle designs that maybe get to the point you're talking about of trying to get people to have this reptilian reaction of like, I want one of those.

41:40Chris Theodore: What happened here?

41:42Perry Stern: Well, I think there's a couple of things. Yes, you want the reptilian response. Think about this. Quote Yogi Berra, this is deja vu all over again. Sell the future. What did Chrysler do? I mean, we reinvented, if you will, the NAIS when we brought the Viper out there. And that's when the heydays of the show cars came out. And now Europe's in deep, deep trouble. And we talk about that in the sales and marketing section, too, of the book. They've got an onslaught of Chinese cars coming, and they have to introduce new models. And if you look at many of the new models, the show cars that you saw, they try to grab the emotions of prior great products.

42:36Perry Stern: So you have, I saw the, what's the Renault Cordini looking show car. And there was a Citroën de Cheveau. The Citroën Du Chavot, which, if you look at that, looks like a direct copy of the Chrysler CCV that Brian Desmond did about 20 years ago.

43:00Gary Vasilash: But remember, he used the original Du Chavot as an inspiration for that.

43:05Perry Stern: And so now they're trying to capture those memories, and that's why you see it. Meanwhile, auto shows have disappeared, and we talk about that in the marketing section because they're too expensive. expensive. Now you have to have a new way to catch the consumer's attention with all these different awareness techniques, influencers, and all that other stuff. Change the whole marketing scenario. And I get chapter on marketing. I'm pretty critical because most marketing, automotive marketing is not very good. There are some great examples. But the funny thing, I give the automotive industry a break.

43:44Perry Stern: They are slightly better than the average of all product marketing, but it's pretty bad.

43:51John McElroy: It is interesting you mention the concepts, though, because the Koreans still, you know, Hyundai, Genesis, Kia, still are attending all the auto shows. They're still showing concept cars as if nothing changed. Some of the Genesis concept cars are absolutely gorgeous, and a lot of them have come very close to the production models.

44:10Perry Stern: And the press is reacting.

44:12John McElroy: Yes, absolutely.

44:13Perry Stern: And that was the purpose of it. So maybe there's another venue that's less expensive. Maybe it's a press car show instead of an automobile car show where you show just current models. The public will go out to see current models, but you want to generate some excitement for what's coming in the future. And I think that's what the French are. It's a Hail Mary. It was a Hail Mary Chrysler. We were selling K cars. you know the LH was called the last hope right I mean that's what the press called it go back

44:50Chris Theodore: but it worked but it worked so okay if if Europe is in a very bad situation and needs his hail Mary how do you see the domestic landscape now and in the near future not the far future the near future

45:08Perry Stern: In the near future, we're kind of like the last bastion of defense, and it's only short-term defense, in my opinion, of basically the Chinese onslaught that's attacking Europe, Middle East, South America, Canada.

45:29Gary Vasilash: Well, everywhere in the world except the U.S. Except the U.S.

45:32Perry Stern: And we are a unique market with heavily dependent on huge pickup trucks and SUVs. And we're going to milk that and be profitable in the short term while everybody is sliding into the abyss of red ink. But the tide is ultimately going to turn here as well. We've got some time, and I hope we use that time wisely to think about what I think the future is going to look like 10 years after that, like 2050, in an 8 million market. How are you going to be profitable? What are you going to do? Who's going to be the survivors? Who are going to be the losers? And you have to recognize that the domestic market, the big three are now the Detroit three.

46:20Perry Stern: They're not global manufacturers. And so where is their place in the world? It's this is going to the next 20 years are going to be the biggest revolution. You know, since the elimination of the horse and buggy, this is I won't be around for it. But 2050, I think, is we're going to look back at that. And that's when everything finally changed over to the to another new world for transportation. Yeah.

46:48Gary Vasilash: And nobody is planning for it. No one's talking about it. I mean, I hope they're planning for it.

46:54Perry Stern: Nobody's talking about it. I don't think they want to mention it. I mean, you.

46:58Gary Vasilash: No, because it becomes a self-fulfilling prophecy. If you come out and say, you know what? We think our market's cratering. Your stock's going to take a hit right from the get go. So automakers have got to be very careful with what they say publicly. But going back to what you were talking about, I like Ford's Fathom, the UEV platform. I think that's an attempt to get after being competitive with the Chinese. I do too. I don't see anything else. I hope stuff is going on behind closed doors, but I haven't heard anything about it. And my fear is that the top man, the C-suite at the Detroit three right now, maybe not so much Antonio Filosa, but they're in the twilight of their careers.

47:45Gary Vasilash: and I just don't see them wanting to rock the boat. I think they're going to leave it to the next generation. They're just going to finish off their run.

47:53Perry Stern: Well, and that goes back to it's hard to criticize that. On the one hand, because of the short-term reinforcement they get is to get short-term profits, and that's what they're doing. The U.S. market is maximizing their profits now. Hopefully, they're planning for and investing in the future. Because I think, I could be wrong, but I think there's only going to be a few survivors. One, maybe two, probably in each major region of the world, if you look, if you fast forward. And yeah, there'll be niche products all over the place, but the mass market manufacturers are going to be few and far between.

48:38There's going to be some winners and a lot of losers.

48:41Perry Stern: So I hope behind the scenes, they're using this time to plan. And I think the Fathom's a great start, but there's a lot that has to be done.

48:50Gary Vasilash: Right. The Fathom's just one example. The question is, how do you take that across the company?

48:55John McElroy: And if you're talking about, you know, having the new product sales, how do you plan for that? I mean, I understand, you know, having some product that, you know, is going to be competitive. But at some point, I mean, how do you plan for the demise of your industry?

49:12Perry Stern: Well, it's not necessarily devised because it's just how do you end up being the winner on a smaller market? If the market gets smaller and you are, we talk about corporate strategy in the session. If you're the highest value, lowest waste producer, fastest to market with innovative products, that's the strategy to win. But if it's going to be, if 50 % of the market is going to be basically cybercabs, and I talked about this, there are going to be Tupperware vehicles in the chapter. It's going to be a box or a slight plastic shape of it on a skateboard, minimal cost, high durability, quality that can rack up the miles and never break.

50:06Perry Stern: The guy that can do that most efficiently is going to dominate that cyber cab market. So who's planning for that? And then, you know, the same thing, there could be a similar scenario with trucks and vans. So there may be the high volume, think of an automated London taxi company, if you will, in the 22nd century. and then there may be these autonomous, as you need them, pickup trucks and vans and so on. That could be another business model. So maybe there's one guy who works on the high end and one guy who works on the small end. But it's hard to imagine three or four. Same thing with autonomous software.

50:52Perry Stern: We talk about that, talk about the risks, talk about what's going to happen, and I think it's going to be one, a maximum of two softwares. that ultimately prevail per region, just like in phones. I mean, we've got the model is there. And phones, okay, they were different fashion statements. They were new. They're different. Well, now a phone's a phone. You got two, and you got different doodads on each. But I know as a car guy, I hate to see the commoditization of those products, but it's happened in the phone world, the smartphone world. It's going to happen, you know, in this autonomous world.

51:35Between now and then, though, I mean, so if we look at the current situation, you know, you mentioned that the D3 is essentially about pickup trucks, big SUVs.

51:48Chris Theodore: And, you know, reporting is that pickup trucks in big SUVs are basically sitting at dealerships right now because nobody is buying them in the numbers that they were before. What do you recommend that the leaders of these companies do now to improve their fortunes?

52:12Perry Stern: Well, that's a great question.

52:18Perry Stern: I think, and I think they're doing a large, they're maximizing the profits with what they have. Some of those profits have to be set aside for this future date. And the other thing that's happening, and you see it now, the products that are there are going into high profit, longer life cycles, less recapitalization. And so that's making them more profitable. The replacement cycle is starting to, the consumer doesn't really know it yet, but it is starting to stretch out. So now you're using your capital investment a little more efficiently. And so that's buying you time. Now you've got to figure out how, if EVs are going to be the winner, and they are going to be the winner in the end game, how do you get there?

53:14Perry Stern: And that's another chapter where we've got another radical proposal. the Detroit Three are going to get their derriere kicked in the EV world because of cost. One of the radical suggestions when I talk about the future is there is a way to replicate, just like we had to replicate the Koretsu. You've got China's KTARC, and they've got their battery consortiums and their rules. How do we do that? And the answer, and I get into that in more detail, is going to have to be collaboration amongst the Detroit Three. And it's been tried and failed at least half a dozen times. And maybe necessity will make the Detroit Three figure out how to work together.

54:12Perry Stern: Because I think they can control. there is a strategy that could control the U.S. market for them. And it's pretty radical, so it's in the end of the purchasing chapter. I at least encourage them to consider steps one and two. Step three might be, you've seen it, John, it might be a little one bridge too far. But how are you going to compete with, just think about, we're setting up unique battery plants. one for Stellantis, one for Chrysler, one for GM, different technologies, all think they have the best approach.

54:50Gary Vasilash: I'll give you another good one. Both Ford and GM going after LMR battery chemistry. Why don't they work together? They're both pursuing different approaches to get to the same goal. There's no sense to that.

55:07Perry Stern: That's the whole point is you can collaborate on that. And if you think about it, if you look at the Chinese business, the government has defined the platforms. Here's the platforms. Now you build your car around it. And they've created their best set of specifications. That may change with time. But the efficiencies that you get there, the efficiencies of all the battery packs being the same size, being interchangeable, being swappable. We could do that. You know, if there are C-cell batteries, and if North America adapts to D-cell batteries, and all American cars have the volume of the D-cell batteries, and the D-cell batteries are swappable only in domestic-made products, you know, you can create your own little biosphere.

56:04I don't know if anybody's really talking about that, but I think that may be one of the survival scenarios to get us between here and there.

56:14Chris Theodore: Okay, but that almost sounds like reactive, not proactive. How do you get them to do this before they need to do this? Because people are looking across the Detroit River and looking at those cars in Windsor that are coming from China and going, wow, those are great. I wish I had one.

56:35Perry Stern: Well, I understand that.

56:37Chris Theodore: I mean, go ahead.

56:38John McElroy: I was just going to say, aren't we past proactive at this point? I don't know. I mean, it seems that, like you just said, the cars are already here.

56:47Perry Stern: Well, we are past proactive, but we can do things that could help. What we've done, and Europe, even worse, for example, is the way we incentivized EVs was putting the cart in front of the horse. It was just backwards. If you think about it, we know China, top-down government incentives, Who do the incentives go to? They don't go to the customer. Just my feeble mind, what if I had taken the$7 ,500 and said to each manufacturer, for every electric vehicle you sell, I will give you$7 ,500, but only if you sell it. Versus telling the manufacturers, you have to sell, especially in Europe, this many EVs.

57:45Perry Stern: And oh, by the way, I'm going to create the consumer demand artificially by giving them$7 ,500. So they're happy. They vote for me. And you get to lose more money.

57:57John McElroy: I think that last little bit there you said is the reason it's that way.

58:01Perry Stern: Well, vote for me. I mean, it's so public policy could change this. If you think about it, being proactive, the Chinese government literally had students here, went back, put together a plan for China on electric vehicles, and laid out a plan. We can do the same thing, but we're the motorboat, we're the sailboat culture, right? We're Democrat, we're Republican, we're EV, we're not EV. time to get our act together and put together a plan with the industry. And I'm not saying the government should run it. I'm saying the industry should learn to collaborate.

58:47Gary Vasilash: Right.

58:48Perry Stern: Right. And because I've been thinking a lot about this, too,

58:52Gary Vasilash: working with you on the book, how do you get that going? I think it's got to start with the board of directors, because the boards of directors set the stage for all the criteria they want management to meet. Here's how we're going to feed and reward and compensate you. And because if the board's not on board, it's not going to happen. And how do you get to the board to start thinking about, boy, the board should collaborate with GM that should collaborate with Stellantis.

59:22Chris Theodore: See, this goes back in time as a bunch of old guys in here talking, but you remember PNGV.

59:28Perry Stern: That's why I brought them up, another failure.

59:30Chris Theodore: But it could have been. And it could have been. Tremendous success. And the car companies were working together. So it was a partnership for Next Generation Vehicle and Ford, Chrysler at the time. And General Motors. They got dispensation by the government to work together, collaborate for pre-competitive research. And the research was to develop a vehicle that got how many miles per gallon? I can't remember.

59:56Gary Vasilash: I want to say it was 70.

59:57Perry Stern: Yeah. It was Francoise. 70 miles per gallon. He proposed it. I was on those. And I walked out because I was a Chrysler guy. The Ford guy didn't want to share any of his information because he thought he was smarter than me. And then the GM guy thought he was smarter than the Ford guy. And there was no collaboration. So what did they do? They built three different cars. Of course. Three times the waste. Right.

1:00:21Chris Theodore: But don't you think that at this point in time, if we're facing, as Jim Farley called it, an existential crisis, that there might be some willingness for the D3 to work together?

1:00:35Perry Stern: I sure hope so. Hubris, and I talk about this, should not get in the way. You know, let's quote Churchill, when your head's in the lion's mouth.

1:00:49Gary Vasilash: It concentrates your attention or words to that effect. All I can tell you is having come from two industry conferences, there's more and more talk about this collaboration. So far it's just talk, but it's happening at higher and higher levels of management. So we'll see what happens. I personally believe the crisis is not yet dire enough to force them into action.

1:01:18Perry Stern: Oh, yeah, you're looking at record profits. But I think, and I think the government has to come in and say, hey, we see this. You know you see this. You have to do this. So at least force the collaboration, if you will. This was the other way around back in PNG. Dear government, can we please talk to each other? Now it should be government says, you will talk to each other or you guys are not going to survive.

1:01:45Chris Theodore: All right, we got to leave this on a high note. Okay, so this is the quiz. So someone was born on October 15th, 1924. Very famous individual in the auto industry. And coincidentally enough, this person was associated with a famous firing, which also occurred on October 15th. But this was in 1978.

1:02:12Gary Vasilash: So October 15th. I know the answer. But let's see if Perry and Chris can come up with that.

1:02:20Perry Stern: 1978.

1:02:21Gary Vasilash: That's the firing.

1:02:23Chris Theodore: I wish we had Jeopardy music. Yeah.

1:02:28Gary Vasilash: Then we'd have to pay royalties on that, so we'll come up with it.

1:02:31Perry Stern: It had to be Iacocco.

1:02:33Chris Theodore: Lee Iacocco. There you go. A hundred years ago. So he was born in 1924 and was fired by Henry Ford II.

1:02:40Perry Stern: Yes, and he's one of the four executives I talk about as models of good CEOs.

1:02:47John McElroy: So he was fired on his birthday. Yeah.

1:02:48Gary Vasilash: that's rude yeah and and henry happy birthday henry the second famous words to um i just don't like you that's how we fire up yeah that literally that that's that's what it was chris thanks so much for coming on the show thank you you know for the audience you've gotten a little bit of a taste of the 10 chapters, 18 videos, and what was it, 25 hours, I think, 20 to 25 hours that we've recorded. We're posting them every Friday, but I think this gives everybody an overall view of what's going on there.

1:03:29Perry Stern: Well, I hope they enjoy it. Feel free to comment, and it's just what I learned. take it, use it, ignore it. But I think don't ignore history. There's some things to be learned from it. Perry, thanks for being with us. I always have to be here.

1:03:50Gary Vasilash: We'll be back again next week. Thank you for having tuned in.

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