AAH #813 - How Automakers Can Win New Military Contracts

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0:24Gary Vasilash: Hey everybody, thanks for joining us on Auto Line After Hours. And thank you, Mr. Gary Vassilash, for being here today with us. Thank you for having me, John. Good to have you here. Should let everybody know our special guest for the show is Jeff Norman. He's with GDLS. Maybe a lot of you don't know what that means. It stands for General Dynamics Land Systems. Jeff is the Senior Director of Programs there. We'll be getting into what that's all about. But we also have Brianna Noble on the show for the first time from the Detroit News. And great to have you here, Brianna. Thanks for having me. So what's your beat?

0:58Gary Vasilash: Because you seem to cover an awful lot of different things that are in the industry. Do you have a specific beat or it's just whatever you want to get into? I'm focused on covering Ford Motor Company, but in the newsroom these days, it's sometimes all hands on deck. You're getting to dig into all sorts of different subjects. Yeah, no kidding. Well, great to have you here. And we got Jeff here because we've been covering this on the show and on Auto Line Daily. There's this growing convergence between the automotive industry and the military, particularly in the United States, but also in Europe.

1:31Gary Vasilash: And Jeff, you bring a perfect background to being on the show. You were in the Army for what? Quite a while, right? 30 years. 30 years. And you got to, what was your ultimate rank? Brigadier general. Brigadier general. That's not a half bad title to have. But now you're on the other side. Yeah. So I guess I'll just kick it off by saying you were in the Army. You were involved in defining what next generation vehicles for the Army needed to be, right? Yeah, exactly. And now you're on the side that's providing those. Has your perspective changed being on one side? Wait, wait, wait, wait. He's got to explain what GDLS is before we get to this.

2:13Because, you know, here we have this brigadier general who's going to be talking about what he thinks should be, but he's got the opportunity to really make it happen. So tell us about that. So no pressure. I got to make it happen now. Yeah. So currently with General Dynamics Land Systems, I joined the company two years ago. But I feel a connection to the company going back more than 30 years because I started out my career on M1 Abrams tanks and General Dynamics Land Systems makes the Abrams tank for the U.S. Army and for 10 other countries around the world. We also make the Stryker 8x8 combat vehicle and a number of other vehicles for the U.S.

2:56Army, Marine Corps and international customers. So as you pointed out, we're in the business of making vehicles to meet customer needs and then also to invent things that the customers will want, military customers primarily, by understanding what their requirements are, excuse me, in some cases, even before they've defined those requirements. But my last assignment in the Army was to map out next generation combat vehicles requirements and specifically what capabilities the Army needed and how we wanted those packaged. I was not an acquisition officer. During my Army career, I was what we call an operator.

3:40So I was an armor officer, and I had served in the 1st Infantry Division, Ford in Poland during the most recent Russian invasion. So I had a real current set of experiences when I was then assigned to Detroit Arsenal. And at Detroit Arsenal, I was in charge of a cross-functional team of requirements writers, testers, technologists, and other analysts to come up with the requirements for combat vehicles. Not only manned combat vehicles, but also robotic combat vehicles. And so now we're in the process at General Dynamics Land Systems of making those vehicles, of meeting the requirements, designing to those performance specifications and producing the prototypes against those requirements.

4:30So it's a kind of a full circle moment. I was actually right before driving over here, spent the morning in the prototyping shop in the bays, crawling around on the vehicles with our teams who are designing and actually building those vehicles right now. It's incredible.

4:48Gary Vasilash: So has your perspective changed as being one writing requirements and now being in the company that's got to deliver them? Yeah, it's really interesting how a person's perspective changes. changes. And for me, what I've grown to appreciate more in these last couple of years being in industry is how important designing for cost, designing for manufacturability, and understanding one's supply chain is to having a viable product, a viable, in our case, combat vehicle for our customers. And so oftentimes, requirements writers will be very aspirational, and they will be fascinated by exquisite materials, sometimes that don't even exist.

5:30And we call it, you know, unobtainium. Either it doesn't exist in the natural world or it's so expensive that nobody could afford it at scale. And so working on the industry side where you actually have to build something, source the parts that go into it and design it in a way that your craftsmen, your welders can actually build the thing is a whole different side of the equation. And it's fun to be on the side of the fence now. So how big is your organization? You know, we're saying, oh, you know, manufacture these things. But I mean, how many people are doing this? Yes, we have about 8 ,000 people spread principally across the UK, Canada, and the United States.

6:16The lion's share of General Dynamics Land Systems is here in the United States. Our headquarters is in Sterling Heights, where we have about roughly 2 ,000 people. a lot of engineers, supply chain professionals, and it's the company headquarters. So all the functions that would go with a company headquarters. Our principal manufacturing plant is down in Lima, Ohio at the Joint Systems Manufacturing Center, the tank plant down there where we make the M1 Abrams tank and large structures for other vehicles as well. And we have the, depending on the volume will have normally anywhere between 900 or maybe 1 ,200 down to 700 people.

7:00It just fluctuates. And so those are the principal places where we're located in kind of our headcount. We also have a plant in Scranton, Pennsylvania, where we make large machined parts, principally for the turrets of our vehicles or the suspension systems. And then we make our own electronics for really bespoke components down in Tallahassee, Florida. And we also have a big assembly facility down in Anniston, Alabama. So we're spread out across the country. We have test facilities in South Carolina and Ohio, so we can test our own kit too. Similar to automotive proving ground, ours are a little different in that the automotive testing is interesting, but it's not nearly as demanding as the blast testing that we do in South Carolina and the live fire testing shooting our vehicles in Ohio.

7:57All right, you got to explain that. You have people who are shooting at the tank while the guy's driving it? We do that. We do that on government ranges, normally in Aberdeen Proving Grounds in Maryland. So we don't shoot at our own vehicles in Ohio. So our friends down south don't have to worry about that, but we actually tune our, what we call fire control systems. So the computers, the algorithms, the sensors that enable us to, to, uh, aim to a target and make sure that our rounds, our bullets hit exactly where we're aiming, um, again, stationary targets, moving targets with us being stationary with our vehicles moving day, night, all weather.

8:39Gary Vasilash: um it's interesting to hear you say some of the things uh uh logistics that going into it because i hear a lot of similarity um with what you're talking about and in automotive in automotive right now there is a huge push on to shrink the product development time yeah you know it typically takes five years or has typically taken that automakers here are trying to slash that in half or even more. I'm told that in the military, it takes 15 years to get a major new weapons system in the hands of our warfighters. I got to believe you're trying to compress product development time too. What are you looking to do to do that?

9:20The first and most important things we're doing really fall into two categories. One, and most importantly, is to understand our customers, their operating environment, and sort of stay close to understanding their needs. So we're not waiting for a requirement to come from them. We can iterate on our own to develop full solutions or partial solutions before they've communicated a requirement to us formally. And then secondly, design systems with open architectures so they can be quickly upgraded without a major tear-up or a major redesign. And really that open architecture approach, that modular open systems approach, and doing digital design from the beginning has really shortened our development cycles, increased our opportunities to bring in great technology without a major tear-up or redesign, and get access to capabilities that we just haven't been able to bring into our development cycles previously.

10:29Brianna, ask something because otherwise I will. Yeah, no, I was wondering how long does that development cycle now? Yeah, so it's a great question. So for the combat vehicles that we're working on right now, which is the M1E3 Abrams tank, which is a radically transformed Abrams tank. That development cycle has been shrunk from really about nine years down to less than five years. And that's for a complete redesign of that vehicle. And that's a really impressive reduction in the time. And then for the infantry fighting vehicle that we're working on that we call the Wolf or the XM30, that development time, the requirements were codified in 2022 when we were put on contract for that and we're delivering prototypes this year.

11:27So that's a four-year cycle. So what used to be 15 years, and that's exactly right, and even maybe quick using previous metrics now has been slashed in half or a third.

11:41Gary Vasilash: Which is pretty good. That's extremely good progress, but I still got to believe it takes too long. Yeah. And so the way we're approaching that now is by leveraging the open architecture and having a model year approach. And we are absolutely stealing that from commercial auto, where we have a development pipeline for capabilities that we can spin into the vehicle, both new production and potentially retrofit to existing fielded vehicles through a model year approach, leveraging that open architecture, bringing in new sensors, new software, a whole range of new capabilities. Your mind can just imagine the types of things that we would want to bring in, and we can bring in now through this model year approach.

12:29So we don't have to necessarily do a full restart with that four-year design cycle to go from ideation to implementation. But there is a pipeline now that allows us by model year to bring in the new capabilities. Jeff, has the war in Ukraine changed thinking about things like tanks and other military vehicles? Yeah, absolutely. So, you know, I would be remiss if I didn't address the proverbial elephant in the room of why tanks? Why do we even need tanks anymore? because we've all seen the video clips of a$500 drone smashing into the top of a$10 million tank and burning it to the ground. And the reality is more complicated than that.

13:20There is no doubt that drones can destroy tanks, but that's not where the story ends. Our thinking has been hugely shaped by what we're seeing in Ukraine and in other conflicts. But the tank in its current design is a product of learning from wars previously. So this is a cycle that we've been through successfully before, and we're confident we'll be through successfully this time as well. So our thinking is that combat vehicles are still essential to success on the battlefield. field. What they enable an army to do or a friendly force to do is to get from point A to point B through the enemy's defenses on the ground and seize terrain or protect a piece of terrain that the enemy is trying to take from you.

14:14That can only be accomplished with combat vehicles and soldiers on the ground. We can't do that from the air and you can't do it unless you actually have boots and tracks on the ground. So we have to figure out how to protect our vehicles. How can our vehicles survive in an environment where their drones constantly flying and our vehicles are constantly under surveillance? And so we're in the process of developing our own and partnering with companies that are developing counter drone systems that are really, really effective. So systems that can detect the drones before they can be seen, systems that can jam the drones so they can't come close, systems that can knock down the drones without firing a shot, and then systems that actually shoot them down if they get too close.

15:02And those counter drone systems, counter unmanned aerial systems, as we call them, are absolutely essential to the viability of combat vehicles in the future. And so that's one aspect where our thinking has changed. The other area where our thinking has changed quite a bit from what we're seeing in Ukraine is the teaming of manned systems or crewed systems with unmanned systems or uncrewed systems. There is a convergence that's happening now in real time in Ukraine where robotic systems that are not necessarily autonomous, they're teleoperated, remote control, are being employed in very dangerous or perhaps long duration missions when you don't want to expose a human to be at risk as a crew member of a vehicle.

15:53Those robots can perform those missions really well. So we're watching that closely and really doing a lot of work in-house to come up with the best solutions for those manned, unmanned teams, for those crude, uncrewed systems to partner together based on what we're seeing in Ukraine and some thinking that we've been doing for a number of years now.

16:14Gary Vasilash: I saw a video clip of a tank battle in Ukraine. These days, you don't know what's AI or what's real, but it looked real to me. and it showed two Ukrainian tanks going through these fields with their own killer drone cover. So it was, here's main battle tanks that have got their own air cover, which are drones that are drone killers. And that's when I thought, oh, okay, this makes a lot of sense to me. That's the recipe for success for armored forces for tanks in the future. So having drones that are providing the air cover for vehicles on the ground, for soldiers on the ground, is absolutely essential.

16:55We also think that those drones should be launched and recovered by those vehicles themselves. So they don't have to rely on some other unit to provide the drone for them. And so we're designing systems on our tanks, on our fighting vehicles that actually launch drones, and then that feed comes directly to that crew of the vehicle. So it's a new way of fighting, a very effective way of fighting. And again, that would be an example of a model year upgrade that we can spin in with this open architecture. And we're actually testing a few of those systems down at Fort Hood, Texas, basically as we speak.

17:33We had them on the floor in Washington, D.C. at a trade show recently, and those systems got packed up and sent to Fort Hood, Texas, so soldiers can start experimenting with them in the field here in the States. What about the universe? I'm sorry, you go. I was just curious because you mentioned earlier appreciation, grants and appreciation for the sourcing side of things. I was curious about just the impact of tariffs and new regulations about restrictions on sourcing from places like China, Russia. Yeah, it's a really, really important point because the supply chain, particularly of rare earths and other commodities, has become so diffused.

18:15And a lot of those critical minerals are coming from places other than North America and other than the state. So the Department of War, the Army, and our company, we're all looking very closely at where our critical materials are coming from. You know, we make a lot of things with aluminum, titanium, and steel. And so there is a hyper focus on where those materials come from, where they're being sourced by to make sure that we've got stable supply chains. The Department of War is doing an interesting thing, a really, I think, smart thing right now that they call the vault program. And through this program, America is buying up stockpiles of critical materials, rare critical minerals and other commodities that we're going to need for wartime level production.

19:16And we don't want to be beholden to a foreign supply chain or potentially adversary sourcing location. So those are a couple of the things that are being done right now. But part of it is a new level of scrutiny on supply chain visibility to make sure that with our subs, our sub-tier suppliers, we have visibility of where they're sourcing their parts and that their sub-tier suppliers have visibility on where their parts are coming from. So we're looking, you know, all the layers down to the origin in a way that hasn't been done before.

19:56Gary Vasilash: In fact, the term I've heard, down to dirt and water. That's right. It's that level of fidelity. And for all of us as taxpayers who have an interest in our national defense, it's the right thing to do. But it is a heavy lift. I'm not going to say it's easy and I'm not going to say that we've cracked the code on it yet. But it's beyond the point of something that we're just talking about and wringing our hands. And now we're rolling up our sleeves and actually doing the hard work. But you're not necessarily worried about any sort of immediate bottleneck effects, especially with regulations next year?

20:29No, we generally have a really open dialogue with the administration, and they're acutely aware of making sure that decisions they're taking don't affect national security. And oftentimes, they're national security carve-outs on some of the restrictions that are being put in place, tariffs being an example. And so right now we haven't been hamstrung or faced any bottlenecks because of it. Jeff, if I'm mistaken, you're literally down the street from a Stellantis plant, which makes me think, okay, why are you guys here? And is there any advantage to be in the Detroit area? Yeah, that's a great question.

21:18I drive by that parking lot full of Ram 1500s twice a day, once on my way to work and once on my way home and see the immediate benefits of being essentially co-located in this automotive ecosystem. There's so much crossover between the talent that makes American commercial automotive successful and the talent that we need to do the work for the defense industry here. I think it's called the innovation corridor on some maps. For us, it's a defense corridor that runs basically from 11 mile up to really 24 mile with a transmission company called Sapa up there. There is this corridor of innovation that leverages the talent, the talent pipeline through internships, through educational opportunities, and skilled trades programs that bring the right talent in.

22:29And it's really powerful to be here. There's a lot of interest with, you know, being in some of the cool places like Silicon Valley or down in Austin or some of these other tech hubs, not taking anything away from them. And so we have a footprint and penetration in those places as well. But we find that a lot of the talent that we need is right here in southeast Michigan. And we're really happy to be here.

23:01Gary Vasilash: Jeff, as I said at the beginning of the show, there's this growing convergence of military and automotive. What advice would you have for automakers or suppliers that are looking at getting into military business? A lot of the ones I've talked to are definitely looking for potentially new areas of business. A lot of it's motivated by patriotism, too. But it ain't easy getting into this. What advice do you have for the auto industry? We would love to talk to them to share the opportunities and our knowledge of the opportunities through the work that we do closely paired with our customers, the Army and the Marine Corps.

23:45But also we can share with them the challenges, the pitfalls, the potential obstacles that they would encounter because doing government contracting is not easy work. And I think a lot of commercial auto in the past has steered away from working in the defense space because of those challenges. So my advice to commercial auto is let's have a conversation. We can share the pros, the cons, the opportunities and the risks. because right now I think the customer, Department of War, is really courting commercial auto to come in and leveraging that patriotism. And I'm all about it. I have no objection to that.

24:36But I think there's also an interest from the Department of War to have commercial auto invest, invest their capital, invest their resources in tooling up and facilitizing for production. And I think that each company is going to have to do their own assessment of the risk that they would take on, given the ebb and flow of defense procurement over time. That's been one of the biggest challenges for a lot of companies to stay in the defense space is those demand signals, production demand signals change frequently. And so I think for commercial auto, you've got to go in with eyes wide open and be willing to either ride those highs and lows or partner with a company like Land Systems or some of our other defense primes to provide what commercial auto can provide so well without having to necessarily take on the risk of becoming a prime.

25:50to the government themselves. What about the suppliers? I mean, let's forget about the OEs and just, I mean, so there are a lot of them that presumably could add some benefit in terms of the technologies and the machining capabilities that they may have for your company. I mean, is this something that you're looking for on a regular basis? It is. We're frequently finding new suppliers, looking for new suppliers. And so the key to onboarding them oftentimes has to do with, like we talked about, where they're sourcing their materials and the ability to define that or have an audit trail that will pass muster.

26:35And then to have cybersecurity protocols in place that enable us as a prime and the government that we're working for to have confidence that controlled information that would need to be shared both ways wouldn't be compromised. And so those are the two barriers to entry that are oftentimes keeping suppliers out of this space. The demand cycle, the ebbs and flows is real, and that's the third factor that's keeping a lot of folks out. My hope is that we will start seeing major systems go into production. I talked about the development work we're doing right now, those prototypes. The key is to get those into production because that gives suppliers confidence that they can work in the defense space and not take a bath.

27:38and that hasn't been the case in some recent instances where programs that were supposed to go into production didn't go into production and suppliers in our company kind of get left holding the bag. So we want to make sure that we're doing everything we can to make it easy for the Army and the Marine Corps to say, yes, this system is going into production. It works. It's the capability we want, and then we're off to the races. With defense spending sort of on the upswing right now, are you guys seeing opportunities for expansion of U.S. manufacturing footprint at all? We are. And so I think we're probably seeing the budgets at a high watermark right now.

28:27And some of those budgets seem particularly high because of really large and expensive programs that don't necessarily correlate to the manufacturing that we're kind of talking about here. Some of those big dollar budget wedges, as we call them, are for Golden Dome, a Golden Fleet, shipbuilding, and other things. Which isn't to say that the manufacturers and suppliers couldn't get into building components for those as well. I think General Motors, in fact, has recently announced a partnership or an effort to make rocket motor components or other things like that. So there are opportunities. But I think we're probably at the high watermark for defense spending right now.

29:23and it's either going to remain flat where it is now or perhaps go down a little bit. So I think there are a lot of promising prototype vehicles and systems that are ready to go into production. I don't see a lot of new prototyping going on beyond what's on the table right now. It's going to be about building what's being proved out now.

29:53Gary Vasilash: Jeff, it's been fascinating having you on here. We're going to have to wrap up this segment, but thank you so much for coming on AutoLine After Hours. My pleasure. Thanks so much for having me. Yeah. We're going to take a quick commercial break, give a shout out to our sponsors. We'll be back to talk some more of the news that's been happening in the automotive industry this week. We act, we grow, we transform, we protect, we rescue. In moments that define the future, we are the partner you can trust. Alex Partners, when it really matters.

30:31Knowing that a little rain won't slow down your day, that's what really matters. Bridgestone Toronto Quiet Track Tires. Confident control in wet conditions.

30:45Gary Vasilash: All right, we're back, talking all things automotive. Gary, do you have a stumping question for us today? Of course I do, John. Oh, good. Excellent. All right. So you're involved in this, by the way, Brianna, so it's not just him. All right. So last week's question, the answer to Lee Iacocca, remember it was a two-part, you know, when was he born and then he was fired on the same date but right years years after that's right so this this is a this is a two part or two except for the fact that it is not a person okay so on october 22nd 1954 this vehicle was introduced oh okay i know what it is it went out of production for four years oh no i don't know what it is then it had an encore for four years what was this vehicle vehicle first introduced on october 22nd 1954 let's see when

32:04uh 2001 oh see when you said 54 i thought that would be the 55 chevy because that's about the

32:14Gary Vasilash: time that it got introduced was september october 54 so i figured that but but it was uh you know they that's the year of the annual styling change so that was only one year so you said so it could It would have basically been any vehicle that was in 19. So it was in production for four years, and then it went out of production? No, it had a 43-year run. Oh, 43-year run. Then went out of production for four years.

32:40You both know the answer to this question. I know you both know the answer to this question. I don't know. I don't know either. You stumped us. It was five in 2001. You don't have to rub it in. Yeah, yeah, yeah, right. The Thunderbird.

32:55Gary Vasilash: Oh, yeah. No, that's a good one. That makes sense. That's a good one. That's right. Ford orientation. Yeah, I like it. Thanks for the nod. That's right. So you must have been all excited this week. You heard all about General Motors coming out with its new platform, its new centralized compute system. So what was your take about what we heard from General Motors yesterday? Finally, they came out and started talking about what they're doing. I mean, and it's very interesting to contract. And I'd love to get your input on this, too. You know, Ford went the skunk works route to go lickety split on a program, digital this, that and the other thing, revolutionize the manufacturing process.

33:37Gary Vasilash: And GM was sort of like, man, we don't need no skunk works. You know, we're going to bring our our our legacy operations up to speed. Although I'll hasten to add, I think most of this work's being done out in California, not here in southeast Michigan. But look, they're talking all the right stuff, going heavy, heavy, heavy on digital simulation. You know, everything, design, engineering, manufacturing. My guess is they're probably even taking this simulation into their supply chain. And they're talking about cutting their product development time in half. They didn't give an exact time frame.

34:14Gary Vasilash: They said it used to take them almost five years. They're cutting that in half. That would say two and a half years. I would say two and a half years is still not competitive. You know, you've got to be in the 24 months. And then we can talk about how do you measure, you know, when does it start? When do you start the stopwatch? When do you stop it? So Francois Castagne taught me this. Francois used to run engineering at Chrysler in the heyday. You start the stopwatch at Clay Freeze. Clay Freeze is, you know, in the design studio where you go, okay, nobody, nobody touched that. That's it. that's what we're going to production with because that's the point at which a car company starts spending a lot of money that's when you start cutting dyes and i always thought it was job one is when you stop the watch and francois was like no not until your plant gets to line speed so you start spending money at clay freeze and you don't start making a profit until line speed so why do these guys need to make clay anymore um you know that that's interesting i remember being in the design dome at general motors being told that they weren't going to do this anymore it was all going to be digital right and and so what they have found is there's you know we're we're human beings have evolved over a long time and we have what they call atavistic attitudes you know atavistic goes back to the very you know basics of our brain being developed and there's something about being able to physically touch something and see it in different light and get back far and get up that hasn't so the designers say I'm not I'm just saying what the designers are that digital form even if you go full hologram is not as translatable as an actual physical object like a clay model so that's why you still do clay now what I would say some some people who are young probably don't need to have this three-dimensional thing.

36:15What do you think? Similar is what I've heard too. And I mean, I think the way people approach thought, it's different when you're looking at something that's on a screen versus something that like you can tangibly look at. And folks who are younger might be more comfortable using some of those technologies and whatnot too. But I've heard the same thing that there's a lot to do with like a physical object when you're creating something that's going to be something that people experience. Yeah. Physically.

36:43Gary Vasilash: Yeah. So what do you think of the Ford approach going Skunk Works versus GM just trying to bring the legacy system up to speed? Yeah. It's interesting doing a comparison on the two and whether, you know, a hundred plus year old company can make the dramatic shifts and become a more agile and quickly developing product type of business within a current structure. Obviously, Ford did decide that it needed to completely separate a team. They went to California based there in terms of developing the new electric vehicle platform there and sort of slowly incorporate and rotate out and give exposure for the folks in Dearborn.

37:29We've yet to see that product yet, but it's coming next year in 2027. I know there's a lot of anticipation to see what all the specs and how this vehicle will look. So when you talk to people in Dearborn, I mean, do you get a sense that they embrace the skunk works out in California or they're a little jealous that, you know, these people out there are in a cool place and we're back at the old place? Well, I mean, now they have that fancy new headquarters too and there's been a lot of investment in the Dearborn campus itself in terms of bringing up some of the the spaces to be uh more inviting especially to younger generations of talent and engineers as well but certainly you know especially hearing from those who have had the opportunity to be in touch with the the Skunk Works team I think they understand and recognize that there's a different mentality and mindset into the approach that they're bringing to product, the sort of break all the rules type of mentality.

38:25And I think for a lot of people that that has been an invigorating sort of sense to bring to something new and different perspective to the process. I'm sure you'll find everywhere some people who are less reluctant to embrace that, certainly. But for some people, obviously, the enthusiasm as well.

38:45Gary Vasilash: Brianna, what I've been told too is that Ford is rotating people from the legacy operation, rotating them through the Skunk Works ops. Have you learned anything from that? Any feedback that you got on that? Well, it was interesting hearing about that, too, because, you know, Ford is recognizing that, you know, as much as they want to be the speedy, you know, business and embrace that mentality, they understand that they cannot also like completely or the challenges with completely like forcing that and bringing in. And so recognizing that this is going to be a years long process to kind of adopt more of the mentality of the skunk works and, you know, frequently ask executives about what's an example of where you're seeing sort of that come.

39:27And, you know, there's small examples here and there that are coming to fruition. So I think as we move forward in a longer process, we'll see sort of larger, more clear examples of what that looks like in terms of product development versus just something related to like software programs.

39:44Gary Vasilash: Yeah. Gary, what did you think of the GM announcement? I thought they rolled out some very impressive numbers in terms of what they're looking at. I mean, in terms of their compute platform, 40 % more powerful, 30 % less wiring, the electronic system, 50 % faster cellular connectivity, because they're really pushing OnStar, AI, you'll talk to your vehicle. What they say, they have like 12 million OnStar subscribers? Yeah. That's a healthy number. Yeah, and when they reported their earnings this week, they said, for the full year, we were on track to approach$7.5 billion in margin accretive deferred revenue from software and services.

40:28So that's basically OnStar and Super Cruise. Fourth generation EV platform. So, you know, they're right there with Ford. God bless you, Mark Royce. You're going to make it happen. Yeah. Well, it's interesting, too, in terms of the system that GM is using in terms of centering on the electrical architecture is centered on one specific computer versus Ford's approach, which is more of a zonal architecture. And that incorporates one main computer, but also computers in sort of each of the regions of the vehicle. And they've emphasized that that approach is especially related to, obviously, Ford strength with trucks and commercial vehicles and the ability to be able to update and upfit those vehicles into the different types of needs that different commercial customers especially have.

41:27And that's a great point. But I think you can spound on this thing of like in both cases, they're both talking about vehicles that very few people are buying, electric vehicles.

41:41Gary Vasilash: Yeah, because, you know, the belief is EVs are still the end game. That's the belief. We're going to go EV at some point even in this country. And if that's the end game, then don't mess around. to just keep refining that product until you can get it to the point where people want to buy it and you can make a profit on it. Okay. But in the meantime, these companies, Ford and General Motors, are having their lunch eaten by companies that are offering hybrids. And we heard - The centralized computing system is power train agnostic. Right. But I'm just saying that, as John was saying, that their centralized computing system is powertrain agnostic.

42:21I'm just saying that we didn't hear a word yesterday from General Motors about hybrid vehicles. No, we did. I think on Monday they provided a little bit.

42:31Gary Vasilash: Yeah, they said they are coming out. Mary Barra had some statements. They are coming out with hybrids. But here's the thing that I would - All right, so here's from Mary Barra's letter that she wrote to the shareholders. Over the next several years, our portfolio will only get stronger as we complete launches of the all-new 2027 Chevrolet Silverado and GMC Sierra light-duty pickups and follow them with our next generation of heavy-duty pickups, our next generation full-size SUVs, all-new Cadillac sedans, and crossovers, and more. So unless the hybrids are and more, I'm hearing nothing. No, I thought she said that they would have hybrids in multiple product lines.

43:11Gary Vasilash: Now, she did not put a time frame on that. They previously have said 2027, I believe, in North America. But I'd point out this. Toyota lost money in North America last year. And I haven't run the numbers yet. We should be able to get their most recent financial quarter numbers very shortly. Companies are starting to report now. But, you know, I get the hybrid thing and I agree that this is a product planning fiasco on the part of GM and even to a degree on a part of Ford. But on the other hand, if you're selling a bunch of hybrids and you can't make money on them, what's the point? So you're suggesting that the 261 ,000 Camrys that they've sold so far this year, they're not making any money off of?

44:11Gary Vasilash: I'm saying that Toyota lost money in North America last year. Now, I think this is before the tariffs really had their full impact. They made money in North America in their first fiscal quarter this year. but it's a fraction of what you would think a company should be making that's knocking on the door of surpassing General Motors and sales. So that's what I come down to. It's great to be able to sell a lot of product, but if you can't make a whole lot of money on it, it's not going to get you very far. Yeah, I mean, obviously, Absolutely. Ford obviously has focused especially hybrids on and championed the hybrid technology on its, especially now that it's ended production of the Escape crossover on its trucks.

45:04So the Maverick hybrid has been a big high seller for Ford, as well as the F-150 hybrid has been an emphasis for their sales. they've already said that they're going to be bringing out the extended range F-150 Lightning in the future as sort of the next step of that. So they clearly are expressing confidence in electrification, even as they've backed away from the full electric truck. I look at it from the point of view of the Maverick Hybrid. Fantastic vehicle. Selling, I'm sure that trucks roll up and people say, I want that. And they're buying them like mad. And it's just like, why isn't there more focus on bringing out products like that?

45:50I mean, if you go back, you know, you get a Fusion hybrid. And I think they had a Focus hybrid for a while. I mean, they had hybrids. And then they abandoned it because, oh, everybody wants electric vehicles. No, they don't. And yes, it may be the end game. But you know what? To be in the game, you've got to make money to get to the end. And that's the thing that I'm concerned about.

46:15Gary Vasilash: No, no, no. I hear you. And, you know, so you hear a lot of talk in the industry right now with the term optionality. And optionality means that you give your customer any option that they want from your powertrain agnostic. You want a hybrid? Great. A strong hybrid, a plug-in hybrid, an E-rev, a BEV, whatever. We're going to have a platform or platforms that will give you that option as a customer. GM clearly missed the boat on that. But I still come back to the point that you need a strategic plan that even if parts of it go belly up, you still deliver very good returns to your shareholders.

46:54Gary Vasilash: And GM's doing a pretty good job of that. So what about the controversial$20 billion share buyback? Oh, I got a few things to say about this. It's controversial because Sean Fain, the UAW president, came out and lambasted GM for that. And in fact, Abdul Al-Sayed, who's running for U.S. Senate in Michigan, came out and said the same thing. How dare they do this? And Mike Rogers, the Republican running for Senate against Abdul. Abdul is supported by the UAW. So here is the 180-degree difference to Abdul. Mike Rogers came out and said, quote, GM lost billions investing in EVs nobody wanted. For two years, GM could have focused on reinvesting in Michigan workers and manufacturing vehicles consumers actually want to buy.

47:48Instead, they chose profits over people, and Michigan autoworkers will pay the price. That's the Republican. That's the Republican.

47:55Gary Vasilash: So here's a couple of things, because I had to look into this. I'm not a big fan of share buybacks, okay, number one. But number two is, what's wrong with doing something for your shareholders? Now, Sean Fain says, oh, this is all going to the billionaire class. I can assure you, billionaires are not investing in anything automotive. Maybe Tesla. Why? Because investing in automotive, I mean, the returns are inky dinky. So the whole idea that the share buybacks are going to benefit billionaires, to me, is ludicrous. because point in fact, something like 90 % of GM shares are held by institutional investors, the big institutions.

48:35Gary Vasilash: And what do they do? They manage pension plans. Most of that stock is in pension plans. What's wrong with General Motors doing buybacks that are going to help pension plans? And in point of fact, and Sean Fain will never mention this, the UAW Retire Medical Benefit Trust Fund holds over$5 billion of GM stock. And so with GM doing these buybacks that has driven up the price of the shares, it's actually making the UA, you know, we used to know it as the VBA, but it's the Retirement Medical Benefits Trust Fund. It's benefiting from this. UAW retirees are benefiting from it. And so this whole socialist claptrap of this is all going to the billionaire class, to me is ludicrous.

49:23Gary Vasilash: And besides, the$20 billion number is going to be spread over multiple years. My guess is it's going to work out to about$4 billion to$5 billion a year. Still a lot of money, but it's not like they're handing$20 billion to billionaires. So what if they spent$4 billion this year developing some really cool product that people wanted to buy? Then they spent$4 billion next year buying machine tools. Then they spent the years after that developing another really cool product. And then the year after that, they bought more machine tools. I haven't looked at the numbers, but I bet if you look at it today, GM is probably this year spending, I'm going to guess between eight and nine billion dollars on new product development.

50:03Gary Vasilash: So it is spending that billions. And guess what? They don't need new plants. They don't need new plants. I mean, they need to get the existing plants up to full capacity utilization. This idea that Sean Fain's talking about, well, they haven't built a new plant in America in 20 years is a good thing that they haven't. This country, this auto industry does not need one more new one. New stuff in it, John, just as new computers on desks make people more productive than old computers. Yeah. And I still come back to, if you look at GM's financial returns for the last quarter, they're pretty damn good.

50:40Gary Vasilash: So they're spending all this money on CapEx. They're spending all this money on R &D. By the way, the UAW workers are probably going to end up getting something like$14 ,000 a piece in profit sharing this year. So to me, I can take all kinds of pot shots at GM and Mary Barra in particular, but they're running a pretty good company. Well, and the context behind this, too, is interesting, given that Sean Fain was just majority elected overwhelmingly by UAW members as well in their most recent election of leadership. What was the turnout in that vote? Oh, that is true. It was a minor, minor part of the workforce that voted in.

51:25For those who did vote, yes. Yeah.

51:27Gary Vasilash: And besides, too, didn't the federal monitor lambaste the UAW for poor investment decisions? It was vague. They didn't come out and say much about it. But the UAW lost out on some 50 million dollars of investment income it should have earned. But somebody was sitting on their hands. So for him to criticize GM of doing stock buybacks at the same time, he can't even manage his own money. is take some chutzpah. Well, amid some of the tensions within UAW leadership, a lot of that blame was placed on the Secretary-Treasurer. Good point. No, very good point. But the Monitor also in his report recognized that there is an approval processes that involve all of the IEB members as well.

52:14So he did place responsibility on the entirety of the IEB as well. Yeah.

52:19Gary Vasilash: Thank you for that, Brianna. All right. Moving on to a non-UAW plant for company. Tesla reported its numbers. What was your take on that? Boy, their profits fell off a cliff. They were down what? Over 40%. And there's some things they boosted their R &D spending. Their SG &A, you know, selling general and administrative costs went up by half a billion dollars. but the big takeaway for me is that their sales dropped a little bit their revenue flatlined their operating profit their net profit took up a huge drop and I know they got a lot of things coming there's the you know the the semis going into production they got they're making the cyber cab they're going to crank up the humanoids they're doing a lot with AI and the like but the core automotive business is not growing at all.

53:17Gary Vasilash: That's my takeaway. Revenue declined 3 % from a year earlier for the automotive segment of Tesla. It's not so bad. And we should recognize that obviously a year ago at the end of September was the expiration of the federal tax credit as well. So that no doubt plays into a bit with the US sales as well being represented there. Yeah. So, you know, one of the things that Elon said in the earnings call that he was making a big deal out of, and he referred to this as FSD with a car attached. So it's his full self-driving system. So people are going in, he claims, to whatever, they're not dealerships, what were we called?

53:58Stores, Tesla stores, and saying, I want to buy full self-driving. And oh, by the way, I'll take a car with that. 75 % of the take, he said, is that, look, it's a terrific system.

54:12Gary Vasilash: More power to them. I mean, I question how long they'll be able to maintain their pricing as others like General Motors come in and offer something awfully similar for a whole lot less money. and that's been one of the things that Tesla even singled out in its earnings report is I want to say seven European countries have approved FSD. I mean, they've applied two years ago to get FSD legal in China. The Chinese still have not given the okay on that. My guess is maybe they're not going to ever. Why? Because it's an American company and it's going around and its cars are collecting data. And even though Elon has assured the Chinese that all of that data will reside in China on Chinese servers and will never leave it.

55:03Gary Vasilash: I just don't think they want to give that kind of opening to a non-Chinese company to be able to collect data like that. That's my guess. You know, MIIT, the Ministry of Industry and Information Technology hasn't called me to explain why they're doing that. But what... I hear the phone right now. So what do you make of Tesla earnings? I am astonished at how well, comparatively speaking, the company continues to do. I mean, they keep innovating. They keep doing stuff. I mean, they keep moving forward. And you would have thought at some point they would have like, eh, and said, we're going to do rocket ships and that's it.

55:50You know, and not screw around with cars. But they continue to do that. And, you know, the last week after the show was over, they introduced the Roadster, the flying Roadster, which was sort of like a circus trick, I think. But, man, I'm just astonished at that company.

56:13Gary Vasilash: No, I would agree. I would like to see them do more for their core automotive business. I mean, they're riding on the Model Y, essentially, and a little bit of the three. And I mean, that's what's keeping the lights on right now. And so all this other innovation that you're talking about, with the exception of the CyberCab, is largely non-automotive. And I'm not criticizing them for that. I'm just saying it's like, guys, what put you on the map was being a car company, a very innovative car company. But didn't Elon basically say that the Roadster will be the last human-driven vehicle that they'll introduce?

56:51And henceforth, the whole plan behind the CyberCab is that I won't drive it, you won't drive it, it will drive itself, and we'll just be in it.

57:03Gary Vasilash: Well, I mean, if they even build the Roadster. There's a clause when you sign up to buy one that says you may never, ever get one, which is an awfully interesting clause to put in. What's your take, Brianna? I mean, I think, you know, obviously Tesla is not just a U.S. manufacturer either. Electric vehicle sales continue to grow in other places in the world. And that points to our conversation earlier also about the Detroit 3 automakers and their continued focus on electric vehicles. These companies have to be competitive internationally as well. And there continues to be regulations in place that are driving consumers towards electrified power trains in Europe and China, even as we see maybe some pushback, especially in the European market.

57:53Gary Vasilash: Yeah, on the Chinese vehicle. Yeah. Right. But, you know, we just got the SEA sales report for September. And in Europe, EV sales were up 60 percent. I mean, it's a massive jump. A lot of that being Chinese, but still, I want to say, what did we say, 16 % market share? Oh, no, 16 % market share was for the Chinese. I want to say EVs were like 30 % market share for the whole market. So, yeah, one out of three cars being sold in Europe right now are BEVs, you know, not PHEVs, BEVs.

58:36Gary Vasilash: Different use case. Well, you know, fuel prices, when it's eight bucks a gallon, you start to think, maybe an electric's looking better to me. It goes back to the conversation of convenience, too, in people's pocketbooks. Like, what is most convenient? If it's going to hurt your pocketbook more or if it's easy to actually fuel up, that is going to impact consumers' decisions. Let's say you're on one side of Texas and you want to drive to the other side of Texas. What kind of vehicle do you want to take for that drive? An E-rev. Well, let me know when you get one. Yeah, no, I mean, you know, Horse, the powertrain company, is talking about full-size U.S.

59:18Gary Vasilash: pickups with 1 ,000 miles range and 350 miles of range towing an 8 ,000-pound trailer. And 1 ,000 miles range is going to be mighty appealing to some people. Mm-hmm. let me know when you see that vehicle uh all right all right so i i ran some numbers for sean okay all right so i i you know there there are six grand prix races left okay no there's not final six grand prix yeah no there's because the last two are not going to happen they're not going to happen because they're in the middle east i thought they just moved them I think they are talking about moving one of them. All right. Let's just assume for the sake of argument there's going to be six races left.

1:00:07Gary Vasilash: For the sake of argument, yes. Okay. So I've looked at the numbers. What happens if Cadillac came in first and second in every one of those races? No last. No, not exactly last. They would get to about fifth place. Sean's making a face that is indicating fifth place is okay. But they have to win first and second for all of these things. So that would give them a total of, where's the number? 258 points. And right now Mercedes has 578 points. Could you imagine if Cadillac came out of nowhere and won every single race for the rest of the year? That would be fantastic. That would be amazing. It would be amazing.

1:00:53No, they're not going to win one race. So they're still at zero. That was my way of bringing that up.

1:00:59Gary Vasilash: No, I said it even before they got into F1. It's going to take them three seasons to score points consistently. Anthony in the comments section just said Cadillac is lucky to finish each race. To just finish. Well, I mean, they made a big deal. Oh, we've got this new livery that we designed for the U.S. Grand Prix. Come on, guys. I know. Who cares? Right. Well, they care. Well, whoever came up with the design cares, but to me, that doesn't move the needle. Anyway. Do you hear him say that? Yeah. Keep that on tape. Okay. We need to wrap this up. Brianna Noble, Detroit News. Thank you so much for coming on Outline After All.

1:01:47Gary Vasilash: It's great having you here. Gary, fun show. This is good stuff. Hope we didn't talk too much. Yeah. It was great. I enjoyed the conversation. Good deal. I want to thank all of you for having tuned in.