AAH #816 – 3D, AR and The New Displays Coming to Your Windshield

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0:08Gary Vasilash: Hey everybody, thanks for joining us on Auto Line After Hours. Gary, great to be riding shotgun next to you. Thank you, John. How are you doing? I'm doing pretty good. Yeah? Seems like we might be getting winter at long last. Yeah, yeah, yeah. For those who are not living in Michigan, we've just gone from this delightful autumn to... Binary. Yeah, yeah, that's right. Party's over. Yeah, and the other voice that you just heard there is Joe White from High Speed Rodeo. Great to have you back on the show. Good to be here. But let's introduce our special guest for today, Jorg Weisgerber. He's the head of all the electronics that are taking place at Rivia Hella on a global basis.

0:47Gary Vasilash: And Jorg, good to have you on the show. Yeah, thanks for having me. I mean, we'll talk business with you, but I want to get into some of the interesting technology that you guys are working on. And one thing that really caught my eye, because this has been coming for a while, people have been talking about this, augmented reality in a head-up display. And I love the idea. So instead of just putting some numbers displayed on the instrument panel or maybe the turn signals or something like that, you guys are getting into augmented reality. And tell us where you're going with that. Yeah, so about two years ago, we said, okay, hey, what blank sheet?

1:24What could we do? What is changing? Where do we go? And we put a few people together and said, okay, just find the next big thing. And they looked into the market and they saw, A, that there is kind of a little bit of a demand. People want to get a little more, like you said, than rather having the sign of the speed limit on your windshield. and as well we looked into there is technology that you can do and we have you know at the traditionally we know a little bit about optics from our lighting experience also backlighting that you need so we have that brought that together the electronics the software so it was really a nice area where we could put all our know-how we also found a partner with a real good imaging technology that we're interacting with and we said okay let's look into it and the beauty of it, it is not even, you know, those head-up displays nowadays, they're as big as a shoebox.

2:22And for us, when we looked into it, it's not just that enhanced feature, you know, with that three-dimensional, you know, view that you have, but it's also significantly smaller and it's significantly lighter. So we get a lot of interest, not only because of that extra, you know, how it looks, but even more about the built-in space, the weight, and also that we can meet the pricing that is comparable to the ones that are out there. So there's more than just that trend that helps us promote such technology. So is this something where it becomes like a 3D kind of a display in the windshield as opposed to just a static, like, flat 2D number display like John was talking about?

3:06Yeah, it's going to be. So you can also, it's the question on how far ahead of the, you know, on the hood you are portraying. So it's definitely 3D. So what we are looking on right now, we want to have like perhaps a 2D that stays stable where you have like the basic information and then a little bit of a 3D. And I think it looks a little bit like a hologram. Okay. Like on top of your hood. So that's kind of nice. And the good thing is you can also go much wider than the mirror-based systems because there you have a certain limit. And so what we are talking about, perhaps even in the whole front of the windshield, so there's a lot of ideas coming around that.

3:47And one last question for me. I mean, how much processing power do you need to run that? I mean, do you need to have a car with an NVIDIA chip in it or something comparable? The thing is you don't have that much, but yes, the illumination and the processing. So from a one challenge, and I think you got it right, is also a little bit the heat, the power absorption. But we keep that to a minimum by improving the optics, which is the backlighting and everything. But it uses a little bit more power than what you have today. But again, therefore, you get the other gains. And for me, the beauty of it is it was mostly like, okay, just think out of the box.

4:29because we are not known for such a technology. And that was the real fun part of it. So I want to bring the focus back some. Okay, so we're talking about a specific product here, but you're in charge of electronics. What does that encompass? What are the elements of that? What are the sorts of things that you guys are involved with? Because it seems to me other companies say, hmm, we're software. You know, I mean, that's part of it, right? Yeah, for us, I think we were always trying to be finding a little bit the niche, you know. So there's the big names that do very, very complex, high-end electronics.

5:03That was perhaps always a bit too much of a stretch for us, even if you're, I think, very, very strong. But we address more or less the mega trends. So we have automated driving or assisted driving. We have radar technology that you can get in there and sensors for power steering, so too for activation. So that is one area. Then we are also doing kind of for years already, you know, a little bit a battery sensor on the lead acid batteries, which now developed into, you know, high-volt battery management system, DC-DC converters and chargers. And then we have the traditional body electronics. You know, we have lighting electronics because we are a lighting company.

5:45So we started there, but then also smaller control units for seat electronics or trailer towel control, stuff like that, which is now growing into more zonal electronics that are much larger electronic areas. And then we have a little bit of a side business, which is a good business, is sensors and activators. So all the bread and butter. I think we are the world leader in accelerator pedals, for example, which is a sensor that is measuring position. so that's that's nobody knows it but that's like our our business that is not really following a

6:20Gary Vasilash: megatrend but it's a very good core that we have as well i want to go back to this head head up display a minute because i i'm finding this intriguing it it's going to be 3d it's going to be augmented reality as well which means i'm guessing and you fill in the blanks for me you can highlight things that would bring attention to the driver and whether it's something that they're interested in or alerting them to a potential danger? Yes, you can do that too. So I think in that regard, you need to have the input to say, okay, highlight this, highlight that. So we are not controlling that. I think that comes from the OEM or whoever does the surrounding surveillance.

7:02But yes, we can definitely do that. It's also like navigation. So you can say, hey, I'll highlight really the street that comes up.

7:09Gary Vasilash: I was just going to ask you that if you were getting to that, Because to me, that is the ultimate in navigation, where instead of an arrow or a map, you highlight the road and just drive on the yellow brick road. Yeah, yeah. So, again, that is possible. So it's always, but in the end there, you need also a lot of input from, control there is the OEM. So what do they want to do? Where do they get the information? You know, they need to guide you. But the sky is the limit. There's a lot of things. You can even do that with lighting. So, for example, in Germany, I drive a car with our HD SSL, so high-definition lights, and there, more or less, it follows, really.

7:52It gives me like a light carpet that I just need to follow. So it's all automatic. So that is possible. In the U.S., it's allowed because of regulation. So headlamps are highly regulated. But you can do a lot with guiding and giving that experience of driving to the customer.

8:11Gary Vasilash: Right now in a head-up display, pretty much only the driver can see it. Will passengers be able to see this new one that you're going with? So I think you still need to have a little bit of an angle to look at it. But what you can do, like I said, we are talking about having a full front of the vehicle in that kind of 3D world. Of the windshield. Exactly. So you can do specifically for the passenger and then also for the driver, two different. See, here's why I'm excited about this technology, because it's something that the customer can see and experience. There's so much technology going into cars today that, quite honestly, is only adding cost in a lot of instances.

8:50Gary Vasilash: And this is something I think customers would be willing to pay for. What are the OEMs telling you? Honestly, I think there are two things. So I think on the one side, a lot of people are excited about that new, but that takes a little time. You know, you have the marketing people. Everybody has an opinion. Yeah, let's go there. And what do we want? So I think it needs to grow because it's very, very new technology. So there's one or two competitors that are going in a similar direction with different technologies. The question is now who is most mature. But it's really kind of brand new. So you have a lot of opinions.

9:26but in general so what we are seeing that people are starting to think about it but there's also the other aspect for example if you have a sports car very very small like low windshield no no room to put anything because the dash and everything is pretty pretty tight a lot of people in that in that segment are super excited because instead of a shoe box you know you have like a teeny tiny on another teeny tiny but a smaller book size thing that they can integrate so like a 911 never had a chance to put a head-up display in their car so perhaps we can convince porsche to say why don't you go with us it's you know just as an example i think the same problem occurs at a corvette you know so it's it's that that so it's there's multiple angles to that so it's projection rather than reflection uh you're projecting yes so it's still projection on the windshield.

10:20Right. But the, so we are much more flexible than a mirror-based system. Right, because when you're talking about how big things are, I don't think people really understand that there's a whole lot of air that is for a heads-up display system that just takes up all kinds of real estate. So that's below, you know, what you can see. So it sinks into the dashboard. So I want to ask you, so I want to jump from that a little bit. I mean, as you, you know, you have global responsibility. I mean, as you go around, you and your team go around the world, where are you seeing or feeling the most pull for that kind of innovation?

10:57Is it from China? Is it from, you mentioned Porsche, is it from Europeans who are trying to figure out, well, how do we compete with the Chinese? And is it from the United States or the North American market? I'm sort of wondering kind of where, how you see the dynamics among the major markets for taking that kind of a technology job. I think in China in that regard, I think they are always like another gimmick. So the car jumps, the car moves, there's another light, there's a hologram. I think there is a significant willingness for that. Like I said, custom experience, something that you can see, feel, touch.

11:36I think that's there, but there's also then a very, very significant focus on cost. so they if it's you know a bit too expensive then i'd rather not do it and i do another gimmick so therefore i think we have a lot of interest in in in china and we if i think from a cost perspective we can also get there definitely some market traction probably not for the bread and butter car a little bit the higher end so there is a possibility and in the western world i think everybody is talking about it you know and that's why i say it's a new technology so you get a lot of open ears, but you need to find a way around in those, you know, for a decision to implement such technologies.

12:16Is it for technical reasons? Is it for marketing reasons? So it's a little bit needs to build. Jörg, as you know better than I do, you're in charge of electronics, but man,

12:29Gary Vasilash: electronics in cars is changing at a greater rate than we've ever seen. And what I'm getting at is these zonal centralized electronic architectures that a few automakers have out there. Tesla pioneered it. Everyone's racing to get there, but this has got to be maybe an opportunity, but also at the same time, turning your business upside down. Yeah. Like I said, I think we have some larger electronics already, historically body control electronics, even with multi-significant amount of functions in it. So I think we are fairly well equipped with the hardware design and also the software part of it, the feature part of it.

13:08I think we are positioned there quite well. Yes, you have the large players and I think that's very good now especially in that zonal part. That's where we want to play. We don't want to go high performance compute and that's definitely a league that is definitely one or two levels above where we would like to play because you need to be just at a different level of software. But in that zonal architecture, you have those electronic controls that are driving all the activators, the features, the functions in that area. And you consolidate a lot of body electronics. So that's an area where we are playing with.

13:46So we have a few wins already with products that are launching soon and one that launched last year. So for us, we are interested there in kind of that driving the features and then distributing signal and also power. Because through such electronics, you need to drive a motor, you need to drive whatever feature, so you always run power through that. And there's a trend also that you have instead of that melting fuse box that you had back in the day, you have now chip users that are doing that on a chip base. And I think that is so that you can control, you can switch on and switch off, that you can control it better.

14:30I think that is a trend where we started early, so like a power distribution type module, and we also developed there like an ASIC that is consolidating some of the hardware, but it's also software-driven. So again, it's an area where it is new, and wherever it is new, you have a chance to innovate a little bit and outperform a little bit the competition for a while. That's why I like those changes. So like you said, opportunity. I read an interesting piece that you wrote, and I want to read a little bit to you and have you comment on it. It sort of goes to what you were just talking about. You wrote, energy has to be managed, software needs a new architecture to run on, and a self-driving vehicle has to perceive its surroundings.

15:15All three start as an electronics challenge. Treating them as three separate programs risks creating problems at the points where they ultimately have to connect. so talk to us about the need to integrate these things and why these things aren't being integrated now i think there are being integrated now at least designed so like with ever with every oem that you're talking uh nowadays they're they're designing that architecture you know with the with the high performance compute so where you can run everything and then you you know uh update your zonal electronics. And then now the question is, and the debate is always there, what are you putting in those larger zonal electronics?

16:00So in the front, are you doing, you know, like driving perception, you know, like all the automated driving stack, do you put that there? Are you driving high forces? Do you need to have power management there? So I think this is what happens right now. And every OEM is trying to find their way. And some of the Chinese or Tesla, Tesla was the first, but then some of the Chinese, they run ahead and do the first version, then they do the second. So they are a little bit more there already, but also changing. And in the Western world, you have some of them, some of the OEMs want to do a lot themselves.

16:40Some of them partner with partners like Hela or the other large electronic providers and discuss and then design it and test it and then eventually define it. And then mass production starts, development and mass production starts. So it's there. It's just not entirely decided everywhere. So are you seeing overall, are you seeing, I want you to sort of see if you can help me figure out two different trends. One, volumes, just vehicle volumes in the industry are flat to down. I think John talks about this a lot, you know, flat to down. But are you seeing automakers nonetheless investing more to get to the kind of, you know, next generation electronics that you've just been describing?

17:26I mean, is the arc of investment in that going up, even though overall volumes are going down? I think especially in those three trends, the software-defined vehicle, the automated support for driving, and also still in electrification. There's still old propulsion where now money flows back into because the changeover is a bit slower. But those three trends, they're still there. And I think that's also where the most research money and also the most invest still goes into. So that's not changed. And that's part of what you're trying to ride. Yeah, and that's where we want to partake in all those three trends.

18:09And I think we have product for all those three trends. And then the question is who finds their place where usually, like I said, as traditional Hela, we were trying to find those niches that were not. So, for example, we were very dominant in low-volt DCDC. So everything like in the 12-volt DC-DC side, 48-volt DC-DC side. So for mild hybrids, and it was a European thing, everybody wanted to go in electrification, you know, like 400 volts, whatever, you know, back then. And we found that niche and lived very good in it because we had, you know, we had something and we delivered it and good quality.

18:53So you had a reason to be there. and there was then a lot of competition on the other one. So now, you know, you need to find always that, what is the extra that you can, it's a little bit smaller, but still, I think with a significant background can deliver to the customer. Whatever happened to 48 volts, everybody used to talk about it all the time. Yeah, I think it's still there. It's still there. I think it's still helping, you know, the traditional, you know, propulsion to get more efficient. So it's definitely there. But the full electrification trend and, you know, I don't want to say hype, but the vision that a lot of people had then, like whatever, what is it, like seven, eight years ago, that overshadowed it completely.

19:41So everybody went full electric. Now there's a lot of hybridization in the middle. So I think the market, you know, addresses all the propulsions.

19:50Gary Vasilash: Jörg, another thing that we're hearing from automakers, especially in North America, is they want, I guess, x-ray vision for their supply chain. They want to know where everything's coming from. Some of it's got to do with increasing how they're going to get tariffed or hopefully, in their case, avoid tariffs. It's also got to do with geopolitical disruptions and the like. Is this something that you've got to devote a lot of your time to? How much of a headache is it or not? Yeah, I think it's definitely a demand from everybody. And I think we learned it perhaps through the first, you know, the COVID crisis when, you know, there were supply chains drained empty.

20:31And then the same thing when we had like, you know, an Xperia last year where, you know, all of a sudden, oops, you know, there was a geopolitical little fight that caused the whole industry to, you know, scramble. But I think those incidents and now we have PCBs, the AI boom is drawing a lot of raw material into the data center. So you're struggling then really deep in the supply chain. And I think the OEMs saw that, learned that. Everybody learned a little bit. We learned a lot. So how deep we have to go. So I think it's definitely what we have to do also as an industry. and independent from, you know, the OEM demanding, we have to do it ourselves anyhow.

21:15So I think it's just, it's something that is new. Yes, we have to devote time to it, but it's also important that we build that resilience. So how much are you having to, and maybe this is not just your part of the company, but overall, but how much are you looking at your manufacturing footprint and saying, well, we've got to move some of it? I mean, you see some of these big OEMs, you know, Audi, Toyota, Honda announcing these big new factories in the United States, presumably because they want to de-risk around our tariff regime. I mean, what are you looking at? So for us, I think we are fortunate.

21:58So we have plans in the U.S. We have a little bit Mexico, so that's still USMCA. South America. And so what we always did, and I think most reasonable suppliers did that, you wanted to be close to your customers, so you had in every region a little bit of a footprint. So now, yes, you can balance that a little more here, a little bit more there. But for us, it is more where do we win more. So, for example, we were reasonably successful with North American OEMs over the last years. We also dropped out here and there, so we need a little bit more floor space, where would we build it? We build it where the customer is or where we ship to.

22:42So that is normal. And even if not, our parts are still you know, they travel easy. So if you put a few you know, if you put a few radar sensors in a box, you know, you ship them it's okay. If you start, you know, shipping headlamps like the colleagues in lighting, that is not a good...

23:00Gary Vasilash: You're shipping a lot of air. Yeah, that's what I'm saying. So that's why, but footprint decisions are you know, a mid-years long-term. But in general, the closer to the market that you serve, the better it is. You were mentioning, you know, the challenge with chips versus, you know, the AI data centers and, you know, the chip manufacturers going, ooh, get a lot of money from them, not so much money from automotive. But I want to look at a different aspect of this. I mean, what you're doing takes a lot of smart people. Are you able to attract the type of young people that are capable of doing the type of work that you're doing within the electronics area?

23:43I would say yes. So you need to have a little bit of a good environment so that people, like you said, that like to be creative and engineering heavy or technology heavy, that they can strive. So I think we, perhaps I'm a bit biased, but I think we built that well. so I think people find a good home there I think right now in the industry and you hear more about layoffs rather than people growing so I think the market has shifted a little bit from there's nobody out there to there's fewer jobs so I think it's even a bit easier nowadays than it was perhaps before COVID or so So I don't think that that is a big challenge at this moment.

24:33And as well, because of also the implementation of AI and, you know, like more sophisticated tools in development, in manufacturing, you can also get more efficiency out of the people that you have before you grow the stuff a little larger.

24:52Gary Vasilash: There's so much talk in the industry about China speed. I'm sure you've done programs in China and been impressed at how fast they went. What are you learning? And are you able to translate those learnings to North America, Europe, and wherever? Yeah, I think we looked at that already before even China Speed was a name. And for us, it's more like reducing bureaucracy. In the Western world, and especially, again, perhaps negatively biased, especially in Germany, you have a lot of regulation, ISO norms, a-spice, and functional safety. You get a lot of requirements, which I think are good to protect, but sometimes it's a bit of an overkill how you apply them.

25:38So it's that really I think the intention is good, but if you do a little too much, then you can also over-engineer and the product doesn't get better. Folders get fuller, but it's really a little bit counterintuitive. So we started that about three, four years ago when I took the global role and said, okay, we need to make everything more simple. Take that out. And it works, but that is what is needed to get to the speed. Because when you compare, like, yes, in China, perhaps people work also longer hours and on the weekends. And there's a little bit different regulations also there. There's more freedom.

26:19In Europe, we can't do that. In the U.S. also, not all the time. But it's also, there is, okay, we cut a corner or two, you know, and that is not as allowed in the Western, you know, setup that grew for 100 years. So now what we need to find is that balance, reduce a little bit that, you know, the process focus, not to have no process, but to have it as light and as lean as possible and still make the right decision and focus again on the product and not just on the process that develops the product. And if you do that, at least we try. I think we got already a lot more speed even in the Western programs that we run.

27:00And you can also see it in the launches and the debates. And I think it's already much smoother. And that's what everybody can do, not just our company. Everybody should do it. Are we getting to the same speed? we have to get significantly faster. I'm not sure if we have to really copy that speak.

27:21Gary Vasilash: Well, you know, I'll just interject here too. Even certain Chinese government agencies have come out and warned the auto industry there that it's going too fast when it comes to safety, particularly ADAS things. They're even asking to add another year into the development time. I don't think they're going to get that, but they're pushing. Yeah, but that's true. I was a few weeks back, I was in China It was the same talk. So it was also a news outlet, and they said, Chinese government does not want to hear the word China speed in any interview anymore because it's that, okay, we're too fast and we are losing quality.

28:01So I think that is the understanding. And so therefore, I think there is a realization perhaps a few things were too fast. And I don't think it's the speed is the issue. I think it's more the balance between being really fast but not cutting the necessary corners. And that's exactly that balance that you have to find. We were perhaps a bit too much on the bureaucracy type design process orientation. And the Chinese New World was perhaps a little bit, okay, let's do it and try it. If something happens, it doesn't matter. We fix it later. and the balance is, I think, something that both sides probably have to find.

28:46Are you seeing any, so part of the China speed formula, as I understand it, is that the Chinese manufacturers tend to sort of go with what's on the shelf. Either they end up, it's a formal thing or if it's just by practice, they're willing to take each other's specs. And I'm wondering to what extent you're seeing in the Toyota Hyundai universe universe or the European North American automakers starting to kind of come to the same things like, look, we don't need our special version of your electronics. We'll standardize on what the other guys have been able to use. I think the desire is more or less talked about at a lot of OEMs in the Western world.

29:31Are you able to change a grown culture where the engineer wants to give their special touch to their special product that they lived for in their 25, 30-year career. Different story. So I think if you talk on higher levels, everybody looks at it like, okay, how can you, even as a supplier, help us to make sure that our engineers are focusing on cost-optimized and good enough? But it's changing. So I think it's also a big openness, I think, on the engineering community in the OEMs to really look in the same direction. So I think, and that is also a very positive thing. I think the OEMs and the supply ways are getting closer again.

30:18I think there's always, there was those days, you know, back in the day where, you know, you were nickel and dime for everything. The cars looked crappy in the end, but you saved some money. Now I think it is, okay, we can't live without a good collaboration with the OEM. But the OEMs also, I think most of the ones I talked to, they want to really partner deeper than perhaps it was traditional supplier-customer relationship. Good.

30:46Gary Vasilash: With that, we're going to have to wrap up this segment of the show. But Jörg, thank you so much for coming on. This has been a great conversation. Thank you very much for your time. We're going to take a quick break and we're going to be coming back to talk more about the news of the industry. So don't go away. making a life full of memories one road trip at a time that's what really matters Bridgestone Weather Peak tires with a 70 ,000 mile limited warranty

31:18Gary Vasilash: all right we're back we got a lot of news to talk about there's never a shortage of news in this industry. Yeah. Hard to keep up. It is. Where do you want to start, Joe? Oh, gosh. I mean, you know, I'll just start, and this may not be where you want. I'll start with Honda's announcement. It seems like just a few days ago or a million years ago. With Honda's announcement, they're going to build yet another factory in Ohio. Right. And, you know, and I think, I know you've done this relatively recently, but you just start to look. Honda's got a new factory. Audi's got this new kind of mega complex that they that they're proposing for georgia you know um toyota's going to have a new factory uh rivian is already you know and and i'm going to lose count here yeah um there's at least eight there's at least eight brand new plans i think there's more there's a handful of others that are being uh retooled yeah yeah and and being retooled um and And I just, you know, a couple of weeks ago, I wrote in my substack, you know, that basically that, you know, America is the land of hope and dreams for the automakers.

32:28It's the last refuge for the Western and non-Chinese Asian automakers, Toyota, Hyundai, and the like, for profitability without having to compete with the Chinese. and you just now see this and you couple that reality with the with trump's tariffs and all the uncertainty around that where you know it's like fine just not going to deal with that uncertainty we're just going to build more vehicles in america um you know you you just look at this this this land rush uh by the automakers to put more capacity in this market i mean heck toyota is now going to build uh k i call them k cars i guess i've heard i've heard k trucks k trucks um They're going to build these things in Indiana.

33:12It's on the one hand, I think it could be a real boon to consumers potentially because you have more product potentially at lower cost, certainly domestically produced. On the other hand, I just think, wow, by like 2032, this market is going to be chaos. Joe, but don't you think if you look at Honda, OK, so three billion bucks, it's going to be a hybrid plant. Yeah, you're right. So if you look at Honda's sales, basically Honda sells everything it builds. Right. So there's not excess capacity. So basically what they're saying is that we see a business to be able to sell all these vehicles. Right, but at whose expense in a market that's not growing?

33:50Well, at the expense of the other guys, right? Yeah. And the other guys are building plants. Thinking that the other guys are going to need it. But my point is with Honda and with Toyota, you know, with their expansion of the San Antonio plant. Right. Okay. So basically these guys are looking at, okay, what are the day supply of vehicles that are out there right now? That we sell already. That we sell already. Yeah. It's slow relatively, right? Yeah. And then you look at the other guys and they're way up here. So they're done. Yeah. So it's just like, wow, if we have more vehicles. And we have more, if we have more U.S.

34:25sourced hybrids, which does seem to be the through line to some degree. I guess Toyota's talking about trucks, but I do. I think hybrids are certainly part of their portfolio. But the Honda announcement, yes, was very explicitly. I mean, they're investing across their entire U.S. supply chain to expand their hybrid offering, right? So, you know, and you see hybrids are already gaining market share. I guess I think that it seems like there's going to be a real brawl over a structural heavy investment brawl for market share over the next five to ten years. I mean, it hasn't necessarily been static, but it's been kind of static in terms of who's building plants and who's got capacity.

35:10And now it seems like a bunch of automakers have decided America is the land of opportunity. You know, the Chinese aren't here and we are going to go and we're going to go get the buckets out and dip into that profit pool in a much more aggressive way than we have before. So that's something I think. I mean, I just think it's something that that's, you know, as if as if the domestic automakers, you know, the Detroit automakers needed something else to worry about. That seems to be something else to worry about.

35:39Gary Vasilash: Yeah, I totally agree. But I also believe that by the middle of next decade, these new plants are going to be a disaster. So are the old plants. I just. Well, yeah, I mean, somebody's plant is going to be a disaster. And that's what's going to be the that's what's going to be the competition. Right. I mean, if you have an old plant with an old product, that's not the baby, the best place. Well, you know, if you have a new plant, a new product might not do any good. Well, right. You could be building the next Cybertruck. So. Yeah. Well, we should talk Cybertruck because there is another one. Jeez.

36:08Gary Vasilash: Oh, Pete, man. I mean, you know, it exploded on the scene. What was that? Three years ago. I call the Cybertruck the face that launched a billion write-offs because everybody's looked at that and said, oh, my God, electric large pickup trucks are the future. Let's invest billions in it. Yeah, it never happened. But here's what I don't understand. So Elon comes out and says, OK, we're going to stop production.

36:37Gary Vasilash: But demand far outstrips our supply to deliver it. And I'm thinking, when in the history of any product ever made by any company have you stopped making something because it was selling so well? So I don't buy that. No, you shouldn't. And the other thing is he says, oh, we're going to have to add a second shift to be able to meet the production demand. And so I dug into the numbers. Tesla, by its public statement, tooled the Cybertruck line for$125 ,000 a year. So I did some math. that's 200 labor days that works out to 60 an hour. So 60 an hour, very standard rate in the industry. But if you look at their sales of Cybertrucks, and I'm going by the last quarter when I'm assuming there was no S's and X's in the other number, right?

37:28Yeah, the other number is Cybertruck.

37:29Gary Vasilash: And so the other number is Cybertruck, maybe a few semis, maybe some cybercabs. But the way I look at it, they're selling Cybertrucks at a rate of 23 an hour. but the line's designed for 60 an hour. Yeah. But Elon says he has to add a second shift. And so what I'm figuring out is the Cybertruck is actually a manufacturing nightmare to make, and they've never come anywhere close to their 60 an hour. And he's got to add a second shift to what to do the build out between now and next year. Right. Yeah. It doesn't make any sense. I, he's, he's sold. He, he, I mean, This is something a lot of people reported, and I looked it up myself.

38:12He sold$131 million worth of Cybertrucks to SpaceX. He had SpaceX buy$131 million worth of Cybertrucks. And I try to do the math on this, and I'll get this wrong, but that's like 1 ,400 or 1 ,500 Cybertrucks or something like that, if you say, and they were supposedly purchased at list price, so that's like$92 ,000 or something like that. But point being, he had to unload a bunch of Cybertrucks where he chose to have one of his companies, SpaceX, buy a bunch of Cybertrucks from Tesla. Why? Because there's, I think, because nobody else wanted them, would be my guess. I bet he gave himself a volume discount.

38:52Probably. Who knows? It's in the intercompany transactions, related party transactions.

38:58Gary Vasilash: Yeah. Technologically, the truck is, you know, it's all 48 volt. It's all decentralized. Everything that we were just talking with York about, but man uh and and look failures happen in the auto industry happens uh commonly but well but you look at look at all the pickup sales ford had to stop doing the lightning right yeah okay the silverado sierra ev sales or de minimis i think that plan has been i i don't know if it's operating like as we're sitting here but i know that that ham tramek factory zero has been not operating a lot right uh may not be operating now right um see my theory is mary barra does not want to have the big write-off on the EV investment like Ford and Stellantis had.

39:41Gary Vasilash: So she's, right. She's, you know, trying to have this limp along so she doesn't have to declare another $7 billion write-off. Yeah. I mean, that makes sense to me. I don't, I mean, I don't, I don't know, but I mean, that's definitely not, it's definitely not an important source of sales. You know, another thing that, I mean, we talked about Audi, another thing that, I mean, that just literally, you know, this broke today, you know, you, there's this fight going on now. It seems There's been an escalating fight going on now in Germany between the automakers and Ige Mittal, their UNW, their union.

40:13Mercedes just announced today they're not going to invest in Germany anymore until they sort out their labor disputes and their cost of production disputes with Ige Mittal. And if you look at, you take that and then you look at, again, these Audi investments. And also Mercedes, increasing investments in the United States, which is the profit pool for all. So I'm going to be watching that really closely because it does seem like the German auto industry and that union, which is super powerful, half the seats on all their boards. There's some sort of day of reckoning that seems to be coming there.

40:50Gary Vasilash: No, that's right. I mean, think about it. You know, here's Volkswagen Group going to close down an Audi plant in Germany and build a brand new$3 billion one in the U.S. and maybe double the size of it, too. Yeah. So you bet any union leader, any politician, they're going to be hopping mad over that. Yeah, even as the politicians in the United States, you know, celebrating. They'll celebrate until the middle of next decade. When I think most of these plants are going to end up getting shut down. Or the older ones that are, you know, essentially incumbent plants. But, you know, as I keep pointing out, what is a plant?

41:25Gary Vasilash: It's four walls and a roof. It's the equipment inside. It's not the age of the walls and the roof. I mean, and the people. And the people, right. I mean, as automated as these plants are supposedly going to be, they're still promising thousands and thousands of jobs at each one of these plants, the Honda plant, Toyota plant, the Audi plant. Well, you know, when they promise those jobs, they're promising everything in the kitchen sink. They're, you know, the people who mow the lawn, you know, everything. Every job gets thrown into that. Yeah, yeah. No, that's true. But, you know, well, if you want to have the president of a country come and visit, open an auto plant.

42:04You know, that's worked for Trump. He had the head of Audi at his rally when they announced that. That's right.

42:09Gary Vasilash: Yeah. Well, that's before the midterms. Well, yeah. I think he'd still do it. Isn't it conceivable, though, that Audi won't do that plant? So, I mean, we're treating this like it's fait accompli. Although, to your point, the head of production for Mercedes came out and said five times more cost to produce in Germany. So that is why, I mean, look, let's just simulate that. I think they're serious because if you look at Audi's competitive situation, here's BMW. BMW has this huge North American production footprint. Mercedes has a huge North American production footprint. U.S. U.S. Yeah, specifically in the tariff world, Bartonberg is their biggest plant.

42:54Yeah, and back to my point about the U.S. being the profit pool of last resort. So you're Audi, and you don't have any of that. And their sales, and I was listening to the podcast, Gary, you pointed out, their sales have lagged well behind the two German competitors, let alone Lexus. They're lagging.

43:15Gary Vasilash: They're even behind Cadillac. Yeah, they had a shot of momentum like a decade ago, and it's petered out. And so, yeah, look, I mean, they might not be successful. They might bring ugly vehicles. They might bring vehicles that don't meet the market. But do I think that it seems structural to them that they have got to get a significant U.S. production footprint to be competitive long-term? This is, you know, in their China market, which was going to save everything for them, right, that's dwindling away very rapidly. Again, as you've talked about many times, if you don't have a China market, if the European market is under assault from Chinese rivals, where else is there for you?

44:02It's here. It's in the United States. So, yeah. I mean, I don't. So you use the scout plant. Well. Yeah.

44:08Gary Vasilash: Should have, could have, would have, and Chattanooga. They still can. Right? They still could. No, you're right. If you want, so I did this and I do things, you know, sometimes just on instinct and then try to get the data later. God help me. But if you look at the Volkswagen group, they've got Chattanooga. They've got the Scout plant. They've got now this$4 to$7 billion, depending Audi operation that they're going to invest in. And their affiliate, Rivian, you know, not majority-owned, but a partner and affiliate, a shareholder, is building a 400 ,000, correct? 400 ,000 vehicle plant also in Georgia.

44:47I don't know how far it is from the Saudi plant, but it's in the same state. So I've lost, you know, I've run out of fingers here. You've got, you know, what is that? It's close to a million vehicles worth of capacity? Right. Within the sort of the greater Volkswagen family of companies. Right. You're just talking in the United States.

45:06Gary Vasilash: Meanwhile, Volkswagen and Audi both have plants in Mexico. Oh, yeah. So it just seems like if, you know, I guess if I were, if I had, you know, was on the board of directors of Volkswagen, I might raise my hand and say, hey, you know, Oliver, you know, and all the rest of you, can you explain to me why we aren't, you know, kind of optimizing this footprint. That's already installed. That we're either going to build or have built or are building. We've got this very large footprint. Why aren't we? What do I know? That makes a little sense to me is if you look at the U.S. market share that Volkswagen has.

45:48Very small. Look at the market share Audi has. Very small. Smaller. Smaller. Yeah. Rivian's doing okay in its space, right? Right. But it's still, I mean, you know, and look, I join a lot of people in our profession who like Rivian and are fascinated by Rivian. But as far as volume is concerned, it's still very small. Right. Their aspirations are large. Their volume is small. So the question I have is, you know, why would they invest, you know,$3 to$7 billion in the United States when they're making so little in the United States in terms of return? Here's what I think they're making. Well, because they think they can double their sales, but in a flat market.

46:31Gary Vasilash: Well, I don't think they're going to double sales in the U.S. I think this is what they're looking at. They have stated that they're losing$1.2 billion to tariffs, that tariffs are costing them a billion two in the U.S. So three, four years down the line, you have paid for a new American client. And they're looking at Audi or BMWs and Mercedes plants in the U.S. and seeing that so much of that volume is exported all over the world. And they're thinking, we can do this too. In three to four years, we've saved all the money from tariffs and we're exporting and making a bunch of money. I'm just saying, I think that's what they're thinking, Gary, because I'm with you.

47:08Gary Vasilash: I think this is not... So the irony of this, this was pointed out to me by a friend of my sub stack and your show, Warren Brown, that in a way, Audi should be cheerleading for high tariffs because once they build that plant, then the math that John just rolled out works and makes sense. If we suddenly go back to like a zero tariff regime within North America, zero tariff regime with, I don't think we ever had zero tariff, but a low tariff regime with Europe. Now, all of a sudden they could just like, well, wait, we could just go back to using our European factories, you know, to ship stuff. Or at least one in Mexico.

47:42Or one in Mexico to ship stuff to the United States. And we don't have to put the$7 billion in the ground. um conversely i would say this is i mean i don't see how these folks you know they must buy all the maalox there is to buy because conversely if we're going to have trade wars with all of our major you know the united states all our major trading partners and now you're building vehicles the united states you could be shipping them into a retaliatory tariff regime in whatever country it is that our you know the president has decided to go after today i mean he just threatened the president just threatened Mexico with huge tariffs.

48:16I think he did yesterday. Doubling the tariffs yesterday or today because he's unhappy. There's apparently some column of folks who are marching toward the United States and outside the purview of this show. But that's the kind of thing you're dealing with. All of a sudden, the president of the United States finds out, oh, there's something going on. This country's done something I don't like. The prime minister of Canada has given me some sass. Well, I'm going to have a 50 % tariff on the heavy duty trucks that GM and Ford just agreed with Unifor that they're going to build up there. Yeah, I mean, the thing, I mean, I just keep getting back to the whole issue of the importance of product, okay, in terms of, you know, everybody's like, oh, when I have a plant, we're going to make a bazillion vehicles because everybody's going to want them.

49:01But they don't. I mean, I'm driving an Atlas right now, a VW Atlas. It is a wonderful car. I would never, I mean, it's competent. It's, you know, the interior is gorgeous on that car now. them you know the door shuts and it thunks i mean when's the last time you've had a car that thunks when you shut it i mean it's uh but are they going to sell a whole lot more than the old one they're not selling a whole lot more and that in is is the problem so why have more you know and what was the other vehicle that they were building in in chattanooga oh it was the id3 or id4 thing yeah i mean how'd that work out for them that's so good and it should be a high they both should be have been hybrids in retrospect you know and you know we were all going to be buying id buzzes right like yesterday i was driving my wife said oh that's the first id buzz i've seen in the wild okay i mean yeah the only other other one was the one that i had in the driveway a

49:54Gary Vasilash: couple of years ago i mean yeah yeah no you're so right uh it comes down to product you gotta have great product, not competent, checks all the boxes, is competitive. No. I mean, if you're going to great, you can do that kind of product that comes out of committee meetings and PowerPoint presentations and customer clinics and all that. And you'll sell them and maybe you'll make a return. Maybe you'll pay for your cost of capital, maybe, but you're not going to gain market share. Yeah. And again, I mean, this is work I feel like I need to do, but I was just looking at Cadillac's numbers, the latest quarter.

50:33And Gary, you look at this stuff really closely. But I mean, Escalade has been a great product, but not in the last quarter. It's down 20, I think it's 29%. 99%. Wow. And, and it's like, I mean, gosh, I didn't realize people who are rich enough to own Escalade were turned off by $4.50 or$4.20 a gallon gas, but something's happened to that product. And certainly compared to a year ago. And so, right, even when you have a good, I mean, the Escalade has been a fantastically successful and profitable product for General Motors and Cadillac, but all of a sudden it looks like it's, you know, let's say run out of gas, so I should do better than that.

51:12But it's kind of, there's something's happened relative to where it was. And, you know, I mean, I guess all products kind of, their life cycle and, you know, something else cycles in. But this one's pretty new. Yeah. Yeah, I'm just saying that the fickleness of the consuming public, you know, you say you have to have the right product. We have to have the right product, then you have to reckon with the fact that that'll be the right product for about two years. and then someone else is going to come in or something's going to change where all of a sudden the consumer is going in a different direction.

51:47Gary Vasilash: I'm glad you pointed that out. I hadn't caught on to Escalade sales down that much. That's a big drop. Well, I looked at this because I noticed that it's a December to remember in November. The December luxury car sales all started right after Halloween, and I said, that seems kind of early. What's going on? And, and again, I just looked at like the Q3 sales reports for all these, for not all, for the major luxury brands. And I think with the exception of BMW, they're all down sort of year to date. And certainly for the third quarter, the sales trends are down. So it's not been a super strong year so far relative to the last year.

52:28It's been not, not actually not that great or, you know, mediocre to not great. Right. Right. And so I was like, oh, okay, well, that explains why maybe they said, you know, we're going to, you know, Black Friday luxury vehicle sales are going to happen just like everything else. Black Friday is now a month, a month long or a month and a half long affair. And, you know, we're going to start promoting and, you know, trying to gin up excitement around this, you know, right now. All right, since I make fun of Cadillac all the time on the show, for Formula One, I've got to give them some props here, give them some credit.

53:01They're not quite as bad as you think, Joe. Okay. So year to date through the third quarter, Escalade is down only 17%. Well, okay. Now, the thing that is... Was I right about Q3? Can you tell from those numbers? Yeah, Q3 is only down 15.4%. Oh, I was wrong about that. It's still a big drop. It's still a double-digit drop. When you get into double digits. I'll stand by my basic point and stand corrected on that number that I put out. Okay. But Lyric down 50.5 % third quarter to third quarter. That's not so good. No. That's not. How about Optic? That was the hot item for them. Optic, so what do you want for the quarter?

53:46Yeah. It's down 6.9%. I think it's been cannibalizing. This stick is down 34%. Uh-huh. not doing so well with electric vehicles. Yeah. Yeah. Yeah. And overall, what's the overall for Cadillac brand? So for the third quarter, they're down 30%. Okay. Maybe that's the number that I was... Man. All right. Well, man. Those are China numbers. Yeah. That's not good. So calendar year to calendar year, they're down 25%. That's significant. All right. Well, I can't keep my numbers straight, but I think the thrust of my argument still stands. So I'll go with that. But see, but every show I make fun of the Formula One team.

54:25So I got it. But did you see? So the guy who owns the the sporting company that really wants to sell Cadillac.

54:34Gary Vasilash: Well, he's caught up in some financial shenanigans or accusations. And so he's looking at selling or there's reports that he's looking at selling part of it. And they value the team at three billion dollars. That's that ain't half bad. Yeah. Nice. Nice work if you can get it. Yeah. But, yeah, and, you know, the other thing I think is going to be interesting to watch over the next few months, I know there's been, you know, lots of speculation, excitement, you know, well, now the Democrats are going to control Congress. What will that mean?

55:09And, well, that's hard to tell because the president is still the president. Right. And, you know, if he decides, yeah, you know, the electorate was right. We got to back off on tariffs. So that's one thing. if he decides, no, I'm going to dig in, I'm not going to back down, that's another. I mean, this thing with, can I allude to this, the issues with Canada? I mean, I don't think there's any visibility and it's here it is. It's almost mid-November and a month and a half away from this sort of, you know, tariff hand grenade with Canada.

55:46Gary Vasilash: What do we know? Yeah, no, it's a great question. I don't have an answer. I think that when it comes to regulatory things like emissions and fuel economy standards, I don't think the Democrats are going to be able to change anything. As long as Trump has his appointed heads of those regulatory agencies, nothing's going to change. But it seems to me that there's a chance to for the Democrats to really fight on tariffs, at least with Mexico and Canada. and uh i i expect to see something there and i i think they'll they'll pull enough republicans along with them to to to get something done what what the mechanism is i don't know but but if you look you're right you know right here in michigan there's no question that tariffs uh trump's tariffs very much hurt the republican candidates for governor and senator i think i think that's clear.

56:45And it, yeah, but it's going to be interesting to watch because on the one hand, I think, I think when I think Canada and Mexico are probably two different buckets. I think when you, with Canada, I agree with you that I think the Canadian tariffs were a political loser for the Republican party. And I wouldn't be totally shocked to see kind of pressure from both parties, members of Congress, both parties say, look, let's get that off the table. You're talking about Mexico though. I wonder because the United auto workers are, you know, again, strong supporters of Abdul El-Sayed, strong supporters of any and all Democrats in this last election cycle.

57:17I don't think the United Auto Workers is in favor of a zero tariff regime with Mexico today any more than they have been over the last 30 years, right? So they're going to argue, no, no, no, we need to have some kind of equalization of the wage gap between Mexico and us. I don't have the answer for it. I'm just saying that it's a new chapter in the volatility around trade that's driving the industry crazy. That's a great way to put it.

57:41Gary Vasilash: New chapter in the volatility. Great way to put it. All right, I want to quiz you guys before we leave for today. Yeah. Okay. These are two business-oriented questions in honor of Joe. Okay. Okay. So these are two business-related events that have to do with the auto industry. Both happened on November 12th today. One in 1908 and one 90 years later. Okay. What are these events? You both are going to get the reason. We are. You will get the one that's recent. So I'm going to say with the 1908 one is Model T. That's my guess. No? Do the 98 one. Come on, guess on that one. You guys will both get it.

58:381998. Because I was covering the industry in 1998. I just can't remember which event in 1998. November 12th, 1998. You're really taxing me. I can't think. I think I was in the same room with you when this happened. Was it the... I can't remember what happened. It wasn't...

59:00Gary Vasilash: All right. Wait, wait, wait. So let me... This isn't the day that Inyaki walked, is it? No. Okay. It was the day that Daimler Chrysler officially came into existence. Oh. So, okay. So, was 1908 the foundation of Chrysler? No, no, no. They're two separate companies involved in this. I lost it. My Model T guest didn't work. That's it. That's all I had. No, that was my guest, too. That's all I had. So, on November 12, 1908, General Motors bought Olds Motor Works. Wow. Okay. Okay. Yeah. Well, it wasn't the start, but it was like part of the empire building. It was creation of like motors. Yeah, motors.

59:44Yeah. And then Daimler Chrysler, probably the most egregiously failed combination acquisition. I was worried about using the word acquisition. I mean, I think it was an acquisition. It was an acquisition. Yeah. And honestly, I probably went along too passively with kind of the company's kind of insistence this was a merger of equals. And we dutifully write over, they say it's a merger of equals. And it became clear to all of us reasonably quickly, right? The joke was that the company's Daimler Chrysler, the Chrysler is silent. It was an acquisition.

1:00:23Gary Vasilash: Yeah. No, look, I went along with it because I thought if it's not a merger of equals, this thing's going to be a disaster. So these are smart people putting it together. So it's got to be how wrong I was. No, no. Juergen Schrempf was the dictator. He was the man. That's right. Yeah, he was doing – oh, never mind. I wonder if the guys at Mercedes now are looking at it and saying, damn, we should have kept that company. I don't, I mean, Mercedes has got its own problems now, like we were talking about earlier. You know what? I wonder, because on the one hand, you know, I do think that running the North American kind of mass market business of Chrysler was, you know, was too much for the, you had to run this luxury car company in Germany and then figure out how to run.

1:01:17And once they threw out the management team, the Chrysler management team that actually knew how to run that business, once you did that, then I think we all know what the history was. It was bad. I wonder, though, I do wonder, though, if the Mercedes, if they had to live over again, if they had said, you know what, this Ram and Jeep thing is great. We'll keep that and we'll figure out how to run that. And all the rest of the stuff, we'll get rid of that because we don't understand it. But, you know, Jeep is a premium brand of a sort. And Ram is a premium brand of a sort. You know, certainly it transacts at premium levels, right?

1:01:52They're transaction prices. But, you know.

1:01:55Gary Vasilash: Yeah, that's a whole other show. We could devote an entire show to discussing Daimler Chrysler, or Daimler, as you say. Yeah. The Chrysler is silent. But we'll wrap up this one right now. Joe, thanks so much for coming on the show again. Well, we'll always have you back. And Gary, you and I can do this again next week. We will. And, of course, we thank all of you for having tuned in. AutoLine After Hours is brought to you by Bridgestone Tires, solutions for your journey.