Ford Overhauls Assembly Line for EVs & UFC is Ditching Pay-Per-View

0:00Tuesday on NBC, Jimmy Fallon and Bozma St John host the highly anticipated new competition show. I hired 10 creatives from all walks of life. They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best I do win! On Brand with Jimmy Fallon. Series premiere Tuesday on NBC.

0:34Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Ford is giving up its family heirloom, the assembly line. Ben, Nvidia and AMD can resume exporting their AI chips to China with a catch. It's Tuesday, August 12th. Let's ride.

0:55You know what we haven't done in a minute, Toby? Eat a vegetable? Bar trivia, which is why we are bringing it back. Toast to the end of the summer with MBD trivia night next Tuesday, August 19th, where you'll be able to meet us, talk to fellow listeners, and if you've got a crack squad of a team, win a Morning Brew Daily mug. It'll take place in downtown Manhattan. Sorry, out-of-towners. We will get to you at some point, I promise. But Toby, what are the other details people need to know? Ah, the details. To sign up, it's free. Just head to the link in the show description and bring your friends.

1:28You are allowed to add a plus one when you sign up. But I also recommend tossing the link in your group chat, the smart friend group chat, that is, to roll up with a squad. If you have no smart friends, bring your dumb ones for the vibes. But yes, can't wait to see you all there. Our third MBD trivia night in New York City next Tuesday. Sign up at the link in the show description. And now a word from our sponsor, LinkedIn Ads. Neil, I've been getting the wildest ads online lately. I'm getting email after email about a procedure to lengthen your arms. Are you going to do it? No, I do not have T-Rex arms.

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2:41Just go to linkedin.com slash mbd. That's linkedin.com slash mbd. Terms and conditions apply only on LinkedIn ads. Everyone knows that President Trump loves to make a deal, but the one he struck with chip makers NVIDIA and AMD might be his most controversial yet. NVIDIA and AMD both agreed to send 15 % of their revenues from AI chip sales in China back to the U.S. government in exchange for earning the licenses to let them sell there in the first place. The agreement covers sales from each company's scaled-down versions of their most powerful AI chips, the H20 for NVIDIA and the MI308 for AMD.

3:18It is an unusual quid pro quo agreement, so unusual, in fact, that it's never been done before. The Financial Times talked to export control experts and came to the conclusion that no U.S. company has ever agreed to pay part of their revenues in order to obtain export licensees. Still, it fits a pattern under the Trump administration where the president often uses penalties like the imposition of a tariff in order to make companies do certain things like beef up domestic investments. Critics of the policy point to the fact that this is playing right into China's hands. If companies can earn the right to export sensitive tech in exchange for a fee, then where does that slippery slope end?

3:58What's next? Letting Lockheed Martin sell F-35s to China for a 15 % commission, a former National Security Control Advisor Liz Tobin told the Financial Times. But the likes of NVIDIA and AMD are happy to make the deal because it grants them access to the lucrative Chinese market again, which Bernstein analysts estimate would have been worth around$23 billion in additional revenue for NVIDIA this year. Neil saw a lot of uses of the word unprecedented thrown out when describing this pact. There was certainly an outcry by national security experts who worry that we are sending China the ability to compete with us in AI where the U.S.

4:34has a lead, but it is dwindling by the day as one business executive posted on X. If the chips are a national security concern, we shouldn't export them at all. If they are not, then we shouldn't be charging U.S. businesses for making money like some Banana Republic. That kind of encapsulates a lot of the criticism of this particular deal. But it is a huge win for NVIDIA CEO Jensen Huang, who's been on this charm offensive on both sides of the Pacific. He's been at the White House a bunch of times. He's been in Beijing a bunch of times in order to persuade both of these governments to allow them to send chips to China, whether they're scaled down or not, because at one point it represented 20 percent of their sales.

5:14So Jensen Huang is, you know, looking in the mirror and saying, like, I did a pretty good job here. Yeah. Remember, NVIDIA made the H20 specifically for the Chinese market after Biden actually imposed these very tough export controls. But then in April, Trump administration said that they would ban those very same chips made for China and then reverse course after Jensen Huang had a meeting with him in June. But then no export licenses were forthcoming after that initial agreement. So he went back to the White House, struck this deal. And so it was actually on the same around the same time that Tim Cook was in the White House as well.

5:50So there was a lot of wheeling and dealing going on there. So now we are in this world where not only are imports getting taxed, exports are suddenly getting taxed, which is kind of uncharted territory. It's uncharted territory. And legal experts are wondering whether it is constitutional because the Constitution expressly forbids taxing exports. So there might be legal challenges coming as there have been with tariffs. Now, NVIDIA's case, this is how Jensen Huang persuaded Trump. He said, we need to treat these chips or other AI infrastructure like the U.S. dollar. We need to export it around the world so we get Chinese AI companies on an American tech stack.

6:28And Commerce Secretary Howard Ludnick agreed. He said, we want other countries addicted to American technology. Apparently, that persuaded the president along with the potential for billions of dollars in new revenue. And then ironically, after all this Hubba Blue came out yesterday, China issued a notice to a lot of companies saying, avoid using NVIDIA H20 processors. We do not want you using them, especially for government-related processes. So China is almost kind of backing up that viewpoint by saying, hey, we don't actually want you to get addicted to an American tech stack. So that complicates everything further.

7:05Everyone thought, oh, wow, NVIDIA and AMD, they just unlocked these new revenue streams. Not so if you are a Chinese official. Big picture here. Some economic commentators like The Wall Street Journal's Greg Ip are saying that what we've been seeing over the past few months in the Trump administration is a move toward a, quote, state capitalism model that is a severe break from the way free markets have typically operated in the United States, where President Trump has come in and really imposed his will on the private markets in a way that we just haven't seen in the U.S. economy. Some recent examples, he demanded that Intel CEO resign.

7:41He got this golden share when Nippon Steel took over U.S. Steel. He told Coke to change its formula. He told Walmart to eat the tariffs. He has accrued$1.5 trillion of promise for an investment that he will direct himself. Economists generally do not like this because when the government picks winners and losers, it's not necessarily an efficient market. Just look at what happened with Intel. The Chips Act from the Biden era gave them eight point five billion dollars and Intel has mostly squandered it. So there's an example of when the government intervenes too much in the private markets, you get a lot of inefficiencies and waste.

8:18The company that popularized the assembly line is moving on. Ford, whose founder Henry implemented the first moving assembly line in 1913, announced yesterday sweeping changes to its manufacturing methods as part of a drastic overhaul to its electric vehicle strategy. In what execs called a Model T moment for the company, Ford will invest$5 billion to produce a new family of affordable electric vehicles, beginning with a mid-sized pickup truck debuting in 2027 that costs$30 ,000,$10 ,000 less than the average price of a new car in the United States. But to make cheaper cars, you need a cheaper production process.

8:55And after years of tinkering in a skunk's works lab, Ford thinks it's found a worthy successor to the assembly line. Three assembly lines. Ford said it will scrap the traditional single conveyor line into a three-branched assembly tree in which teams of employees can make the front, rear, and middle parts of the car separately before hitching them together at the end. Combined with a lighter, cutting-edge battery design, you get an EV that contains 20 % fewer parts and can be produced 15 % faster. This universal EV platform, as Ford calls it, will be introduced at its Louisville plant, which will receive a$2 billion makeover to create Ford's cars of the future.

9:32Will it work? Not even CEO Jim Farley is sure. There are no guarantees with this project. He said, we're doing so many new things. I can't tell you with 100 % uncertainty that this will all go just right. It is a bet. There is a risk, but it is a risk Ford needs to take. Yeah, Ford's EV division has been suffering of late. Over the last two and a half years, it's lost$12 billion. It's already lost$2.2 billion in the first half of this year, and it's not heading in the right direction. Sales of its electric models have completely stalled out. They fell 12 % in the first six months of the year. Its top two EVs, the Ford F-150 Lightning and the Mustang Mach-E, are both falling as well.

10:12So this was something that they thought was an existential threat to their business. They need to compete globally with the car companies producing cheap EVs out of China. So they literally went down to the drawing board, rethought their entire process. How do we move away from the single assembly line? Somehow tripling it makes it more efficient. But it is fascinating where they found these efficiency gains. Yeah, they're going to give each worker group a kit, kind of like an IKEA thing that you unpack. and they say this will be a profound change in terms of storage and production layout. It will result in 84 % less reaching over the fender, which I guess takes a lot of time, can be dangerous, and 63 % less sitting in the vehicle installing parts.

10:57And then an interesting aspect of this is what does the United Auto Workers think? This is the powerful auto union in the United States because this factory, Ford has said, will require less workers. Usually that's something that prompts protests from the United Auto Workers, but instead they have been bought in from the very beginning because one of the big things it does is change the ergonomics of doing this work. Remember, it is hard work making a car. You've got to reach in. These are heavy parts. And so there's less twisting, less turning, and hopefully a more safe environment. So even though this is actually reducing the amount of workers, UAW people are on board with it because it makes it safer, and it just makes your body under less pressure.

11:37And Ford is saying that if this goes well and we sell more cars and we'll open up new plants and create more jobs. And I also final note, I thought this was interesting about the competition, the competitive landscape that Ford thinks it's dealing with. It says its rivals isn't GM or Tesla or any other American or European car. They specifically pointed out China and these low cost Chinese affordable cars that Ford CEO Jim Farley is absolutely worried about. He can't sleep at night. He said he went to China previously and called it the most humbling experience of his career. Their cost, their quality of their vehicles is far superior to what I see in the West.

12:17So China, Ford is coming for you. Days after getting sold to Skydance Media, Paramount is looking for a fight and it may have just found one. Yesterday, the media company announced a deal to stream combat sports giant UFC in the U.S. for seven years beginning in 2026. It won't come cheap. The deal is worth$7.7 billion in total, or an average of$1.1 billion per year. But it's a sign that under new ownership, Paramount is willing to spend big to aggressively make up ground in the streaming octagon. The UFC deal means that 43 events will stream on Paramount +, 30 fight nights and 13 marquee lineups, some of which will be simulcast on CBS.

12:56And here's the part that's got UFC fans really excited. No more pay-per-view. ESPN, which currently has the UFC rights, put up a double paywall for certain premium matchups, meaning you had to pay for the streaming service and the specific fight on top of that. As the president of TKO Group, UFC's parent company, put it, the pay-per-view model is a thing of the past. What's on pay-per-view anymore? Boxing, movies on DirecTV. It's an outdated, antiquated model. So it was paramount to us, forgive the pun, where it's one-stop shopping, especially for our younger fans in flyover states. Speaking of TKO Group, they're on a heater as streamers pay up the nose for live sports rights.

13:35Its other property, the wrestling promotion WWE, just inked a deal with ESPN worth$1.6 billion to air WrestleMania and other big events. Its stock was up 9 % yesterday. Toby, thoughts on this mixed martial art of the deal? I think that there is a scarcity of sports properties available right now because Formula One rights are going to get snapped up by Apple. Major League Baseballs don't come up until 2028. So there's not that many, you know, top shelf sporting properties available. And Paramount thought that they had to jump. David Ellison, who, you know, leads the Paramount Skydance merger at this point, said that UFC is a unicorn asset that comes up about once a decade.

14:16He himself described himself as a UFC fan. So they spent a lot of money on this. I mean, before this deal closed, Paramount's entire market cap was six and a half billion dollars. This UFC deal is worth$7.7 billion. So the literal deal itself is worth more than the entire combined entity. So it's a good immediate property, though. One of the reasons why UFC events are pretty desirable for streamers is because they take place year-round. There is no off-season when it comes to fighting. They're 43 live events annually. So that's a pretty desirable property, and that's why you saw them spend so much money to go after it.

14:51And David Ellison, who's the CEO of this new company, has said he's also the son of Larry Ellison, Oracle founder. He said you can't cut to grow and has pledged that Paramount will invest meaningfully in content to grow its platforms. We just talked about two weeks ago that it inked a deal with South Park that was worth$1.5 billion. It has about 78 million subscribers at the end of June. This is Paramount Plus, which is smaller than most of its rivals. Netflix is way ahead with over$300 million. But it is spending to try to get people to sign up for Paramount Plus and not have them cancel. Hey, if you can spend$13 a month to get UFC all year round, that is perhaps a compelling proposition for those fans.

15:35Up next, let's talk about Toby's Trends.

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17:24Rise Splunk into the recesses of the business world to emerge with a trend you should keep your eye on. And today's trend is all about the four-wheeled menaces taking over America's public roads. I'm not talking about anything futuristic like Waymo or RoboTaxies. I'm talking about the humble golf cart. According to the Wall Street Journal, suburban dwelling families far from manicured fairways are opting to hop into golf carts to run a quick errand or go for an evening cruise instead of their minivan or SUVs. Twins love them too for the freedom they provide. But the rise of the golf cart cavalry has brought with it backlash.

18:00Drivers of normal cars say they clog traffic with their slow driving. Reckless teenage drivers make operating a cart on roads an unsafe affair, and laws vary across states when it comes to public road access, max speeds, and leaving home without a license plate. Some states have just said screw it, opting to let municipalities set their own rules. Still, it has done little to slow golf carts roll. Carts that can handle the open road instead of just fairways have seen their sales jump in recent years. One sales exec from the cart maker Club Cart said that the U.S. market for that type of beefed up cart is now worth$5 billion, up from$1 billion before the pandemic.

18:37Neil, I was talking with you before the show. Suburban golf cart culture was a foreign concept to you, but it's reaching all corners of America. If you weren't whipping a golf cart around as a kid, what the heck were you doing? The New England mind can't comprehend this, I have to say. But then I went down to your neck of the woods in western Florida to this one beach town, and everyone is rocking their golf carts. What was it like? Describe to me what having a golf cart culture was like in a town. It really was more like the suburbia. One kid would have a golf cart, everyone piled on. I totally get why people are kind of mad at them because we weren't the most responsible of drivers.

19:12You're a teenager. Of course, you're doing some dumb stuff, but also these are not your grandma's golf cart anymore. These things are street ready. Some of them come with seatbelts. They have headlights. They have turn signals that can cost up to$25 ,000. And some owners tricked them out. One person that the Wall Street Journal article talked to, it had a turquoise frame, white seats, orange rims, four-wheel drive in case it snowed. He lives in Gaffney, South Carolina. And then also a dashboard that has a built-in refrigerator sound system with 24 speakers that can light up and pulse with the rhythm of the music.

19:45So again, if you're thinking just puttering around, these things are basically cars at this point. And you can kind of trick them out so they go above the max speed. Like that's not really a huge issue. So if you go to a town hall meeting in your local municipality anytime soon. You know, there's a probably good chance that some resolution around whether we should allow golf carts are coming up. It was just rejected in Norwalk, Connecticut last year and in Elburn, Illinois, a petition to get golf carts on the roads also was rejected. But in so many other municipalities, they are being allowed.

20:16People are saying it's way more social. It's much easier for us to get around. So, you know, that is the next frontier, I guess, in town fights. There is certainly backlash, though. So if you just go on a TikTok and you search up golf carts, there was this one video a guy in Florida posted where he filmed golf carts clogging a road in both directions. And he says, we hate you. Get your golf cart off the road and drive a regular car. So there is certainly, obviously there's the danger aspect because if you have kids driving these around, like it is a little unsafe. But then also if you are taking up road space from actual cars, people are going to get a little frustrated.

20:50So the golf carts are coming for your community. whether you accept them, that's up to you. Now let's sprint to the finish with some final headlines. President Trump nominated a new commissioner of the Bureau of Labor Statistics yesterday. The economist E.J. Antony will replace Erica McIntarfer, who Trump fired at the beginning of the month after a dismal July jobs report, accusing her of manipulating the data. Antony is the chief economist at the conservative-leaning Heritage Foundation. He was also a contributor to Project 2025, the policy blueprint designed to set goals for Trump's second term.

21:25Antony has been an outspoken critic of the BLS, namely the large revisions to jobs data seen recently. He posted on X last week that there are better ways to collect, process, and disseminate data that is the task for the next BLS commissioner. But economists across the political spectrum have pushed back on the nomination, saying that introducing partisanship to the BLS could hurt the integrity of the agency's data moving forward. Neil, Antony is certainly a controversial pick, but one thing is certain, he enters a job market that is slowing after two sharp downward revisions of May and June job gains.

22:00Yeah, even if he doesn't want to acknowledge it. Jessica Rydell, who's the former economist at the Heritage Foundation, which is a conservative think tank that Antony is now the chief economist of, posted on X last night. The articles and tweets I've seen him publish are probably the most error-filled of any think tank economist right now. I hope we see better at BLS. He still has to get confirmed by the Senate, where he'll certainly be under fire for his credentials, whereas McIntyre had 1 ,300 citations with her papers that she's published. Antony is just five years out of grad school. He appears to have published one article and one citation.

22:38So his experience appears to be lacking compared to previous commissioners at this particular post. And he is a very much advocate of the MAGA worldview and is not a nonpartisan technocrat, which economists and businesses and investors want because they want to ensure the integrity of this data. And we'll get the first test in a few hours. The BLS will release the CPI, the Consumer Price Index Report, which will tell us the inflation numbers for July. Cannabis stocks jumped yesterday after President Trump said he's considering downgrading marijuana to a less dangerous drug classification. Companies who are linked to the cannabis industries like Tilray, Canopy, Aurora, and more, Southern Share Price, go nuts after Trump gave this sagging industry a much-needed boost.

23:24Cannabis is currently classified as a Schedule I drug that puts it next to substances like heroin and LSD, but the reclassification floated by the Trump administration would put it on the same level as Adderall, which gave the sector hope that it could lead to better access to capital from banks and bolster medical research going forward, opening up a broader market in the process. Now, this isn't federal legalization. That's a totally separate issue, but still one of the first positive pieces of news for a sector that is still trading well below the peak it reached in 2021. These companies did go nuts.