Latest / Financial Survival Network / Auto Industry Crash of 2023 -- Carl Gould #5903

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Auto Industry Crash of 2023 -- Carl Gould #5903 · Financial Survival Network

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  On the one hand, you know, one of the threats to the Big
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  three is the electric vehicle, but as you said, the second and equally
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  if not, if not, you know, more threatening is the autonomous driver.
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  I mean it is Elon Musk's goal to remove the steering wheel from an
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  automobile. That's his goal, he said, He goes, I want to
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  remove the steering wheel from the automobile. That would be one aspect of the
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  car driving experience I would like to remove. And we've all been driven around
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  before, and you know, and you tell me how the American public are
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  going to respond when they know that with reasonable certainty they can be taken anywhere
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  and not have to drive themselves, and they have a personal vehicle to do
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  it. You're listening to Carrie Let's his Financial Survival Network where you get valuable
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  need the Financial Survival Network now more than ever. Go to Financial Survival and
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  Network dot com and get your free newsletter and gift. Financial Survival Network now
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  more than ever. And welcome. You are listening to watching the Financial Survival
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  Network. I'm your host, Carry Lutts stay. We're already in the last
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  part of September so far into stock market crashes. But we do have eleven
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  days, so there is plenty of time for that. But in the meantime,
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  EUAW has walked out on the Big Three. The Big Three really is
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  in the midst of an existential crisis, although nobody wants to admit it.
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  The Emperor his clothes were sent out to the dry cleaner. The dry cleaner
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  lost them, and you know what happened to the Emperor with no clothes.
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  Carl Gould is here with us now. Our good friend. Carl is the
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  president of seven Stage Advisors. You find him at seven Stage Advisors. That's
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  seven the number Stage Advisors dot com. And if you've got a question of
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  Carl myself KL, the kerrluts dot com is the email address to send it.
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  Two Carl, great to have you back on. So UAW. Are
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  they whistling past the cemetery or do they just want to get everything they possibly
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  can because they know that the Big Three is basically going down? Well,
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  I think there there's a couple of things got at play here. Number one
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  is the Union's got a landmark deal with UPS. Earlier in the years,
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  so they're feeling they're they're feeling their strength and they feel like they've got the
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  you know, timing on their side. The sentiment in the country right now
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  is very pro union, and we we applaud any worker that's willing to go
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  back to work stay at work. So the timing, the sentiment, the
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  mood is in the union's favor. And if you remember back to two thousand
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  and seven and two thousand and eight when the financial collapse happened and it really
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  impacted the base three, that union took a pretty big haircut to keep the
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  companies in business. Now we're in a bit of an artificial boom because of
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  the pandemic and because of you know, supply chain challenges. Cars have been
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  and you know the chip shortage. If you all remember, you know,
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  cars were hard to get. So the prices are high. Prices are high,
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  so there's profits right now, but it is an artificial it's an empty
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  calorie here, it's an artificial boom. And right around the corner is the
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  ev revolutions. So while they can likely take advantage of some short term games,
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  short term short term gains, sorry, this is a long term play,
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  you know, asking for thirty six to forty percent increase in salary just
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  that you know, it's going to put the company out of business. No,
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  I couldn't agree with you more. Hey, you know, the profits
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  were artificially inflated of the Big three because of the chip shortage, because of
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  the car shortage, because used car prices skyrocket. It's so high that it
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  was cheaper to buy a new car than a used car. I mean,
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  Carl in Florida here there is a Toyota dealer, one of the largest in
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  the country, and during the midst of the pandemic, I passed by their
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  lot and literally it was empty. You couldn't They were like a couple of
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  cars parked in front of the office. Yeah, there were no cars on
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  the law at all. So, you know, Detroit, whenever they can,
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  they jack up their prices. And then that sets the stage for the
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  next time when people say, you know, the cost of a new car
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  is too high and we're just not going to buy, and then they go
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  busy rebating, discounting all this stuff. Is there a better way of doing
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  things than they are doing it? Well, yeah, of course there is.
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  I mean, the union workers are looking at the fact that the CEOs
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  took big pay increases over the last three to four years, and they're saying,
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  well, if you've got a forty percent race, we want a forty
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  percent race. And that's what they're basing it on. They're they're working off
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  of that, that narrative to see if they can, if they can,
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  if they can get more. Now. I you know, I'm the first
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  guy to say, listen, you should negotiate the best deal for yourself.
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  At the same time, you know, it would it would be in everyone's
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  interest if they sat down and said, Okay, let's look at the long
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  term strategy of the company, and let's see where this company is going to
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  be ten years from now. Because the the you know, these big free
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  automakers are trading at a very low price to earning ratio in their stock.
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  And what that means is is that's that's the market saying we don't think you're
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  going to be around all that much longer, you know, and years from
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  now, there's no guarantee all three of them are still in business the same
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  way that they are right now. Other manufacturers have come to the United States,
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  they've moved south, they've moved out of Detroit, they're not union shops.
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  And last time I check those those companies, you know, are are
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  selling an awful lot of cars, you know, and and so sore.
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  There really should be a balance here. And in the midst of a in
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  the midst of a recession and high prices, you know, we have a
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  union force that is trying to ultimately hurt the customer in order or pressure the
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  customer in order to get their way. And if they get it, you
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  know, the price of these cars are going to go even higher. So
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  it's there. To me, there this is not quite the way to go
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  about it. And I'm not putting the fall on these strike strikers. I'm
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  not putting the fall on the UH solely on the on management. I'm putting
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  it in both sides. You know, you can't you can't figure out how
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  to carve up multiple billions of dollars a year. To me, that's irresponsible.
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  And they do have a point. The CEOs pay has gone way up.
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  Maybe if the CEOs knew, of the companies knew that whatever you give
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  the CEO in terms of increased compensation other than for extraordinary circumstances, you're going
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  to have to give to the workers. Maybe that would put a lid on
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  CEO pay Oh. I mean you think if you think about it, that
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  that CEO compensation, you know, is equally as irresponsible as the as what
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  the workers are demanding. You know, you've got to look at the bigger
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  picture here, you know, there there comes a point in your life where
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  you say, does that little bit extra change my life forward the better?
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  And if I were to take less, is that actually more for me long
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  term? And so there's you know, there's optics with this as well,
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  and this just does not seem to be the most well thought through long term
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  strategy, you know. And meanwhile, you see the market share of the
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  big three going down, whereas you see Tesla, Toyota, Kia, Hyundai
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  and these other brands Subaru that continue mercenities that continue to see their market share
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  rise. So again it's it seems to be shortsighted. And you know,
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  they're they're in charge of an awful lot of money that they see. MAB
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  a hard time managing a lot of assets too. And you know the nickname
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  for the president of GM, Mary Barra, is Mary Embarrassment. I mean,
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  she makes all these proclamations about uh EVS and everything else, and yet
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  in reality, GM's producing very few evs. And like it or not,
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  that is the future of of the auto industry in the US and the world.
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  Yeah, it's it's certainly heading in that direction. And they'll always be
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  there'll be niche players, They'll always be that. They'll always be that niche
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  internal bushed in manufacture, and that's where those three are headed. If they're
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  not careful, you know, I'm you know, the they've done a tremendous
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  job of making those those cars energy efficient, you know, low carbon,
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  the lowest carbon emission ever in the history of the manufacturing. But at the
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  same time, that demand is not going to be there. And what we're
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  going to see is though the demand for the internal combustion driven car is going
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  to shrink, and they'll always be the need for a big block V eight,
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  there's just not going to be as much of one, and the companies
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  are going to have to right size as and downsize as a result of it.
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  Yeah, there's a certain inevitability to this thing here, Carl. And
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  you look at Tesla. They're making more money than just about the entire Big
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  three put together, and their profits go up every year. Their sales go
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  up every year. They're a company on the move, and it seems to
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  me that the Detroit as well as as other regular car companies, legacy car
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  companies around the world, are kind of been left flat footed a year.
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  This is how far behind the Big Three are. Tesla controls the software,
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  the master software, programming in the entire car. If Ford wanted to change
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  this would be how those seats, the electric seats operated. They would have
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  to go to the electric seat vendor and get permission from them to alter their
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  software. I believe there are nineteen different softwares inside of a Ford vehicle and
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  Ford doesn't own any of them. And for the first time in their history,
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  they're writing their own master software. Tesla has had it for ten years
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  and all the data and the millions and millions of miles that have been driven
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  where they can utilize that data for better manufacturing. The Big three are just
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  getting started today. That's how far behind they are. Think what will happen
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  if and when Tesla master's full self drive and the car drives itself literally from
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  point A to point beef Pretty close right now, I gotta tell you,
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  But imagine when they hit it uh, that could be the spike and the
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  only choice the Big three will have is to beg Tesla to license it to
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  them, right, I mean, so you you say on the one On
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  the one hand, you know one of the threats to the Big three is
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  the electric vehicle, as you said, the second and equally if not,
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  if not, you know, more threatening is the autonomous driver. I mean
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  it is. It is Elon Musk's goal to remove the steering wheel from an
• 11:39
  automobile. That's his goal, he said, He goes, I want to
• 11:41
  remove the steering wheel from the automobile. That would be one aspect of the
• 11:46
  car driving experience I would like to remove. And we've all been driven around
• 11:50
  before, and you know, and you tell me how the American public are
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  going to respond when they know that, with reasonable certainty, they can be
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  taken anywhere and not have to drive themselves, and they have a personal vehicle
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  to do it. And then that brings up the whole thing of do you
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  need to own a car at all? You just call one on an app
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  and it comes and picks you up and takes you from point A to point
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  B, and it's it's a real game changer for the entire auto industry.
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  So what do we learn from what the where the big three are now and
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  where they potentially may wind up. Well, I think you know, their
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  their adversarial relationship with their labor has been an issue for decades. It's been
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  an issue for decades, right. The union wants to bring back the nineteen
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  eighties, you know, guaranteed retirement plans and lifetime employment and some of the
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  some of the agreements that they had in place. Then I don't see that
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  as a sustainable strategy. I think they're just going to put these companies out
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  of business flat out. And I think that's that's where it's headed. So
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  I do think they have they have a bigger problem on their hand than just
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  this strike. But maybe this strike is an opportunity for them all to say,
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  all right, let's put our heads together to see what we could do
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  for the survival of the company, not necessarily our own particular interests. And
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  and maybe that's a form of evolution here. But the worker has got to
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  feel like the CEO is going to feel the pain just like they are,
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  and they got to share in the benefits just like the CEO does, no
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  matter how good or better nobody's doing. I mean, you know, what
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  does marry embarrassment get like twenty five million fifty if it's something like that.
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  Yeah, yeah, And I don't know that. I don't know that this
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  is a pain scenario. I think this is this is a company. These
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  are three companies right now that are drowning in profits and they are swimming in
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  abundance, and we have two sides that are struggling to figure out how to
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  clip up exactly. It's not that they're it's not that they're in survival mode.
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  That's a different story. That was two thousand and seven, two thousand
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  and eight, really two nine, But right now that's not the case.
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  Right now, it's they're prosperous and they should be asking themselves, how can
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  we make sure we stay there? You know that could change very quickly,
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  Carl, as we can and it could change quickly. Yeah, So,
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  uh, the cost of not innovating is really a cost that they can't afford
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  to because the bigger, the biggest threat, the biggest threat to the union
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  is automation. And these you know, these are these are assembly lines that
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  are already run robotic already, and there's more to come. That's the bigger
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  threat to them. Yeah, so again, that's that's where I would be
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  focusing my efforts on right now. Yeah, well, they don't even know
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  what they're in for at this point, Carl, that's amazing. They really
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  don't get it. They seem to be completely clueless both. I think the
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  unions get it a little bit and management gets it. But the two,
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  the stupidity of the two interest groups, mutual stupidity is could really well be
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  their undoing. You know, right, it's very very short sighted. I
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  get it, and I'm the first guy, like I said, I'm the
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  first guy to say, negotiate what you're worth, negotiate your value. Right
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  at the same time, let's not kill the golden goose along the way.
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  You know you can. You can hold something so tight that you choke it
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  out. And I have a feeling that's what both sides are, you know,
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  in danger of doing if they're not careful, and you might very well
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  be correct to you know, their sales have been going down for years as
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  a percentage of the entire market. They've sold off their overseas operations. Once
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  they lose it here, they're finished they Carl, appreciate your coming on as
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  always, and make sure you go over to carl site seven Stage Advisors dot
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  com. That's the number. Seven Stage Advisors dot com. Got a question
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  for Carl and myself, shoot me an email kl acarreluts dot com. Link
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  to carl site is in the show notes this interview on Financial Survival Network dot
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  com. While you're there, sign up for your free newsletter Carl. Always
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  a pleasure. Thanks, Thanks Carry, Thanks for listening to Carry Letts's Financial
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  Survival Network, your solution to today's trying times. For the latest, go
• 16:30
  to Financial Survival Network dot com. Financial Survival Network now more than ever