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