1 00:00:00,120 --> 00:00:03,319 On the one hand, you know, one of the threats to the Big 2 00:00:03,359 --> 00:00:07,400 three is the electric vehicle, but as you said, the second and equally 3 00:00:07,440 --> 00:00:12,359 if not, if not, you know, more threatening is the autonomous driver. 4 00:00:12,679 --> 00:00:17,199 I mean it is Elon Musk's goal to remove the steering wheel from an 5 00:00:17,199 --> 00:00:20,320 automobile. That's his goal, he said, He goes, I want to 6 00:00:20,359 --> 00:00:24,199 remove the steering wheel from the automobile. That would be one aspect of the 7 00:00:24,239 --> 00:00:29,239 car driving experience I would like to remove. And we've all been driven around 8 00:00:29,280 --> 00:00:34,000 before, and you know, and you tell me how the American public are 9 00:00:34,039 --> 00:00:39,039 going to respond when they know that with reasonable certainty they can be taken anywhere 10 00:00:39,320 --> 00:00:42,679 and not have to drive themselves, and they have a personal vehicle to do 11 00:00:42,719 --> 00:00:47,640 it. You're listening to Carrie Let's his Financial Survival Network where you get valuable 12 00:00:47,679 --> 00:00:53,200 information you just can't find anywhere else to thrive in today's trying times. You 13 00:00:53,280 --> 00:00:59,079 need the Financial Survival Network now more than ever. Go to Financial Survival and 14 00:00:59,200 --> 00:01:04,519 Network dot com and get your free newsletter and gift. Financial Survival Network now 15 00:01:06,079 --> 00:01:14,239 more than ever. And welcome. You are listening to watching the Financial Survival 16 00:01:14,280 --> 00:01:18,200 Network. I'm your host, Carry Lutts stay. We're already in the last 17 00:01:18,400 --> 00:01:23,079 part of September so far into stock market crashes. But we do have eleven 18 00:01:23,200 --> 00:01:27,519 days, so there is plenty of time for that. But in the meantime, 19 00:01:27,959 --> 00:01:34,760 EUAW has walked out on the Big Three. The Big Three really is 20 00:01:34,840 --> 00:01:40,799 in the midst of an existential crisis, although nobody wants to admit it. 21 00:01:41,120 --> 00:01:45,040 The Emperor his clothes were sent out to the dry cleaner. The dry cleaner 22 00:01:45,159 --> 00:01:48,840 lost them, and you know what happened to the Emperor with no clothes. 23 00:01:49,079 --> 00:01:53,159 Carl Gould is here with us now. Our good friend. Carl is the 24 00:01:53,239 --> 00:01:57,920 president of seven Stage Advisors. You find him at seven Stage Advisors. That's 25 00:01:57,959 --> 00:02:04,000 seven the number Stage Advisors dot com. And if you've got a question of 26 00:02:04,120 --> 00:02:07,439 Carl myself KL, the kerrluts dot com is the email address to send it. 27 00:02:07,520 --> 00:02:13,199 Two Carl, great to have you back on. So UAW. Are 28 00:02:13,199 --> 00:02:16,879 they whistling past the cemetery or do they just want to get everything they possibly 29 00:02:16,960 --> 00:02:23,759 can because they know that the Big Three is basically going down? Well, 30 00:02:23,800 --> 00:02:27,039 I think there there's a couple of things got at play here. Number one 31 00:02:27,360 --> 00:02:32,319 is the Union's got a landmark deal with UPS. Earlier in the years, 32 00:02:32,360 --> 00:02:36,919 so they're feeling they're they're feeling their strength and they feel like they've got the 33 00:02:37,199 --> 00:02:40,120 you know, timing on their side. The sentiment in the country right now 34 00:02:40,240 --> 00:02:46,719 is very pro union, and we we applaud any worker that's willing to go 35 00:02:46,800 --> 00:02:50,560 back to work stay at work. So the timing, the sentiment, the 36 00:02:50,599 --> 00:02:54,319 mood is in the union's favor. And if you remember back to two thousand 37 00:02:54,319 --> 00:02:59,280 and seven and two thousand and eight when the financial collapse happened and it really 38 00:02:59,280 --> 00:03:02,639 impacted the base three, that union took a pretty big haircut to keep the 39 00:03:02,680 --> 00:03:08,159 companies in business. Now we're in a bit of an artificial boom because of 40 00:03:08,159 --> 00:03:15,120 the pandemic and because of you know, supply chain challenges. Cars have been 41 00:03:15,240 --> 00:03:16,759 and you know the chip shortage. If you all remember, you know, 42 00:03:16,840 --> 00:03:20,879 cars were hard to get. So the prices are high. Prices are high, 43 00:03:21,000 --> 00:03:24,000 so there's profits right now, but it is an artificial it's an empty 44 00:03:24,000 --> 00:03:29,319 calorie here, it's an artificial boom. And right around the corner is the 45 00:03:29,360 --> 00:03:35,120 ev revolutions. So while they can likely take advantage of some short term games, 46 00:03:35,599 --> 00:03:39,400 short term short term gains, sorry, this is a long term play, 47 00:03:39,680 --> 00:03:45,479 you know, asking for thirty six to forty percent increase in salary just 48 00:03:45,599 --> 00:03:47,080 that you know, it's going to put the company out of business. No, 49 00:03:47,400 --> 00:03:51,439 I couldn't agree with you more. Hey, you know, the profits 50 00:03:51,879 --> 00:03:55,319 were artificially inflated of the Big three because of the chip shortage, because of 51 00:03:55,360 --> 00:04:00,439 the car shortage, because used car prices skyrocket. It's so high that it 52 00:04:00,479 --> 00:04:03,639 was cheaper to buy a new car than a used car. I mean, 53 00:04:03,840 --> 00:04:10,639 Carl in Florida here there is a Toyota dealer, one of the largest in 54 00:04:10,680 --> 00:04:15,879 the country, and during the midst of the pandemic, I passed by their 55 00:04:16,040 --> 00:04:20,680 lot and literally it was empty. You couldn't They were like a couple of 56 00:04:20,720 --> 00:04:25,319 cars parked in front of the office. Yeah, there were no cars on 57 00:04:25,360 --> 00:04:30,560 the law at all. So, you know, Detroit, whenever they can, 58 00:04:30,639 --> 00:04:34,360 they jack up their prices. And then that sets the stage for the 59 00:04:34,399 --> 00:04:38,600 next time when people say, you know, the cost of a new car 60 00:04:38,720 --> 00:04:42,639 is too high and we're just not going to buy, and then they go 61 00:04:43,600 --> 00:04:47,839 busy rebating, discounting all this stuff. Is there a better way of doing 62 00:04:47,879 --> 00:04:51,480 things than they are doing it? Well, yeah, of course there is. 63 00:04:51,519 --> 00:04:57,879 I mean, the union workers are looking at the fact that the CEOs 64 00:04:57,959 --> 00:05:02,680 took big pay increases over the last three to four years, and they're saying, 65 00:05:02,680 --> 00:05:05,399 well, if you've got a forty percent race, we want a forty 66 00:05:05,399 --> 00:05:09,439 percent race. And that's what they're basing it on. They're they're working off 67 00:05:09,480 --> 00:05:12,519 of that, that narrative to see if they can, if they can, 68 00:05:13,160 --> 00:05:15,240 if they can get more. Now. I you know, I'm the first 69 00:05:15,240 --> 00:05:18,680 guy to say, listen, you should negotiate the best deal for yourself. 70 00:05:19,720 --> 00:05:24,560 At the same time, you know, it would it would be in everyone's 71 00:05:24,600 --> 00:05:27,399 interest if they sat down and said, Okay, let's look at the long 72 00:05:27,519 --> 00:05:30,079 term strategy of the company, and let's see where this company is going to 73 00:05:30,120 --> 00:05:35,439 be ten years from now. Because the the you know, these big free 74 00:05:35,439 --> 00:05:41,240 automakers are trading at a very low price to earning ratio in their stock. 75 00:05:41,279 --> 00:05:45,439 And what that means is is that's that's the market saying we don't think you're 76 00:05:45,480 --> 00:05:48,079 going to be around all that much longer, you know, and years from 77 00:05:48,079 --> 00:05:51,399 now, there's no guarantee all three of them are still in business the same 78 00:05:51,439 --> 00:05:57,120 way that they are right now. Other manufacturers have come to the United States, 79 00:05:57,199 --> 00:06:00,480 they've moved south, they've moved out of Detroit, they're not union shops. 80 00:06:00,839 --> 00:06:04,240 And last time I check those those companies, you know, are are 81 00:06:04,240 --> 00:06:09,439 selling an awful lot of cars, you know, and and so sore. 82 00:06:09,600 --> 00:06:14,319 There really should be a balance here. And in the midst of a in 83 00:06:14,360 --> 00:06:18,319 the midst of a recession and high prices, you know, we have a 84 00:06:18,480 --> 00:06:26,240 union force that is trying to ultimately hurt the customer in order or pressure the 85 00:06:26,279 --> 00:06:30,639 customer in order to get their way. And if they get it, you 86 00:06:30,639 --> 00:06:32,759 know, the price of these cars are going to go even higher. So 87 00:06:33,199 --> 00:06:36,759 it's there. To me, there this is not quite the way to go 88 00:06:36,839 --> 00:06:41,360 about it. And I'm not putting the fall on these strike strikers. I'm 89 00:06:41,360 --> 00:06:46,120 not putting the fall on the UH solely on the on management. I'm putting 90 00:06:46,120 --> 00:06:48,879 it in both sides. You know, you can't you can't figure out how 91 00:06:48,920 --> 00:06:54,639 to carve up multiple billions of dollars a year. To me, that's irresponsible. 92 00:06:55,399 --> 00:07:00,600 And they do have a point. The CEOs pay has gone way up. 93 00:07:00,680 --> 00:07:06,240 Maybe if the CEOs knew, of the companies knew that whatever you give 94 00:07:06,360 --> 00:07:15,199 the CEO in terms of increased compensation other than for extraordinary circumstances, you're going 95 00:07:15,279 --> 00:07:18,839 to have to give to the workers. Maybe that would put a lid on 96 00:07:18,959 --> 00:07:24,240 CEO pay Oh. I mean you think if you think about it, that 97 00:07:24,720 --> 00:07:30,360 that CEO compensation, you know, is equally as irresponsible as the as what 98 00:07:30,399 --> 00:07:32,439 the workers are demanding. You know, you've got to look at the bigger 99 00:07:32,480 --> 00:07:35,480 picture here, you know, there there comes a point in your life where 100 00:07:35,480 --> 00:07:40,279 you say, does that little bit extra change my life forward the better? 101 00:07:41,519 --> 00:07:45,519 And if I were to take less, is that actually more for me long 102 00:07:45,680 --> 00:07:48,319 term? And so there's you know, there's optics with this as well, 103 00:07:48,800 --> 00:07:56,519 and this just does not seem to be the most well thought through long term 104 00:07:56,600 --> 00:08:00,120 strategy, you know. And meanwhile, you see the market share of the 105 00:08:00,120 --> 00:08:05,439 big three going down, whereas you see Tesla, Toyota, Kia, Hyundai 106 00:08:05,600 --> 00:08:11,079 and these other brands Subaru that continue mercenities that continue to see their market share 107 00:08:11,199 --> 00:08:16,480 rise. So again it's it seems to be shortsighted. And you know, 108 00:08:16,519 --> 00:08:20,040 they're they're in charge of an awful lot of money that they see. MAB 109 00:08:20,079 --> 00:08:24,240 a hard time managing a lot of assets too. And you know the nickname 110 00:08:24,399 --> 00:08:31,680 for the president of GM, Mary Barra, is Mary Embarrassment. I mean, 111 00:08:31,720 --> 00:08:37,679 she makes all these proclamations about uh EVS and everything else, and yet 112 00:08:37,720 --> 00:08:43,720 in reality, GM's producing very few evs. And like it or not, 113 00:08:43,919 --> 00:08:50,000 that is the future of of the auto industry in the US and the world. 114 00:08:50,519 --> 00:08:54,320 Yeah, it's it's certainly heading in that direction. And they'll always be 115 00:08:54,399 --> 00:08:58,120 there'll be niche players, They'll always be that. They'll always be that niche 116 00:08:58,360 --> 00:09:03,840 internal bushed in manufacture, and that's where those three are headed. If they're 117 00:09:03,840 --> 00:09:09,639 not careful, you know, I'm you know, the they've done a tremendous 118 00:09:09,720 --> 00:09:13,600 job of making those those cars energy efficient, you know, low carbon, 119 00:09:15,080 --> 00:09:20,240 the lowest carbon emission ever in the history of the manufacturing. But at the 120 00:09:20,279 --> 00:09:22,480 same time, that demand is not going to be there. And what we're 121 00:09:22,480 --> 00:09:26,440 going to see is though the demand for the internal combustion driven car is going 122 00:09:26,480 --> 00:09:31,639 to shrink, and they'll always be the need for a big block V eight, 123 00:09:31,720 --> 00:09:35,279 there's just not going to be as much of one, and the companies 124 00:09:35,320 --> 00:09:39,000 are going to have to right size as and downsize as a result of it. 125 00:09:39,240 --> 00:09:43,320 Yeah, there's a certain inevitability to this thing here, Carl. And 126 00:09:43,480 --> 00:09:48,639 you look at Tesla. They're making more money than just about the entire Big 127 00:09:48,679 --> 00:09:52,320 three put together, and their profits go up every year. Their sales go 128 00:09:52,440 --> 00:09:56,679 up every year. They're a company on the move, and it seems to 129 00:09:56,679 --> 00:10:03,080 me that the Detroit as well as as other regular car companies, legacy car 130 00:10:03,080 --> 00:10:05,799 companies around the world, are kind of been left flat footed a year. 131 00:10:07,279 --> 00:10:11,440 This is how far behind the Big Three are. Tesla controls the software, 132 00:10:13,039 --> 00:10:18,440 the master software, programming in the entire car. If Ford wanted to change 133 00:10:18,720 --> 00:10:22,279 this would be how those seats, the electric seats operated. They would have 134 00:10:22,320 --> 00:10:28,279 to go to the electric seat vendor and get permission from them to alter their 135 00:10:28,320 --> 00:10:31,799 software. I believe there are nineteen different softwares inside of a Ford vehicle and 136 00:10:31,919 --> 00:10:35,320 Ford doesn't own any of them. And for the first time in their history, 137 00:10:35,320 --> 00:10:39,759 they're writing their own master software. Tesla has had it for ten years 138 00:10:39,799 --> 00:10:43,720 and all the data and the millions and millions of miles that have been driven 139 00:10:45,000 --> 00:10:48,120 where they can utilize that data for better manufacturing. The Big three are just 140 00:10:48,320 --> 00:10:54,840 getting started today. That's how far behind they are. Think what will happen 141 00:10:54,840 --> 00:11:03,519 if and when Tesla master's full self drive and the car drives itself literally from 142 00:11:03,519 --> 00:11:05,840 point A to point beef Pretty close right now, I gotta tell you, 143 00:11:07,080 --> 00:11:13,279 But imagine when they hit it uh, that could be the spike and the 144 00:11:13,360 --> 00:11:18,559 only choice the Big three will have is to beg Tesla to license it to 145 00:11:18,600 --> 00:11:22,039 them, right, I mean, so you you say on the one On 146 00:11:22,080 --> 00:11:24,720 the one hand, you know one of the threats to the Big three is 147 00:11:24,720 --> 00:11:28,679 the electric vehicle, as you said, the second and equally if not, 148 00:11:28,919 --> 00:11:33,799 if not, you know, more threatening is the autonomous driver. I mean 149 00:11:33,879 --> 00:11:39,039 it is. It is Elon Musk's goal to remove the steering wheel from an 150 00:11:39,039 --> 00:11:41,159 automobile. That's his goal, he said, He goes, I want to 151 00:11:41,200 --> 00:11:46,039 remove the steering wheel from the automobile. That would be one aspect of the 152 00:11:46,039 --> 00:11:50,000 car driving experience I would like to remove. And we've all been driven around 153 00:11:50,120 --> 00:11:54,840 before, and you know, and you tell me how the American public are 154 00:11:54,879 --> 00:12:00,080 going to respond when they know that, with reasonable certainty, they can be 155 00:12:00,159 --> 00:12:03,200 taken anywhere and not have to drive themselves, and they have a personal vehicle 156 00:12:03,279 --> 00:12:07,799 to do it. And then that brings up the whole thing of do you 157 00:12:07,840 --> 00:12:09,879 need to own a car at all? You just call one on an app 158 00:12:09,879 --> 00:12:13,039 and it comes and picks you up and takes you from point A to point 159 00:12:13,039 --> 00:12:20,240 B, and it's it's a real game changer for the entire auto industry. 160 00:12:20,519 --> 00:12:24,759 So what do we learn from what the where the big three are now and 161 00:12:24,799 --> 00:12:28,919 where they potentially may wind up. Well, I think you know, their 162 00:12:28,080 --> 00:12:33,080 their adversarial relationship with their labor has been an issue for decades. It's been 163 00:12:33,120 --> 00:12:37,039 an issue for decades, right. The union wants to bring back the nineteen 164 00:12:37,080 --> 00:12:43,399 eighties, you know, guaranteed retirement plans and lifetime employment and some of the 165 00:12:43,519 --> 00:12:48,720 some of the agreements that they had in place. Then I don't see that 166 00:12:48,840 --> 00:12:52,639 as a sustainable strategy. I think they're just going to put these companies out 167 00:12:52,679 --> 00:12:58,039 of business flat out. And I think that's that's where it's headed. So 168 00:12:58,399 --> 00:13:01,519 I do think they have they have a bigger problem on their hand than just 169 00:13:01,679 --> 00:13:07,000 this strike. But maybe this strike is an opportunity for them all to say, 170 00:13:07,200 --> 00:13:09,799 all right, let's put our heads together to see what we could do 171 00:13:09,919 --> 00:13:18,200 for the survival of the company, not necessarily our own particular interests. And 172 00:13:18,200 --> 00:13:24,639 and maybe that's a form of evolution here. But the worker has got to 173 00:13:24,679 --> 00:13:28,240 feel like the CEO is going to feel the pain just like they are, 174 00:13:28,600 --> 00:13:33,360 and they got to share in the benefits just like the CEO does, no 175 00:13:33,360 --> 00:13:37,080 matter how good or better nobody's doing. I mean, you know, what 176 00:13:37,159 --> 00:13:41,440 does marry embarrassment get like twenty five million fifty if it's something like that. 177 00:13:41,519 --> 00:13:45,360 Yeah, yeah, And I don't know that. I don't know that this 178 00:13:45,480 --> 00:13:48,960 is a pain scenario. I think this is this is a company. These 179 00:13:48,960 --> 00:13:54,320 are three companies right now that are drowning in profits and they are swimming in 180 00:13:54,399 --> 00:13:58,480 abundance, and we have two sides that are struggling to figure out how to 181 00:14:00,080 --> 00:14:03,960 clip up exactly. It's not that they're it's not that they're in survival mode. 182 00:14:05,000 --> 00:14:07,919 That's a different story. That was two thousand and seven, two thousand 183 00:14:07,960 --> 00:14:11,960 and eight, really two nine, But right now that's not the case. 184 00:14:11,159 --> 00:14:16,919 Right now, it's they're prosperous and they should be asking themselves, how can 185 00:14:16,960 --> 00:14:20,399 we make sure we stay there? You know that could change very quickly, 186 00:14:20,519 --> 00:14:26,120 Carl, as we can and it could change quickly. Yeah, So, 187 00:14:28,000 --> 00:14:33,759 uh, the cost of not innovating is really a cost that they can't afford 188 00:14:35,240 --> 00:14:39,799 to because the bigger, the biggest threat, the biggest threat to the union 189 00:14:39,440 --> 00:14:45,200 is automation. And these you know, these are these are assembly lines that 190 00:14:45,200 --> 00:14:50,039 are already run robotic already, and there's more to come. That's the bigger 191 00:14:50,080 --> 00:14:54,399 threat to them. Yeah, so again, that's that's where I would be 192 00:14:54,519 --> 00:14:58,159 focusing my efforts on right now. Yeah, well, they don't even know 193 00:14:58,240 --> 00:15:01,519 what they're in for at this point, Carl, that's amazing. They really 194 00:15:01,559 --> 00:15:05,799 don't get it. They seem to be completely clueless both. I think the 195 00:15:05,919 --> 00:15:11,000 unions get it a little bit and management gets it. But the two, 196 00:15:11,720 --> 00:15:16,519 the stupidity of the two interest groups, mutual stupidity is could really well be 197 00:15:16,639 --> 00:15:20,159 their undoing. You know, right, it's very very short sighted. I 198 00:15:20,200 --> 00:15:22,440 get it, and I'm the first guy, like I said, I'm the 199 00:15:22,440 --> 00:15:26,919 first guy to say, negotiate what you're worth, negotiate your value. Right 200 00:15:28,120 --> 00:15:31,120 at the same time, let's not kill the golden goose along the way. 201 00:15:31,200 --> 00:15:33,240 You know you can. You can hold something so tight that you choke it 202 00:15:33,240 --> 00:15:37,919 out. And I have a feeling that's what both sides are, you know, 203 00:15:37,159 --> 00:15:41,919 in danger of doing if they're not careful, and you might very well 204 00:15:41,960 --> 00:15:46,919 be correct to you know, their sales have been going down for years as 205 00:15:46,960 --> 00:15:50,639 a percentage of the entire market. They've sold off their overseas operations. Once 206 00:15:50,679 --> 00:15:56,279 they lose it here, they're finished they Carl, appreciate your coming on as 207 00:15:56,519 --> 00:16:02,600 always, and make sure you go over to carl site seven Stage Advisors dot 208 00:16:02,600 --> 00:16:07,360 com. That's the number. Seven Stage Advisors dot com. Got a question 209 00:16:07,399 --> 00:16:11,159 for Carl and myself, shoot me an email kl acarreluts dot com. Link 210 00:16:11,320 --> 00:16:17,080 to carl site is in the show notes this interview on Financial Survival Network dot 211 00:16:17,120 --> 00:16:19,879 com. While you're there, sign up for your free newsletter Carl. Always 212 00:16:19,879 --> 00:16:25,399 a pleasure. Thanks, Thanks Carry, Thanks for listening to Carry Letts's Financial 213 00:16:25,480 --> 00:16:30,639 Survival Network, your solution to today's trying times. For the latest, go 214 00:16:30,759 --> 00:16:37,200 to Financial Survival Network dot com. Financial Survival Network now more than ever