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Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.

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Speaker 1: Along with my co host Lisa Abramowitz. Each day we

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Speaker 1: bring you the most important, noteworthy, and useful interviews for

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Speaker 1: you and your money, whether at the grocery store or

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Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes,

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Speaker 1: SoundCloud and at Bloomberg dot com. Toyota Motor Company has

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Speaker 1: said that it will invest ten billion dollars in the

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Speaker 1: United States over the next five years, and Bob Carter

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Speaker 1: is the president of Toyota North America. He joined us

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Speaker 1: for a discussion of the all new, updated camera, the

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Speaker 1: outlook for sedans, and also being positioned for the presidential transition.

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Speaker 1: The new camera is a vehicle that we're very proud of.

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Speaker 1: This is the eighth generation since we introduced it originally

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Speaker 1: back in three but this is a this is a

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Speaker 1: unique camera for us. We've done this entire car completely.

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Speaker 1: It has a new platform, new power trains, new body,

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Speaker 1: new interior, and all the new technology that that that

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Speaker 1: we have developed over the years is all comes together

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Speaker 1: in this eighth generation car. Uh really proud of it.

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Speaker 1: We've done two executions of the camera. There's one that's

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Speaker 1: very sporty and there's one that's very luxurious. So depending

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Speaker 1: on what the consumers preferences. And we're announcing it here

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Speaker 1: for the first time globally in in uh in the

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Speaker 1: Detroit Auto Show, but it will be available at our

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Speaker 1: dealerships later this summer. So why is Toyota focusing on

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Speaker 1: a camera which is a mid size smaller midsized vehicle

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Speaker 1: when the trend is really really moving towards light trucks.

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Speaker 1: The story of Team was was light trucks, and and

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Speaker 1: light trucks happens to be an uh more of an

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Speaker 1: industry slang. What it's really most popular right now is

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Speaker 1: car based SUVs or c uvs um like our rav

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Speaker 1: and like our our Highlander. However, the sedan market is

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Speaker 1: still an extremely large and important part of the business.

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Speaker 1: How big of a part of business is it for you?

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Speaker 1: It's about well, the industry itself, it's about two point

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Speaker 1: five million units, and Camray is the number one vehicle

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Speaker 1: not only in that segment, but it's the number one

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Speaker 1: selling pass in your car in the US for fifteen

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Speaker 1: consecutive years. What about for Toyota, it is by far

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Speaker 1: our number one volume vehicle and we have a four

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Speaker 1: O FO. We did three thousand last year, and so

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Speaker 1: we're looking at similar sales going into One of the

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Speaker 1: things I think it's going to be interesting to watch

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Speaker 1: because we've seen this over the years, is the midsize

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Speaker 1: sedan segment hasn't had a lot of innovative product, new

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Speaker 1: product coming in. So this year we're we're launching the

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Speaker 1: best camera that we've ever built, full of new technology.

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Speaker 1: This vehicle is so sophisticated that even if a pedestrian

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Speaker 1: walks in front of the vehicle, it will actually apply

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Speaker 1: the brakes and assist the driver of steering around it.

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Speaker 1: So it's automatic breaking, which is available in the market,

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Speaker 1: but by we've developed or that it can actually uh

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Speaker 1: sense soft tissue and help avoid avoid accidents. UH. There's

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Speaker 1: rumors that perhaps there's going to be a competitors will

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Speaker 1: bring be bringing their cars to market later this fall.

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Speaker 1: So we have seen in the past in small pickup trucks,

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Speaker 1: We've seen it in in subcompact cars. When new vehicles

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Speaker 1: come with new styling, new design, new technology, UM, there's

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Speaker 1: life comes back into that segment. So we we think

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Speaker 1: that the UH the segment that did decline last year,

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Speaker 1: will will plateau and who knows, perhaps even show little

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Speaker 1: growth next year. Bob where up rating? It seems at

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Speaker 1: least in the automobile industry or any big manufacturer in

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Speaker 1: a different world. Come January, there will be a new president.

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Speaker 1: Donald Trump has certainly taken to the Twitter sphere in

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Speaker 1: order to voice his particular perspective on where automobiles are made.

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Speaker 1: Do you feel, as an auto executive that you are

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Speaker 1: living in a different time than you were, let's say,

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Speaker 1: twelve months ago. Well, my quick answer to that, pen

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Speaker 1: would be, it's a little bit early to tell. But

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Speaker 1: the global the the auto industry is very much a

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Speaker 1: global industry. We have fifty three plants that are currently

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Speaker 1: operational in UM countries around the world. Ten of those

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Speaker 1: plants are here in the US, but the supply chain

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Speaker 1: is very very much global. The camera that we were

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Speaker 1: talking about earlier, UM cars dot Com has now for

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Speaker 1: four years named that the most American car consumers can buy.

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Speaker 1: And what they calculate that on is where are the

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Speaker 1: parts sourced? Whereas the labor source and by their calculation

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Speaker 1: of the camera is American sourced. The reverse of that, though,

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Speaker 1: is we still because of the global supply network, uh

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Speaker 1: do source of a camera across the world. So it's

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Speaker 1: very much a global industry. The supply chains are very long,

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Speaker 1: and so we're working. We look forward to working with

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Speaker 1: the new administration to get them to understand the complexities

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Speaker 1: of our industry. What's your number one fear for this

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Speaker 1: year as far as political interference with the auto industry,

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Speaker 1: I wouldn't characterize it as a as a fear. We

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Speaker 1: we are very confident this year. The economy is very good.

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Speaker 1: There was seventeen point five million cars sold in the

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Speaker 1: US last year. We believe it's gonna be lower in ten,

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Speaker 1: but we're forecasting and market between seventeen seventeen point two.

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Speaker 1: Uh So the economy, he's very robust right now. We think, uh,

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Speaker 1: we think it's going to be another good year. That

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Speaker 1: was Bob Carter, president of Toyota North America, speaking with

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Speaker 1: US yesterday about the updated Camray, as well as the

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Speaker 1: outlook for sedans and the potential uh for political interference

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Speaker 1: or perhaps lack thereof. There we are hearing is going

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Speaker 1: on right now at Capital Hail. Jeff Sessions is looking

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Speaker 1: to be confirmed as Attorney General, and John Kelly president

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Speaker 1: elect Trump's pick for Homeland Security. I want to bring

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Speaker 1: in Nancy Agnanovitch. She's a Capital Hill reporter for Bloomberg

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Speaker 1: b an A in Washington, d c UM, and I

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Speaker 1: wanted to get your sense of so far what we've learned.

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Speaker 1: I believe Jeff Sessions is still being grilled. Well, this

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Speaker 1: is only the beginning of his two day hearing. As

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Speaker 1: ss UM, they'll be meeting at Judiciary for two days

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Speaker 1: in a row to look at his qualifications. I think

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Speaker 1: he's one of the people who's already got all of

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Speaker 1: his financial information in and has complied with those requirements,

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Speaker 1: and so he's covered there in terms of fulfilling those requirements.

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Speaker 1: But I guess there are concerns about his very conservative

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Speaker 1: philosophy concerning immigration and other issues, and so there'll be

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Speaker 1: a lot of questions there. And so I was gonna say,

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Speaker 1: could you just outline for us how many how many

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Speaker 1: hearings are going to be held today and then tomorrow

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Speaker 1: and then on Thursday, just we have an idea of

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Speaker 1: how packed the schedule is this week. All overall, we're

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Speaker 1: looking from twelve to fifteen depending on how you calculated.

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Speaker 1: But today we have those three hearings, including too that

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Speaker 1: you mentioned. Then tomorrow Wednesday, there were six that were scheduled.

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Speaker 1: But Senator Schumer, the Minority leader, just a little bit

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Speaker 1: ago this morning, I announced that Eastern negotiated a plan

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Speaker 1: with joy Pretty Leader McConnell to reduce that down to

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Speaker 1: three on Wednesday and to push some of those off

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Speaker 1: till Thursday and next week. And then on Thursday we

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Speaker 1: have another five to six hearings. So there are a

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Speaker 1: lot and a lot of these deal with President elect

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Speaker 1: Trump's national security team, and McConnell wants very much to

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Speaker 1: get six to seven of the cabinet picks or national

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Speaker 1: security team members confirmed by inauguration day in order for

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Speaker 1: him to have that in place when he goes into

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Speaker 1: the White House. Nancy, is this typical, this type of

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Speaker 1: packed confirmation schedule, Well, Senator McConnell has said repeatedly that

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Speaker 1: on the very first day of the Obama administration they

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Speaker 1: confirmed seven people. But I think what Democrats are saying

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Speaker 1: is those people um already had their FBI tabinet I'm sorry,

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Speaker 1: FBI background checks done, their financial disclosure, the disclosure forms,

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Speaker 1: the in and all these other requirements, and a lot

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Speaker 1: of people who Trump as proposed to nominate haven't flied

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Speaker 1: without so far, and for that's one of the reasons

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Speaker 1: why Democrats want to slow this process down. And then

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Speaker 1: they also were saying that, unlike in the Obama administration,

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Speaker 1: we're looking at many billionaires or otherwise very very wealthy

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Speaker 1: people who have very complicated financial holdings that require more examination.

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Speaker 1: And also many of these people have never served in

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Speaker 1: government before, especially not at this kind of level. Rex Chellison,

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Speaker 1: former chief executive of ex On Mobile, slated to be

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Speaker 1: the nation's top diplomat. How contentious or how confrontational do

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Speaker 1: you believe those hearings will be? Well. Democrats will obviously

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Speaker 1: raise a lot of questions about his relationship with Vladimir

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Speaker 1: Putin and his feelings with Russia over the years, And

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Speaker 1: I guess the primary question is whether he can put

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Speaker 1: aside maybe his friendship with Putin to look out for

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Speaker 1: the interests of the United States as this country's top diplomat.

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Speaker 1: So I think there will be some contentiousness there. So, Nancy,

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Speaker 1: from your perspective, I mean, so far, what is the

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Speaker 1: tenor of the questions been, Like, I mean, is it

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Speaker 1: mostly just political grandstanding or are are the questions, really

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Speaker 1: probing and substantive and trying to get to some kind

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Speaker 1: of comfort with who we have. There's always political grandstanding,

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Speaker 1: but I think there are legitimate concerns about UM some

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Speaker 1: of these nominees financial holdings and trying to get a

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Speaker 1: look at that in order to identify potential conflicts of interest, UM,

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Speaker 1: when a person is in charge of a department UM

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Speaker 1: with billions of dollars in funding going out to different industries,

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Speaker 1: and you can't really look for potential conflicts of interest

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Speaker 1: if you haven't seen the paperwork yet. So I think

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Speaker 1: they're trying to slow it down, and I think Democrats

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Speaker 1: know that it's very unlikely that they can derail many

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Speaker 1: of these nominees, but they want to have a chance

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Speaker 1: to do what they call the advice and consent role

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Speaker 1: that the Senate has traditionally done before they let them advance,

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Speaker 1: before they're actually put to a vote on the Senate floor.

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Speaker 1: Thank you very much for joining us. Nancy Ognanovich, Capitol

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Speaker 1: Hill reporter for Bloomberg b NA, joining us from Washington,

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Speaker 1: d C. We're broadcasting from the North American International Auto Show,

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Speaker 1: and Lisa Brahmins, do you know that Cadillac is going

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Speaker 1: to launch a fifteen hundred dollar a month luxury car

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Speaker 1: subscription service. Do you get a new car every months?

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Speaker 1: Coming in the mouth, Well, you might be able to,

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Speaker 1: particularly since we're gonna be talking now with the president

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Speaker 1: of Cadillac. Johann didn't meet Mason. Thank you very much

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Speaker 1: for being in here. Tell us about this new subscription service.

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Speaker 1: What's it aimed at, and why are you Why are

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Speaker 1: you launching this? It's called Book by Cadillac, and really

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Speaker 1: is a response to what is a very dynamic environment

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Speaker 1: within which the order industry is doing business today. If

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Speaker 1: we look at the emergence of the mega cities around

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Speaker 1: the world. UM, these cities were initially enabled by the

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Speaker 1: principle of individual mobility, but the principle has become so

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Speaker 1: successful that it's resulted in congestion and noise and pollution

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Speaker 1: and all the things that are big obstacles to vehicle ownership. UM.

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Speaker 1: One response to that is the emergence of right shoting

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Speaker 1: service is like lift and Ubo, and those certainly will

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Speaker 1: probably containue to gain traction. And living in New York

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Speaker 1: I can tell you that we face significant barriers to

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Speaker 1: operating vehicles so we are still diplomatic. I mean, honestly,

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Speaker 1: I've driven down a one way street with three bike

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Speaker 1: riders coming at me and you know, another person walking

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Speaker 1: out in front. This is this is what you're talking

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Speaker 1: about with challenging. So it's it's it's like one benefit

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Speaker 1: of living in the city. I experienced it first then.

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Speaker 1: And what we want to do is to make sure

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Speaker 1: that we are part of the world that does the

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Speaker 1: disruption and we don't end up being disrupted. And so

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Speaker 1: we need to respond to a changing world. And we

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Speaker 1: know that for affluent customers, flexibility convenient time has value,

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Speaker 1: and we thought, why should we follow only the conventional

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Speaker 1: model of business ownership where you're right out of check

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Speaker 1: by the car pocket in your garage for of the time,

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Speaker 1: and that's kind of it. Surely there must be an

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Speaker 1: opportunity to respond with greater flexibility. So it's basically like

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Speaker 1: a new version of having a personal driver. Not quite no,

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Speaker 1: you will continue to drive the car yourself. But of

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Speaker 1: course this is a precursor to full autonomous driving capability,

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Speaker 1: in which gets that's no longer a point is that

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Speaker 1: the point of this, though partly up to it's it's

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Speaker 1: basically training well to have call, have cars on call,

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Speaker 1: rather than having ownership and being able to have that

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Speaker 1: car brought to them and for now they'll drive it,

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Speaker 1: but maybe in three years they were but precisely right.

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Speaker 1: So it's a setup for the future that we see

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Speaker 1: a little bit beyond just the the the definition of

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Speaker 1: the product substance today and what this really book means

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Speaker 1: is that you buy into a Cadillac experience, a luxury

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Speaker 1: experience that's fully immersive. It's not tied to any individual vehicle.

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Speaker 1: It gives you flexibility to change your car eighteen times

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Speaker 1: a year, so more than once a month. And if

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Speaker 1: today you feel like a sports car, tomorrow it's a

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Speaker 1: night out of the town and a luxury automobile. And

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Speaker 1: then you want to go skiing, you need a suv.

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Speaker 1: You can have all of those. And as we expand

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Speaker 1: the program, we're starting off in New York, but conceivably,

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Speaker 1: let us say you go to l A for a

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Speaker 1: week and you need a car there, Well, you take

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Speaker 1: your book by Cadillac in l A. You know, to

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Speaker 1: rent a car anymore. So it's about convenience, about flexibility.

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Speaker 1: All maintenance insurance is taken care of. They always have

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Speaker 1: a car that's clean and fully gassed, a lover to

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Speaker 1: your doorstep, and all of that convenience and flexibility we

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Speaker 1: think has value for affluent consumers. Now you have experienced

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Speaker 1: at Infinity as well as Audi, and I'm wondering what

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Speaker 1: you are bringing Cadillac, particularly to the dealership network, because

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Speaker 1: there's a big effort on the part of Cadillac to

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Speaker 1: really upgrade and streamline and stabilize the dealership. The real

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Speaker 1: thing for us is we are on a long term journey.

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Speaker 1: I would have to say to restore Cadillac what we

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Speaker 1: kind of loosely call to the pinnacle of premium, back

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Speaker 1: to that world where it occupied this position as the

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Speaker 1: unquestioned standard for the world in Project It's called Project

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Speaker 1: Pinnacle for that reason. And while we are working very

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Speaker 1: hard on expanding the product portfolio and really creating top

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Speaker 1: technology cars with great craftsmanship and and and great technology,

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Speaker 1: that's only part of the question that needs to be answered.

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Speaker 1: We also need to look downstream at the overall ownership experience.

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Speaker 1: And yeah, dealer network plays a crucial role because it's

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Speaker 1: the environment within which the customer engages the brand and

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Speaker 1: the quality of our dealer network also needs to reflect

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Speaker 1: our premium aspirations. And to be clear, we have some

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Speaker 1: really outstanding dealers that do an herculean task in terms

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Speaker 1: of elevating the overall brand experience. Reality for us, though,

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Speaker 1: is we also a very large dealer network and the

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Speaker 1: variability in the overall delivery of that experience is something

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Speaker 1: that we are trying to get into a narrower distribution,

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Speaker 1: and the Project Pinnicle is designed to set around brand

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Speaker 1: standards for our dealers in terms of that customer experience,

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Speaker 1: which we then reward with ever increasing financial bonuses as

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Speaker 1: they reach increasing compliance. Johann Denaithan, thank you so much

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Speaker 1: for being with us. It's truly fascinating development. The idea

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Speaker 1: of trying to create a precursor to what the inevitable.

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Speaker 1: The Johann Denaisan, president of Cadillac, talking about the new

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Speaker 1: car subscription service in New York City, which may really

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Speaker 1: be the stepping stone to the new version of auto

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Speaker 1: lack of ownership, which a voids the bicycles when you drive.

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Speaker 1: I'm trying. My dad tells me, this is Bloomberg. We're

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Speaker 1: broadcasting from them North American International Auto Show Earlier we

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Speaker 1: got a chance to sit down with the Joe Henrix.

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Speaker 1: He is the president of the Americas for Ford. Talked

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Speaker 1: about the new F one fift pick up, the electrified

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Speaker 1: vehicle lineup at Ford, plus investments in new jobs in Michigan,

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Speaker 1: and the Donald Trump effect. The first question we wanted

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Speaker 1: to know was what the importances of the F series

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Speaker 1: is to Ford. You know, when you when you start

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Speaker 1: with our business in North America, it starts with F series,

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Speaker 1: or of our volume in North America's our F series trucks.

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Speaker 1: FIR trucks have been the best selling vehicle in the

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Speaker 1: United States for thirty five years consecutively, the best selling

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Speaker 1: trucks for forty years. So it's a big part of

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Speaker 1: our business. Obviously, we're expanding beyond that into all kinds

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Speaker 1: of other parts of the business, but it's it's safe

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Speaker 1: to say the crown jewels of Ford Motor Company in

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Speaker 1: North America are the F series trucks. And of course

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Speaker 1: we got to announce the two thousand eighteen Molly R

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Speaker 1: F one fifties getting some upgrades and freshening, which is

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Speaker 1: all he's very exciting to talk about. Whenever we talk

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Speaker 1: about car companies. At this point in the political trajectory.

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Speaker 1: We have to uh talk about President elect Donald Trump

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Speaker 1: less than a week ago forward canceled plans for one

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Speaker 1: point six a billion dollar planned in Mexico. You have

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Speaker 1: to think it has to do somewhat with President elect

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Speaker 1: Trump's rhetoric. Will this cancelation material effect the production of

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Speaker 1: any particular vehicles and do you expect less of production

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Speaker 1: of certain types of vehicles because of the political pressure

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Speaker 1: right now? Yeah, So you know, it's a hot topic

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Speaker 1: at the moment. To be sure. I mean, we took

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Speaker 1: a look at the end of last year where small

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Speaker 1: car sales were going in the US and and did

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Speaker 1: some updated projections whether they're going to be in the future,

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Speaker 1: and we reached a point where we felt comfortable enough

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Speaker 1: that we could fit the focus volume that we forecast

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Speaker 1: for two thousand and eight, nineteen twenty and beyond into

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Speaker 1: an existing manufacturing capacity plant we have in Hermcile, Mexico.

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Speaker 1: That was the big driver decision. Uh. And because in

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Speaker 1: our in our business capacities everything, it's such a billion

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Speaker 1: dollar plants are a big deal. Capacitization is everything, and

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Speaker 1: you when you can get new capacity into existing plants

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Speaker 1: a lot cheaper than building a new plant, even though

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Speaker 1: we were pretty far along on starting the new plant.

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Speaker 1: The cancelation of that, the movement of focus into her

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Speaker 1: mas SEO and then investing some of that money into

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Speaker 1: an expansion of our plant here in Michigan to produce

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Speaker 1: two new products. That say, it's about five million dollars

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Speaker 1: of capital UM and that was the big driver read decision.

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Speaker 1: I know the timing and us of his um leads

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Speaker 1: to a lot of other questions, but but you know,

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Speaker 1: the ability to be able to forecast lower small car sales,

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Speaker 1: so that's what's been happening in the US really was

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Speaker 1: the main driver. So do you think that Ford will

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Speaker 1: make any changes to its future plans as a result

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Speaker 1: of the current political climate and sort of the focus

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Speaker 1: on American produced goods? You know, well, we are taking

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Speaker 1: into account what we expect to be some pro growth

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Speaker 1: initiatives by the Trump administration, including some taxation policy discussions,

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Speaker 1: hopefully some improvements in the competitiveness of the US economy

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Speaker 1: when it comes to corporate tax rates and some other

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Speaker 1: things regulatory and the like. So if he never say

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Speaker 1: one factor really drives a decision, there's in our business,

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Speaker 1: so many things get taken into account when you're making

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Speaker 1: investment decide of what we make. But we are taking

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Speaker 1: into account some expected changes into the into the you know,

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Speaker 1: regulatory and economic cycle in the US. You asked the

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Speaker 1: question about production, we're not. We're still moving focus production

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Speaker 1: to Mexico. We won't, it won't be any production. Kind

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Speaker 1: of mythsed by all of this. It's just making sure

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Speaker 1: that we spend the right amount of mind to do it.

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Speaker 1: Give our listeners an idea Ford's business in North America

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Speaker 1: and Ford's business overseas. It's may surprise people. Yeah, well,

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Speaker 1: in North America we're the second largest manufacturer and seller

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Speaker 1: of vehicles. We actually produce more vehicles in the United

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Speaker 1: States and anybody else. We employ more workers and manufacturing

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Speaker 1: workers in the US and anybody else. We're number one

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Speaker 1: in Canada, we're second in the U S and sales,

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Speaker 1: number one in Canada for sales, and we're you know,

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Speaker 1: fifth or six in Mexico, depending on what time of

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Speaker 1: the year we are. And our business in total of

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Speaker 1: North America is over three million units. Ford globally has

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Speaker 1: a strong presence of course in Europe, a strong presence

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Speaker 1: now in China. We're now in the top six, five

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Speaker 1: or six brands in China. UM, we have a strong

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Speaker 1: presence in Brazil and South America. Were third or fourth

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Speaker 1: or fifth, depending on what market. Second in Argentina, but

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Speaker 1: we're depending on what market you're looking at, and when

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Speaker 1: you look at our business, the majority of our revenue

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Speaker 1: comes to North America. The majority of our profits come

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Speaker 1: from North America, but we certainly have a strong presence

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Speaker 1: all around the Roman what's the weakest market right now, Well,

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Speaker 1: it's harder to find weakest market. The probably the most

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Speaker 1: challenged market would be Brazil, given the economic and political

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Speaker 1: challenges that the country faces. The auto industry in Brazil

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Speaker 1: has collapsed about half were it was a few years ago.

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Speaker 1: That puts a lot of pressure on our business. Also

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Speaker 1: the uncertainty and the political challenges that they've had. We've

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Speaker 1: seen some progress lately the president Tamarins and things that

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Speaker 1: have happened, but Brazil is certainly challenged and the Indian

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Speaker 1: market India has not grown to the level people thought

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Speaker 1: I was going to grow and there's a lot of

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Speaker 1: pressure on that business as well. That was Joe Hendrix.

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Speaker 1: He is the president of the Americas for Ford. Thanks

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Speaker 1: for listening to the Bloomberg P and L podcast. You

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Speaker 1: can subscribe and listen to interviews at iTunes, SoundCloud, or

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Speaker 1: whatever podcast platform you prefer. I'm pim Fox. I'm out

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Speaker 1: there on Twitter at pim Fox. I'm out there on

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Speaker 1: Twitter Ata Abramo. It's one before the podcast. You can

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Speaker 1: always catch us worldwide on Bloomberg Radio m