Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
Speaker 1: bring you the most important, noteworthy, and useful interviews for
Speaker 1: you and your money, whether at the grocery store or
Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes,
Speaker 1: SoundCloud and at Bloomberg dot com. Toyota Motor Company has
Speaker 1: said that it will invest ten billion dollars in the
Speaker 1: United States over the next five years, and Bob Carter
Speaker 1: is the president of Toyota North America. He joined us
Speaker 1: for a discussion of the all new, updated camera, the
Speaker 1: outlook for sedans, and also being positioned for the presidential transition.
Speaker 1: The new camera is a vehicle that we're very proud of.
Speaker 1: This is the eighth generation since we introduced it originally
Speaker 1: back in three but this is a this is a
Speaker 1: unique camera for us. We've done this entire car completely.
Speaker 1: It has a new platform, new power trains, new body,
Speaker 1: new interior, and all the new technology that that that
Speaker 1: we have developed over the years is all comes together
Speaker 1: in this eighth generation car. Uh really proud of it.
Speaker 1: We've done two executions of the camera. There's one that's
Speaker 1: very sporty and there's one that's very luxurious. So depending
Speaker 1: on what the consumers preferences. And we're announcing it here
Speaker 1: for the first time globally in in uh in the
Speaker 1: Detroit Auto Show, but it will be available at our
Speaker 1: dealerships later this summer. So why is Toyota focusing on
Speaker 1: a camera which is a mid size smaller midsized vehicle
Speaker 1: when the trend is really really moving towards light trucks.
Speaker 1: The story of Team was was light trucks, and and
Speaker 1: light trucks happens to be an uh more of an
Speaker 1: industry slang. What it's really most popular right now is
Speaker 1: car based SUVs or c uvs um like our rav
Speaker 1: and like our our Highlander. However, the sedan market is
Speaker 1: still an extremely large and important part of the business.
Speaker 1: How big of a part of business is it for you?
Speaker 1: It's about well, the industry itself, it's about two point
Speaker 1: five million units, and Camray is the number one vehicle
Speaker 1: not only in that segment, but it's the number one
Speaker 1: selling pass in your car in the US for fifteen
Speaker 1: consecutive years. What about for Toyota, it is by far
Speaker 1: our number one volume vehicle and we have a four
Speaker 1: O FO. We did three thousand last year, and so
Speaker 1: we're looking at similar sales going into One of the
Speaker 1: things I think it's going to be interesting to watch
Speaker 1: because we've seen this over the years, is the midsize
Speaker 1: sedan segment hasn't had a lot of innovative product, new
Speaker 1: product coming in. So this year we're we're launching the
Speaker 1: best camera that we've ever built, full of new technology.
Speaker 1: This vehicle is so sophisticated that even if a pedestrian
Speaker 1: walks in front of the vehicle, it will actually apply
Speaker 1: the brakes and assist the driver of steering around it.
Speaker 1: So it's automatic breaking, which is available in the market,
Speaker 1: but by we've developed or that it can actually uh
Speaker 1: sense soft tissue and help avoid avoid accidents. UH. There's
Speaker 1: rumors that perhaps there's going to be a competitors will
Speaker 1: bring be bringing their cars to market later this fall.
Speaker 1: So we have seen in the past in small pickup trucks,
Speaker 1: We've seen it in in subcompact cars. When new vehicles
Speaker 1: come with new styling, new design, new technology, UM, there's
Speaker 1: life comes back into that segment. So we we think
Speaker 1: that the UH the segment that did decline last year,
Speaker 1: will will plateau and who knows, perhaps even show little
Speaker 1: growth next year. Bob where up rating? It seems at
Speaker 1: least in the automobile industry or any big manufacturer in
Speaker 1: a different world. Come January, there will be a new president.
Speaker 1: Donald Trump has certainly taken to the Twitter sphere in
Speaker 1: order to voice his particular perspective on where automobiles are made.
Speaker 1: Do you feel, as an auto executive that you are
Speaker 1: living in a different time than you were, let's say,
Speaker 1: twelve months ago. Well, my quick answer to that, pen
Speaker 1: would be, it's a little bit early to tell. But
Speaker 1: the global the the auto industry is very much a
Speaker 1: global industry. We have fifty three plants that are currently
Speaker 1: operational in UM countries around the world. Ten of those
Speaker 1: plants are here in the US, but the supply chain
Speaker 1: is very very much global. The camera that we were
Speaker 1: talking about earlier, UM cars dot Com has now for
Speaker 1: four years named that the most American car consumers can buy.
Speaker 1: And what they calculate that on is where are the
Speaker 1: parts sourced? Whereas the labor source and by their calculation
Speaker 1: of the camera is American sourced. The reverse of that, though,
Speaker 1: is we still because of the global supply network, uh
Speaker 1: do source of a camera across the world. So it's
Speaker 1: very much a global industry. The supply chains are very long,
Speaker 1: and so we're working. We look forward to working with
Speaker 1: the new administration to get them to understand the complexities
Speaker 1: of our industry. What's your number one fear for this
Speaker 1: year as far as political interference with the auto industry,
Speaker 1: I wouldn't characterize it as a as a fear. We
Speaker 1: we are very confident this year. The economy is very good.
Speaker 1: There was seventeen point five million cars sold in the
Speaker 1: US last year. We believe it's gonna be lower in ten,
Speaker 1: but we're forecasting and market between seventeen seventeen point two.
Speaker 1: Uh So the economy, he's very robust right now. We think, uh,
Speaker 1: we think it's going to be another good year. That
Speaker 1: was Bob Carter, president of Toyota North America, speaking with
Speaker 1: US yesterday about the updated Camray, as well as the
Speaker 1: outlook for sedans and the potential uh for political interference
Speaker 1: or perhaps lack thereof. There we are hearing is going
Speaker 1: on right now at Capital Hail. Jeff Sessions is looking
Speaker 1: to be confirmed as Attorney General, and John Kelly president
Speaker 1: elect Trump's pick for Homeland Security. I want to bring
Speaker 1: in Nancy Agnanovitch. She's a Capital Hill reporter for Bloomberg
Speaker 1: b an A in Washington, d c UM, and I
Speaker 1: wanted to get your sense of so far what we've learned.
Speaker 1: I believe Jeff Sessions is still being grilled. Well, this
Speaker 1: is only the beginning of his two day hearing. As
Speaker 1: ss UM, they'll be meeting at Judiciary for two days
Speaker 1: in a row to look at his qualifications. I think
Speaker 1: he's one of the people who's already got all of
Speaker 1: his financial information in and has complied with those requirements,
Speaker 1: and so he's covered there in terms of fulfilling those requirements.
Speaker 1: But I guess there are concerns about his very conservative
Speaker 1: philosophy concerning immigration and other issues, and so there'll be
Speaker 1: a lot of questions there. And so I was gonna say,
Speaker 1: could you just outline for us how many how many
Speaker 1: hearings are going to be held today and then tomorrow
Speaker 1: and then on Thursday, just we have an idea of
Speaker 1: how packed the schedule is this week. All overall, we're
Speaker 1: looking from twelve to fifteen depending on how you calculated.
Speaker 1: But today we have those three hearings, including too that
Speaker 1: you mentioned. Then tomorrow Wednesday, there were six that were scheduled.
Speaker 1: But Senator Schumer, the Minority leader, just a little bit
Speaker 1: ago this morning, I announced that Eastern negotiated a plan
Speaker 1: with joy Pretty Leader McConnell to reduce that down to
Speaker 1: three on Wednesday and to push some of those off
Speaker 1: till Thursday and next week. And then on Thursday we
Speaker 1: have another five to six hearings. So there are a
Speaker 1: lot and a lot of these deal with President elect
Speaker 1: Trump's national security team, and McConnell wants very much to
Speaker 1: get six to seven of the cabinet picks or national
Speaker 1: security team members confirmed by inauguration day in order for
Speaker 1: him to have that in place when he goes into
Speaker 1: the White House. Nancy, is this typical, this type of
Speaker 1: packed confirmation schedule, Well, Senator McConnell has said repeatedly that
Speaker 1: on the very first day of the Obama administration they
Speaker 1: confirmed seven people. But I think what Democrats are saying
Speaker 1: is those people um already had their FBI tabinet I'm sorry,
Speaker 1: FBI background checks done, their financial disclosure, the disclosure forms,
Speaker 1: the in and all these other requirements, and a lot
Speaker 1: of people who Trump as proposed to nominate haven't flied
Speaker 1: without so far, and for that's one of the reasons
Speaker 1: why Democrats want to slow this process down. And then
Speaker 1: they also were saying that, unlike in the Obama administration,
Speaker 1: we're looking at many billionaires or otherwise very very wealthy
Speaker 1: people who have very complicated financial holdings that require more examination.
Speaker 1: And also many of these people have never served in
Speaker 1: government before, especially not at this kind of level. Rex Chellison,
Speaker 1: former chief executive of ex On Mobile, slated to be
Speaker 1: the nation's top diplomat. How contentious or how confrontational do
Speaker 1: you believe those hearings will be? Well. Democrats will obviously
Speaker 1: raise a lot of questions about his relationship with Vladimir
Speaker 1: Putin and his feelings with Russia over the years, And
Speaker 1: I guess the primary question is whether he can put
Speaker 1: aside maybe his friendship with Putin to look out for
Speaker 1: the interests of the United States as this country's top diplomat.
Speaker 1: So I think there will be some contentiousness there. So, Nancy,
Speaker 1: from your perspective, I mean, so far, what is the
Speaker 1: tenor of the questions been, Like, I mean, is it
Speaker 1: mostly just political grandstanding or are are the questions, really
Speaker 1: probing and substantive and trying to get to some kind
Speaker 1: of comfort with who we have. There's always political grandstanding,
Speaker 1: but I think there are legitimate concerns about UM some
Speaker 1: of these nominees financial holdings and trying to get a
Speaker 1: look at that in order to identify potential conflicts of interest, UM,
Speaker 1: when a person is in charge of a department UM
Speaker 1: with billions of dollars in funding going out to different industries,
Speaker 1: and you can't really look for potential conflicts of interest
Speaker 1: if you haven't seen the paperwork yet. So I think
Speaker 1: they're trying to slow it down, and I think Democrats
Speaker 1: know that it's very unlikely that they can derail many
Speaker 1: of these nominees, but they want to have a chance
Speaker 1: to do what they call the advice and consent role
Speaker 1: that the Senate has traditionally done before they let them advance,
Speaker 1: before they're actually put to a vote on the Senate floor.
Speaker 1: Thank you very much for joining us. Nancy Ognanovich, Capitol
Speaker 1: Hill reporter for Bloomberg b NA, joining us from Washington,
Speaker 1: d C. We're broadcasting from the North American International Auto Show,
Speaker 1: and Lisa Brahmins, do you know that Cadillac is going
Speaker 1: to launch a fifteen hundred dollar a month luxury car
Speaker 1: subscription service. Do you get a new car every months?
Speaker 1: Coming in the mouth, Well, you might be able to,
Speaker 1: particularly since we're gonna be talking now with the president
Speaker 1: of Cadillac. Johann didn't meet Mason. Thank you very much
Speaker 1: for being in here. Tell us about this new subscription service.
Speaker 1: What's it aimed at, and why are you Why are
Speaker 1: you launching this? It's called Book by Cadillac, and really
Speaker 1: is a response to what is a very dynamic environment
Speaker 1: within which the order industry is doing business today. If
Speaker 1: we look at the emergence of the mega cities around
Speaker 1: the world. UM, these cities were initially enabled by the
Speaker 1: principle of individual mobility, but the principle has become so
Speaker 1: successful that it's resulted in congestion and noise and pollution
Speaker 1: and all the things that are big obstacles to vehicle ownership. UM.
Speaker 1: One response to that is the emergence of right shoting
Speaker 1: service is like lift and Ubo, and those certainly will
Speaker 1: probably containue to gain traction. And living in New York
Speaker 1: I can tell you that we face significant barriers to
Speaker 1: operating vehicles so we are still diplomatic. I mean, honestly,
Speaker 1: I've driven down a one way street with three bike
Speaker 1: riders coming at me and you know, another person walking
Speaker 1: out in front. This is this is what you're talking
Speaker 1: about with challenging. So it's it's it's like one benefit
Speaker 1: of living in the city. I experienced it first then.
Speaker 1: And what we want to do is to make sure
Speaker 1: that we are part of the world that does the
Speaker 1: disruption and we don't end up being disrupted. And so
Speaker 1: we need to respond to a changing world. And we
Speaker 1: know that for affluent customers, flexibility convenient time has value,
Speaker 1: and we thought, why should we follow only the conventional
Speaker 1: model of business ownership where you're right out of check
Speaker 1: by the car pocket in your garage for of the time,
Speaker 1: and that's kind of it. Surely there must be an
Speaker 1: opportunity to respond with greater flexibility. So it's basically like
Speaker 1: a new version of having a personal driver. Not quite no,
Speaker 1: you will continue to drive the car yourself. But of
Speaker 1: course this is a precursor to full autonomous driving capability,
Speaker 1: in which gets that's no longer a point is that
Speaker 1: the point of this, though partly up to it's it's
Speaker 1: basically training well to have call, have cars on call,
Speaker 1: rather than having ownership and being able to have that
Speaker 1: car brought to them and for now they'll drive it,
Speaker 1: but maybe in three years they were but precisely right.
Speaker 1: So it's a setup for the future that we see
Speaker 1: a little bit beyond just the the the definition of
Speaker 1: the product substance today and what this really book means
Speaker 1: is that you buy into a Cadillac experience, a luxury
Speaker 1: experience that's fully immersive. It's not tied to any individual vehicle.
Speaker 1: It gives you flexibility to change your car eighteen times
Speaker 1: a year, so more than once a month. And if
Speaker 1: today you feel like a sports car, tomorrow it's a
Speaker 1: night out of the town and a luxury automobile. And
Speaker 1: then you want to go skiing, you need a suv.
Speaker 1: You can have all of those. And as we expand
Speaker 1: the program, we're starting off in New York, but conceivably,
Speaker 1: let us say you go to l A for a
Speaker 1: week and you need a car there, Well, you take
Speaker 1: your book by Cadillac in l A. You know, to
Speaker 1: rent a car anymore. So it's about convenience, about flexibility.
Speaker 1: All maintenance insurance is taken care of. They always have
Speaker 1: a car that's clean and fully gassed, a lover to
Speaker 1: your doorstep, and all of that convenience and flexibility we
Speaker 1: think has value for affluent consumers. Now you have experienced
Speaker 1: at Infinity as well as Audi, and I'm wondering what
Speaker 1: you are bringing Cadillac, particularly to the dealership network, because
Speaker 1: there's a big effort on the part of Cadillac to
Speaker 1: really upgrade and streamline and stabilize the dealership. The real
Speaker 1: thing for us is we are on a long term journey.
Speaker 1: I would have to say to restore Cadillac what we
Speaker 1: kind of loosely call to the pinnacle of premium, back
Speaker 1: to that world where it occupied this position as the
Speaker 1: unquestioned standard for the world in Project It's called Project
Speaker 1: Pinnacle for that reason. And while we are working very
Speaker 1: hard on expanding the product portfolio and really creating top
Speaker 1: technology cars with great craftsmanship and and and great technology,
Speaker 1: that's only part of the question that needs to be answered.
Speaker 1: We also need to look downstream at the overall ownership experience.
Speaker 1: And yeah, dealer network plays a crucial role because it's
Speaker 1: the environment within which the customer engages the brand and
Speaker 1: the quality of our dealer network also needs to reflect
Speaker 1: our premium aspirations. And to be clear, we have some
Speaker 1: really outstanding dealers that do an herculean task in terms
Speaker 1: of elevating the overall brand experience. Reality for us, though,
Speaker 1: is we also a very large dealer network and the
Speaker 1: variability in the overall delivery of that experience is something
Speaker 1: that we are trying to get into a narrower distribution,
Speaker 1: and the Project Pinnicle is designed to set around brand
Speaker 1: standards for our dealers in terms of that customer experience,
Speaker 1: which we then reward with ever increasing financial bonuses as
Speaker 1: they reach increasing compliance. Johann Denaithan, thank you so much
Speaker 1: for being with us. It's truly fascinating development. The idea
Speaker 1: of trying to create a precursor to what the inevitable.
Speaker 1: The Johann Denaisan, president of Cadillac, talking about the new
Speaker 1: car subscription service in New York City, which may really
Speaker 1: be the stepping stone to the new version of auto
Speaker 1: lack of ownership, which a voids the bicycles when you drive.
Speaker 1: I'm trying. My dad tells me, this is Bloomberg. We're
Speaker 1: broadcasting from them North American International Auto Show Earlier we
Speaker 1: got a chance to sit down with the Joe Henrix.
Speaker 1: He is the president of the Americas for Ford. Talked
Speaker 1: about the new F one fift pick up, the electrified
Speaker 1: vehicle lineup at Ford, plus investments in new jobs in Michigan,
Speaker 1: and the Donald Trump effect. The first question we wanted
Speaker 1: to know was what the importances of the F series
Speaker 1: is to Ford. You know, when you when you start
Speaker 1: with our business in North America, it starts with F series,
Speaker 1: or of our volume in North America's our F series trucks.
Speaker 1: FIR trucks have been the best selling vehicle in the
Speaker 1: United States for thirty five years consecutively, the best selling
Speaker 1: trucks for forty years. So it's a big part of
Speaker 1: our business. Obviously, we're expanding beyond that into all kinds
Speaker 1: of other parts of the business, but it's it's safe
Speaker 1: to say the crown jewels of Ford Motor Company in
Speaker 1: North America are the F series trucks. And of course
Speaker 1: we got to announce the two thousand eighteen Molly R
Speaker 1: F one fifties getting some upgrades and freshening, which is
Speaker 1: all he's very exciting to talk about. Whenever we talk
Speaker 1: about car companies. At this point in the political trajectory.
Speaker 1: We have to uh talk about President elect Donald Trump
Speaker 1: less than a week ago forward canceled plans for one
Speaker 1: point six a billion dollar planned in Mexico. You have
Speaker 1: to think it has to do somewhat with President elect
Speaker 1: Trump's rhetoric. Will this cancelation material effect the production of
Speaker 1: any particular vehicles and do you expect less of production
Speaker 1: of certain types of vehicles because of the political pressure
Speaker 1: right now? Yeah, So you know, it's a hot topic
Speaker 1: at the moment. To be sure. I mean, we took
Speaker 1: a look at the end of last year where small
Speaker 1: car sales were going in the US and and did
Speaker 1: some updated projections whether they're going to be in the future,
Speaker 1: and we reached a point where we felt comfortable enough
Speaker 1: that we could fit the focus volume that we forecast
Speaker 1: for two thousand and eight, nineteen twenty and beyond into
Speaker 1: an existing manufacturing capacity plant we have in Hermcile, Mexico.
Speaker 1: That was the big driver decision. Uh. And because in
Speaker 1: our in our business capacities everything, it's such a billion
Speaker 1: dollar plants are a big deal. Capacitization is everything, and
Speaker 1: you when you can get new capacity into existing plants
Speaker 1: a lot cheaper than building a new plant, even though
Speaker 1: we were pretty far along on starting the new plant.
Speaker 1: The cancelation of that, the movement of focus into her
Speaker 1: mas SEO and then investing some of that money into
Speaker 1: an expansion of our plant here in Michigan to produce
Speaker 1: two new products. That say, it's about five million dollars
Speaker 1: of capital UM and that was the big driver read decision.
Speaker 1: I know the timing and us of his um leads
Speaker 1: to a lot of other questions, but but you know,
Speaker 1: the ability to be able to forecast lower small car sales,
Speaker 1: so that's what's been happening in the US really was
Speaker 1: the main driver. So do you think that Ford will
Speaker 1: make any changes to its future plans as a result
Speaker 1: of the current political climate and sort of the focus
Speaker 1: on American produced goods? You know, well, we are taking
Speaker 1: into account what we expect to be some pro growth
Speaker 1: initiatives by the Trump administration, including some taxation policy discussions,
Speaker 1: hopefully some improvements in the competitiveness of the US economy
Speaker 1: when it comes to corporate tax rates and some other
Speaker 1: things regulatory and the like. So if he never say
Speaker 1: one factor really drives a decision, there's in our business,
Speaker 1: so many things get taken into account when you're making
Speaker 1: investment decide of what we make. But we are taking
Speaker 1: into account some expected changes into the into the you know,
Speaker 1: regulatory and economic cycle in the US. You asked the
Speaker 1: question about production, we're not. We're still moving focus production
Speaker 1: to Mexico. We won't, it won't be any production. Kind
Speaker 1: of mythsed by all of this. It's just making sure
Speaker 1: that we spend the right amount of mind to do it.
Speaker 1: Give our listeners an idea Ford's business in North America
Speaker 1: and Ford's business overseas. It's may surprise people. Yeah, well,
Speaker 1: in North America we're the second largest manufacturer and seller
Speaker 1: of vehicles. We actually produce more vehicles in the United
Speaker 1: States and anybody else. We employ more workers and manufacturing
Speaker 1: workers in the US and anybody else. We're number one
Speaker 1: in Canada, we're second in the U S and sales,
Speaker 1: number one in Canada for sales, and we're you know,
Speaker 1: fifth or six in Mexico, depending on what time of
Speaker 1: the year we are. And our business in total of
Speaker 1: North America is over three million units. Ford globally has
Speaker 1: a strong presence of course in Europe, a strong presence
Speaker 1: now in China. We're now in the top six, five
Speaker 1: or six brands in China. UM, we have a strong
Speaker 1: presence in Brazil and South America. Were third or fourth
Speaker 1: or fifth, depending on what market. Second in Argentina, but
Speaker 1: we're depending on what market you're looking at, and when
Speaker 1: you look at our business, the majority of our revenue
Speaker 1: comes to North America. The majority of our profits come
Speaker 1: from North America, but we certainly have a strong presence
Speaker 1: all around the Roman what's the weakest market right now, Well,
Speaker 1: it's harder to find weakest market. The probably the most
Speaker 1: challenged market would be Brazil, given the economic and political
Speaker 1: challenges that the country faces. The auto industry in Brazil
Speaker 1: has collapsed about half were it was a few years ago.
Speaker 1: That puts a lot of pressure on our business. Also
Speaker 1: the uncertainty and the political challenges that they've had. We've
Speaker 1: seen some progress lately the president Tamarins and things that
Speaker 1: have happened, but Brazil is certainly challenged and the Indian
Speaker 1: market India has not grown to the level people thought
Speaker 1: I was going to grow and there's a lot of
Speaker 1: pressure on that business as well. That was Joe Hendrix.
Speaker 1: He is the president of the Americas for Ford. Thanks
Speaker 1: for listening to the Bloomberg P and L podcast. You
Speaker 1: can subscribe and listen to interviews at iTunes, SoundCloud, or
Speaker 1: whatever podcast platform you prefer. I'm pim Fox. I'm out
Speaker 1: there on Twitter at pim Fox. I'm out there on
Speaker 1: Twitter Ata Abramo. It's one before the podcast. You can
Speaker 1: always catch us worldwide on Bloomberg Radio m