Speaker 1: Welcome to the next generation of Wall Street Week, bringing
Speaker 1: you stories of capitalism, stories that will help you think
Speaker 1: about business, markets, economics, geopolitics, climate, and technology. This week,
Speaker 1: we tell a story of the pride of an auto
Speaker 1: industry and its home city pride that led to their
Speaker 1: fall and their efforts to restore that pride. We have
Speaker 1: a story about the business behind that restaurant where you
Speaker 1: feel like you belong. We start with a story about value.
Speaker 1: The value of a college degree one of the biggest
Speaker 1: investments many of us will ever make. But it's getting
Speaker 1: more and more expensive for the students and for the institutions.
Speaker 2: But is it worth it?
Speaker 3: Yes, one hundred percent. I mean, you know, financial considerations
Speaker 3: is the main motive, and Purdue is an affordable college.
Speaker 3: But yeah, no, I could have never imagined having access
Speaker 3: to the amount of resource that I have access to
Speaker 3: do here.
Speaker 1: Rebecca Senior is a rising junior at Purdue. She pays
Speaker 1: about forty one thousand dollars a year as an out
Speaker 1: of state student, just over the national average of thirty
Speaker 1: six thousand dollars, a number that's gone up forty percent
Speaker 1: since two thousand and four. With students like Senior making
Speaker 1: ends meet through a combination of grants, scholarships, and federal loans.
Speaker 3: I am very appreciative of the scholarship and grant Purdue
Speaker 3: has offered me. I would not be able to be
Speaker 3: here without it.
Speaker 1: As hard as it may be for many students and
Speaker 1: their families to cover the costs, historically colleges and universities
Speaker 1: haven't had to worry all that much about what they charge.
Speaker 1: The cost of higher education rose faster than the cost
Speaker 1: of living for most of the last forty years, something
Speaker 1: interrupted only by the big spike in inflation in twenty
Speaker 1: twenty two. But Mitch Daniels, who ran omb and then
Speaker 1: served as governor of Indiana and as president of Purdue,
Speaker 1: says that is changing, that people are no longer willing
Speaker 1: to spend whatever colleges charge.
Speaker 4: The systems sort of built for higher pricing. I mean,
Speaker 4: if you had total pricing power in any business, in
Speaker 4: other words, you could raise prices and you not only
Speaker 4: don't lose customers, you may gain more. Because there's no
Speaker 4: quality measurement, people have associated the price with quality, no
Speaker 4: proof that that's true. That's certainly one reason the hardest
Speaker 4: business to change is one that's succeeded for a long time,
Speaker 4: and this model you call it, that was very successful,
Speaker 4: had the wind at it's back and young people being
Speaker 4: told you got to go to college, four year college,
Speaker 4: and they followed the path at least resistance. Now, very belatedly,
Speaker 4: there's a little consumer resistance. Finally, slowly the market has
Speaker 4: begun to react to that. So you're seeing now a
Speaker 4: system beginning to experience the shakeouts that other sectors have.
Speaker 1: The shakeouts Mitch Daniels talks about are becoming more common
Speaker 1: in the United States as colleges have cut programs places
Speaker 1: like UNC Greensboro Drake and West Virginia University. The State
Speaker 1: Higher Education Executive Association reports that over five hundred private,
Speaker 1: nonprofit four year colleges have closed down all together in
Speaker 1: the last ten years. Some American students look to Great
Speaker 1: Britain for an alternative, seeing high quality at much lower prices,
Speaker 1: but Jillian Ted, who has added provost of King's College,
Speaker 1: Cambridge to her responsibilities as US editor at large at
Speaker 1: The Financial Times, says British schools are facing their own
Speaker 1: financial pressures.
Speaker 5: The challenge today is that essentially the numbers have exploded dramatically,
Speaker 5: which in many ways is a good thing, but it
Speaker 5: also means that the huge strain on public sector budgets,
Speaker 5: which at the moment the government simply can't pay the
Speaker 5: bill for all the students to have cheap education, let
Speaker 5: alone free education. So what universities are facing today is
Speaker 5: a squeeze where on the one hand, they are allowed
Speaker 5: to charge students today for their tuition, but that's capped
Speaker 5: at nine thousand pounds a year, and even that level,
Speaker 5: which looks very low americanized, is seen as grotesquely high
Speaker 5: by many people in the UK.
Speaker 1: As if the business model for higher education weren't challenged enough,
Speaker 1: it's consumers. The students and the parents are starting to
Speaker 1: doubt that they're getting good value for their money, at
Speaker 1: least in the United States, where polls indicate that only
Speaker 1: thirty six percent of adults say they have a great
Speaker 1: deal or quite a lot of confidence in higher education,
Speaker 1: a number that's down from fifty seven percent in twenty fifteen.
Speaker 1: Is this system succeeding right now? And what is the goal?
Speaker 1: How do we measure success for higher education?
Speaker 6: Well?
Speaker 4: When I said succeeding, I meant they were able to
Speaker 4: perpetuate themselves in their institutions. I didn't mean it was
Speaker 4: necessarily succeeding for the students. That's a whole other question, which,
Speaker 4: again way too late, is being asked more and more forcefully.
Speaker 4: But no, a whole other discussion. Whether the system, as
Speaker 4: we've been operating it has been teaching what it ought
Speaker 4: to teach, teaching it as rigorously as it ought to
Speaker 4: be taught, And therefore whether the young people emerging meet
Speaker 4: either of I would say the two basic tests of success.
Speaker 4: One are they ready for highly productive work somewhere in
Speaker 4: the economy. Two are they prepared to be knowledgeable, engaged,
Speaker 4: active citizens. And by those two measures we have the
Speaker 4: system hasn't been doing, in general, too good a job.
Speaker 1: The question of whether an increasingly expensive college education is
Speaker 1: truly worth it is being asked on both sides of
Speaker 1: the Atlantic.
Speaker 5: The explosion of digital technologies, the rise of AI, the
Speaker 5: rise of homeworking means that the question of what we're
Speaker 5: educating for is becoming increasingly unclear. And it's worth remembering
Speaker 5: that so much of what we've had as higher education
Speaker 5: and secondary education in the last century was created very
Speaker 5: much post the Industrial Revolution in order to prepare a
Speaker 5: workforce to either manage factories or work in a factory
Speaker 5: and to have the discipline and the skills quad for that.
Speaker 5: And today, of course, manufacturing is such a small part
Speaker 5: of the economy that the question of what we're educating
Speaker 5: for is becoming increasingly uncertain and challenged.
Speaker 1: It should come as no surprise that, given the challenges
Speaker 1: to the value of higher education, leaders are looking to
Speaker 1: make changes. Eight years ago, Mitch Daniels shook things up
Speaker 1: at Purdue, freezing tuition just two months in his job,
Speaker 1: something that continues to this day. When you were on Purdue,
Speaker 1: what business principles did you try to bring to bear
Speaker 1: in managing.
Speaker 4: I'd love to tell you some brilliant set of brilliant strokes.
Speaker 4: It was, and a lot of it had to do
Speaker 4: with what question you asked. I used to say, we
Speaker 4: saw if we decided we solve the question the equation
Speaker 4: for zero. Instead of asking how much money do we
Speaker 4: need next year to keep operating and keep peace and
Speaker 4: happiness on the campus, we asked the question, what would
Speaker 4: we have to do this year not to raise tuition?
Speaker 4: What combination of things? It's not hard to find them
Speaker 4: if you make that your goal. Capital spending is one
Speaker 4: place it's the look. You can have very first rate
Speaker 4: facilities without the gold plating that I've seen in so
Speaker 4: many other places. If you watch things carefully, like staff
Speaker 4: to student ratios, faculty to administrator ratios, things like that,
Speaker 4: it's not hard, as I say, to pick the low fruit.
Speaker 1: One of those places where the fruit may be hanging
Speaker 1: low is in the administrative staff.
Speaker 4: Look at these schools that astonishingly have more administrators than students.
Speaker 4: I mean, a lot of that could disappear. I used
Speaker 4: to say to people, you'd be amazed how much government
Speaker 4: you'd never miss.
Speaker 1: But as is the case elsewhere, it's awfully hard to
Speaker 1: cut your way to success. In the end, it comes
Speaker 1: back to providing a service, a product of real and
Speaker 1: sustainable value, one tailored for today, that will leave you
Speaker 1: in good stead well into the future.
Speaker 4: Twelve years ago, on my arrival, more than forty percent
Speaker 4: of the students were already studying the STEM discipline. Today
Speaker 4: it's closer to two thirds, and the student body is
Speaker 4: thirty percent bigger. But those are students' choices. The students
Speaker 4: are seeing that these are exciting things to learn, exciting
Speaker 4: careers beyond them. And we responded to what we thought
Speaker 4: was going to be that demand.
Speaker 1: And yes, for Mitch Daniels, one investment that is well
Speaker 1: worth the price paid is an education in business, something
Speaker 1: that at Purdue is now granted by the Mitch Daniels
Speaker 1: School of Business.
Speaker 4: We sensed a growing appetite and I think this is
Speaker 4: positive of students who want to study business and hope
Speaker 4: and hope to have a career there. First of all,
Speaker 4: I want them to be grounded in a little broader
Speaker 4: way than much business education today is. They'll have read's,
Speaker 4: some economic history, some economic philosophy. They'll have been able
Speaker 4: to compare systems. They'll make up their own minds which
Speaker 4: system is better for the vast majority of people. But
Speaker 4: they ought to know something about that, not just how
Speaker 4: to read a balance sheet or how to calculate an MPV.
Speaker 4: Beyond that, I want them to leave with a sense
Speaker 4: that this career they've chosen is a noble one.
Speaker 1: Over at King's College, Camber Jillian and Ted is similar
Speaker 1: focused on making sure that students are being prepared for
Speaker 1: a world transformed by technology, but not defined by it.
Speaker 5: British OIGH education is starting to play around with online learning,
Speaker 5: partly as a result of COVID. But the path that
Speaker 5: Oxford and Cambridge are going down and most of the
Speaker 5: other British universities is to say that there is a
Speaker 5: real value in face to face education, not just because
Speaker 5: it's chat GBT resistant, because it is actually by the way,
Speaker 5: but also because face to face education gives kids the
Speaker 5: skills they're going to really need for the future, such
Speaker 5: as the ability to get along with people they might
Speaker 5: disagree with, such as the ability to present an argument
Speaker 5: but to have a socratic debate which doesn't just take
Speaker 5: one side. And any higher education establishment that can teach
Speaker 5: kids to not just be able to amass knowledge in
Speaker 5: a computer, but also the skills to navigate people will
Speaker 5: have an advantage. So we used to talk about the
Speaker 5: digital divide being between kids who knew about tech skills
Speaker 5: and kids who don't. Today there's another digital divide, which
Speaker 5: is the kids who know about tech skills but can
Speaker 5: still talk to humans effectively and manage them and be
Speaker 5: creative as a human. They will be the really advantage
Speaker 5: ones in the future.
Speaker 1: However, the leaders running higher education sort it all out.
Speaker 1: The one thing they agree on is that although it's
Speaker 1: a business, we must never lose sight of the fact
Speaker 1: that it's also much more than a business.
Speaker 5: It's a mission, and it's something which is much higher
Speaker 5: than any commercialization mantra would suggest, and we need to
Speaker 5: keep that in mind above all else. We're really investing
Speaker 5: in kids, but not just in money, in all kinds
Speaker 5: of other ways as well. And yes, we need to
Speaker 5: pay the bills, but it cannot be just about paying
Speaker 5: the bills. It's fundamentally about championing the source of ideas,
Speaker 5: creation and learning.
Speaker 4: Higher education are not supposed to be a business. I
Speaker 4: used to say the same thing about government, But it
Speaker 4: can be much more business of life. It just didn't
Speaker 4: have to in too many cases until recently. I hope
Speaker 4: we don't overreact, though, because the college degree as we've
Speaker 4: known it, if it's well done, I think, is still tremendous.
Speaker 4: There's still a great return on that very expensive investment.
Speaker 1: But in the end, the question of whether a college
Speaker 1: education gives value that justifies the cost is for those
Speaker 1: receiving it to decide. People like becka senior.
Speaker 3: I think the personal growth and professional development that Purdue
Speaker 3: has offered me is definitely going to take me to
Speaker 3: a good career or grad school.
Speaker 1: Coming up the story of a city and an industry
Speaker 1: fighting to regain their pride. That's next on Wall Street
Speaker 1: Week on Bloomberg. This is a story about pride, pride
Speaker 1: and the way up pride that comes before a fall,
Speaker 1: and what its to restore the pride of a business,
Speaker 1: an industry, and a city when they've lost their way.
Speaker 1: Our Bloomberg Radio colleague Michael Barr is a native of
Speaker 1: Detroit who watched his city burn during the Riots of
Speaker 1: nineteen sixty seven, as a once great economic hub edit
Speaker 1: a period of decline.
Speaker 6: I'm going to give away my age because that happened
Speaker 6: in sixty seven and I was three years old, and
Speaker 6: I was in southwest Detroit, and at the time I
Speaker 6: saw the National Guard Enerje go by. Now being a
Speaker 6: stupid kid, I'm thinking, oh Gi, Joe, I didn't realize
Speaker 6: that the dagone city is burning down. Between that, how
Speaker 6: the auto industry really took a hard nosedive.
Speaker 1: The story of Detroit is all the more dramatic given
Speaker 1: what it had once been, the motor city that helped
Speaker 1: drive the US economy. Autoproduction once accounted for almost five
Speaker 1: percent of USGDP and nearly a million jobs at its peak.
Speaker 1: Detroit was the fourth largest city in the nation. That
Speaker 1: would have been a happy story if it had ended there,
Speaker 1: but it didn't. Rising costs, new competition, particularly from Japanese automakers,
Speaker 1: and an oil crisis hit the industry hard, reducing US
Speaker 1: auto industry employees by more than a third in thirty years,
Speaker 1: from more than nine hundred thousand nineteen fifty to run
Speaker 1: six hundred thousand by nineteen eighty two. Today, auto abuile
Speaker 1: production accounts for under three percent of US GDP, and
Speaker 1: Detroit has fallen from fourth to twenty sixth in the
Speaker 1: ranks of US cities. According to current Ford CEO Jim Farley,
Speaker 1: an entire industry, including his own Ford Motor, had failed
Speaker 1: to see and respond to the changes happening around it.
Speaker 7: I think World War two is a big challenge for
Speaker 7: the company, and when Henry Ford the second led the
Speaker 7: company back to a revitalized state through the Whiz Kids.
Speaker 7: We hired all these logistics experts from the army after
Speaker 7: the World War Two and they really created this kind
Speaker 7: of bureaucratic but an incredibly efficient machine. And the company
Speaker 7: was back in the sixties, and then the energy crisis came.
Speaker 7: The company didn't have efficient vehicles, it wasn't competitive among quality,
Speaker 7: and it really lost its way in the seventies, as
Speaker 7: well as the city of Detroit after the riots and.
Speaker 1: We were lost, and from there things just got worse.
Speaker 1: By the end of the twentieth century, it was hard
Speaker 1: to remember where it had all started, back in eighteen
Speaker 1: ninety six, when Henry Ford invented his quadricycle and then
Speaker 1: moved quickly to found the company he named after himself
Speaker 1: in Detroit, introducing his iconic Model T in nineteen oh eight,
Speaker 1: and then inventing the first moving assembly line, which went
Speaker 1: on to produce twenty million of those Model t's in
Speaker 1: the nineteen twenties.
Speaker 7: My grandfather is a good example, you know. He was
Speaker 7: an educated man, but he had a great job at
Speaker 7: Ford and built his family. His kids went to college eventually,
Speaker 7: and just like your family.
Speaker 1: My family was one of those affected by Ford, where
Speaker 1: my dad went to work in lower level management in
Speaker 1: the nineteen sixties and continued until cutbacks in the nineteen
Speaker 1: nineties led him to take a buyout. But long before
Speaker 1: my dad went to work there, long before it all
Speaker 1: went south, Detroit erected an emblem of the growth and
Speaker 1: strength of the new auto industry the Michigan Central station.
Speaker 1: At its peak, over two hundred passenger trains left that
Speaker 1: station every day, carrying over four thousand passengers, and another
Speaker 1: three thousand people worked in the office tower above the station.
Speaker 1: Michigan Central continued it to rain well into the nineteen fifties,
Speaker 1: when Detroit was the home to some two million people.
Speaker 1: But then the American auto industry went into a long
Speaker 1: period of decline as Autoplant after Autoplant began to shut down.
Speaker 1: As the auto industry went, so went Michigan Central. The
Speaker 1: last Amtrak train left the station in nineteen teen eighty eight,
Speaker 1: leaving the Detroit Lambark to fall into disuse and decay,
Speaker 1: its windows broken, its roof open to the sky, It's
Speaker 1: marble scavenged. By twenty thirteen, the Detroit City Council had
Speaker 1: voted to tear the train station down, and it took
Speaker 1: a determined Mayor Duggan leading a group of detroiters to
Speaker 1: restore Michigan Central to what it is again.
Speaker 8: From my first day in office, getting that train station
Speaker 8: reoccupied was a central focus. There was no way it
Speaker 8: was going to be a demolished just meant too much
Speaker 8: to too many generations. And so my first month, Matt Moron,
Speaker 8: the owner, was in my office had a list of
Speaker 8: things that they wanted, and I said, I want one thing.
Speaker 8: I want you to put windows in that abandoned train station.
Speaker 8: And he looked at me like I was crazy, and
Speaker 8: I said, all people see when they look at that
Speaker 8: train station is blight.
Speaker 2: I remember when it was beautiful.
Speaker 8: And so we made a deal on some other things
Speaker 8: where they spend a million dollars to put in windows.
Speaker 8: And when the windows started to go in, it hit
Speaker 8: an electric effect in the city. Everybody driving by in
Speaker 8: the freeway said, oh my God.
Speaker 1: To bring Michigan Central and Detroit back from the brank,
Speaker 1: it took more than private industry and government. Darren Walker
Speaker 1: runs the foundation the Ford family created in the nineteen thirties,
Speaker 1: and he helped lead philanthropies like his to step in.
Speaker 9: The crisis of twenty thirteen was significant, to say the least.
Speaker 9: The moutheisence that was committed was shocking and criminal, and
Speaker 9: of course the city found itself in this very odd
Speaker 9: situation with the museum being an asset of the city
Speaker 9: which was a debtor. The Ford Foundation made the first
Speaker 9: grant one hundred and twenty five million dollars. Of that
Speaker 9: four hundred that helped I believe to insent others to join,
Speaker 9: and it was one of my proudest moment.
Speaker 1: But above all, Detroit needed the auto industry to come
Speaker 1: back to set aside the pride that it caused it
Speaker 1: to underestimate its foreign competitors for too long, and to
Speaker 1: take a hard look at what those competitors were doing
Speaker 1: better than they were where I worked.
Speaker 7: At Toyota a young person with my family from Detroit.
Speaker 7: That was the best car company when I graduated in
Speaker 7: business school, you know, efficient and really focused on the customer,
Speaker 7: and we became the best selling car with the camera
Speaker 7: because we had a better car and it was built
Speaker 7: in Kentucky. You know, ultimately, the competition in America, it's
Speaker 7: a free society, is going to be you know, open market.
Speaker 7: But ultimately, ultimately, in the end of the day, as
Speaker 7: a CEO, I have to be completely competitive on quality
Speaker 7: and cost to their quality and cost, take out all
Speaker 7: the subsidies, all the tariffs. We have to be full competitive.
Speaker 7: If you look at the company, this has happened many
Speaker 7: many times. It's a company that's been through a lot,
Speaker 7: but here we are. There is I think fifty companies
Speaker 7: that have survived after fifty the fifties to be still here.
Speaker 7: The average company now big companies stays on the stock
Speaker 7: to change for like twenty years. You know, we've been
Speaker 7: there for every year. So it's a company though that
Speaker 7: when it gets is back against the wall, something magical happens.
Speaker 1: Where are you on the roadback? How far along that
Speaker 1: road are you?
Speaker 7: Our backs are off the stove pipes.
Speaker 1: Ford, along with GM and Stilantis, has clawed its way
Speaker 1: back from the worst of it, with the three automakers
Speaker 1: selling over six million units in the United States last
Speaker 1: year and reaping more than a half a trillion dollars
Speaker 1: in revenue. They're profitable again, with Ford making over four
Speaker 1: billion dollars in net income in twenty twenty three, all
Speaker 1: of which has brought jobs back as well. Michigan unemployment
Speaker 1: peaked apart from the pandemic in nineteen eighty two at
Speaker 1: sixteen point six percent, well above the national average. Last year,
Speaker 1: it had fallen all the way down to three point
Speaker 1: six percent.
Speaker 2: Done.
Speaker 1: As Mayor Douget explains, one plant at a time.
Speaker 2: But when I started, I sat with Bill Ford.
Speaker 8: I sat with Mary Barr and I sat then with
Speaker 8: Sergio Marcioni, who was running Fiat Chrysler, and I said, look,
Speaker 8: if Detroit's going to come back, we've got to come
Speaker 8: back on our strength. We're not going to be the
Speaker 8: tech cobb, the biomedical hibe. The next time use cite
Speaker 8: of parts plant, please ask them to come talk to
Speaker 8: me first. And it was Bill Ford who was the
Speaker 8: first one had flexingate made parts for Ford trucks. Ultimately,
Speaker 8: we landed a jeep plant with five thousand employees, almost
Speaker 8: all Detroiters being hired. So that was terrific because I
Speaker 8: had a large number of unemployed who had high school
Speaker 8: degrees and we needed good paying manufacturing jobs. Now, with
Speaker 8: the University of Michigan Grads School being built, we are
Speaker 8: now competing for the tech jobs, the jobs of the future.
Speaker 8: And that's exciting as well, because in this city we
Speaker 8: need both. We need the people building the cars, we
Speaker 8: also need people designing the jobs of the future. Son
Speaker 8: on Fourteenth Street, next to the train station, is the
Speaker 8: only public street in America where the road charges your car.
Speaker 8: We have a self charging road while you park there
Speaker 8: because the coil is underneath will charge it.
Speaker 2: That's what we're doing. It's the technology in the future.
Speaker 1: Now once again, as it did over one hundred years ago,
Speaker 1: Michigan Central stands as a symbol for the potential of
Speaker 1: the American auto industry, driven by the vision of another forward,
Speaker 1: William clay Ford, the great grandson of patriarch Henry Ford.
Speaker 7: I think it is you know, obviously it's a family company,
Speaker 7: build's vision, but also the train station is very much
Speaker 7: a symbol, a kind of a mark along our journey
Speaker 7: to create a great company and we avoid a bankrupt
Speaker 7: which was amazing in the early two thousands, has been
Speaker 7: two thousands, but to build a vibrant company, you know,
Speaker 7: in the.
Speaker 2: Ev world, the digital vehicle world.
Speaker 7: The train station felt like the right kind of challenger
Speaker 7: project for four to be part of, so that we
Speaker 7: could be part of the you know, revitalization of Detroit,
Speaker 7: which had really been kind of used by almost the
Speaker 7: national media as a example of the decay of the country.
Speaker 7: And this felt like the kind of project that would
Speaker 7: be emblematic of our recovery as a company.
Speaker 1: With the US auto industry and the city of Detroit
Speaker 1: on the rise again, the question is whether it can
Speaker 1: continue on its path, can it avoid the tunnel vision
Speaker 1: born a pride that led it to stumble fifty years
Speaker 1: ago Like its competitors, for it has concluded that its
Speaker 1: path the future lies through solving the riddle of electric vehicles.
Speaker 1: And that is where we turn next on Wall Street
Speaker 1: Week to the perplexing question of how and when to
Speaker 1: make that transition to an electric future. This is Wall
Speaker 1: Street Week. I'm David Weston. At the beginning of the
Speaker 1: twentieth century, the United States radically changed how we move
Speaker 1: people and cargo around. It was the dawn of the
Speaker 1: internal combustion engine, pioneered by people like Henry Ford. According
Speaker 1: to current Ford CEO Jim Farley, it changed our economy
Speaker 1: and our world.
Speaker 7: At that time, Ford was the pinnacle. We had eighty
Speaker 7: percent market share globally of the car business. We were
Speaker 7: working on our second vehicle called the Model A, built
Speaker 7: at the Rouge. We were going from the moving as
Speaker 7: semily line but basically buying our parts from other people,
Speaker 7: to a completely integrated plant at the Rouge.
Speaker 1: In nineteen oh eight, when Ford began producing the Model T,
Speaker 1: there were only about two hundred thousand registered cars and
Speaker 1: trucks in all the United States. In less than twenty years,
Speaker 1: that number had exploded to over seventeen million. Today it's
Speaker 1: edging toward three hundred million, around nine cars for every
Speaker 1: ten people. Now many see another transportation revolution, one that
Speaker 1: will rival or even exceed that of one hundred years ago. Ironically,
Speaker 1: Tesla was not the true pioneer in electric vehicles. General
Speaker 1: Motors introduced its Evy one back in nineteen ninety six.
Speaker 1: That experiment was quickly abandoned, and the Detroit automakers returned
Speaker 1: to their core businesses of internal combustion engines, a business
Speaker 1: on the upswing again, thanks in no small part, to
Speaker 1: help the government during the Great Financial Crisis.
Speaker 10: I was young staffer on the transition operation, standing before
Speaker 10: the forefront of this new administration.
Speaker 1: Michigan Congresswoman Haley Stevens served in the Obama administration, which
Speaker 1: faced the imminent demise of the US auto industry. Back
Speaker 1: in two thousand and nine.
Speaker 10: All I could do in my spare time is read
Speaker 10: the Detroit Free Press online and look back to what
Speaker 10: was going on in Michigan, in my hometown. This was very,
Speaker 10: very troubling, scary, and unique, in part because the word
Speaker 10: bankruptcy started to enter this sentence as it related to
Speaker 10: General Motors and to Chrysler, and particularly to hear the
Speaker 10: words General motors and bankruptcy in a sentence was foreign
Speaker 10: and newfound territory. And so I knew that if I
Speaker 10: was going to serve in the administration of Barack Obama,
Speaker 10: I had to do something for Michigan.
Speaker 1: It was catastrophic, But now comes the hard part converting
Speaker 1: to a world of electric vehicles, and there is a
Speaker 1: long way to go. Tesla led the way, going from
Speaker 1: nineteen thousand EV sales in twenty thirteen to one point
Speaker 1: eight million a decade later. GM, Slanted, and Ford are
Speaker 1: trying to catch up and are growing their EV businesses,
Speaker 1: but off of a much lower base, selling around one
Speaker 1: hundred and fifty thousand EV's in the United States in
Speaker 1: twenty twenty three, or less than three percent of their output.
Speaker 1: EV success will require a fundamental rewiring of all the
Speaker 1: car companies, including Ford.
Speaker 7: We're well into the messy middle of the most transformational
Speaker 7: time other than the Model T you know, we've never
Speaker 7: gone through this electrification transition for low co two drive trains.
Speaker 7: We've never had a digital product before. We never could
Speaker 7: give people time back like we will with Level three autonomy.
Speaker 7: We're investing in all that enabling technology. We're very profitable
Speaker 7: with our pro business and our combustion business. I'd say,
Speaker 7: you know, we're just a few years away from another
Speaker 7: vibrant period for the company, and as leaders, we see
Speaker 7: it before everyone else sees it, and so it's it's
Speaker 7: exciting for us, but we feel a tremendous amount of
Speaker 7: responsibility for your parents, for you, for my grandparents.
Speaker 1: Reinventing a huge legacy company takes money and lots of it.
Speaker 1: Ford has said that it plans to invest twenty two
Speaker 1: billion dollars in electrification through twenty twenty five, and in
Speaker 1: twenty twenty one, GM set a bold target of transitioning
Speaker 1: its entire fleet to EV's by twenty thirty five, all
Speaker 1: to make a product the vast majority of consumers have
Speaker 1: yet to embrace.
Speaker 10: I'm so proud of our domestic automakers for continuing to innovate,
Speaker 10: continuing to lead the way. They've doubled down on, particularly
Speaker 10: electric vehicles in the plight towards zero emissions. They've made
Speaker 10: the strategic investments and the automakers that we have today
Speaker 10: as we head into the year twenty twenty five are
Speaker 10: so different than the automakers of the turn of the century.
Speaker 10: The world is moving towards electric vehicles. We're seeing this
Speaker 10: in markets on all continent. We want the United States
Speaker 10: automakers and workers to be leading the way. We want
Speaker 10: them to be dealt in.
Speaker 1: Ford's Jim Farley admits that traditional US automakers have a
Speaker 1: long way to go, but insists they are making progress.
Speaker 7: The growth in the US is still you know, we
Speaker 7: were up thirty forty percent in electric sales, were number
Speaker 7: two in the US to Tesla. We're also number three
Speaker 7: in hybrids. We're the only company that kind of you
Speaker 7: can buy an F one fifty electric or hybrid, or
Speaker 7: or a V eight. You know, it's your choice. And
Speaker 7: so we've learned a lot from customers. I think what's
Speaker 7: happened is we're in the mainstream customer, and the mainstream
Speaker 7: customer is totally different than their early adopters.
Speaker 1: That consumer resistance to the next round of EV sales
Speaker 1: has caused Ford and the other US automakers to trim
Speaker 1: back their aggressive goals, at least for the time being,
Speaker 1: with Ford announcing it will entirely shut down its plans
Speaker 1: for an all electric suv at a cost of over
Speaker 1: four billion dollars, something Congressmen Stevens monitors closely. Even as
Speaker 1: she remains sure of where things are headed over the
Speaker 1: long run.
Speaker 10: None of us fully know how the consumers are going
Speaker 10: to embrace electric vehicles. I know anytime I get with
Speaker 10: an automaker, I'm asking how are these cars being sold?
Speaker 10: What needs to be done? But one thing is very clear.
Speaker 10: The world is moving towards electric vehicles.
Speaker 1: Whatever resistance some consumers may have to evs Ted Cannis,
Speaker 1: president of ford Pro, the commercial arm of the company, says,
Speaker 1: the story is very different for businesses running fleets of trucks,
Speaker 1: fans and emergency vehicles.
Speaker 11: A retail customer is making the decision of choice and
Speaker 11: might be a very personal decision about their own commitment
Speaker 11: to what they like are the fast cars. But in
Speaker 11: a business, it's a business. You're trying to improve fuel costs,
Speaker 11: run maintenance, enter a quiet neighborhood in the working hours,
Speaker 11: there's real business res sands to have an electric vehicle.
Speaker 1: Give what Cannis says about commercial demand, it's no surprise
Speaker 1: that his Ford Pro is now the company's most profitable unit.
Speaker 1: The challenge is keeping up with the demand.
Speaker 11: The demand remains so strong, but it's for the rest
Speaker 11: of this year. I t it's going to be a backlog.
Speaker 2: Do you have any.
Speaker 1: Concern that that may give an opportunity to competitors If
Speaker 1: they can't get the vehicles they want when they want
Speaker 1: to get it, they might go to someplace else.
Speaker 2: That has been a concern.
Speaker 11: There's no question if there's open capacity, people prefer our product,
Speaker 11: whether on.
Speaker 1: The consumer or the commercial side. The transformation to electric
Speaker 1: is about more than just propulsion and connectivity. The manufacturing
Speaker 1: process itself is fundamentally different, which could come at the
Speaker 1: cost of some employment, a major issue in the last
Speaker 1: collective bargaining agreement with the UAW and something that the
Speaker 1: congresswoman who represents many of the Detroit area autoworkers has
Speaker 1: very much in mind.
Speaker 10: We're certainly seeing some volatility in the market. I'm eyeing
Speaker 10: still is very closely, in part because as they're transitioning,
Speaker 10: they're winding down some manufacturing. Then they're announcing job layoffs.
Speaker 10: They've got tight contracts, but there's also some tough conversations
Speaker 10: that are taking place even though those contracts have been set.
Speaker 10: In part, we don't want to be ushering in anything
Speaker 10: that isn't fair for the hard working men and women
Speaker 10: of our auto industry.
Speaker 1: As if making the transition to EV's work hard enough.
Speaker 1: The Detroit automakers are doing it in the face of
Speaker 1: stiff competition, first from Tesla and now from Chinese EV makers,
Speaker 1: with Byd alone now producing over three million cars last
Speaker 1: year and threatening to export their much less expensive models
Speaker 1: into the United States, something that Biden administration says it
Speaker 1: will at least slow down by imposing tariffs of over
Speaker 1: one hundred percent. For his part, the Ford CEO says
Speaker 1: that he doesn't object to the competition, provided it's fair.
Speaker 7: I've been doing this for forty years. I worked for
Speaker 7: Toyota for a couple of decades. I've never seen a
Speaker 7: competition like this. They have full sponsorship of their government.
Speaker 7: The government bent on evs before anyone else in the world.
Speaker 7: They're the largest market in the world, and now they're
Speaker 7: the most important market in the world. We can compete
Speaker 7: and win against them, but we have to bring our
Speaker 7: a game, and we have to learn of a lot
Speaker 7: of new things.
Speaker 2: This will be the.
Speaker 7: Ultimate test of companies like Ford for the next one
Speaker 7: hundred years. I fully believe we can do it.
Speaker 1: It's been a long journey for the auto industry and
Speaker 1: for Detroit, from the peaks of production, employment, and profitability
Speaker 1: of the mid nineteen hundreds to the deep valleys at
Speaker 1: the end of the century. Now it looks like it's
Speaker 1: truly regained some momentum and some of that pride that
Speaker 1: it lost, But the industry and Detroit may have their
Speaker 1: biggest challenges still ahead. We've talked about a very proud
Speaker 1: time for Detroit and for Ford and then losing some
Speaker 1: of that pride with sort of losing the way, both
Speaker 1: for Detroit and for Ford. How do you make sure
Speaker 1: you don't lose it again? How do you make sure
Speaker 1: you don't make the same mistake in a different time,
Speaker 1: in different places.
Speaker 7: This is the most important question for a CEO, and
Speaker 7: I think really the only answer is culture.
Speaker 2: It can't depend on me.
Speaker 7: It has to depend on kind of the heart and
Speaker 7: soul of our workforce who comes in every day, and
Speaker 7: their commitment to quality and cost is really only the
Speaker 7: only way to be enduring and sustainable. Great companies like
Speaker 7: Toyota did that to empower the factory worker to pull
Speaker 7: the hand on cord when they saw something wrong. And
Speaker 7: the only way I believe to sustain that afford is
Speaker 7: not me.
Speaker 1: The future of Detroit can't depend on any single person
Speaker 1: or any single company. At its best, the story of
Speaker 1: the auto industry over the last century and more has
Speaker 1: been one of innovation and investment. Is not letting unimaginable
Speaker 1: success lead to complacency. As Andy Grove said, complacency breeds failure.
Speaker 1: Only the paranoid survive. Coming up a story about the
Speaker 1: restaurant business and the people behind it that's still ahead
Speaker 1: on Wall Street week on Bloomberg. This is a story
Speaker 1: about what makes the restaurant business work when it all
Speaker 1: belongs food. It appeals the right atmosphere, people who make
Speaker 1: us feel welcome, prices we are willing to pay, and
Speaker 1: in the end, revenue to cover costs and make a profit.
Speaker 1: It can be a tough business, but ultimately, like any
Speaker 1: good recipe, it works only when it all comes together,
Speaker 1: all driven by a vision that turns a business into
Speaker 1: a calling.
Speaker 12: I'm born bread and Buttered in Harlem and one hundred
Speaker 12: and fourteenth Street in Frederick. Douglass was one of the
Speaker 12: most notorious drug in the community. There's a school down
Speaker 12: the block, like halfway midway down the block. And it
Speaker 12: broke my heart to know that school kids on their
Speaker 12: way to school to learn how to witness that type
Speaker 12: of activity. And I always said, you know, I complained
Speaker 12: about it, and I'm like, but what am I going
Speaker 12: to do about it?
Speaker 1: Melbolle Wilson is one of those who had a vision
Speaker 1: which led her to start her own restaurant in Harlem,
Speaker 1: as much for the sake of the neighborhood as for
Speaker 1: the food.
Speaker 12: My parents are from the South. My father is from
Speaker 12: a very very small town, three stop lights, Hemingway, South Carolina.
Speaker 12: So they grew up saving money under their mattress. You know,
Speaker 12: they didn't trust the banks. So what did I do
Speaker 12: when I got paid? Whether it's at Sylvia's or Rosa
Speaker 12: Mexicano Windows on the world, Every Friday when I got paid,
Speaker 12: I put a little bit under my mattress. This particular day,
Speaker 12: I said, let me see how much I've saved up. Well,
Speaker 12: I started counting and counting and counting.
Speaker 2: Then I got scared. I'm like, oh my god, it's
Speaker 2: a lot of money.
Speaker 12: I'd saved up three one hundred and twelve thousand dollars
Speaker 12: in cash, in cash, five dollar bills, one dollar bills,
Speaker 12: twenty hundreds. But I said, what am I going to
Speaker 12: do with this? And I decided to change my neighborhood
Speaker 12: to be the change that I wanted to see.
Speaker 1: It's not just Harlem that's been changed by restaurants like Melboury's,
Speaker 1: restaurateur of Danny Meyer, creator of the famed Union Square Cafe,
Speaker 1: and Grammercy Tavern says, the New York restaurant business overall
Speaker 1: is thriving, often driven by connections to particular neighborhoods all
Speaker 1: over the city, and.
Speaker 13: I think people more and more crave getting out to restaurants.
Speaker 13: In my entire career, I have never seen our restaurants
Speaker 13: nearly as full as I are today.
Speaker 1: Our restaurant won't make it without the passion and vision
Speaker 1: of a Danny Meyer or a Melboe Wilson, but it
Speaker 1: also has to make it as a business. So Miley
Speaker 1: tell us about the restaurant business. How does the restaurant
Speaker 1: business work? What drives it?
Speaker 14: I mean, this is a tough business. It's a small
Speaker 14: margin in business, and I think as customers were probably
Speaker 14: not always aware of just how much it takes to
Speaker 14: make a restaurant successful.
Speaker 1: Miley Carpenter is the founding editor in chief of Food
Speaker 1: Network magazine, and she says, as tough as the business is,
Speaker 1: it's also essential to the economic dynamism of cities like
Speaker 1: New York.
Speaker 14: I can't express how important the restaurant scene is to
Speaker 14: the energy and the like. It's our life, but it's
Speaker 14: everything to New York.
Speaker 1: There are over seven hundred thousand restaurant businesses in the
Speaker 1: United States, bringing in revenues approaching ninety billion dollars a month,
Speaker 1: or about four point six percent of the national GDP. Nationwide,
Speaker 1: restaurants employ over twelve million people, according to the Department
Speaker 1: of Labor, making it the sixth largest labor sector in
Speaker 1: the country. But as important as restaurants are to our
Speaker 1: economy and to our everyday lives, many were driven to
Speaker 1: the point of extinction when the pandemic hit in early
Speaker 1: twenty twenty.
Speaker 13: The pandemic brought really the entire industry, and I would say,
Speaker 13: especially in New York City, brought us to our knees
Speaker 13: because we were not allowed to have revenue outside of
Speaker 13: some pitily things like can you sell a bottle of
Speaker 13: wine out the door? And horribly one of the toughest
Speaker 13: things to reconcile was being an employee first company, and
Speaker 13: then being in a position where the only way to
Speaker 13: stay in business was to lay off a huge, huge
Speaker 13: percentage of our company.
Speaker 1: In New York City alone, restaurants employed over three hundred
Speaker 1: thousand workers before the pandemic hit, but nearly half of
Speaker 1: those lost their jobs when the city shut down. Many
Speaker 1: restaurants didn't survive the crisis, and the rest had to
Speaker 1: make immediate changes to their businesses to keep them alive.
Speaker 1: The pandemic upended the world of commercial real estate and
Speaker 1: with it the restaurants that depend on it, with much
Speaker 1: of the industry still struggling to recover as people have
Speaker 1: been slow to return to the office, something that has
Speaker 1: both affected restaurants near those offices and created a potential
Speaker 1: incentive to get people to come back.
Speaker 15: We have diversified quite a bit our business model, especially
Speaker 15: going through COVID. I think we've learned the hard way
Speaker 15: because Daniel old model, as we all own and operated
Speaker 15: like he owns this resturant physically, the walls and everything else,
Speaker 15: becomes a lot of obligation to do this.
Speaker 1: Sebastian Silvestri is CEO of Dynex, which runs Daniel Blude's company.
Speaker 1: He says restaurants like Ballues can be a magnet for
Speaker 1: office workers.
Speaker 15: I'm going to take like one like a cel Green,
Speaker 15: for example, the one of our partner, and they have
Speaker 15: those spectacular building like when Vanderbilt one Medicine. They're trying
Speaker 15: to get tennant in. They're trying to bring people back
Speaker 15: to work in the office. That's their own business. They
Speaker 15: need to bring world class ammenities, and then they come
Speaker 15: to people like us and say, hey, what could we
Speaker 15: do here? But I think a company like a cel Green,
Speaker 15: a larger commer show real estate company, they need world
Speaker 15: class commenity and then this is when they come to us.
Speaker 15: So it's been a win win for them and for us.
Speaker 1: As hard as the pandemic hit commercial real estate, one
Speaker 1: might think rensfree restaurants would come down, but Danny Meyer
Speaker 1: says he hasn't seen that in New York.
Speaker 13: Interestingly, the side rents are not down at all. It's
Speaker 13: almost seems like whatever struggles developers and landlords are having
Speaker 13: getting office tenants to come back, they're taking out on
Speaker 13: the people who are on the street, the retail people.
Speaker 13: So I would say that it's not necessarily a better
Speaker 13: time to open a restaurant than it was. But I
Speaker 13: have no question at all that the restaurants that have
Speaker 13: opened post pandemic have been some of the most exciting
Speaker 13: vintage that we've ever seen in New York City. Anyone
Speaker 13: who opened a restaurant after the pandemic had a very
Speaker 13: very real sense of where their neighborhood was at that point,
Speaker 13: so that was a much better thing.
Speaker 1: Well, in other businesses that would cause a renegotiation at
Speaker 1: that twenty.
Speaker 13: Year lease, Well we tried, We tried with what success.
Speaker 13: Modest modest look. Landlords have the best subscription business in
Speaker 13: the world. It doesn't matter whether it's raining, they're going
Speaker 13: to get their rent. It doesn't matter whether there's an
Speaker 13: economic downturn, They're going to get their rent. So it's
Speaker 13: a good business to be in. And unfortunately in New
Speaker 13: York City, one of the things that I find quite
Speaker 13: frustrating is that a lot of the landlords would rather
Speaker 13: warehouse their space waiting for a sunny day, and so
Speaker 13: that's not necessarily good for the streetscape of the city.
Speaker 1: Despite all the challenges and uncertainties of running a restaurant,
Speaker 1: there are some that not only succeed, but succeed year
Speaker 1: after year and become a part of the DNA of
Speaker 1: New York City, something that New York restaurateur is like
Speaker 1: Danny Meyer and Danielle Ballud have shown over decades, with
Speaker 1: Danny starting Union Square Cafe back in nineteen eighty five
Speaker 1: when he was just twenty seven and Danielle Ballude opening
Speaker 1: Danielle eight years later.
Speaker 16: We don't want to this oriental customer, neither these orient
Speaker 16: out team, but we want to continue to progress and
Speaker 16: keep us a level of excellence always and a style
Speaker 16: of cooking that belonged to us. Danielle, me, myself, my team,
Speaker 16: So there's always a French DNA in what we do.
Speaker 16: And yet you know, after so many years in America,
Speaker 16: there is this temptation of borrowing flavors, Like right now
Speaker 16: we're doing a beef dish and we're using miso as
Speaker 16: a curring and seasoning and flavoring around it.
Speaker 15: I can talk about a place like Danielle. So it's
Speaker 15: thirty one years, so there's.
Speaker 6: A lot of people.
Speaker 15: I have been with Danielle for a long time, and
Speaker 15: I think that's the success in the Russian industry. That's
Speaker 15: what I tell people all the time is when you
Speaker 15: have good people, your job is to retain them, take
Speaker 15: good care of them, make sure they're happy, give them,
Speaker 15: you know, care and love and support, and give them
Speaker 15: a career. But every time we open a new place,
Speaker 15: it's like you have to start almost from scratch. And
Speaker 15: you know, every ration is an enterprise in itself, you know,
Speaker 15: Russian like Danielle employ over one hundred people, Same with
Speaker 15: La Pavillon, same with Cafebulu, same with Central New York.
Speaker 15: So every rasta and he's a business on his own.
Speaker 13: You know, I'm so proud of the fact that our
Speaker 13: two I was going to say oldest, but our two
Speaker 13: senior restaurants, Union Square Cafe is going to be forty
Speaker 13: years old in twenty twenty five. Grammercy Tavern is going
Speaker 13: to be thirty this year, The Modern is twenty this year,
Speaker 13: and Shakeshak is going to be twenty this year. So
Speaker 13: that's pretty good. And what I'm really proudest about is
Speaker 13: that in a city whose first name is New, where
Speaker 13: people definitely want to talk about what's new? Have you
Speaker 13: been any new restaurants? They love that that's part of it.
Speaker 13: But I think what any restaurant strives to do that
Speaker 13: is here for keeps, or that wants to be here
Speaker 13: for keeps, that wants to become an institution in this
Speaker 13: amazing city. If you go to ten restaurants, I'm going
Speaker 13: to expect that seven of those ten restaurants are restaurants
Speaker 13: you've never been to. Because it's fun to discover a
Speaker 13: new place. I want to be one of the three
Speaker 13: that make your list, ther rotation that you go back to,
Speaker 13: and you go back to him because your favorite restaurant,
Speaker 13: like mine, is someone that loves you the most.
Speaker 1: As you've watched restaurants come and go over the years,
Speaker 1: is there some sort of rule of thumb of which
Speaker 1: ones work and which ones don't work?
Speaker 14: I mean, I'm always fascinated by this. And when I'm
Speaker 14: eating out, I'm looking around, is what's making this place packed?
Speaker 14: Why is no one here when the food is great
Speaker 14: and it's this sort of magical combination of elements. And
Speaker 14: I think it's changing. And so restaurants that are able
Speaker 14: to quickly adapt to the way we eat now versus
Speaker 14: how we ate before COVID or how we ate ten
Speaker 14: years ago, those are the ones that tend to survive.
Speaker 14: And when I look now at which restaurants are really
Speaker 14: you know, packing people in and able to keep them there.
Speaker 14: I mean, there's so many elements. I think fun is
Speaker 14: a very important element that wasn't as important maybe ten
Speaker 14: years ago. An element of sort of levity when we
Speaker 14: go out to eat, we want to be entertained. Surprise
Speaker 14: hugely important. Think about the restaurant experiences that you go
Speaker 14: tell other people about. It's an element of surprise. It
Speaker 14: is something something and grabbed you, whether it was a
Speaker 14: little gift when you laugh, just that little something that
Speaker 14: makes you tell a story. I mean, I think the
Speaker 14: best restaurants are storytellers.
Speaker 1: Whether it's surprise or fun or a story, it all
Speaker 1: has to come together and make us feel welcome.
Speaker 13: When people come to a restaurant, they want to belong.
Speaker 13: They want to feel like if they've been there before.
Speaker 13: They want to know that you recognize that. They want
Speaker 13: to feel seen. I don't think is ever going to change.
Speaker 13: People want a hug, a virtual hug, but they want
Speaker 13: to know that you are happy to see them back there.
Speaker 13: And in a time when there's more alienation and if
Speaker 13: you can point your finger at social media, work from home,
Speaker 13: whatever you want to talk about. I think restaurants are
Speaker 13: one of the great places that they're almost like a
Speaker 13: town hall that bring people together, and restaurants can recognize
Speaker 13: you and can be that part of your day that
Speaker 13: just makes you feel happy that you're in New York City.
Speaker 1: And when all the pieces belong together, restaurants can help
Speaker 1: trans form a community or a city. We felt the
Speaker 1: loss when the pandemic hit, and perhaps we appreciate the
Speaker 1: connection all the more now that we can return to
Speaker 1: our favorite restaurant that does it. For this episode of
Speaker 1: Wall Street Week, I'm David Weston. This is Bloomberg. See
Speaker 1: you next week with more stories of capitalism.