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Speaker 1: Our new spinoff show Lots More. We'll be back next Friday,

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Speaker 1: but for now, enjoy this bonus episode with Steve Radner.

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Speaker 2: Hello, and welcome to another episode of the Odd Blots podcast.

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Speaker 2: I'm Tracy Alloway.

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Speaker 1: And I'm Joe Whysenthal.

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Speaker 2: Joe, it is the first week of the United Auto Workers' strike.

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Speaker 2: I feel confident predicting that by the time this episode

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Speaker 2: comes out, it'll probably still be ongoing.

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Speaker 1: Right so we are recording this September twentieth. I think

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Speaker 1: you're listening to this Friday, September twenty second. Even in

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Speaker 1: the off chance that they get a deal between now

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Speaker 1: and then, there is a lot going on with autos

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Speaker 1: right now, there's a lot going out with labor that

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Speaker 1: even if they're by some miracle there's a deal in

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Speaker 1: the next forty eight hours, it's worth having a deeper

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Speaker 1: understanding of what's going on right now.

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Speaker 2: Absolutely, and we've obviously recorded an episode on this previously.

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Speaker 2: We spoke to one of theaw leader's Dan Vicente, talked

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Speaker 2: about some of the concerns. But I think this whole

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Speaker 2: saga is interesting from a sort of thematic perspective because

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Speaker 2: it gets it all these big picture conversations that we've

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Speaker 2: been having, you know, questions over the division of labor

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Speaker 2: in the US economy, over productivity, over the future of

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Speaker 2: the US car industry, and how it's responding to environmental

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Speaker 2: pressures and concerns industrial policy. Even it sort of wraps

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Speaker 2: all of these things up in one complicated package.

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Speaker 3: Let's put it that way.

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Speaker 1: Yeah, you nailed it. I mean, there's the question of

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Speaker 1: labor costs and the tight labor markets and whether this

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Speaker 1: is an opportunity for labor to get a greater share

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Speaker 1: of the pie.

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Speaker 4: So to speak.

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Speaker 1: There is the transition which was already happening, is already underway,

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Speaker 1: and that poses very unique opportunities and threats to the

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Speaker 1: legacy industry. And then this idea of like, well, we're

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Speaker 1: in an era of sort of industrial policy, and part

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Speaker 1: of this is by design the Bidenomics and so forth,

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Speaker 1: and so you know how all of these things play together.

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Speaker 1: It really, as you said, it comes together in this

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Speaker 1: one story in a unique way in.

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Speaker 2: The strike, right, So we obviously need to talk more

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Speaker 2: about it. I am very happy to say that we

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Speaker 2: do indeed have the perfect guest. We're going to be

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Speaker 2: speaking with Stephen Ratner, a very prominent American financier, as

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Speaker 2: they say, and someone who was very much involved, in

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Speaker 2: fact spearheaded the big auto bailout, the auto task. Cars

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Speaker 2: are the cars are, That's exactly it under the Obama

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Speaker 2: administration in circa two thousand and eight, two thousand and nine.

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Speaker 2: Someone who can talk very authoritatively over some of the

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Speaker 2: concerns from the car makers and the broader sort of

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Speaker 2: financial state of those companies. So Stephen is currently the

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Speaker 2: chairman and chief executive officer of Willett Advisors, that's the

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Speaker 2: investment arm for the personal and philanthropic assets of Michael Bloomberg,

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Speaker 2: who is, of course the majority owner of Bloomberg LP. Steve,

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Speaker 2: welcome to the show.

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Speaker 4: Thanks so much for having me.

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Speaker 2: We're excited to have you here. I wanted to start

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Speaker 2: out with something that the UAW representative that I mentioned

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Speaker 2: in the intro told us, and it's the idea that

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Speaker 2: the unions accepted a lot of concessions in the aftermath

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Speaker 2: of two thousand and nine in order to get their

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Speaker 2: respective employers, the car companies back up and running.

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Speaker 3: Is that right?

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Speaker 2: And was there an expectation that at some point those

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Speaker 2: concessions would reverse.

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Speaker 5: No question that the unions made concessions as part of

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Speaker 5: what we like to call not the bailout, but the

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Speaker 5: rescue of the auto companies. It was important, it was

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Speaker 5: an important part of committing what ultimately became eighty two

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Speaker 5: billion dollars of tax payer money to this industry that

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Speaker 5: they be shared sacrifice, that all the different constituents around

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Speaker 5: the industry, whether it be labor, whether it be shareholders,

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Speaker 5: whether it be suppliers, whether it be management, all participated

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Speaker 5: in making shared sacrifice. So yes, that definitely was the case.

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Speaker 5: But as I'm sure we'll get into, as you asked

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Speaker 5: me some more questions, the concessions that the automaker the

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Speaker 5: auto workers made back in two thousand and nine were

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Speaker 5: relatively small compared to what they're asking for today, And

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Speaker 5: what they're asking for today would not just restore whatever

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Speaker 5: it is, whatever they gave up back in two thousand

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Speaker 5: and nine, but add a bunch of other stuff on

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Speaker 5: top of that.

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Speaker 1: What did they give up in two thousand and nine.

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Speaker 1: The main thing that came up in our previous conversation

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Speaker 1: on the strike was just this idea of tiered labor,

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Speaker 1: a teering system. Certain employees sort of grandfathered into one

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Speaker 1: pay scale and then an acceptance that new employees would

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Speaker 1: not be on that scale. But what did you give

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Speaker 1: your comparison of your characterization of what the UAW gave

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Speaker 1: up or was willing to concede to in two thousand

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Speaker 1: and nine versus what we know about what the UAW

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Speaker 1: is asking for now.

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Speaker 5: Some of the things that were given up in two

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Speaker 5: thousand and nine were actually given up just before the

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Speaker 5: auto rescue because of the problems that the industry had.

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Speaker 5: So I'm going to lump all that together into what

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Speaker 5: really happened around those couple of years, both right before

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Speaker 5: and right after as part of the auto rescue. It's

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Speaker 5: important to say that no full time Tier one as

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Speaker 5: we called them, member of the UAW took any reduction

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Speaker 5: in their cash compensation. That was a part of the understanding.

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Speaker 5: There were concessions around things like the Tier two workers,

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Speaker 5: who are workers who get newly hired workers who started

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Speaker 5: out at roughly half of the cash compensation of the

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Speaker 5: established workers. I don't want to get into a huge

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Speaker 5: fight with the UAW, but it's important to note that

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Speaker 5: the way the concession, the types of concessions that the

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Speaker 5: UAW was willing to make mostly affected these newer workers

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Speaker 5: rather than the established workers. It was a case of

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Speaker 5: the UAW and effect. Think of it as there was

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Speaker 5: a big pot of money and how does it get allocated?

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Speaker 5: And the uaw's attitude is that the existing workers should

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Speaker 5: be protected and the new workers should in effect take

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Speaker 5: a lot of the pain. But there were other changes

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Speaker 5: made around healthcare, especially for retirees, around the so called

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Speaker 5: jobs bank, in which workers were getting paid even if

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Speaker 5: they were laid off during a downturn, they could get

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Speaker 5: ninety percent of their wages for actually working. And so

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Speaker 5: it was a very complicated package of a lot of stuff,

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Speaker 5: but we did think that in total it reduced the

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Speaker 5: automaker's labor costs by a meaningful amount.

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Speaker 2: What was it like negotiating with the unions back then?

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Speaker 5: It was very different than today, and I think it

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Speaker 5: was different for a couple of reasons. First, there was

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Speaker 5: a crisis, and as Ram Emmanuel, President Obama's chief of STEFF,

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Speaker 5: liked to say, never let a good crisis go to waste,

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Speaker 5: and so the UIW got it. They understood that without

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Speaker 5: this shared sacrifice, these companies would go bankrupt and perhaps

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Speaker 5: even disappear and lose all of those jobs, and so

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Speaker 5: they got the message in that. Secondly, they had a president,

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Speaker 5: Ron Gettelfinger, who I dealt with extensively, who was a

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Speaker 5: very reasonable guy. He had an agenda, he had members

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Speaker 5: he wanted to take care of. We respected that, he

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Speaker 5: respected us. The discussions are always very cordial. Nobody, at

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Speaker 5: least in the meetings I was in, ever started yelling

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Speaker 5: and screaming or pounding the table or any of that

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Speaker 5: kind of stuff. And in contrast, today, for a variety

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Speaker 5: of reasons, the UAW has a leader, Sean Fame, who

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Speaker 5: is much more of a firebrand, who's put these rather

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Speaker 5: large demands on the table, who's actually conducted a lot

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Speaker 5: of these negotiations publicly, which is not the way it

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Speaker 5: worked certainly when I was involved with it, or the

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Speaker 5: way I think it's worked most times in the past.

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Speaker 5: And that reflects a couple of things I think. I

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Speaker 5: don't know Sean Fayne, but I think it reflects a

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Speaker 5: couple of things. One that, in fact, as I'm sure

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Speaker 5: we'll get into, the auto workers haven't really done that

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Speaker 5: well in the last fifteen years, and so they do

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Speaker 5: have legitimate concerns, grievances, whatever you want to call it

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Speaker 5: around that. Secondly, the UAW, as i'm sure you know,

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Speaker 5: has been through a variety of corruption scandals in the

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Speaker 5: last few years, had a whole succession of presidents. These

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Speaker 5: are not ron Gettholfinger kinds of guys. And I think

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Speaker 5: the membership is just angry and frustrated and disappointed in

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Speaker 5: their union. And I think Sean Fain has been able

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Speaker 5: to capitalize that. He's really more of a firebrand than

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Speaker 5: he is a dispassionate negotiator.

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Speaker 1: You mentioned the tiering system, one argument that the union

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Speaker 1: makes that tiering is bad for the It's just bad

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Speaker 1: for the union. It creates divisions. The union is supposed

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Speaker 1: to be sort of one family or one team. And

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Speaker 1: then if you say, as you put tier one tier

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Speaker 1: two workers, that inherently weakens the union in your view,

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Speaker 1: Is it sort of plausible or reasonable that it goes

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Speaker 1: back to a single tier people doing this getting the

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Speaker 1: same pace goal for the same job. And then what

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Speaker 1: else you said in the beginning that the demands are

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Speaker 1: above and beyond what that sacrifice was like roughly fourteen

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Speaker 1: years ago. So talk to you about what you perceive

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Speaker 1: as being further beyond that.

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Speaker 5: Well, let's take that in pieces, and you can remind

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Speaker 5: me of a couple of the questions that I'm not

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Speaker 5: going to remember, but because I'm focused on your first question. Yeah,

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Speaker 5: there's no doubt that it is odd, I think unfair

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Speaker 5: in many respects, a bad dynamic to have two people

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Speaker 5: working on the same assembly line performing essentially similar functions.

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Speaker 5: Maybe one is putting on windshield wipers and one is

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Speaker 5: putting on door handles, and one is getting paid literally,

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Speaker 5: at least back then, was getting paid literally half as

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Speaker 5: much in cash and a much reduced benefits package relative

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Speaker 5: to the guy or a woman who was standing next

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Speaker 5: to him doing essentially the same job. That's a bad dynamic.

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Speaker 5: But it occurred in part for the reason I said

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Speaker 5: that the union was unwilling to have the existing members

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Speaker 5: make a significant and more significant sacrifice. Sacrifice I actually

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Speaker 5: reduced their cash compensation. And so again you think of

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Speaker 5: it as a pot of money and has to get allocated,

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Speaker 5: and a disproportionate amount of it got allocated the existing

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Speaker 5: workers at the expense of these knew what we used

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Speaker 5: to call here too now they call them temp workers

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Speaker 5: who had just started at the company were getting paid

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Speaker 5: a lot less, all.

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Speaker 2: Right, I'm going to take up the second portion of

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Speaker 2: Joe's question then, And you've pointed out in an op

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Speaker 2: ed that you think there's no way the automakers will

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Speaker 2: be able to meet some of the asks or all

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Speaker 2: of the asks, rather that the UAW is making. Can

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Speaker 2: you explain that a little bit more. What's the thinking

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Speaker 2: behind that statement.

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Speaker 5: The auto companies are making very very good profits at

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Speaker 5: the moment. There's no nobody can argue about that. But

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Speaker 5: this is a tough business. The profit margins are relatively thin,

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Speaker 5: the capital expenditures required are large. The transition to EVS

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Speaker 5: is going to be very expensive and painful for these companies.

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Speaker 5: And so when you boil it all together, if you

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Speaker 5: look at General Motors, for example, it's stock price. When

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Speaker 5: it's stock price from when it went public, I think

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Speaker 5: about twelve years ago it was twenty eleven, has not budged.

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Speaker 5: The overall stock market is up two hundred and seventy

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Speaker 5: five percent, and so Wall Street investors are basically saying,

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Speaker 5: we don't think these companies are actually doing that great,

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Speaker 5: and therefore they have limits as to what they can

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Speaker 5: do and still have the resources and the profits they

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Speaker 5: need to keep investors happy and do this transition. And

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Speaker 5: so when you talk about things like getting paid for

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Speaker 5: forty hours but working thirty two hours, when you talk

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Speaker 5: about things like restoring the jobs bank where you get

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Speaker 5: paid even if you're laid off. When you talk about

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Speaker 5: going back to a defined benefit pension plan from defined contribution,

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Speaker 5: which would be wonderful, but very few companies even have

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Speaker 5: those anymore.

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Speaker 4: From new workers, those.

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Speaker 5: Are demands that the company simply can't meet. I think

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Speaker 5: what this will hopefully come down to is a big

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Speaker 5: ask on cash compensation. The union wants thirty five thirty

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Speaker 5: six percent. The companies have offered twenty percent. This would

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Speaker 5: be over four years and some other one time payments

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Speaker 5: something like somewhere in there. There's a deal to be done,

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Speaker 5: but all the rest of this stuff is mostly going

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Speaker 5: to have to go away to have an outcome that

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Speaker 5: I think is appropriate for these car companies.

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Speaker 4: We're obviously going.

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Speaker 1: To talk more about the negotiations, but I want to

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Speaker 1: actually just pause the union component of the conversation for

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Speaker 1: a second setting. Aside the UAW contract, This would be

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Speaker 1: a major period of upheaval for the industry regardless, because

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Speaker 1: the transition that we're talking about and the incredible investment

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Speaker 1: that it's going to take to compete with Tesla, to

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Speaker 1: compete potentially on a global scale with Chinese ev makers,

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Speaker 1: you name it. Give us your review of just how challenging,

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Speaker 1: setting aside the labor component, how challenging for the business

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Speaker 1: models of the Big three, which make most of their

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Speaker 1: profits from selling cars with internal combustion engines, How challenging

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Speaker 1: is this ev trans.

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Speaker 5: It's going to be significantly challenging. And we should talk

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Speaker 5: about the labor piece of it, because that's very relevant.

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Speaker 5: But let me, as you ask, let me talk about

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Speaker 5: some of the other elements of it. Look, you have

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Speaker 5: a whole bunch of new entrants coming into this industry

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Speaker 5: starting from scratch. I'm reading at the moment Walter Isaacson's

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Speaker 5: new biography of Elon Musk and Tesla. He started with

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Speaker 5: a blank piece of paper when he did Tesla, and

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Speaker 5: he was able to design a manufacturing system, a set

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Speaker 5: of supply arrangements, not without a lot of commotion and

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Speaker 5: difficulty and so forth, and with no unions, by the way,

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Speaker 5: and build Tesla in effect from the ground up. The

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Speaker 5: legacy companies have a way of doing things that's existed

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Speaker 5: for now one hundred and twenty years plus or minus,

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Speaker 5: and so they have to completely rethink a lot of

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Speaker 5: how they operate a lot of their processes, and they

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Speaker 5: have to compete against not just Tesla, but Rivian and

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Speaker 5: Lucid and the Chinese companies you mentioned are not yet

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Speaker 5: here because of the high tariffs that we have on

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Speaker 5: auto imports, but sooner or later they probably will be here.

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Speaker 5: And so what has been a tough business is getting

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Speaker 5: even tougher. And it's important for these companies to have

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Speaker 5: a cost structure that they can live with.

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Speaker 2: You touched on it in that answer just then. But Tesla,

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Speaker 2: of course is famously non unionized, and then of course

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Speaker 2: there is the threat of the Chinese EV manufacturers and

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Speaker 2: cheap labor over there. Could it not go the other

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Speaker 2: way though? Could you not have a situation where instead

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Speaker 2: of competing with non unionized EV companies that maybe some

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Speaker 2: of those start to get unionized, Like maybe these actions

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Speaker 2: start to filter through to companies like Tesla.

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Speaker 5: I think it's pretty unlikely. I think that it's not

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Speaker 5: just Tesla, but when you look at the auto companies

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Speaker 5: that have been operating in the South for a long time,

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Speaker 5: which were Toyota, Hana, the German companies and so forth.

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Speaker 5: They are also not unionized, and I believe I'm right,

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Speaker 5: although my memory is a little hazy and sad saying that,

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Speaker 5: I think there have been efforts to try to unionize

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Speaker 5: them that have failed because the workers understood. Look, I

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Speaker 5: think we should step back and talk about the general

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Speaker 5: issue of manufacturing in the United States, not just autos.

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Speaker 5: But this was a real wake up call for me.

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Speaker 5: I had spent my whole career working in essentially with

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Speaker 5: service industry companies, mostly media and telecoms, and then suddenly

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Speaker 5: I'm plunged into manufacturing. And what I saw was really

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Speaker 5: scary to me, which was that we basically have a

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Speaker 5: high cost structure in this country. Appropriately, we want our

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Speaker 5: manufacturing workers to earn a good living. But an increasingly

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Speaker 5: globalizing world and we can talk about whether the world

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Speaker 5: is now going to deglobalize, but at least has been globalizing.

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Speaker 5: It was getting harder and harder for us to compete.

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Speaker 5: And that's why, in large part, we lost so many

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Speaker 5: manufacturing jobs over these last fifteen or twenty years. And

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Speaker 5: so you had, from the union's point of view, you

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Speaker 5: had jobs moving from the Midwest to the South, from

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Speaker 5: union jobs to non union jobs. But you also had

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Speaker 5: a lot of jobs moving to Mexico from these same companies,

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Speaker 5: including the Detroit companies. The Detroit Three have twenty facilities

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Speaker 5: in Mexico of one sort or another. And when you

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Speaker 5: look at the wage structure in Mexico, you're literally talking

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Speaker 5: about GM actually has a unionized plant there which has

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Speaker 5: low wages. But if you talk about the non unionized

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Speaker 5: plants there, you're talking about wages of nine to thirteen

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Speaker 5: or fourteen dollars a day, not an hour a day.

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Speaker 5: And if you talk to auto executives who operate there,

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Speaker 5: they will tell you that they get very good productivity

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Speaker 5: out of their Mexican workers. Some will say they get

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Speaker 5: better productivity. And the consequence of that is that the

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Speaker 5: number of auto workers in Mexico has crossed the line

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Speaker 5: and has now higher the number of auto workers in

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Speaker 5: the US. Our number of auto workers did recover after

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Speaker 5: the two thousand and nine exercise, but Mexico simply grew

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Speaker 5: faster and has outgrown US and is now a larger

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Speaker 5: source of employment at these very very low ways. And

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Speaker 5: so this isn't changing. And again you have the Chinese

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Speaker 5: as we talked about coming and potentially other low wage countries,

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Speaker 5: and so it really worries me about the future of manufacturing.

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Speaker 5: The yin and the yang of this whole situation with

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Speaker 5: the UAW in a sense is that it's a tension

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Speaker 5: between jobs and pay. The more you pay, the fewer

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Speaker 5: jobs you ultimately have, because inevitably these jobs will migrate

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Speaker 5: out of the union facilities and into non union facilities.

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Speaker 1: I don't know if it's pushing back, but intuitively or

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Speaker 1: a sort of big picture I get that, Okay, if

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Speaker 1: you can get high productivity or commensurate productivity out of

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Speaker 1: a plant in Mexico and labor costs are a lot

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Speaker 1: cheaper than over time, are going to have this migration.

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Speaker 1: But labor costs still, like my understanding, I've seen this

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Speaker 1: stat a few times, like they're not a huge part.

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Speaker 1: They're like I've seen a stat here it says five

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Speaker 1: percent of auto industry costs, so it's like it's significant,

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Speaker 1: but it's not the majority of the cost or even

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Speaker 1: anywhere close to the major.

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Speaker 4: Costs of a car.

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Speaker 1: So intuitively, someone I look at five percent, who's like, okay, well, like,

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Speaker 1: what would be the big problem if it moved to

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Speaker 1: seven percent or six percent, I guess I'm just skeptical

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Speaker 1: or I have this intuitive skepticism that the labor component,

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Speaker 1: if it's a bit more radically changes the economics for

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Speaker 1: these companies.

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Speaker 4: Well, let's think about it this way.

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Speaker 5: Okay, I think I don't have this figure in my head,

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Speaker 5: but let's just say, and I think it's probably directionally

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Speaker 5: about right that the profit margins all going well, and

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Speaker 5: there are plenty of times when they're not going well.

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Speaker 5: The profit margins for these kinds, for these big companies,

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Speaker 5: there's maybe ten percent or something like that. And so

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Speaker 5: if your labor costs go from five to seven, as

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Speaker 5: you said, that means your profit margins go from ten

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Speaker 5: to eight, and you've wiped out twenty percent of your profits.

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Speaker 5: And that's a lot to a company. I mean companies

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Speaker 5: like these that are high cost companies with lots of

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Speaker 5: moving parts, no pun intended. They watch, or they're supposed

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Speaker 5: to watch every penny, every cost item, and work unbelievably

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Speaker 5: hard to keep costs down to make some reasonable profit.

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Speaker 5: These are not companies with forty percent profit margins where

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Speaker 5: maybe it doesn't matter, And so it is important to

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Speaker 5: these companies to have labor costs be competitive with other

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Speaker 5: companies that are basically doing the same thing with labor

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Speaker 5: costs and can behalf of what they are for the

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Speaker 5: Detroit three.

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Speaker 2: Well, on a similar note, the UAW strikes are happening

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Speaker 2: against this backdrop of historically low unemployment post pandemic, and

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Speaker 2: I imagine that has empowered a lot of the workers

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Speaker 2: to feel like this is the moment when they can

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Speaker 2: ask for all these different things. But the other broad

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Speaker 2: trend that's happening is the sort of post pandemic tendency

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Speaker 2: towards reshoring or building more resilient supply chains, or call

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Speaker 2: it whatever you want. And of course the backdrop of

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Speaker 2: Bidenomics as well, where Biden has basically said he wants

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Speaker 2: to build more industrial and manufacturing capacity within the US.

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Speaker 2: Does that not potentially put a lid on the threat

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Speaker 2: of moving a lot of car production to places like

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Speaker 2: China or Mexico.

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Speaker 4: Well, let me try to unpack that.

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Speaker 5: You're going to again have to remind me of a

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Speaker 5: couple of good questions that you asked that I won't remember. Look,

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Speaker 5: the first point that you alluded to, I just would

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Speaker 5: like to mention for the benefit of the listeners, which

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Speaker 5: is and maybe it's obvious, but as you said, what's

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Speaker 5: happening right now is we have a historically low unemployment

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Speaker 5: rate three point eight percent and about one and a

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Speaker 5: half jobs for everybody who's actually looking for a job,

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Speaker 5: and so that has led workers in many, many industries

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Speaker 5: to feel empowered to ask for more. And so obviously

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Speaker 5: you have the screenwriters and the actors on strike, you

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Speaker 5: have hotel workers in LA on strike. At the moment,

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Speaker 5: you've had very large contracts to the ups drivers, to

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Speaker 5: the American Airlines pilots and so forth. But those are

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Speaker 5: all service industries and if you pay those people more,

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Speaker 5: sure it cuts into profits a little bit. It may

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Speaker 5: add to inflation a little bit because the companies raise

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Speaker 5: their prices, but fundamentally, those jobs don't leave. They can't

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Speaker 5: leave if you have to have if you're an LA

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Speaker 5: hotel worker, that's the only place you're going to work.

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Speaker 5: And again, manufacturing, manufacturing is different. So let's talk about

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Speaker 5: deglobalization and industrial policy and bynomics because they are somewhat different.

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Speaker 5: Obviously related. I think the wake up call during the

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Speaker 5: pandemic and the context of what's going on with China

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Speaker 5: to many American companies and government officials is that we

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Speaker 5: globalized to a great extent to cut costs for Americans.

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Speaker 5: And it's important to recognize that part of why we

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Speaker 5: had so little inflation until the pandemic was because we

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Speaker 5: were importing manufactured goods from China from other places, not cars,

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Speaker 5: that were much cheaper than anything we could make here,

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Speaker 5: and so prices for things like clothes were very barely

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Speaker 5: moved I think during this period because they were able

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Speaker 5: to source it more cheaply. Now, companies and again the

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Speaker 5: government are saying, well, the supply lines are too stretched

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Speaker 5: and this is how you get in trouble, and so

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Speaker 5: there will be and it's not an organized effort, it's

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Speaker 5: not a government policy that, it's not a government edict.

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Speaker 5: But companies are reassessing their supply lines and saying, Okay,

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Speaker 5: you know, maybe we shouldn't rely on China. But then

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Speaker 5: they have to get it from somewhere else. And by definition,

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Speaker 5: if they were getting it from China because it was

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Speaker 5: the cheapest they could get, it's going to cost more

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Speaker 5: to get it from somewhere else, and that does add

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Speaker 5: at some point into inflation and costs for everyday Americans.

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Speaker 5: And so this is not going to be a top

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Speaker 5: down decision from Washington. This is going to be decision

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Speaker 5: made company by company to try to balance secure supply

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Speaker 5: lines with being able to keep prices to consumers at

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Speaker 5: reasonable levels. And I think when the dust settles, it

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Speaker 5: will not be as big of a It will not

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Speaker 5: be as big as people think it might be for

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Speaker 5: the because of the cost problem that companies are going

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Speaker 5: to find the costs are higher and are going to

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Speaker 5: maybe pull back from some of this deglobalization that you

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Speaker 5: see talking about. So now if you're ready, we can

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Speaker 5: talk about bionomics and industrial policy. Yeah.

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Speaker 2: Well, wait, can I ask one more question just on

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Speaker 2: the car industry. I mean, you were the cars and

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Speaker 2: before you were the cars are you were in private

439
00:23:02,800 --> 00:23:05,440
Speaker 2: equity and an investment banker. So you've dealt with all

440
00:23:05,480 --> 00:23:09,160
Speaker 2: these different types of businesses over the years. What did

441
00:23:09,160 --> 00:23:12,720
Speaker 2: you learn about the car industry specifically? Is there something

442
00:23:12,720 --> 00:23:15,040
Speaker 2: that makes that business model special in your mind?

443
00:23:16,560 --> 00:23:21,680
Speaker 5: It's an iconic American industry. It's an industry that every

444
00:23:21,760 --> 00:23:25,640
Speaker 5: country takes some national pride in having their own company.

445
00:23:25,640 --> 00:23:27,960
Speaker 5: In effect, if you look at Europe, there's been some

446
00:23:28,040 --> 00:23:31,520
Speaker 5: mergers recently to try to rationalize it. But every country

447
00:23:31,560 --> 00:23:33,120
Speaker 5: in Europe felt like it had to have its own

448
00:23:33,160 --> 00:23:35,159
Speaker 5: car company, even though it really didn't make sense for

449
00:23:35,200 --> 00:23:37,120
Speaker 5: every country in Europe to have its own car company.

450
00:23:37,640 --> 00:23:39,520
Speaker 5: And so if I were to stand up and say,

451
00:23:39,560 --> 00:23:41,119
Speaker 5: you know, we don't really need a car industry in

452
00:23:41,119 --> 00:23:44,200
Speaker 5: this country, I'd be probably drawn and quartered or burned

453
00:23:44,200 --> 00:23:46,240
Speaker 5: at the stake or something like that. There's a lot

454
00:23:46,240 --> 00:23:49,040
Speaker 5: of emotion and feeling around it. The car industry is

455
00:23:49,119 --> 00:23:51,400
Speaker 5: three percent of our GDP that it may not sound

456
00:23:51,440 --> 00:23:54,320
Speaker 5: like a lot, but that is a lot. And I

457
00:23:54,320 --> 00:23:56,320
Speaker 5: think there's a strong feeling that we need to have

458
00:23:56,480 --> 00:23:59,560
Speaker 5: a robust car industry here. And I get that. As

459
00:23:59,600 --> 00:24:02,879
Speaker 5: I said I when I got into the auto rescue job,

460
00:24:03,320 --> 00:24:05,240
Speaker 5: I did see a couple of things. One was the

461
00:24:05,320 --> 00:24:08,240
Speaker 5: unbelievable pressure I'm manufacturing that I just described and how

462
00:24:08,240 --> 00:24:11,720
Speaker 5: tough this was. And secondly, I saw these iconic companies

463
00:24:11,720 --> 00:24:14,720
Speaker 5: that were really so much a fabric of America that

464
00:24:14,800 --> 00:24:16,320
Speaker 5: we really felt like we.

465
00:24:16,280 --> 00:24:16,880
Speaker 4: Had to save.

466
00:24:17,280 --> 00:24:19,800
Speaker 5: That it was the right thing to do with tax paramney,

467
00:24:19,800 --> 00:24:21,800
Speaker 5: which by the way, we got virtual all of it back.

468
00:24:22,040 --> 00:24:25,960
Speaker 1: Out of curiosity. Other other factors that pressure domestic auto

469
00:24:26,000 --> 00:24:30,400
Speaker 1: manufacturing or maybe manufacturing in general in the US versus

470
00:24:30,440 --> 00:24:34,159
Speaker 1: other countries, not related to labor costs. I don't know

471
00:24:34,160 --> 00:24:37,280
Speaker 1: whether there are environmental regulations, et cetera, other other reasons

472
00:24:37,359 --> 00:24:39,920
Speaker 1: why manufacturing in the US is tough.

473
00:24:40,400 --> 00:24:44,639
Speaker 5: That's a great question, and the answer is yes, we

474
00:24:44,680 --> 00:24:47,880
Speaker 5: obviously do focus on this labor problem. But for example,

475
00:24:48,200 --> 00:24:51,480
Speaker 5: permitting in the US and the environmental regulations and all

476
00:24:51,480 --> 00:24:55,560
Speaker 5: that surrounds it is really really tough. Let me give

477
00:24:55,600 --> 00:24:57,600
Speaker 5: you an example that has nothing with the car industry,

478
00:24:57,720 --> 00:25:00,439
Speaker 5: but we recently looked at at copper invests in a

479
00:25:00,440 --> 00:25:01,679
Speaker 5: copper mine in Arizona.

480
00:25:02,200 --> 00:25:02,480
Speaker 4: Fine.

481
00:25:03,119 --> 00:25:06,159
Speaker 5: It's what I learned, though, is that much and I

482
00:25:06,160 --> 00:25:08,359
Speaker 5: don't know the percentage of the copper ore that we

483
00:25:08,480 --> 00:25:12,760
Speaker 5: mine here gets sent to China to be smelted and

484
00:25:12,800 --> 00:25:15,600
Speaker 5: then it comes back here, all adding to cost. And

485
00:25:15,680 --> 00:25:17,639
Speaker 5: of course the Chinese don't exactly observe a lot of

486
00:25:17,800 --> 00:25:20,600
Speaker 5: environmental protections when they do that kind of stuff over there.

487
00:25:21,119 --> 00:25:24,520
Speaker 5: And meanwhile, there's a smelter in Idaho I'm told that

488
00:25:24,720 --> 00:25:28,200
Speaker 5: is built sitting there not operating because it can't get

489
00:25:28,200 --> 00:25:32,640
Speaker 5: permitted because of environmental concerns and so and of course,

490
00:25:32,680 --> 00:25:35,480
Speaker 5: copper is a key ingredient in EVS and all the

491
00:25:35,600 --> 00:25:39,520
Speaker 5: energy transition things we're talking about. And so there is

492
00:25:39,560 --> 00:25:43,520
Speaker 5: a tension in this country between various goals, and we

493
00:25:43,600 --> 00:25:46,600
Speaker 5: have a goal of obviously making this energy transition. If

494
00:25:46,600 --> 00:25:49,080
Speaker 5: we want to make an energy transition, we're going to

495
00:25:49,080 --> 00:25:52,480
Speaker 5: have to radically change the permitting process. It would be

496
00:25:52,520 --> 00:25:53,959
Speaker 5: great if you want at some point we can talk

497
00:25:54,000 --> 00:25:57,800
Speaker 5: about semiconductors, which is another manufacturing business where there are

498
00:25:57,880 --> 00:25:59,879
Speaker 5: a lot of issues to be thought about.

499
00:26:00,160 --> 00:26:03,440
Speaker 2: Well, all right, I'll take the bait. Let's talk about semiconductors.

500
00:26:03,480 --> 00:26:06,400
Speaker 2: And I mean this leads nicely into bidenomics as well.

501
00:26:07,080 --> 00:26:10,280
Speaker 5: So look, so what happened with semiconductors, and I've actually

502
00:26:10,280 --> 00:26:12,600
Speaker 5: spent a fair amount of time on semiconductors recently because

503
00:26:12,600 --> 00:26:15,399
Speaker 5: I think it's a fascinating subject, is that we of

504
00:26:15,440 --> 00:26:20,439
Speaker 5: course invented semiconductors basically after Sputnik. We basically had our

505
00:26:20,440 --> 00:26:24,240
Speaker 5: Sputnik moment. We said we've got to become a technology leader.

506
00:26:24,680 --> 00:26:27,720
Speaker 5: The Defense Department got heavily involved DARPA, and the Internet

507
00:26:27,880 --> 00:26:31,439
Speaker 5: was one outcome of that our leadership, and semiconductors, with

508
00:26:31,520 --> 00:26:34,600
Speaker 5: Intel in particular being our national champion, but many many

509
00:26:34,640 --> 00:26:39,760
Speaker 5: other companies, QUALCOMAMD whatever also being products of that. But

510
00:26:40,240 --> 00:26:44,240
Speaker 5: what then happened was that we also encouraged and we

511
00:26:44,240 --> 00:26:46,440
Speaker 5: were not the main reason this happened, but you then

512
00:26:46,480 --> 00:26:50,880
Speaker 5: had a semiconductor industry grow up in South Korea, Japan, Taiwan,

513
00:26:50,960 --> 00:26:54,159
Speaker 5: and Singapore. We encouraged it because we felt that if

514
00:26:54,160 --> 00:26:57,600
Speaker 5: those countries were strong economically, it would help resist China

515
00:26:57,720 --> 00:27:01,359
Speaker 5: better in its own economic expansion. Those countries pursued a

516
00:27:01,520 --> 00:27:04,800
Speaker 5: very vigorous industrial policy, which relates to your question, to

517
00:27:04,880 --> 00:27:08,040
Speaker 5: develop those industries there. And so where do we sit now?

518
00:27:08,080 --> 00:27:10,879
Speaker 5: We sit now we're ninety two percent of the world's

519
00:27:10,920 --> 00:27:14,760
Speaker 5: high end semiconductors, the most important ones that power your

520
00:27:14,760 --> 00:27:17,640
Speaker 5: phones and lots of other things that you use are

521
00:27:17,680 --> 00:27:21,080
Speaker 5: made in Taiwan, which obviously has a series of issues

522
00:27:21,119 --> 00:27:23,560
Speaker 5: surrounding it. And now suddenly we want to bring that

523
00:27:23,640 --> 00:27:26,360
Speaker 5: back here. But what we're finding is, and what we're

524
00:27:26,400 --> 00:27:29,480
Speaker 5: going to find, is that that is not easy. We

525
00:27:29,600 --> 00:27:33,480
Speaker 5: don't have the ecosystem of engineers, suppliers and so on

526
00:27:33,800 --> 00:27:37,040
Speaker 5: that has grown up around the semiconductor industries elsewhere. We

527
00:27:37,160 --> 00:27:41,080
Speaker 5: have this permitting problem, we have a high cost structure TSMC.

528
00:27:41,240 --> 00:27:44,679
Speaker 5: Taiwan Semiconductor, which is the leading company in making this stuff,

529
00:27:45,280 --> 00:27:48,200
Speaker 5: has a facility up on the Oregon Washington border they've

530
00:27:48,200 --> 00:27:50,400
Speaker 5: had for a number of years. They say their costs

531
00:27:50,400 --> 00:27:53,800
Speaker 5: are fifty percent higher than they are back in Taiwan,

532
00:27:54,359 --> 00:27:57,000
Speaker 5: and so yeah, they're building a fab as these factories

533
00:27:57,000 --> 00:28:00,439
Speaker 5: are called in Phoenix. But it's going to cost a

534
00:28:00,480 --> 00:28:03,119
Speaker 5: lot and it's going to make barely a dent in

535
00:28:03,160 --> 00:28:06,680
Speaker 5: our semiconductor situation. So we can talk about our industrial

536
00:28:06,720 --> 00:28:10,280
Speaker 5: policy towards semiconductors. We have. The Congress has approved fifty

537
00:28:10,280 --> 00:28:14,439
Speaker 5: two billion dollars for mostly for tax and grants to

538
00:28:14,520 --> 00:28:16,679
Speaker 5: build these things. Another I think twelve billion of it

539
00:28:16,960 --> 00:28:20,040
Speaker 5: for research and development. But then they've gone out with

540
00:28:20,119 --> 00:28:23,840
Speaker 5: an RFP for companies to apply with all kinds of

541
00:28:23,880 --> 00:28:26,960
Speaker 5: other conditions and things around it, like that companies have

542
00:28:27,000 --> 00:28:31,320
Speaker 5: to provide childcare for their employees. One thing, one of

543
00:28:31,359 --> 00:28:33,760
Speaker 5: the most important things that I learned in the auto

544
00:28:33,840 --> 00:28:36,320
Speaker 5: rescue and that we were lucky to have, was we

545
00:28:36,320 --> 00:28:39,040
Speaker 5: were told by the White House, you focus on fixing

546
00:28:39,040 --> 00:28:41,800
Speaker 5: the companies, We'll worry about all the other issues that

547
00:28:41,840 --> 00:28:44,880
Speaker 5: are out there, whether it's environment, labor, whatever, You can't

548
00:28:44,920 --> 00:28:48,840
Speaker 5: have multiple objectives in a policy that's that important and

549
00:28:48,920 --> 00:28:51,360
Speaker 5: be successful. In my opinion, you have to have one

550
00:28:51,400 --> 00:28:55,400
Speaker 5: objective and be willing to make certain sacrifices around it

551
00:28:55,480 --> 00:28:56,320
Speaker 5: to be successful.

552
00:28:56,800 --> 00:29:02,800
Speaker 1: Setting aside whether these sort of other aspects like childcare

553
00:29:02,880 --> 00:29:07,160
Speaker 1: are going to hobble our efforts to build domestic semiconductor manufacturing.

554
00:29:07,480 --> 00:29:09,719
Speaker 1: I mean, you could make the argument right that the

555
00:29:09,800 --> 00:29:13,000
Speaker 1: US semiconductor industry is doing really well. In Vidia is

556
00:29:13,040 --> 00:29:17,480
Speaker 1: a one trillion dollar company. That's twice TSMC is only

557
00:29:17,520 --> 00:29:19,640
Speaker 1: a four hundred and fifty eight billion dollar company, so

558
00:29:19,640 --> 00:29:22,560
Speaker 1: in video is bigger than TSMC. Do you agree with

559
00:29:22,640 --> 00:29:26,840
Speaker 1: the even premise that we need to have more domestic

560
00:29:26,880 --> 00:29:28,959
Speaker 1: semiconductor manufacturing.

561
00:29:29,600 --> 00:29:32,520
Speaker 4: And video doesn't make anything? No, I know, they make nothing.

562
00:29:32,400 --> 00:29:34,440
Speaker 1: But they but they make a ton of money.

563
00:29:34,680 --> 00:29:35,920
Speaker 4: Yeah that point, but.

564
00:29:35,840 --> 00:29:37,880
Speaker 1: No, no, I know, But like, but do we need

565
00:29:38,000 --> 00:29:39,960
Speaker 1: I mean yeah, so the whole look, the whole thing

566
00:29:40,280 --> 00:29:44,680
Speaker 1: sort of arose. This got this semiconductor supply chains got

567
00:29:44,720 --> 00:29:48,640
Speaker 1: on everyone's radar in twenty twenty when the low end

568
00:29:49,240 --> 00:29:53,040
Speaker 1: lagging edge nodes that went into cars, there was a

569
00:29:53,160 --> 00:29:55,280
Speaker 1: shortage of them. But then you know that eased and

570
00:29:55,320 --> 00:29:58,400
Speaker 1: we don't expect pandemics to happen except maybe once every

571
00:29:58,480 --> 00:30:01,840
Speaker 1: hundred years. Like, what, how much manufacturing do we need

572
00:30:01,880 --> 00:30:02,320
Speaker 1: to do here?

573
00:30:03,240 --> 00:30:06,320
Speaker 5: A lot or some or look, I don't know. I'm

574
00:30:06,440 --> 00:30:09,640
Speaker 5: rather skeptical as possible, but in imperfect world you'd want

575
00:30:09,640 --> 00:30:12,040
Speaker 5: a lot more. Nvidia does not make anything. It doesn't

576
00:30:12,120 --> 00:30:15,400
Speaker 5: matter what their profits are. They could design chips every

577
00:30:15,480 --> 00:30:19,400
Speaker 5: day from now till the end of civilization, but if

578
00:30:19,440 --> 00:30:21,840
Speaker 5: they don't have somebody to make them, it doesn't matter.

579
00:30:22,440 --> 00:30:24,520
Speaker 5: So in the chip world, you can separate I, at

580
00:30:24,600 --> 00:30:26,760
Speaker 5: least in my own mind, separated into kind of three

581
00:30:27,360 --> 00:30:30,880
Speaker 5: groups of chips. You have memory chips, which are basically

582
00:30:30,880 --> 00:30:33,000
Speaker 5: a commodity. We make a lot of them. That's not

583
00:30:33,040 --> 00:30:35,200
Speaker 5: going to be an issue. You have, as you said,

584
00:30:35,240 --> 00:30:38,880
Speaker 5: low end processing chips. We make some of those. There

585
00:30:38,880 --> 00:30:40,920
Speaker 5: are made in plenty of places in the world. We

586
00:30:41,040 --> 00:30:44,000
Speaker 5: can be competitive there. But none of that matters if

587
00:30:44,000 --> 00:30:47,320
Speaker 5: you don't have high end ships, because you need those. Again,

588
00:30:47,480 --> 00:30:50,480
Speaker 5: it's not just your phones, it's Defence Department's missiles. It's

589
00:30:50,520 --> 00:30:54,320
Speaker 5: all kinds of stuff that cannot function without them, and

590
00:30:54,360 --> 00:30:56,520
Speaker 5: we don't make any of them here. We literally don't

591
00:30:56,520 --> 00:30:57,120
Speaker 5: make any of them.

592
00:30:57,120 --> 00:30:57,360
Speaker 4: Here.

593
00:30:57,800 --> 00:31:01,400
Speaker 2: Okay, if we agree that we do need to semiconductors

594
00:31:01,440 --> 00:31:03,840
Speaker 2: in the US, and that maybe there is a role

595
00:31:04,000 --> 00:31:08,320
Speaker 2: for industrial policy or government money to play in that process.

596
00:31:08,960 --> 00:31:12,640
Speaker 2: I know you've been somewhat critical of the federal deficit

597
00:31:12,920 --> 00:31:16,440
Speaker 2: in recent years. How do you square those two objectives,

598
00:31:16,560 --> 00:31:18,760
Speaker 2: you know, not wanting to explode the public debt but

599
00:31:18,880 --> 00:31:22,000
Speaker 2: also wanting to foster certain domestic industry.

600
00:31:22,840 --> 00:31:24,200
Speaker 4: Look, first, let me say a couple things.

601
00:31:24,240 --> 00:31:27,520
Speaker 5: First of all, I am on the more skeptical end

602
00:31:27,560 --> 00:31:30,120
Speaker 5: of the value of industrial policy. I think when the

603
00:31:30,120 --> 00:31:33,520
Speaker 5: government gets into the business of picking winners, there are

604
00:31:33,520 --> 00:31:36,160
Speaker 5: many many ways in which it can mess up. I

605
00:31:36,240 --> 00:31:39,080
Speaker 5: will freely concede that what the Asian countries, the for

606
00:31:39,200 --> 00:31:42,720
Speaker 5: Asian countries I mentioned did in semiconductors, which is heavily

607
00:31:42,720 --> 00:31:45,960
Speaker 5: through industrial policy, worked and so there are plenty of

608
00:31:46,040 --> 00:31:49,560
Speaker 5: examples it works. Lots of people like me would say, Okay,

609
00:31:49,600 --> 00:31:51,560
Speaker 5: if you give me full control of this and I

610
00:31:51,560 --> 00:31:53,040
Speaker 5: don't have to deal with all this other stuff and

611
00:31:53,120 --> 00:31:56,160
Speaker 5: politics and whatever, I can make this work. There's a

612
00:31:56,160 --> 00:31:58,320
Speaker 5: certain amount of hubris in saying that, but that's what

613
00:31:58,360 --> 00:32:00,560
Speaker 5: a lot of us would say. That's not how it's

614
00:32:00,560 --> 00:32:02,680
Speaker 5: going to work. It's going to work as a whole

615
00:32:02,720 --> 00:32:05,680
Speaker 5: different kind of process, and that I think brings a

616
00:32:05,680 --> 00:32:07,920
Speaker 5: lot of risks in terms of the costs. We're not

617
00:32:07,960 --> 00:32:09,840
Speaker 5: talking about that much money. I mean, we have a

618
00:32:09,840 --> 00:32:13,360
Speaker 5: federal budget deficit of two trillion dollars. We're talking about

619
00:32:13,360 --> 00:32:16,560
Speaker 5: fifty two billion over a number of years. It is

620
00:32:17,280 --> 00:32:19,720
Speaker 5: important if we believe we can execute it well. And

621
00:32:19,760 --> 00:32:22,560
Speaker 5: as I said, I have my questions about that. It

622
00:32:22,640 --> 00:32:24,840
Speaker 5: is just as important as many many other things the

623
00:32:24,880 --> 00:32:26,960
Speaker 5: government does. And we just would need to find fifty

624
00:32:26,960 --> 00:32:29,240
Speaker 5: two billion dollars somewhere else to pay for this because

625
00:32:29,520 --> 00:32:31,800
Speaker 5: it is. It should be a priority if we can

626
00:32:31,840 --> 00:32:32,800
Speaker 5: execute it well.

627
00:32:32,920 --> 00:32:35,520
Speaker 1: Let me bring it back to autos for a second.

628
00:32:35,720 --> 00:32:38,480
Speaker 1: You laid out the logic of why we should have

629
00:32:38,680 --> 00:32:43,880
Speaker 1: some more manufacturing of semiconductors here. Does that logic to

630
00:32:43,960 --> 00:32:48,000
Speaker 1: you also apply to the battery realm?

631
00:32:48,240 --> 00:32:50,120
Speaker 4: I thought you were asking about autos in general.

632
00:32:50,240 --> 00:32:52,480
Speaker 1: I think, well, we could go into audit, but like

633
00:32:52,520 --> 00:32:54,520
Speaker 1: that seemed to be a specific concern, and I think

634
00:32:54,560 --> 00:32:57,680
Speaker 1: that when they passed the Inflation Reduction Act, a big

635
00:32:57,720 --> 00:33:00,880
Speaker 1: part of it was probably one of Joe Mansion. A

636
00:33:01,000 --> 00:33:03,160
Speaker 1: critical vote was like he does not want to be

637
00:33:03,200 --> 00:33:05,200
Speaker 1: in the same position that the US has found itself

638
00:33:05,240 --> 00:33:08,960
Speaker 1: in with respect to solar with respect to potentially semiconductors,

639
00:33:09,000 --> 00:33:11,680
Speaker 1: and find us in that same vulnerable position with respect

640
00:33:11,720 --> 00:33:12,160
Speaker 1: to batteries.

641
00:33:12,440 --> 00:33:15,560
Speaker 5: I would like to see us make more batteries here,

642
00:33:15,640 --> 00:33:18,320
Speaker 5: because there are a lot of batteries made in China.

643
00:33:18,760 --> 00:33:21,120
Speaker 5: I don't worry quite as much about that as I do.

644
00:33:21,160 --> 00:33:24,160
Speaker 5: It's about semiconductors because they're also batteries made in South

645
00:33:24,240 --> 00:33:27,680
Speaker 5: Korea and lots of other places that are friendly to us.

646
00:33:27,960 --> 00:33:30,160
Speaker 5: And we're Look, we are living in a global world

647
00:33:30,200 --> 00:33:32,040
Speaker 5: and we're not going to get away from that. We're

648
00:33:32,080 --> 00:33:34,000
Speaker 5: not going to get away from that. We have spent

649
00:33:34,080 --> 00:33:38,000
Speaker 5: too many years globalizing. There's a company called ASML that

650
00:33:38,040 --> 00:33:40,200
Speaker 5: you may have heard about, which makes the equipment that

651
00:33:40,200 --> 00:33:44,920
Speaker 5: makes semiconductors. Their high end EUV what's called an EUV

652
00:33:45,000 --> 00:33:47,880
Speaker 5: machine has something like six hundred and fifty thousand parts

653
00:33:47,920 --> 00:33:50,360
Speaker 5: in it. It's one of the most complicated pieces of machinery,

654
00:33:50,400 --> 00:33:53,240
Speaker 5: if not the most complicated made. Those parts come from

655
00:33:53,280 --> 00:33:56,400
Speaker 5: all over the world. The intellectual property is owned by

656
00:33:56,400 --> 00:33:59,040
Speaker 5: countries all over the world, including by US. Some of

657
00:33:59,040 --> 00:34:02,800
Speaker 5: those parts are actually made in California, and so we're

658
00:34:02,800 --> 00:34:04,280
Speaker 5: not going to get away from that. The world's not

659
00:34:04,320 --> 00:34:06,040
Speaker 5: going to get away from that. We have to accept

660
00:34:06,040 --> 00:34:08,480
Speaker 5: that we're always going to be at some risk of

661
00:34:08,600 --> 00:34:13,040
Speaker 5: supply line problems if the world becomes a less forgiving place.

662
00:34:13,680 --> 00:34:16,200
Speaker 5: So I would like to see us make some batteries here.

663
00:34:17,040 --> 00:34:19,560
Speaker 5: I think it is a much easier challenge than making

664
00:34:19,560 --> 00:34:23,080
Speaker 5: semiconductors here. So I think it's possible and likely that

665
00:34:23,120 --> 00:34:25,600
Speaker 5: we will make some. Tesla makes its batteries here, of course,

666
00:34:26,320 --> 00:34:29,959
Speaker 5: But again we shouldn't get overly optimistic about how many

667
00:34:29,960 --> 00:34:31,359
Speaker 5: we're going to make and what the costs are going

668
00:34:31,400 --> 00:34:31,600
Speaker 5: to be.

669
00:34:48,200 --> 00:34:50,360
Speaker 2: I'm going to ask you to put your banker slash

670
00:34:50,440 --> 00:34:54,120
Speaker 2: private equity hat on again. As a director of capital,

671
00:34:54,800 --> 00:34:57,960
Speaker 2: how do you encourage more money to flow into some

672
00:34:58,120 --> 00:35:03,800
Speaker 2: of these strategically and or environmentally important industries such as semiconductors,

673
00:35:03,960 --> 00:35:07,719
Speaker 2: such as potentially batteries, things like that, where to date,

674
00:35:07,880 --> 00:35:11,479
Speaker 2: maybe there hasn't been as much money as certain people

675
00:35:11,520 --> 00:35:12,320
Speaker 2: would have liked.

676
00:35:13,560 --> 00:35:19,480
Speaker 5: In some industries where the prospects for return don't seem

677
00:35:19,960 --> 00:35:23,520
Speaker 5: fulsome enough for us to invest there may if they're

678
00:35:23,520 --> 00:35:26,680
Speaker 5: important enough, then the government needs to step in so

679
00:35:26,960 --> 00:35:29,680
Speaker 5: let's talk about how the government can do this in

680
00:35:29,719 --> 00:35:32,399
Speaker 5: a way that is most cost effective. If you think

681
00:35:32,440 --> 00:35:35,319
Speaker 5: about it very broadly, the government can provide subsidies. They

682
00:35:35,320 --> 00:35:38,520
Speaker 5: can provide tax incentives. The problem with subsidies is then

683
00:35:38,560 --> 00:35:40,799
Speaker 5: you have the government in effect picking winners, and that

684
00:35:40,880 --> 00:35:44,680
Speaker 5: scares me. The advantage of tax incentives is you're basically

685
00:35:44,760 --> 00:35:47,560
Speaker 5: letting the market decide which projects are going to go forward,

686
00:35:47,800 --> 00:35:51,840
Speaker 5: with the tax and centives providing and added boost. We

687
00:35:51,960 --> 00:35:55,160
Speaker 5: have seen in my investment role, we have seen projects

688
00:35:55,880 --> 00:35:58,200
Speaker 5: that came by a couple of years ago that we

689
00:35:58,239 --> 00:36:01,879
Speaker 5: could not get pencil out to make returns meet our thresholds,

690
00:36:02,040 --> 00:36:04,520
Speaker 5: and so we didn't invest. We literally had one of

691
00:36:04,560 --> 00:36:07,400
Speaker 5: those same projects come back after the IRA was passed

692
00:36:07,680 --> 00:36:09,799
Speaker 5: and suddenly there's i think a thirty percent or some

693
00:36:09,920 --> 00:36:13,120
Speaker 5: large tax credit associated with it, and the project suddenly

694
00:36:13,120 --> 00:36:15,040
Speaker 5: made economic sense and we invested in it.

695
00:36:15,120 --> 00:36:16,880
Speaker 4: What area are we talking about. This was in the

696
00:36:16,880 --> 00:36:18,600
Speaker 4: solar area. In the solar area.

697
00:36:18,680 --> 00:36:22,120
Speaker 5: Yeah, And so that's how the market can work better,

698
00:36:22,280 --> 00:36:24,279
Speaker 5: and it is working better. In fact, it's working so

699
00:36:24,440 --> 00:36:29,160
Speaker 5: well that it seems clear that the original estimate for

700
00:36:29,200 --> 00:36:30,960
Speaker 5: the cost of the IRA, which I think was around

701
00:36:30,960 --> 00:36:33,520
Speaker 5: five hundred billion. Goldman Sax thinks it's going to be

702
00:36:33,560 --> 00:36:36,440
Speaker 5: one point three trillion. Other people are somewhere in between.

703
00:36:36,880 --> 00:36:39,080
Speaker 5: And that may sound like a bad thing, and it is,

704
00:36:39,160 --> 00:36:41,879
Speaker 5: obviously from the standpoint of the budget deficit, but it's

705
00:36:41,880 --> 00:36:44,520
Speaker 5: a good thing in the sense that these incentives have

706
00:36:44,600 --> 00:36:47,080
Speaker 5: taken so many projects that were not economic and made

707
00:36:47,120 --> 00:36:49,759
Speaker 5: them economic. And so you've had this enormous take up

708
00:36:49,800 --> 00:36:52,560
Speaker 5: and we will have a lot of progress made in

709
00:36:52,560 --> 00:36:56,319
Speaker 5: this country on energy transition projects because of it.

710
00:36:56,920 --> 00:37:00,239
Speaker 1: Let's go back to cars more broadly, because something it

711
00:37:00,320 --> 00:37:03,960
Speaker 1: comes up a lot in our conversations. It's not just

712
00:37:04,080 --> 00:37:06,720
Speaker 1: about do you have the cash, It's not just about

713
00:37:06,719 --> 00:37:09,480
Speaker 1: do you have the workers. It's like are you good

714
00:37:09,520 --> 00:37:12,120
Speaker 1: at it? Are the learning by doing? And when you

715
00:37:12,200 --> 00:37:14,840
Speaker 1: talk about you know, you even mentioned the car industry

716
00:37:14,880 --> 00:37:16,799
Speaker 1: in the US has been working on it's sort of

717
00:37:16,840 --> 00:37:21,719
Speaker 1: existing model for over a century. The chip makers in

718
00:37:21,800 --> 00:37:24,720
Speaker 1: places like Taiwan and Korea, like they've just gotten really

719
00:37:24,760 --> 00:37:26,400
Speaker 1: good at what they do and they know how to

720
00:37:26,440 --> 00:37:31,520
Speaker 1: do these repeatable processes. When it comes to evs and

721
00:37:31,560 --> 00:37:34,759
Speaker 1: the legacy automakers. Sitting aside the labor cross again for

722
00:37:34,800 --> 00:37:37,000
Speaker 1: a second, like, how much of a challenge is it

723
00:37:37,040 --> 00:37:39,839
Speaker 1: going to be for them to basically get good at

724
00:37:39,880 --> 00:37:41,520
Speaker 1: producing electric cars at scale.

725
00:37:42,120 --> 00:37:44,600
Speaker 5: It's going to be a challenge. But I think there's

726
00:37:44,600 --> 00:37:47,520
Speaker 5: an and yang to this. I think on the positive side,

727
00:37:47,880 --> 00:37:50,399
Speaker 5: they have one hundred years of history in a very

728
00:37:50,440 --> 00:37:57,640
Speaker 5: complicated industry and everything from design, engineering, supply lines, manufacturing, distribution, marketing,

729
00:37:57,680 --> 00:38:01,000
Speaker 5: and so on, and so that's an advantage that they have.

730
00:38:01,400 --> 00:38:05,359
Speaker 5: The disadvantage is their legacy companies, and they really need

731
00:38:05,400 --> 00:38:09,160
Speaker 5: to reinvent themselves in a way to compete. I was

732
00:38:09,200 --> 00:38:13,520
Speaker 5: a skeptic about the ability of companies like Tesla to

733
00:38:13,600 --> 00:38:17,799
Speaker 5: come into a market that was so established and compete effectively,

734
00:38:17,840 --> 00:38:19,080
Speaker 5: and I was wrong about that.

735
00:38:19,160 --> 00:38:20,239
Speaker 4: Obviously it can be done.

736
00:38:20,239 --> 00:38:22,120
Speaker 5: And you now also have a whole bunch of other

737
00:38:22,600 --> 00:38:26,399
Speaker 5: startups coming along, and at the moment, the Detroit Three

738
00:38:26,440 --> 00:38:28,640
Speaker 5: as we call them, are losing a lot of money

739
00:38:28,680 --> 00:38:31,520
Speaker 5: on their evs and just really beginning to roll them

740
00:38:31,520 --> 00:38:35,120
Speaker 5: out in force, and it's going to be a tough

741
00:38:35,160 --> 00:38:39,080
Speaker 5: competitive experience for them, and that's why things like labor

742
00:38:39,120 --> 00:38:40,440
Speaker 5: costs become important.

743
00:38:41,200 --> 00:38:44,280
Speaker 2: Just going back to the UAW strikes, what's your base

744
00:38:44,400 --> 00:38:47,520
Speaker 2: case for how this all works out, and what is

745
00:38:47,560 --> 00:38:51,080
Speaker 2: the trigger I suppose for the two sides to come

746
00:38:51,120 --> 00:38:51,840
Speaker 2: to a resolution.

747
00:38:52,760 --> 00:38:56,320
Speaker 5: Well, first, in relation to your opening comments to your listeners,

748
00:38:56,800 --> 00:38:59,480
Speaker 5: I think this podcast will be relevant for a long

749
00:38:59,520 --> 00:39:05,120
Speaker 5: time from every Unfortunately, unfortunately, certainly, the attitude at the

750
00:39:05,160 --> 00:39:07,440
Speaker 5: companies is that this is not going to get settled

751
00:39:07,520 --> 00:39:11,720
Speaker 5: quickly because the gap between the two sides is so vast,

752
00:39:11,840 --> 00:39:14,840
Speaker 5: and I think the companies, as I said, and you

753
00:39:14,920 --> 00:39:17,960
Speaker 5: may or may not agree, there's no possibility that companies

754
00:39:18,000 --> 00:39:20,960
Speaker 5: can possibly accept paying people forty hours and working thirty

755
00:39:20,960 --> 00:39:24,040
Speaker 5: two or anything like that. It's just it's not in

756
00:39:24,080 --> 00:39:27,759
Speaker 5: the realm of reality. And so I think at the

757
00:39:27,840 --> 00:39:29,880
Speaker 5: end of the day, what I hope will happen, and

758
00:39:29,920 --> 00:39:32,200
Speaker 5: what would be the right thing to happen, is for

759
00:39:32,719 --> 00:39:35,520
Speaker 5: the union to drop a lot of these ancillary demands.

760
00:39:36,000 --> 00:39:38,960
Speaker 5: And there are also, by the way, demands and requests

761
00:39:39,080 --> 00:39:43,120
Speaker 5: around the issue of workplace flexibility. One of the things

762
00:39:43,120 --> 00:39:45,960
Speaker 5: that we did in two thousand and nine was to

763
00:39:46,160 --> 00:39:49,319
Speaker 5: basically strip away a lot of the work roles that

764
00:39:49,360 --> 00:39:53,120
Speaker 5: we felt were impeding efficiency. General motors, I believe from

765
00:39:53,200 --> 00:39:57,000
Speaker 5: my recollection, had something like three hundred job classifications for

766
00:39:57,040 --> 00:39:59,279
Speaker 5: its workers. If you were a plumber, you couldn't touch

767
00:39:59,320 --> 00:40:02,120
Speaker 5: a piece of electric, piece of equipment or whatever. And

768
00:40:02,160 --> 00:40:06,000
Speaker 5: we reduce those to six and that is still more

769
00:40:06,080 --> 00:40:08,680
Speaker 5: or less where things stand. But there are other kinds

770
00:40:08,680 --> 00:40:12,319
Speaker 5: of flexibility that the companies need to manage, especially in

771
00:40:12,360 --> 00:40:15,200
Speaker 5: relation to the ev transition. So what I would like

772
00:40:15,280 --> 00:40:18,279
Speaker 5: to see happen is a robust pay increase, and I

773
00:40:18,280 --> 00:40:20,719
Speaker 5: think the companies have offered a reasonable one, but there's

774
00:40:20,840 --> 00:40:23,440
Speaker 5: more to go, I'm sure, and the gap there, as

775
00:40:23,480 --> 00:40:26,280
Speaker 5: I said, I think is bridgeable. And for the union

776
00:40:26,360 --> 00:40:28,880
Speaker 5: to give up most of these I'm going to call

777
00:40:28,920 --> 00:40:33,400
Speaker 5: them crazy demands and hopefully also address any kinds of

778
00:40:33,480 --> 00:40:36,279
Speaker 5: workplace flexibility issues that the companies feel they need to

779
00:40:36,320 --> 00:40:36,960
Speaker 5: be competitive.

780
00:40:37,160 --> 00:40:40,680
Speaker 2: Does it have to get worse though, before it gets better, Well, it.

781
00:40:40,600 --> 00:40:43,000
Speaker 5: Will get worse because what's happened is, as you know,

782
00:40:43,480 --> 00:40:46,000
Speaker 5: first of all, is the way they structured the strike

783
00:40:46,120 --> 00:40:48,719
Speaker 5: is unprecedented. They close three plants, one for each of

784
00:40:48,719 --> 00:40:51,759
Speaker 5: the companies, and they did that in part because they

785
00:40:51,760 --> 00:40:54,440
Speaker 5: didn't want their strike fund to get depleted too quickly.

786
00:40:54,719 --> 00:40:57,520
Speaker 5: They couldn't afford to strike all three companies. They didn't

787
00:40:57,520 --> 00:40:59,399
Speaker 5: want to do what historically has been done with strike

788
00:40:59,440 --> 00:41:02,640
Speaker 5: one company. But what's going to happen now is that

789
00:41:03,560 --> 00:41:07,120
Speaker 5: gradually other facilities are going to close because there's no

790
00:41:07,160 --> 00:41:10,000
Speaker 5: place to send the parts because there's nobody to assemble

791
00:41:10,120 --> 00:41:12,480
Speaker 5: the cars and trucks at these three facilities that have

792
00:41:12,600 --> 00:41:15,640
Speaker 5: been shut down. And then those facilities will shut down

793
00:41:15,760 --> 00:41:18,080
Speaker 5: and those workers will be laid off. Under the rules,

794
00:41:18,120 --> 00:41:20,680
Speaker 5: the companies can't simply shut those facilities and lay off

795
00:41:20,760 --> 00:41:23,719
Speaker 5: the workers unless they have a legitimate business reason to

796
00:41:23,800 --> 00:41:27,600
Speaker 5: do that, i e. They're oversupplied with whatever that particular facility,

797
00:41:28,040 --> 00:41:31,800
Speaker 5: what facility does. So yeah, this could easily ripple through

798
00:41:32,440 --> 00:41:36,120
Speaker 5: the entire set of facilities around the Big three in

799
00:41:36,239 --> 00:41:39,880
Speaker 5: Detroit three they could shut down. You could have one

800
00:41:40,000 --> 00:41:42,600
Speaker 5: hundred and thirty thousand workers on strike or not on strike,

801
00:41:42,640 --> 00:41:45,160
Speaker 5: but laid off and on strike. There will be significant

802
00:41:45,200 --> 00:41:47,800
Speaker 5: effects on parts suppliers. By the way, let's not forget

803
00:41:48,200 --> 00:41:50,800
Speaker 5: that these companies don't make a lot of their parts.

804
00:41:50,840 --> 00:41:53,920
Speaker 5: Most of their parts they've outsourced those years ago. So

805
00:41:54,000 --> 00:41:56,200
Speaker 5: those and this was something we encountered in two thousand

806
00:41:56,280 --> 00:41:58,520
Speaker 5: and nine as well, And so those companies are going

807
00:41:58,600 --> 00:42:01,960
Speaker 5: to suffer financial pressures and they will be concentrated in

808
00:42:02,000 --> 00:42:04,879
Speaker 5: the Upper Midwest, and none of this is a good thing.

809
00:42:05,680 --> 00:42:09,400
Speaker 1: You broke the UAW demands between what you see is

810
00:42:09,440 --> 00:42:13,640
Speaker 1: like sort of very reasonable and deserved pay increases and

811
00:42:13,680 --> 00:42:17,200
Speaker 1: then this so called crazy demand. Where does ending the

812
00:42:17,280 --> 00:42:19,720
Speaker 1: tiered system fall into that? Do you consider that crazy

813
00:42:19,760 --> 00:42:21,240
Speaker 1: or is that something that can be solved?

814
00:42:21,280 --> 00:42:24,920
Speaker 5: Well, again, that's a money issue, really, and so it's

815
00:42:24,960 --> 00:42:27,920
Speaker 5: a question of how you want to allocate the money.

816
00:42:27,960 --> 00:42:32,800
Speaker 5: If you give the existing permanent workers more than whatever,

817
00:42:33,280 --> 00:42:35,640
Speaker 5: then there's less to deal with what they're called the

818
00:42:35,640 --> 00:42:39,239
Speaker 5: temp workers now, and so it's really a question as

819
00:42:39,320 --> 00:42:41,719
Speaker 5: much for the union as for the companies as to

820
00:42:41,719 --> 00:42:44,279
Speaker 5: how they want to allocate it. The temporary worker thing

821
00:42:44,360 --> 00:42:47,319
Speaker 5: has been significantly improved since two thousand and nine in

822
00:42:47,400 --> 00:42:49,200
Speaker 5: terms of the amount of time a new worker is

823
00:42:49,200 --> 00:42:52,520
Speaker 5: a temporary worker before they become a permanent worker, and

824
00:42:52,560 --> 00:42:55,200
Speaker 5: I think that will continue to shrink under this new contract.

825
00:42:55,360 --> 00:42:58,560
Speaker 5: I think the company's prepared to give something on that front.

826
00:42:58,719 --> 00:43:00,200
Speaker 5: But again, as I said, it's as much for the

827
00:43:00,280 --> 00:43:03,600
Speaker 5: UAW is this for the companies as to where their

828
00:43:03,600 --> 00:43:04,520
Speaker 5: priorities lie.

829
00:43:04,800 --> 00:43:08,080
Speaker 1: Let me ask you one thing about EV's is I

830
00:43:08,120 --> 00:43:11,480
Speaker 1: think they're less labor intensive and they have fewer parts total,

831
00:43:11,560 --> 00:43:15,160
Speaker 1: so there's less assemblies. So even under again saying there

832
00:43:15,200 --> 00:43:19,000
Speaker 1: was no contract issues, I believe the perception is that

833
00:43:19,200 --> 00:43:23,319
Speaker 1: the transition would require less labor. Is that the case, Like,

834
00:43:23,360 --> 00:43:25,360
Speaker 1: what is the stress that's going to become on the

835
00:43:25,440 --> 00:43:29,600
Speaker 1: labor force in your view, regardless of this contract from

836
00:43:29,880 --> 00:43:30,359
Speaker 1: But this is.

837
00:43:30,320 --> 00:43:33,640
Speaker 5: Something the UAW is worrying about, and it's analogous in

838
00:43:33,680 --> 00:43:36,520
Speaker 5: a way to what the screenwriters are worrying about. They're

839
00:43:36,560 --> 00:43:38,720
Speaker 5: worrying that AI is going to put them out of work.

840
00:43:39,040 --> 00:43:41,360
Speaker 5: The UAW is worrying that the evs are going to

841
00:43:41,360 --> 00:43:43,480
Speaker 5: put them out of work. And this is again where

842
00:43:43,719 --> 00:43:47,279
Speaker 5: there's a very interesting tension in America today between the

843
00:43:47,320 --> 00:43:49,520
Speaker 5: people who care passionately about labor and the people who

844
00:43:49,800 --> 00:43:52,200
Speaker 5: care passionately about the energy transition. Many of them are

845
00:43:52,280 --> 00:43:55,720
Speaker 5: the same people, and I certainly would even consider myself

846
00:43:55,719 --> 00:43:58,520
Speaker 5: one of them. But you have to decide what your

847
00:43:58,560 --> 00:44:01,520
Speaker 5: priorities are, and if we want to be competitive in

848
00:44:01,600 --> 00:44:04,480
Speaker 5: evs and not end up like semiconductors where they're all

849
00:44:04,520 --> 00:44:07,120
Speaker 5: made somewhere else, then we have to accept that there

850
00:44:07,160 --> 00:44:08,920
Speaker 5: are going to be some costs to that. I don't

851
00:44:08,960 --> 00:44:12,200
Speaker 5: mean financial costs. I mean costs in terms of jobs, because,

852
00:44:12,200 --> 00:44:15,279
Speaker 5: as you correctly said, evs require a good bit less

853
00:44:15,360 --> 00:44:18,680
Speaker 5: labor and we just have to accept that, and trying

854
00:44:18,719 --> 00:44:22,200
Speaker 5: to protect old jobs is never a winning strategy for

855
00:44:22,239 --> 00:44:23,480
Speaker 5: any country or any company.

856
00:44:24,280 --> 00:44:26,839
Speaker 2: I want to ask one more question. This is what

857
00:44:26,880 --> 00:44:29,600
Speaker 2: we call a giveaway question. Well, you're a former journalist.

858
00:44:29,640 --> 00:44:31,719
Speaker 2: You know your time as cars are.

859
00:44:32,360 --> 00:44:33,000
Speaker 1: What was your.

860
00:44:32,920 --> 00:44:36,320
Speaker 2: Favorite or most memorable moment from that period?

861
00:44:37,320 --> 00:44:41,719
Speaker 5: My most memorable moment, there's a competition for that. For

862
00:44:41,800 --> 00:44:45,160
Speaker 5: that award, I had many many It was a fascinating experience.

863
00:44:45,200 --> 00:44:47,040
Speaker 5: It was the best thing I ever did with my life.

864
00:44:47,160 --> 00:44:50,000
Speaker 5: I felt like I actually made a contribution and we

865
00:44:50,000 --> 00:44:52,920
Speaker 5: were able to achieve it. I would say, interestingly, and

866
00:44:52,960 --> 00:44:55,160
Speaker 5: this this is a little different than what we've made.

867
00:44:55,440 --> 00:44:58,880
Speaker 5: My most memorable moment was when we got inside of

868
00:44:58,920 --> 00:45:02,520
Speaker 5: General Motors. I had been taught and brought up in

869
00:45:02,600 --> 00:45:06,160
Speaker 5: my investment banking world to think that General Motors was

870
00:45:06,280 --> 00:45:11,120
Speaker 5: a really iconic company, well managed for the most part,

871
00:45:11,480 --> 00:45:14,400
Speaker 5: especially in finance. They were renowned for their finance department.

872
00:45:14,800 --> 00:45:17,320
Speaker 5: When we got inside General Motors, I could not believe

873
00:45:17,360 --> 00:45:20,720
Speaker 5: how badly that company was run. They didn't even really

874
00:45:20,800 --> 00:45:24,040
Speaker 5: have a model, a financial model that we could use

875
00:45:24,400 --> 00:45:26,799
Speaker 5: to project the results for five years. They had some

876
00:45:26,880 --> 00:45:29,840
Speaker 5: cut and paste thing, but they didn't even have really

877
00:45:30,080 --> 00:45:32,160
Speaker 5: a model that could be manipulated and where you could

878
00:45:32,239 --> 00:45:35,239
Speaker 5: change assumptions and things like that. The culture of the

879
00:45:35,239 --> 00:45:38,200
Speaker 5: company was terrible. It was a get along, go along

880
00:45:38,280 --> 00:45:42,399
Speaker 5: kind of culture. Nobody would challenge anybody. The CEO had

881
00:45:42,400 --> 00:45:46,000
Speaker 5: an elevator that took him from his private executive or

882
00:45:46,000 --> 00:45:48,759
Speaker 5: the private executive car parking area, straight to I think

883
00:45:48,800 --> 00:45:50,560
Speaker 5: it was the forty ninth or fiftieth floor and the

884
00:45:50,600 --> 00:45:53,759
Speaker 5: Renaissance tower to his office without stopping any of the floor,

885
00:45:53,800 --> 00:45:55,239
Speaker 5: so he didn't have to mingle with any of the

886
00:45:55,520 --> 00:45:59,000
Speaker 5: ordinary people. The executive offices were behind a locked door.

887
00:45:59,040 --> 00:46:01,400
Speaker 5: You had to have a certain kind of paths to

888
00:46:01,440 --> 00:46:05,239
Speaker 5: get through that door. It was unbelievable, unbelievable to me

889
00:46:05,440 --> 00:46:08,520
Speaker 5: to see an kind of company run like that, and

890
00:46:09,040 --> 00:46:11,560
Speaker 5: it was clear from the from day one that a

891
00:46:11,600 --> 00:46:14,040
Speaker 5: big part of what we needed to do there was

892
00:46:14,080 --> 00:46:16,840
Speaker 5: to change management. This was this is not labor. It

893
00:46:16,880 --> 00:46:19,080
Speaker 5: was not labour's fault that these companies got in trouble.

894
00:46:19,160 --> 00:46:22,399
Speaker 5: They have some responsibility, but management had an off lot

895
00:46:22,400 --> 00:46:23,240
Speaker 5: of responsibility.

896
00:46:23,719 --> 00:46:26,080
Speaker 2: All right, Steven Rattner, thank you so much for coming

897
00:46:26,080 --> 00:46:28,440
Speaker 2: on all thoughts and reminiscing with us and sharing your

898
00:46:28,480 --> 00:46:30,600
Speaker 2: thoughts on the current situation. Appreciate it.

899
00:46:30,600 --> 00:46:32,239
Speaker 4: It was fun. Thanks so much for having me.

900
00:46:32,320 --> 00:46:33,439
Speaker 1: Thank you. That was really great.

901
00:46:33,520 --> 00:46:49,120
Speaker 3: Yeah, that was fantastic. Thank you, so Joe. I thought

902
00:46:49,120 --> 00:46:50,040
Speaker 3: that was a.

903
00:46:50,080 --> 00:46:54,440
Speaker 2: Very nuanced discussion of a topic that clearly people have

904
00:46:54,640 --> 00:46:57,319
Speaker 2: a lot of feelings about. I did think one thing

905
00:46:57,320 --> 00:46:59,719
Speaker 2: that jumped out to me was just how important that

906
00:46:59,719 --> 00:47:03,520
Speaker 2: echomic backdrop is for these types of things. So Steve

907
00:47:03,600 --> 00:47:06,279
Speaker 2: was talking about how in two thousand and nine you

908
00:47:06,320 --> 00:47:09,000
Speaker 2: were able to get concessions out of the union because

909
00:47:09,120 --> 00:47:12,640
Speaker 2: the economy was not doing very well. Obviously, fast forward

910
00:47:12,680 --> 00:47:14,720
Speaker 2: to today and it feels like the balance of power

911
00:47:14,800 --> 00:47:18,759
Speaker 2: has shifted potentially more in favor of workers, and so

912
00:47:19,160 --> 00:47:22,040
Speaker 2: you can see why the UAW thinks this is the

913
00:47:22,080 --> 00:47:22,880
Speaker 2: moment to strike.

914
00:47:23,640 --> 00:47:27,239
Speaker 1: Absolutely, I mean absolutely, the macro backdrop couldn't be more

915
00:47:27,320 --> 00:47:31,040
Speaker 1: different from the time when Stephen was the cars. It's

916
00:47:31,120 --> 00:47:34,640
Speaker 1: crazy that last point. I'm yeah, about the elevator going

917
00:47:34,640 --> 00:47:37,360
Speaker 1: straight up to the top of the Renaissance Tower in Detroit.

918
00:47:37,400 --> 00:47:39,440
Speaker 2: I mean, he was talking about how a lot of companies,

919
00:47:39,560 --> 00:47:42,560
Speaker 2: especially car companies, don't have defined pensions anymore. I wonder

920
00:47:42,560 --> 00:47:45,840
Speaker 2: if they still have executive dining rooms and bathrooms and

921
00:47:45,880 --> 00:47:46,560
Speaker 2: things like that.

922
00:47:46,440 --> 00:47:48,800
Speaker 1: They get a I would guess so, though I guess

923
00:47:48,840 --> 00:47:51,200
Speaker 1: we could confirm hopefully. I wonder if they still have

924
00:47:51,280 --> 00:47:54,520
Speaker 1: that elevator. But you know, like there's a lot here,

925
00:47:54,719 --> 00:47:58,160
Speaker 1: and so, you know, obviously, the labor component, like in

926
00:47:58,239 --> 00:48:01,120
Speaker 1: my mind, like when I think about will the big

927
00:48:01,239 --> 00:48:06,560
Speaker 1: three companies thrive in the age of electric vehicles, I

928
00:48:06,600 --> 00:48:10,000
Speaker 1: guess I'm skeptical that the cost of labor, whether it's

929
00:48:10,040 --> 00:48:12,360
Speaker 1: five percent or seven percent, is going to be the

930
00:48:12,400 --> 00:48:15,720
Speaker 1: defining question of it. It still seems like the big

931
00:48:16,080 --> 00:48:19,160
Speaker 1: question mark in my mind is can they make cars

932
00:48:19,239 --> 00:48:22,920
Speaker 1: productively that people want to right and can they maintain

933
00:48:22,960 --> 00:48:25,680
Speaker 1: their businesses which are still, like, you know, heavily driven

934
00:48:25,719 --> 00:48:28,880
Speaker 1: by profits from internal combustion engine cars priced over a

935
00:48:28,880 --> 00:48:31,879
Speaker 1: long time. Can the pencil out in the end where

936
00:48:31,920 --> 00:48:35,279
Speaker 1: the profits from evs against all kinds of competition that

937
00:48:35,360 --> 00:48:38,359
Speaker 1: they didn't have in the previous era, does it work?

938
00:48:38,680 --> 00:48:40,400
Speaker 1: Are they competitive in this space? And I think it's

939
00:48:40,440 --> 00:48:42,000
Speaker 1: still kind of TVD Yeah.

940
00:48:41,840 --> 00:48:43,880
Speaker 2: And the other thing and Steve kind of touched on

941
00:48:43,960 --> 00:48:47,400
Speaker 2: this is just the uniqueness of the car industry on

942
00:48:47,440 --> 00:48:49,880
Speaker 2: the whole. So, you know, we associate a lot of

943
00:48:49,960 --> 00:48:53,160
Speaker 2: car makers with American industry, and I think there's also

944
00:48:53,200 --> 00:48:57,759
Speaker 2: a tendency for Americans to want to buy American cars

945
00:48:57,760 --> 00:49:00,640
Speaker 2: often there's the sort of brand recognition of and so

946
00:49:00,719 --> 00:49:03,600
Speaker 2: I kind of wonder, to your point on the labor costs,

947
00:49:03,680 --> 00:49:06,640
Speaker 2: if maybe people are willing to give up a little

948
00:49:06,640 --> 00:49:09,640
Speaker 2: bit of price in order to you know, support and

949
00:49:09,719 --> 00:49:12,280
Speaker 2: buy American and all of that type of stuff.

950
00:49:12,360 --> 00:49:15,040
Speaker 1: By the way, Tracy, did you hear where that copper

951
00:49:15,080 --> 00:49:16,360
Speaker 1: mind he was looking to invest in?

952
00:49:16,520 --> 00:49:20,560
Speaker 3: Is I knew? I knew you would notice that. Arizona.

953
00:49:20,719 --> 00:49:23,239
Speaker 1: Yeah, another another Arizona angle for when we do our

954
00:49:23,440 --> 00:49:25,880
Speaker 1: Arizona I didn't realize. I just look at on Wikipedia.

955
00:49:25,920 --> 00:49:28,040
Speaker 2: They all somehow comes back to Arizona.

956
00:49:28,160 --> 00:49:28,319
Speaker 4: Right.

957
00:49:28,320 --> 00:49:31,080
Speaker 2: We have to go to Arizona, visit an alfalfa farm,

958
00:49:31,400 --> 00:49:35,400
Speaker 2: visit like a water treatment plant, car a copper mine,

959
00:49:35,480 --> 00:49:36,640
Speaker 2: a car factory.

960
00:49:36,760 --> 00:49:41,040
Speaker 1: No, there's more. There's a Howard Hughes Master Limited, a

961
00:49:41,280 --> 00:49:44,440
Speaker 1: master Plan community semiconductor fab and we have to take

962
00:49:44,480 --> 00:49:47,000
Speaker 1: a self driving car around on the entire tour.

963
00:49:47,160 --> 00:49:49,640
Speaker 3: All right, shall we leave it there? Right now?

964
00:49:49,760 --> 00:49:50,480
Speaker 4: Let's leave it there.

965
00:49:50,640 --> 00:49:53,840
Speaker 2: Okay, this has been another episode of the Odd Blots podcast.

966
00:49:53,920 --> 00:49:57,280
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.

967
00:49:57,040 --> 00:49:59,920
Speaker 1: And I'm Jill Wisenthal. You can follow me at the Stalwart.

968
00:50:00,040 --> 00:50:03,760
Speaker 1: Follow our guests Steven Rattner. He's at Steve Rattner. Follow

969
00:50:03,800 --> 00:50:07,520
Speaker 1: our producers Carmen Rodriguez at Carmen armand dash Ol Bennett

970
00:50:07,520 --> 00:50:10,440
Speaker 1: at dashbod. And thank you to our producer Moses Ondam.

971
00:50:10,800 --> 00:50:14,439
Speaker 1: Follow all of the Bloomberg podcasts under the handle at podcasts,

972
00:50:14,760 --> 00:50:17,160
Speaker 1: and for more odd Loots content, go to Bloomberg dot

973
00:50:17,200 --> 00:50:20,320
Speaker 1: com slash odd Lots, where we post transcripts, a blog,

974
00:50:20,400 --> 00:50:23,360
Speaker 1: and a newsletter. And check out the discord. We have

975
00:50:23,400 --> 00:50:25,920
Speaker 1: a transportation room, we have a climate room. Gonna be

976
00:50:26,000 --> 00:50:29,080
Speaker 1: lots to talk about this one discord dot gg slash

977
00:50:29,120 --> 00:50:31,560
Speaker 1: odd Lots. Talk about this and all the other episodes

978
00:50:31,600 --> 00:50:32,520
Speaker 1: with fellow listeners.

979
00:50:32,800 --> 00:50:35,440
Speaker 2: And if you enjoy odd Lots, if you like it

980
00:50:35,480 --> 00:50:38,480
Speaker 2: when we talk about labor movements, then please leave us

981
00:50:38,480 --> 00:50:42,480
Speaker 2: a positive review on your favorite podcast platform. Thanks for listening.