P&L: The Global Nature of the Auto Industry

is the president of Toyota North America. He joined us for a discussion of the all new, updated camera, the outlook for sedans, and also being positioned for the presidential transition. The new camera is a vehicle that we're very proud of. This is the eighth generation since we introduced it originally back in three but this is a this is a unique camera for us. We've done this entire car completely.

It has a new platform, new power trains, new body, new interior, and all the new technology that that that we have developed over the years is all comes together in this eighth generation car. Uh really proud of it. We've done two executions of the camera. There's one that's very sporty and there's one that's very luxurious. So depending on what the consumers preferences. And we're announcing it here for the first time globally in in uh in the Detroit Auto Show, but it will be available at our

dealerships later this summer. So why is Toyota focusing on a camera which is a mid size smaller midsized vehicle when the trend is really really moving towards light trucks. The story of Team was was light trucks, and and light trucks happens to be an uh more of an industry slang. What it's really most popular right now is car based SUVs or c uvs um like our rav and like our our Highlander. However, the sedan market is still an extremely large and important part of the business.

How big of a part of business is it for you? It's about well, the industry itself, it's about two point five million units, and Camray is the number one vehicle not only in that segment, but it's the number one selling pass in your car in the US for fifteen consecutive years. What about for Toyota, it is by far our number one volume vehicle and we have a four

O FO. We did three thousand last year, and so we're looking at similar sales going into One of the things I think it's going to be interesting to watch because we've seen this over the years, is the midsize sedan segment hasn't had a lot of innovative product, new product coming in. So this year we're we're launching the best camera that we've ever built, full of new technology.

This vehicle is so sophisticated that even if a pedestrian walks in front of the vehicle, it will actually apply the brakes and assist the driver of steering around it. So it's automatic breaking, which is available in the market, but by we've developed or that it can actually uh sense soft tissue and help avoid avoid accidents. UH. There's rumors that perhaps there's going to be a competitors will bring be bringing their cars to market later this fall.

So we have seen in the past in small pickup trucks, We've seen it in in subcompact cars. When new vehicles come with new styling, new design, new technology, UM, there's life comes back into that segment. So we we think that the UH the segment that did decline last year, will will plateau and who knows, perhaps even show little growth next year. Bob where up rating? It seems at least in the automobile industry or any big manufacturer in

a different world. Come January, there will be a new president. Donald Trump has certainly taken to the Twitter sphere in order to voice his particular perspective on where automobiles are made. Do you feel, as an auto executive that you are living in a different time than you were, let's say, twelve months ago. Well, my quick answer to that, pen would be, it's a little bit early to tell. But the global the the auto industry is very much a

global industry. We have fifty three plants that are currently operational in UM countries around the world. Ten of those plants are here in the US, but the supply chain is very very much global. The camera that we were talking about earlier, UM cars dot Com has now for four years named that the most American car consumers can buy. And what they calculate that on is where are the parts sourced? Whereas the labor source and by their calculation

of the camera is American sourced. The reverse of that, though, is we still because of the global supply network, uh do source of a camera across the world. So it's very much a global industry. The supply chains are very long, and so we're working. We look forward to working with the new administration to get them to understand the complexities of our industry. What's your number one fear for this year as far as political interference with the auto industry,

I wouldn't characterize it as a as a fear. We we are very confident this year. The economy is very good. There was seventeen point five million cars sold in the US last year. We believe it's gonna be lower in ten, but we're forecasting and market between seventeen seventeen point two. Uh So the economy, he's very robust right now. We think, uh,

we think it's going to be another good year. That was Bob Carter, president of Toyota North America, speaking with US yesterday about the updated Camray, as well as the outlook for sedans and the potential uh for political interference or perhaps lack thereof. There we are hearing is going on right now at Capital Hail. Jeff Sessions is looking to be confirmed as Attorney General, and John Kelly president elect Trump's pick for Homeland Security. I want to bring

in Nancy Agnanovitch. She's a Capital Hill reporter for Bloomberg b an A in Washington, d c UM, and I wanted to get your sense of so far what we've learned. I believe Jeff Sessions is still being grilled. Well, this is only the beginning of his two day hearing. As ss UM, they'll be meeting at Judiciary for two days

in a row to look at his qualifications. I think he's one of the people who's already got all of his financial information in and has complied with those requirements, and so he's covered there in terms of fulfilling those requirements. But I guess there are concerns about his very conservative philosophy concerning immigration and other issues, and so there'll be

a lot of questions there. And so I was gonna say, could you just outline for us how many how many hearings are going to be held today and then tomorrow and then on Thursday, just we have an idea of how packed the schedule is this week. All overall, we're looking from twelve to fifteen depending on how you calculated. But today we have those three hearings, including too that you mentioned. Then tomorrow Wednesday, there were six that were scheduled.

But Senator Schumer, the Minority leader, just a little bit ago this morning, I announced that Eastern negotiated a plan with joy Pretty Leader McConnell to reduce that down to three on Wednesday and to push some of those off till Thursday and next week. And then on Thursday we

have another five to six hearings. So there are a lot and a lot of these deal with President elect Trump's national security team, and McConnell wants very much to get six to seven of the cabinet picks or national security team members confirmed by inauguration day in order for him to have that in place when he goes into

the White House. Nancy, is this typical, this type of packed confirmation schedule, Well, Senator McConnell has said repeatedly that on the very first day of the Obama administration they

confirmed seven people. But I think what Democrats are saying is those people um already had their FBI tabinet I'm sorry, FBI background checks done, their financial disclosure, the disclosure forms, the in and all these other requirements, and a lot of people who Trump as proposed to nominate haven't flied without so far, and for that's one of the reasons

why Democrats want to slow this process down. And then they also were saying that, unlike in the Obama administration, we're looking at many billionaires or otherwise very very wealthy people who have very complicated financial holdings that require more examination. And also many of these people have never served in government before, especially not at this kind of level. Rex Chellison, former chief executive of ex On Mobile, slated to be

the nation's top diplomat. How contentious or how confrontational do you believe those hearings will be? Well. Democrats will obviously raise a lot of questions about his relationship with Vladimir Putin and his feelings with Russia over the years, And I guess the primary question is whether he can put aside maybe his friendship with Putin to look out for the interests of the United States as this country's top diplomat.

So I think there will be some contentiousness there. So, Nancy, from your perspective, I mean, so far, what is the tenor of the questions been, Like, I mean, is it mostly just political grandstanding or are are the questions, really probing and substantive and trying to get to some kind

of comfort with who we have. There's always political grandstanding, but I think there are legitimate concerns about UM some of these nominees financial holdings and trying to get a look at that in order to identify potential conflicts of interest, UM, when a person is in charge of a department UM with billions of dollars in funding going out to different industries, and you can't really look for potential conflicts of interest

if you haven't seen the paperwork yet. So I think they're trying to slow it down, and I think Democrats know that it's very unlikely that they can derail many of these nominees, but they want to have a chance to do what they call the advice and consent role that the Senate has traditionally done before they let them advance, before they're actually put to a vote on the Senate floor.

Thank you very much for joining us. Nancy Ognanovich, Capitol Hill reporter for Bloomberg b NA, joining us from Washington, d C. We're broadcasting from the North American International Auto Show, and Lisa Brahmins, do you know that Cadillac is going to launch a fifteen hundred dollar a month luxury car subscription service. Do you get a new car every months? Coming in the mouth, Well, you might be able to, particularly since we're gonna be talking now with the president

of Cadillac. Johann didn't meet Mason. Thank you very much for being in here. Tell us about this new subscription service. What's it aimed at, and why are you Why are you launching this? It's called Book by Cadillac, and really is a response to what is a very dynamic environment within which the order industry is doing business today. If we look at the emergence of the mega cities around

the world. UM, these cities were initially enabled by the principle of individual mobility, but the principle has become so successful that it's resulted in congestion and noise and pollution and all the things that are big obstacles to vehicle ownership. UM. One response to that is the emergence of right shoting service is like lift and Ubo, and those certainly will probably containue to gain traction. And living in New York I can tell you that we face significant barriers to

operating vehicles so we are still diplomatic. I mean, honestly, I've driven down a one way street with three bike riders coming at me and you know, another person walking out in front. This is this is what you're talking about with challenging. So it's it's it's like one benefit of living in the city. I experienced it first then. And what we want to do is to make sure that we are part of the world that does the disruption and we don't end up being disrupted. And so

we need to respond to a changing world. And we know that for affluent customers, flexibility convenient time has value, and we thought, why should we follow only the conventional model of business ownership where you're right out of check by the car pocket in your garage for of the time, and that's kind of it. Surely there must be an opportunity to respond with greater flexibility. So it's basically like a new version of having a personal driver. Not quite no,

you will continue to drive the car yourself. But of course this is a precursor to full autonomous driving capability, in which gets that's no longer a point is that the point of this, though partly up to it's it's basically training well to have call, have cars on call, rather than having ownership and being able to have that car brought to them and for now they'll drive it, but maybe in three years they were but precisely right.

So it's a setup for the future that we see a little bit beyond just the the the definition of the product substance today and what this really book means is that you buy into a Cadillac experience, a luxury experience that's fully immersive. It's not tied to any individual vehicle. It gives you flexibility to change your car eighteen times a year, so more than once a month. And if today you feel like a sports car, tomorrow it's a

night out of the town and a luxury automobile. And then you want to go skiing, you need a suv. You can have all of those. And as we expand the program, we're starting off in New York, but conceivably, let us say you go to l A for a week and you need a car there, Well, you take your book by Cadillac in l A. You know, to rent a car anymore. So it's about convenience, about flexibility.

All maintenance insurance is taken care of. They always have a car that's clean and fully gassed, a lover to your doorstep, and all of that convenience and flexibility we think has value for affluent consumers. Now you have experienced at Infinity as well as Audi, and I'm wondering what you are bringing Cadillac, particularly to the dealership network, because there's a big effort on the part of Cadillac to

really upgrade and streamline and stabilize the dealership. The real thing for us is we are on a long term journey. I would have to say to restore Cadillac what we kind of loosely call to the pinnacle of premium, back to that world where it occupied this position as the unquestioned standard for the world in Project It's called Project

Pinnacle for that reason. And while we are working very hard on expanding the product portfolio and really creating top technology cars with great craftsmanship and and and great technology, that's only part of the question that needs to be answered. We also need to look downstream at the overall ownership experience. And yeah, dealer network plays a crucial role because it's the environment within which the customer engages the brand and the quality of our dealer network also needs to reflect

our premium aspirations. And to be clear, we have some really outstanding dealers that do an herculean task in terms

of elevating the overall brand experience. Reality for us, though, is we also a very large dealer network and the variability in the overall delivery of that experience is something that we are trying to get into a narrower distribution, and the Project Pinnicle is designed to set around brand standards for our dealers in terms of that customer experience, which we then reward with ever increasing financial bonuses as they reach increasing compliance. Johann Denaithan, thank you so much

for being with us. It's truly fascinating development. The idea of trying to create a precursor to what the inevitable. The Johann Denaisan, president of Cadillac, talking about the new car subscription service in New York City, which may really be the stepping stone to the new version of auto lack of ownership, which a voids the bicycles when you drive.

I'm trying. My dad tells me, this is Bloomberg. We're broadcasting from them North American International Auto Show Earlier we got a chance to sit down with the Joe Henrix. He is the president of the Americas for Ford. Talked about the new F one fift pick up, the electrified vehicle lineup at Ford, plus investments in new jobs in Michigan, and the Donald Trump effect. The first question we wanted to know was what the importances of the F series

is to Ford. You know, when you when you start with our business in North America, it starts with F series, or of our volume in North America's our F series trucks. FIR trucks have been the best selling vehicle in the United States for thirty five years consecutively, the best selling trucks for forty years. So it's a big part of our business. Obviously, we're expanding beyond that into all kinds of other parts of the business, but it's it's safe to say the crown jewels of Ford Motor Company in

North America are the F series trucks. And of course we got to announce the two thousand eighteen Molly R F one fifties getting some upgrades and freshening, which is all he's very exciting to talk about. Whenever we talk about car companies. At this point in the political trajectory. We have to uh talk about President elect Donald Trump less than a week ago forward canceled plans for one point six a billion dollar planned in Mexico. You have to think it has to do somewhat with President elect

Trump's rhetoric. Will this cancelation material effect the production of any particular vehicles and do you expect less of production of certain types of vehicles because of the political pressure right now? Yeah, So you know, it's a hot topic

at the moment. To be sure. I mean, we took a look at the end of last year where small car sales were going in the US and and did some updated projections whether they're going to be in the future, and we reached a point where we felt comfortable enough that we could fit the focus volume that we forecast for two thousand and eight, nineteen twenty and beyond into an existing manufacturing capacity plant we have in Hermcile, Mexico.

That was the big driver decision. Uh. And because in our in our business capacities everything, it's such a billion dollar plants are a big deal. Capacitization is everything, and you when you can get new capacity into existing plants a lot cheaper than building a new plant, even though we were pretty far along on starting the new plant. The cancelation of that, the movement of focus into her mas SEO and then investing some of that money into an expansion of our plant here in Michigan to produce

two new products. That say, it's about five million dollars of capital UM and that was the big driver read decision. I know the timing and us of his um leads to a lot of other questions, but but you know, the ability to be able to forecast lower small car sales, so that's what's been happening in the US really was the main driver. So do you think that Ford will make any changes to its future plans as a result of the current political climate and sort of the focus

on American produced goods? You know, well, we are taking into account what we expect to be some pro growth initiatives by the Trump administration, including some taxation policy discussions, hopefully some improvements in the competitiveness of the US economy when it comes to corporate tax rates and some other things regulatory and the like. So if he never say one factor really drives a decision, there's in our business, so many things get taken into account when you're making

investment decide of what we make. But we are taking into account some expected changes into the into the you know, regulatory and economic cycle in the US. You asked the question about production, we're not. We're still moving focus production to Mexico. We won't, it won't be any production. Kind of mythsed by all of this. It's just making sure that we spend the right amount of mind to do it. Give our listeners an idea Ford's business in North America

and Ford's business overseas. It's may surprise people. Yeah, well, in North America we're the second largest manufacturer and seller of vehicles. We actually produce more vehicles in the United States and anybody else. We employ more workers and manufacturing workers in the US and anybody else. We're number one in Canada, we're second in the U S and sales, number one in Canada for sales, and we're you know, fifth or six in Mexico, depending on what time of

the year we are. And our business in total of North America is over three million units. Ford globally has a strong presence of course in Europe, a strong presence now in China. We're now in the top six, five or six brands in China. UM, we have a strong presence in Brazil and South America. Were third or fourth or fifth, depending on what market. Second in Argentina, but we're depending on what market you're looking at, and when you look at our business, the majority of our revenue

comes to North America. The majority of our profits come from North America, but we certainly have a strong presence all around the Roman what's the weakest market right now, Well, it's harder to find weakest market. The probably the most challenged market would be Brazil, given the economic and political challenges that the country faces. The auto industry in Brazil has collapsed about half were it was a few years ago. That puts a lot of pressure on our business. Also

the uncertainty and the political challenges that they've had. We've seen some progress lately the president Tamarins and things that have happened, but Brazil is certainly challenged and the Indian market India has not grown to the level people thought I was going to grow and there's a lot of pressure on that business as well. That was Joe Hendrix. He is the president of the Americas for Ford. Thanks

for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at iTunes, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm out there on Twitter at pim Fox. I'm out there on Twitter Ata Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio m