Surveillance: Auto Workers Losing For Decades Now, Alden Says

much for joining Surveillance. What does the Prime Minister in your eyes need to do to win your support in the House of Commons vote on Braxay. Well, good morning, it's very good to be with you. Um. The deal that has come forward from Europe but not a deal that the Democratic Unions Party can support because it makes a difference between Northern Ireland and the rest of the United Kingdom by the backstop that has been inserted in

the deal. There are many good parts in the deal, such as the recognition of European citizens rights um, the fact that we future recognition of professional qualifications, but the backstop, as far as we are concerned, cannot allow to support

this seal and therefore the backstop must go. Okay, but there's a suggestion that the Prime Minister would agree to a common rule book between the UK and the EU are lean faster that might be enough to actually avoid barriers between Northern Ireland and the rest of the UK.

Would such a unilateral declaration be enough for you? We'll see the difficulty for us in Northern Irelanders that this withdrawal agreement, if it's accepted by Parliament, and of course there's no evidence that it will be accepted by Parliament, would bring into place allegally buyinging international treaty which is then in law and is there in black and white

and cannot be superseded. Our difficulty is that the political victory that are being talked about our aspirational they are not legally binding and therefore there is a real asymmetrical relationship between those two documents. Right, So I understand from what you're saying or I'm inferring, and correct me if I'm wrong, that a unilateral declaration would not be good

enough for you. We want to hear what the Prime Minister has to say, and we welcome her to this part of the unedited Kingdom, but we will be saying very clearly to her that she needs to get rid of the back stub. You know, this is going to be a waste of time today if he doesn't listen to what people have to say to her. And as far as I can see, this is not going through Parliament.

And therefore, instead of wasting time over this next two weeks going on a pr offensive around her deal, what she should be doing is to try and find a third way forward, a deal that find support in Parliament and a delible work. So we're saying to her, don't waste the time, use that time profitably and trying to find a better dat right. But the UK government is telling us that there's no point in real opening talks because they want Budge on the backstop. Well, you know

they would say that wouldn't play. I mean, of course, people are going to hold to their line until something else has to be done, um, and they believe that this is the best way board. The Parliament is going to tell her something very different. Okay, the DUP has already abstained in important votes on government business. How likely

is that to continue? Well, the the deal, as I understand, it's coming to Parliament next week for debate and then we'll be voted on on the Tuesday, the eleventh of September. As it currently stands, we will not be supporting the stale and not as the case for many across the Chamber, whether they are remain voters or lead voters, they are not going to support the stale and therefore Prime Minister

is not going to get this steal through. So instead of wasting her time, she should actually be trying to find a way that is acceptible to everybody. Okay, I was talking to Nicki Morrigan at the Treasury Select Committee yesterday and she are saying it's a chance that actually we have a hard Brexit if this deal does not get through. What do you think are is a probability

of a crashing out? Well, I think people are wanting to portray this as a binary choice between this stale and no deal, and of course the Prime Minister wants to portray it is that because that's the best chances are getting the deal through. We don't accept that that's

the case. If we say that there is a third way, a better way, a way that we'll get the support of the British people through their parliamentarium and we should be looking for that way now instead of wasting time on the day that's not going to get support, Okay, Arlene Foster. A lot of people think that the DUP is bluffing, right, that you will end up, you know, supporting this deal because you fear fresh elections and Jeremy Corbyn coming in, or that you will support the deal

in exchange for more money. Are you bluffing? That's quite offensive actually to say that we're going to uh not vote again, that we're going to support the steal and we were giving money for Northern Island of not what this is about. This is about the future of Northern in Ireland constitutionally and economically. Therefore, we will not be

supporting the deal in its current format. And by the way, if it is voted down in Parliament, that does not mean a general election, because what we have at the moment is affect plim in Parliament back and it's only in Parliament of votes for a general action that it's happened. So that's a false thing to say, and it is quite offensive to say that we're bluffing and that we're only holy Night for money. Nothing could be further to the truth. M Arlene Foster, how do you see it?

So if you think that this deal will be voted down, does then the Prime Minister go back to the EU and get a better deal and then it gets through Parliament a second time? Or you know what happens after December eleventh. Well, we would much prefer if she looked for a better day now instead of within the next

two weeks. Our offenses. We think that would be much better spent trying to find a better way forward getting out of that Irish back stuff, because of course the only reason the Irish back stuff is any we are tooled is because to prevent a hard border on the island of Ireland. But Leo Broadcal, the Irish pig monster, has said he's not going to put up a hard border Europe, so they're not pretty slow hard border. She's very strange to know who's going to put this hard

border up. I don't think I'd come to Ireland. Um, so we have over hundreds of pages dealing with an Arish back stop that Frank Day isn't needed. But have you heard any indication from the government or Theresa A that she is willing to go back to Brussels before December eleven, then if not what happens on December twelve, No, I haven't um and she is determined for Shade with her deal. She believes that her day is the best

way forward. But clearly she's not listening because Parliament. I think that was very clear yesterday when she came at to the floor of the House of Common. But she doesn't have the support to get this deal through. Arling Foster, thanks so much for joining us for a very valuable conversation. She's, of course Arlene Foster. She is a UK Democratic Unionist Party leader. If you care about Lordstown, Ohio and the other places where time will march on according to General Motors,

this is without question the interview of the day. Kevin Tynan is an auto guy. He is with Bloomberg Intelligence. But John, what is so important about Kevin Tynan? As he understands that a Chrysler Slant six a Dodge Slant six. If you drop the screw into the distributor cap area where the spark plugs used to wire into you know you will ruin your distributor and your father will not bail you out in your car won't move until you

This would be a little bit of personal experience. Kevin, I have the clearest memory of walking along the chain link fence of Rochester, Delco. In the early eighties when it vapored. Is that what's going to happen to these geographies? Uh, there's a there's a distinct possibility that we go through that kind of uh you know, Flint, Michion again and

and and Rochester. And But at the same time, I would say, you know this, this looks a lot like General Motors clearing the deck and saying, look this this advanced into technology. We've kind of half effort in it. So let's let's just let's draw this line here and say and and I think you see this by them uh ceasing production of Chevrolet Vault with a V yet continuing the bolt with a b um to say, look that the plug in hybrid electric probably isn't the way

forward here. We have to go full commitment with the battery electric and still trucks obviously, right that's going to pay the bill and give them the opportunity to innovative or catch up on the e V side. Before John jumps into the nuts and bolts of this no pun intended. Kevin I had a good friend in Flint, Michigan in seventies. He said, come on, you got to hear this. And I remember sitting in a van hearing the rumble and

the roar. Is those wooden doors opened up out of the nineteen thirties and forties and everybody ran across the street to the bars. Those people weren't retrained. Then Ted Alden told us some CFR this morning, we fail at retraining. Can we retrain these people? We can? And and I was listening to that that piece, and and I think

it was right on the money. And I think that's what becomes important here is that, uh, those factories are now able to and and and again I think this was one of or this is one of the sort of uh, you know, points that I look at as the industry moves towards electric technology. Is you know, how many automakers have committed plants to battery electric vehicles. We've seen Volkswagen start to talk about it in Germany a little bit. Now. I think this is General Motors opportunity

to say, where we're done with this half effort. We're

going all in on this. I'm not sure how big that market is globally, but GM is saying, hey, if that's ten percent of the global market, we want our share, because it may be fift Like we see our friends at benf talk about this is half the market is electrification by UM And to Mary Barr's credit, I think previous administrations at General Motors might have dismissed this as money losing technology and we're not going to get involved, and maybe not even made the bolt in the first place.

And I look at that as an engineering sort of and and design experiment that says, Okay, now we have this technology, let's just scale it up into other products that we can sell. So Kevin, for a lot of people, the last twenty four hours is really really significant, and that essentially what GM has done has said that here in the United States, if it's a sedan with an

internal combustion engine, it's just not worth making here anymore. Now, if that's the conclusion, my next question will be who's next? And how big? What is the scale of what's about to happen? What is it right? Well, and and look Ford said this already, Uh Chrysler did it without you know, being so vocal about it. But you know, uh, they've gotten out of the car business. I mean they're truck now. Uh, just that LX platform is the only thing they have left.

So the other two guys, General is actually laid on this. And if you look at GM's numbers, look at an eight percent drop on the car side in the full year seventeen another this year. So I think the idea is that, you know, do we lose money on these products that are seeing dramatically declining demand or do we lose money on the products that have this huge upside? Uh?

Potentially because now you have governments in China behind them and Kevin, let me represent the president of the United States everything you're saying, Cent and I know John and I are on the same page on this. So you

gotta build something new. What is holding you back from choosing a spot in Ohio to do it other than the the the scale, right, I think I don't think there there is any reason why you wouldn't choose that spot to do it, other than you have a whole lot of installed capacity and not a whole lot of demand for those products yet. Right, So that's one percent

of the global market, it's one percent of the US market. Um, you know, So so you're gonna take the Chevrolet Cruz for example, that's hundreds of thousands of units per year, and you're gonna go in and you're gonna build tens of thousands of electric deals. So it's certainly possible. It's just you're gonna have capacity utilization that's going to be on the floor, Kevin, the repress releases that gets sent to Wall Street. One of the last twenty four hours

from GM was a press release for Wall Street. What's the press release for the White House? What does the president say and what is the response of this company? And I did not think I'd be asking that in the home of capitalism, but I am what is the White House say back to this? And what is the GM board and the c suite say back to them? Well, and here's the interesting thing, Jonathan to and from my perspective is that you know, when you look at the White House, I think a lot of what you see

is this really dramatic, UH move to spark a response? Right, If you want change, it's gonna have to be dramatic. If we go softly through this, nothing ever happens. And I'm speaking in very general terms, and I think that's general motors move here is to say, look, we need to be here in the future, we need to be growing in the future, and for us to do that, we have to draw this line right here, right now

and make this transition. Is it painful, absolutely, But if we're going to exist and be relevant in the future, we have to do this now. Is this just a labor arbitrage? I'm talking like Steve Roach of Yale University. I mean, Union used to make a hundred fifty thousand year overtime, a hundred thirty whatever it was, and then Steve Rattner came in, as cars are and we remodeled labor. I get it. I don't know what they make now, Kevin,

please tell me. But is it just still a labor arbitrage where the American auto worker makes too much for GM to make money on that next suv or pickup truck. I don't think so. But but look at pricing in the industry. Right We talked about transaction prices being at record highs. But if you look at the technology UM and everything, not only in vehicle but in terms of production, it's expensive to manufacture UM, you know. And then if you look at declining volumes, it makes it it makes

the equation that much more on balanced. So UM, you know, I don't I don't think it's just the labor arbitrage. There's cost inflation all across the board there and you have to adjust for it. Um. At the same time, you know there there's pushed back against moving to lower costs to Mexico without production there, and to say, look, we we want this ten percent adjusted EBIT margin. The only way we're gonna do it is if that part of them, that component of the of the cost structure

isn't as low as it can be. Hey, Kevin grant To, can't sell you really really smart. Thank you so much for dropping buying giving us a kill. Kevin Sainen, Bloomberg Intelligent Senior Automotive Analysis as GM announces some big job cuts and some big factory closures as well from the Bloomberg Interactive Broker Studios, John Farrell and Tom Keene, thank you for being with us. And now a definitive conversation on trade. Edward Alden wrote one of my books of

the summer, Failure to Adjust. It is a deceptively wonderful, narrow, dense treatise on trade and what America needs to do. Let's get an update at Alden. What does President Trump and what does America need to do on trade right now? Oh? Now that is that is a big question. I mean, you know, I I think the immediate challenge is to find some way to enter into serious negotiations with China. I mean, we are on potentially a very destructive road with China. That's not to say there are real problems

in China. There are serious problems, but we need to find a way forward on it. And I mean the posit it. A thing with Trump is they were able to do a new NAFTA deal. There was a lot of storm and drawing, but at the end of the day they came out of with the deal. I hope the same thing as possible with China. And then we've really got to focus on what's going on here in the United States and how to boost our economic competitiveness in a whole range of ways that we're just not

doing at the moment. Did the jobs GM Did they go to China? As the John Prine, the Great John Prine of Chicago would say, the jobs went to Mexico. I mean yes and no, I mean no in the sense that that you know, GM is not gonna be exporting it certainly anytimes in your future cars from China to the United States. It's not a Mexico type relationship. But China is obviously a much bigger future market for GM right now than the United States is. And GM

is rationalizing in various ways in North America. They're not going to build these lower margin products in the United States or Canada anymore. They're going to focus on next generation vehicles. All that makes a lot of economic sense, but it doesn't create a whole lot of jobs for for auto workers. And and and that's been the story for a long time. And nothing that the President is under anybody else's done has changed that underlying economic reality. Said.

There was a really interesting gonticle in the Washington Post yesterday following the GM layoffs that was titled GM layoffs or another victory for capital over labor? What do you think about that line? Said? You know, I think again, for better worse, that is true. I mean, you know, labor, even even the auto workers who have done better than most labor unions, have been losing for for decades now. The the owners, you know, the folks who run GM

and other companies, have a lot of flexibility. They can produce anywhere they want in the world. They can decide to replace labor with technology, and at the end of the day, there's not a whole lot the unions can do to stand in the way of that. So I think this is the latest chapter in a very long story. I think that analysis is correct. Whether White House stands out head the lines of to come ready blood. Is this the White House for labor or for capital? Which

one is it? That's a that is a really good question. It wants to be the White House for both. So you know, if you look at the new NAFTA, there are a bunch of provisions in there that organized labor is pretty happy with. I mean, unlike the Transpacific Partnership. Uh, the f l c i O is holding its fire on this agreement, saying, you know, the unions might be

able to support it. But at the same time, obviously, so White has done a lot for capital, you know, particular at the big corporate packs cut that was signed by the President in December, and the presidents obviously very concerned about Wall Street. So so so far it's trying to be both. Um, there may come a point in which it has to make a decision. This, Uh, the GM example is a good one. President is obviously upset

about this. He's upset about these factors closing. Whether he's going to do anything real to try to put pressure on GM, I kind of doubt it. Okay, Well, what's he do'ssure? Uh? You know, I mean, I suppose one source of pressure is these auto tariffs that everybody is talking about. I mean, this investigation on whether the US can can block auto imports on national security grounds is

going to be delivered no later than February. And I suppose if you know, the United States puts in place steep carafs on auto imports, particularly from Europe and Korea in Japan, that could put some pressure on companies to expand production here in the United States just to serve this market, even though it isn't the fast growing market. I mean, that would obviously be a very drastic step, but in the short run might actually bring some auto jobs back to the US. Ted Alton, thank you so much,

greatly appreciate it. Failure to adjust just a wonderful thought provoking book. A trade with the counts on Foreign Relations, Edward Alden, particularly for our American audience, and to be honest for myself as well. We need to triangulate. We need to do that on Russia and on Ukraine. And there's no better person to triangulate with that Andrew Woods.

Sir Andrew is of course the former British Ambassador to Yugoslavia and then served a substantial five years as British Ambassador to Russia and is with Chatham House, London Surrender. We are thrilled to have you with us today. It is nine and twenty miles from Belgrade to Kiev. It's fourteen hundred miles from Belgrade used Yugoslavia up to Moscow. And I bring up this triangulation because so many people say that Ukraine is a gateway to Europe. How do

you translate that? How is Ukraine a gateway to Europe? Well, in the sense that it's her an oil and gas transit, her company country brother in the sense that it's got very strong roots in Russian culture, and therefore, in principle, those two countries should be in effective communication, which they absolutely not. They're not right now. And I believe martial law enforce in Ukraine or or or soon. But so much of this to use Joseph Nay is power and interdependence.

Is this just about the power of Russia versus the power of Ukraine? Or can they find a common ground? Well, they could, um, but that would really be up to Russia. I think we ought to be. In general, it's the Russians who are trying their best to stop Ukraine becoming an independent country able to make its own uh Norse and pursue its own interests, because they believe they have

an innate right two make Ukraine there. John John Mersheimer of Chicago, out with a new book, has been heated in Notorious about saying that the US and the West extended too far east towards Russia. Shah, did we do that with Ukraine? As John Musheimer onto something, that we extended too far to the adjacent geographies of Russia. I don't agree at all, but of course that is what the Russians themselves would say, because they regard the West

as a threat. UM. If he's talking about the extension of NATO in the last century, which is essentially a space what he has in mind, then one shouldn't forget the um the fact that the country that did join NATO or wanted to, precisely because they were afraid and what Russia might do, and precisely because Russia was in a state of quite considerable confusion at the end of Gorbachev and through through the beginning of the Elsin. Is Russia in confusion now? It doesn't seem to be. It

seems to have a plan. Are they in confusion or what is the Putin plan? I think for the things that the inhabitants of Russia would care about, he doesn't have a plan at all. That is, the economy is not doing well. He's not attending to their needs in health, education, infrastructure, and so on and so forth. He's spending a lot of money, however, on military expenditure, precisely because he believes that is necessary to establish Russia as a quote great

power unquote. I think this will end in a much poorer Russia and one which will become most unstable as the years go ahead. If you're just joining us, Sir Anderwood with us, he's a former British Ambassador to Russia and also before that British ambassador to Yugoslavia with Chatham House. I guess there's been sanctions. One sanction, d I can

go French and you, Sir Andrew, sanctions TOI. Are we going to get another set of sanctions here as a result of this, this immediate incident, Yes, um, I wouldn't think so. What we are going to get is it to be much more difficult for Putin to persuade other countries two uh to lift sanctions which he badly needs in that in that sense Athing going to be back in his face. But it does depend on what he really wishes to make of this, what his purpose was

in in doing it. It was only in September that similar Ukrainian ships passed through the Kirch straight, as they have every right to do under an agreement between Ukraine and Russia, that this is their common territory of waters, and his reference to Russian frontiers and rights is, by implication at least a claim to his control of the whole of the as of Sea, Sir Andrew. My colleague Pim Fox points out that within the Brexit battle you have a Gibraltar in view. I think a lot of

Americans understand where Gibraltar is in the Mediterranean. Gibraltar is not Scotland. It's not Ireland or Northern Ireland. It's Gibraltar. Can Gibraltar in the smaller geographies of the United Kingdom, can they play a real part in this immediate Brexit debate? Well, yes, I should declare an interest because I was born in Gibraltar and spent much of my boyhood there, so I have an interest. Um. Actually, Gibraltar has been in British or English hands for considering longer than it ever was

in Spanish. Secondly, it's been an important base to your country and mine and others during wartime, so I think it is a memory of loyalty from us to it in that sense. There's also the fact that the last time the population of Gibraltar were consulted about whether they wished or did not wish to have a co dominion

with Spain, now to nine percent of the voted YEA. Well, within this debate of Braxit, and I'm going to ask you, I guess a more general question with your esteem work and diplomacy, what is the diplomacy the Prime Minister needs now to assist Tories to some form of decision and may maybe drag your labor party into the decision as well. You served under Tony Blair and uh and John major is as well. There has to come to a conclusion here what would diplomacy is necessary right now for your

United Kingdom. Well, uh, the Brexit problem is a problem which has shared with other countries still in the European Union. It's a clash between the Wish buoyed up by the creation of the Euro as a currency to increase the amount of centralized control in Brussels with the help of

the cir called Franco German Motor. A lot of countries have found the pressure of that on them to change their policies here and mostly in economic terms that there are policies considerable and we are now as we're facing that. I don't know how the Parliament will vote on the arrangement that our prime ministers negotiated, but the chances are

pretty highly they're going to refuse it. After that we will be back at square one in one way, but in another week we should be faced with a difficult choice depending how the EU reacts exactly, Sir Andward, thank you so much. We have to leave it there this morning. Greatly appreciated the former British Ambassador to Russia, Sir Andrew Wood, thanks for listening to the Bloomberg Surveillance Podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast

platform you prefer. I'm on Twitter at Tom Keene before the podcast. You can always catch us worldwide. I'm Bloomberg Radio