Michael Robinet, executive director of Automotive Advisory Services at IHS Markit, will share his insight and advice on the automotive and mobility industry through this crisis. Robinet will engage in a one-on-one discussion with Glenn Stevens Jr., executive director of MICHauto. Participants will have the option to submit questions to Stevens during the discussion.
Michael Robinet, executive director of Automotive Advisory Services at IHS Markit, will share his insight and advice on the automotive and mobility industry through this crisis. Robinet will engage in a one-on-one discussion with Glenn Stevens Jr., executive director of MICHauto. Participants will have the option to submit questions to Stevens during the discussion.
Good afternoon. This is Glenn Stevens, hoping everyone is staying home and staying well. Uh, I'm the executive director of mission auto and vice president of automotive mobility initiatives at the Detroit regional chamber. And thank you for joining in today. A couple of housekeeping things real quick. First of all, I do want to point everyone to, if you haven't seen it, uh, at the Detroit chamber.com COBIT 19 website, you will find a resource center. Uh, you also find on the left side of your screen a miss shadow tab that is set up specifically for automotive resources. So we welcome you to use that. Um, and to share that also. Secondly, an audio version of this will be online this afternoon for your information and we are going to do questions today. Sandy Baruah, the Detroit regional chamber CEO is also joining us today and is going to join the conversation and help us with the questions. With that, I'm going to join Mike Robinett and welcome you Michael. Um, thanks for taking your time today. We've known each other for a long time. Um, and we're certainly an unprecedented times right now, but we wanted to give them, there's some timely, relevant and critical information to our investors members in the industry. So thanks Mike for joining us. Some opening thoughts.
Speaker 2:Yeah, good afternoon Glen. And, uh, thanks to you and Sandy and the, uh, ms shadow and Detroit chamber team for the opportunity to, uh, engage in this today and obviously it's more than timely. Uh, um, yeah, it's certainly unprecedented. I've been in the industry for over three decades, either forecasting or advising slash consulting with clients on the supply side. So been through certainly the, uh, nine 11, uh, 2008, 2009 meltdown tsunamis, floods, uh, exploding paint plants. Uh, but this one is certainly different than almost all of the mobile. We can pull aspects of some of those different crises, uh, to answer some, hopefully give you some direction today.
Speaker 1:Great. So you and I talked and what we're going to do real quick here is we're going to cover a supply demand and launches. Um, and then we're going to, we'll bring Sandy in with the questions. So no thoughts on supply.
Speaker 2:Absolutely. Um, you know, usually when you go through an analysis like this, you, you'd like to talk about demand first, but in this case, obviously the supply has been interrupted. So,
Speaker 1:Mmm,
Speaker 2:from a supply perspective, obviously for the most part we're, we're down in North America. There you're maybe a planter too, still operating, but it won't be for long and in how, uh, how long we're going to be down. Obviously it's going to be driven by a shelter in place, notices, uh, and, and other, uh, other factors. Um, it's as, as everybody probably has figured out, it's, it's difficult, uh, very, very difficult to anticipate when the industry is going to come back up. But I, uh, you know, certainly I think it's important to understand how the industry can come back. We are, we are certainly intertwined. So if we sit today in Michigan, um, we're, we're a shelter in place. Ohio is the same way. Uh, what happens with Ohio state, bill has hotspots and they don't come up as quickly as we do with all the just-in-time supply. That obviously is, is very, very difficult to bring facilities up. So if you think about it within a very short period of time, if to bring a facility and OEM production vehicle production or engine or transmission facility back up, you need to bring all the just in time suppliers for the most part backup in very short order. So therein lies the, the biggest issue for the industry is, is how do we come back up. Um, our team, uh, at IHS, they've been working day and night and just came out with the revised forecast for North American production for this year where, uh, the sort of the base cases, uh, you know, for the most part down through the middle, uh, towards the, uh, middle, towards the end of, of April, depending on the situation. And so even even with that kind of downtime and some of the lax demand afterwards, we're looking at, uh, roughly a 14.1 million unit market where earlier we were expecting 16.3. Uh, so obviously you got tremendous destruction of, of supply in terms of the ability to produce. Then again, how you come back up and how it's going to be choppy coming back up. Because there's going to be probably a supply outages and, and other, uh, itchies or we're going to have to deal with is really unprecedented. So from a supply perspective, uh, you know, many, many questions.
Speaker 1:Okay. And I do want to reinforce to the, uh, attendees online. Uh, you can submit questions, um, type your message in, uh, in the questions section there. And, um, we will get to as many of those as we can in the Q and a. Uh, Mike. Uh, how about the demand side?
Speaker 2:Well, that's, that's obviously another, uh, somewhat of a bit more of an unknown. And from our perspective of, uh, we knew very, very well the industry we entered with in terms of, uh, the components of consumer demand, fleet demand, uh, the confidence of the consumer in the light. But as you exit this, and again, exiting won't necessarily be a day, it'll be sort of a, a period of time. But as we exit this, obviously there will be a, uh, uh, you know, several aspects we're going to need to understand, I think for everybody. And I understand how the new vehicle market, there's literally hundreds of different factors and, and uh, indices that, that people would look at. But it really does boil down to three major things. Does a customer have the ability to purchase? So do they have access to credit? Do they have a place to park their vehicle? Uh, that type of analysis where they, they have the income and the access to credit and or the money in the bank, whatever the case might be. Then you then you need the need or the want to buy a vehicle. Maybe maybe a person doesn't need to purchase a vehicle, maybe that their lease is not coming up at that point. Or you've got other situations like the, uh, you know, basically maybe due to the wealth, the fact that you wanted to get into a vehicle, but as a wealth effect declines, you may not, uh, have the want to get into that vehicle. And then lastly is consumer confidence. Do you have the longterm confidence that you're going to be able to pay this vehicle off? Those are really the big three there. There's many, many others. Others, but literally those three have to align and that's really, really critical. So as we come out of this, it will definitely not be a V-shaped recovery. We've heard some pundants on, uh, business channels say that it's going to snap back very, very quickly, but the consumers give me ancient through this and especially at the lower end service sectors. Um, certainly if you look at travel with, with rental fleets, corporate fleets, municipal fleets, um, they're all going to have certainly challenges going forward. So it's going to be lumpy coming out of this. Uh, but no, we do expect towards the end of the year and into next year that we will find a way through this. But it'll be a different market when we exit this then when we came in. Can you expand on that a little bit about a different market? Well, if you think about what's happening with the wealth effect, uh, you know, we went from a 29,000 Dow down, down into the teens. Now it's come back up. Are we going to, when we return back to a, even a high twenties, uh, is, is what, what, what is going be the, the case with the luxury consumer? Are they going to want to engage as quickly? Are they going to be more guarded? What's going to happen with the bottom end of the market? Is our used vehicles going to become, um, more enticing because they may know when to move into the vehicle, new vehicle market because of confidence or, or cost or other issues. So there's going to be a lot of, a lot of factors that are going to have to be worked through and understood going forward. And we've done a lot of that work. But again, um, we're, we're in some really, really unprecedented waters here. Right. Um, thanks. So how about launches? How does this impact launches and there's no new product. Pipeline is important to the OEMs and the suppliers and the industry as a whole, but how, how are we looking at impact there? Well, obviously there's, there's a number of issues with launches as a, you know, you've got a, some of the OEMs have sent their contract workers home, uh, or the, you know, certainly there's construction on new facilities and or revamp of existing facilities is ceased. Uh, and as we well know, most of those timetables are very, very tight. It's not like a, there's X many, many extra months put into, uh, those timetables. Uh, uh, capital is, is, uh, it's tight and, uh, they, they like to employ it as, as efficiently as possible. So when you, you'll look at launches, the, the, as long as we're down, uh, it's difficult to move a program forward. I, um, there's been comments from OEMs just to that very effect. Yeah, that's actually exactly what happened. In a way to no night, the OEM's pulled back substantially, uh, redeployed some of their people. I'm obviously leaned up some of their staffs and it changed our launch schedules, uh, on the short term, if you take a look at the longer term, this also may drive OEMs to shuffle some of their longer term programs. Uh, there could be some opportunities to a delay a programs. So instead of producing a vehicle for a cycle of let's say five years, they look at six or six and a half or seven instead to stretch that capital a little bit further. And, uh, you can also see maybe some of the vehicles I might've been a little bit more iffy on a, uh, on a cost benefit perspective or a profitability perspective. Uh, they could get pulled because of conservation of capital. So from a, from a supplier perspective, it becomes really incumbent to understand what you're working on, what people you've got devoted to them, and getting as much background as you can from your customer, whether that's an OEM or a tier one, to really truly understand what the trajectory of those programs are going to be. They're kind of waiting through that right now and frankly probably won't have a great view of that, um, until we start to exit this. Uh, hopefully, uh, you know, towards the end of next month and into the may time period.
Speaker 1:Okay. Well before we bring Sandy and I, I want to get your thoughts on something we're seeing and everybody's reading about. So as we know, um, it is an extremely resilient industry and it's also an extremely innovative industry. So your thoughts on, on those two things of resiliency and then what you're seeing with companies, um, from GM and Ford to small suppliers across the state of Michigan and elsewhere there that are pivoting right now to, to become a, as Kristin[inaudible] help, uh, help us coin that arsenal of health right now.
Speaker 2:Well, I think there's no doubt this is an industry that is, it's truly flexible and adaptable. We, uh, we designed some of the most complex machines, uh, in the world from that perspective. 3000 or several thousand parts depending on how you count them. That all happened work in unison and in last for 150 and 200,000 miles. So certainly from that perspective, uh, we're, we're very flexible and I, you know, I'm very, very proud to be part of this industry too. How quickly we can pivot, um, and, and help out from, uh, uh, help out with health care workers and us sustaining our populations and a lot of the other factors and initiatives that are underway. Um, you know, that being said though, this is, this is also an industry of, um, high capital and, and caches. Uh, cash is definitely King as we kind of work through this. And you can see, uh, manufacturers and suppliers like all shoring up their balance sheets and kind of a settling in, making sure that they're being very judicious with the expenditures and being smart about what they do. Well, I think when one thing that will may come out of this is that there, there may be some suppliers that financially, uh, well have some real difficulties, but there's also a number of players on the sidelines that are looking around and seeing are there some really good companies to, to engage with from a financial and an equity perspective. So certainly there's, uh, in, in, in all of this, uh, crisis come, uh, opportunities for, uh, for several players in the market. Okay.
Speaker 1:Okay. Well, great. Thanks for those. Uh, those comments and some of that insight. Hopefully those on the line, uh, get some food for thought. Um, as you navigate these times. Sandy, um, what do you want to bring in some other questions we have in, in, in, uh, your thoughts too.
Speaker 3:Sure. Thanks Glenn. And Michael, thanks again for being with us. So you've got a, several of your friends, a co commenting on some questions, people like Kim Hill and Nigel Francis. So let's start with what they're talking about, which is, uh, the automotive companies that have[inaudible] preliminary announced an April restart date. Uh, how realistic is that considering that the supply chain needs to be up and running, uh, in order for the OEMs to be up and running? And also what about China? Is China up and running to be able to support us? OEMs? Uh, we starting in April,
Speaker 2:well on a, on a, on a kind of the factor of, uh, what's going to happen in mid, you know, early to mid April. In terms of the restart of some of these facilities. I think I'm probably not the only one in the media that will have said will have said that that's very aggressive, a very aggressive and a lot of a lot of dominoes need to fall into place for, for that to occur. Uh, and you mentioned properly that the supply chain, what if we, you know, we've never experienced something like this before. We've had a tornadoes hit plants and maybe a fire hit a supplier. So, you know, it's more of a localized issue, but yeah, you know, what do you do if there's an entire state that's down and we'll come back up from a shelter in place perspective and you need those parts. So these are, these are on all unprecedented issues where you really need the supply chain to more or less come back up in some form of, uh, of unison, uh, to, to really negate any part shortages. You also mentioned China and that's actually quite interesting. Um, a couple of clients and that we're talking to are obviously meaning pressured heavily, not so much that China can't supply us, but, uh, we're supplying China with specific components for global platforms or specific systems. And, uh, if we're, if we're down that obviously it's difficult. Um, and the, and the Chinese, uh, it's some of the Chinese, uh, customers, um, you know, they understand and yet they don't. So there is a lot of inner inner connections. We're also hearing that a Mexico where some facilities are still working, but yeah, can't get inputs from the U S or from Canada. So the interdependency of our supply chain is on full display right now.
Speaker 3:You know, Michael, you just touched on an issue that, uh, our team, uh, you know, Glenn, uh, leading it is working, uh, here in the state of Michigan because we have a tier one, tier two suppliers that are working with OEMs and the OEMs say, Hey, we're essential. You know, we're, you know, we need your supply, or they're supplying to companies out of state that don't have the stay at home orders that we do. And these companies are, uh, understandably confused as to which order takes precedence. And so we're, we're trying to solve that issue for them. But you're right. This, uh, the complexity of the supply chain is just even more, uh, exacerbated now that, uh, different jurisdictions have different rules and they're defining essential, uh, differently. Uh, moving on. Uh, you know, each one of our, uh, Detroit three OEMs are actually far more different than I think the average person, uh, gives them credit for. Can you give a little bit of perspective in terms of how this situation might impact, uh, the three Detroit OEMs a little bit differently?
Speaker 2:Well, I think you need to look no further than I'm, who's launching major product product this year. So we've got a major launches very near term with general motors. We've got some important launches of summer F Ford, uh, some critical launches with FCA Ford towards the end of the year. So obviously they're trying to balance, uh, each of those in each company has its own trajectory. I think the other factor that's important is, is, um, from a global perspective whose operations are up and running. IgM as we well know, has, has made a number of moves to, I'll focus their efforts on North America, uh, China and in South America. Uh, certainly North American, South America as we well know are, are having certainly some significant issues, uh, from a revenue perspective given the shelter in place in the Colbert and, uh, Kobe prices. But China's emerging. So they've actually got a decent diversification from her of yes, we, we have one side of our house that is not doing very well, but we do have some aspects that are doing well. You balance this with an FCA or Ford, which are not as focused on China but certainly are, are more focused on the European market and obviously very focused on the North American market. So the complexion of each of the OEMs is, is as you mentioned, accurately, very, very different. And how, uh, they will attack this crisis. Maybe different from a global perspective as well.
Speaker 3:Great. Thank you. Uh, Michael, watch your, uh, take and you know, certainly you don't have a crystal ball or if you do, it's better than the rest of ours. What is the potential impact on construction projects, uh, related to the automotive industry, specifically the FCA plant in Detroit?
Speaker 2:Well, I, I think, uh, you know, it, that'll move forward. Uh, when, uh, you know, it's, it's kind of like the, the, the breads in the oven and it's baking right now. Um, uh, you know, that's certainly going to move forward. It may, it may move forward on a slightly delayed timetable, like given the fact that obviously, uh, workers aren't there to pull that project together, but at some point when we are able to return, um, you know, they'll, they'll move back, uh, cause that's obviously a critical product and a critical facility for FCA. But as I was saying earlier with the launches, it's all gonna be, it's gonna be about really, uh, taking capital in and putting it in the best place where you're gonna get the optimal return. And if that means that an OEM may have put a major, uh, uh, investment into a facility previously, but now under new circumstances, they determine, you know, what, I'm going to change that major renovation to a moderate or a minor rederick renovation. Those types of decisions and choices are likely to go over the next number of months depending on what kind of ministry we emerge with at the end of this. So that's, that definitely is going to have an impact on the construction side.
Speaker 3:Yeah. Micah, those of us who have been in and around the industry for many years, that know that one of the ongoing issue is the quality of the relationship between the OEMs and the tier ones. And we've all seen that ebb and flow over the years in different companies doing a better job of that. What is your sense generally right now the relationship is between the OEMs and the supply base and how effectively do you anticipate they're going to be able to work together to coordinate their relaunches and, and uh, you know, just handle all of this uncertainty about relaunch, uh, that's out there right now.
Speaker 2:Well, I, you know, certainly you hit a, you hit an interesting point. Uh, there has been, when the industry was climbing and the vehicle manufacturers were looking for capacity, uh, you know, they were, uh, I would say relationships were, were relatively good depending on the OEM, uh, because obviously, uh, you know, the ability to build a vehicle and make money really hinged on the supply base. As the market declines, that's when it really tests some of these relationships. I would say this, uh, it's a shared destiny. The OEMs know that the tier ones know that. So, uh, it's, it's going to be really critical that the OEMs and the suppliers are really, especially the tier one suppliers are really on the same page. Uh, from our perspective of what's gonna be expected for lunch Keaton's what's gonna be expected, uh, in terms of support. Um, so for instance, right now, vehicle manufacturers and, and, and tier ones, tier twos, how do they, how do they check tooling? How do they pack parts? How do they, uh, how do they do validation? I mean, these are just basic blocking and tackling that they're so used to doing. But now a lot of those activities, a great majority of have ceased. So how do you ramp that back up and try and maintain timing as best as possible? Ah, there's going to have to be a lot of give and take, uh, in terms of that relationship.
Speaker 3:So, um, leading up to this crisis, there was a growing, uh, set of commentary that the advent of the autonomous vehicle was perhaps not coming as fast as we thought it was maybe five, four years ago. Uh, do you see any additional delay or how do you think that this, uh, crisis at this moment is going to impact the rollout of new technologies like AVS and EVs?
Speaker 2:I think the general inflection in the general trend is going to be maintained. I will say that, you know, an OEM or tier one that has less capital than the, uh, than they would have expected at the beginning of the year. They're gonna reprioritize that capital towards, uh, assets and projects that are, are they feel are, are going to have a greater, uh, ability or lower risk to, uh, to generate cash. Uh, so, so am I saying that it's gonna the, the, the foot can be taken off the accelerator and made to an app to a bit, it'll append on the OEM and the tier one, but some tier ones are, uh,[inaudible]. They're kind of like a, we joke and they're kind of like breakfast. The, uh, uh, the chicken chicken's involved, the pig's committed. You're the pig. You're, they're committed. And, uh, so, uh, they, they really need to move forward on some of those initiatives. But I, I certainly think that, uh, many OEMs and tier ones, uh, they'll continue with the trajectory, but they're, they're gonna look at it on a case by case basis and they're going to be very judicious with their capital in the resources.
Speaker 3:Yeah. And obviously the capital of going into this crisis was already an issue in terms of balancing their need for and their need to invest for, for tomorrow. Right. So, uh, you mentioned that, uh, uh, your estimate is that we're going to go in the United States from, you know, an expected market of over 17 million, uh, unit sales to something in the, in the low fourteens. Uh, what are your thoughts globally, uh, in terms of what kind of impact this is going to have on the global automotive market?
Speaker 2:Well, it's certainly a, we've seen that the European market has pulled back. Um, our team is as certainly pulled back on, uh, that forecast, uh, close to a 10%, a little over 10% per production, uh, in the, uh, in the European market. So a Western central and Eastern Europe, uh, China already a, a lot of those adjustments were made, uh, earlier on in the year, but, but there's no doubt, uh, we're, we're looking at a significant decline this year from a global perspective. Even in the best of cases, just the, uh, you know, everybody needs to stay back. And think about, uh, in your average week in North America, we would make a somewhere between 300 and 350,000 vehicles, uh, in any average week in North America. So we're going to go down for five or six weeks and then have trouble, you know, have probably some sputtering issues as we come back up. Demand's going to be difficult. Certainly the supply chain is, is gonna have to work. It's work issues through, that's a significant amount of volume. And you know, as we saw with the GM, uh, labor, uh, situation early, late last year, um, you know, there, there might've been a bit of a pre-building but certainly not a lot in this case. This was really to some respects not anticipated. So, uh, inventory is going to certainly take a bit of a hit on this one and uh, and coming back up and making sure that we can solidify the supply chain is going to be a, it's gonna be a difficult task.
Speaker 3:Alright, so we're down to four minutes left with this session. I'm going to ask you one last question and then turn it back over to my colleague Glenn Stevens. And this question is, Michael, did the automotive industry as a whole learn the appropriate lessons from the 2007, 2009 a great recession? In other words, are, have, have, did they learn the lessons necessary to, uh, withstand a crisis? Like the one we're in today?
Speaker 2:I would say that they learned some lessons. You can stand back and look at the quality of the balance sheets of the vast majority of suppliers. They knew that going in that Oh seven, Oh eight a and obviously coming out in Oh nine, slowly, uh, it was a financially financial driven, uh, the crisis and with the billability of credit and, and, and the likes. So, you know, balance sheets were really assault. Uh, we're, we are in a different place this time and I think that, you know, smarter OEMs and suppliers are certainly looking at their cash position and, uh, trying to solidify that, but Mmm. You know, what are some of the lessons we learned in Oh eight or no, nine. And even some of the other crises like dual sourcing of components and interdependencies. Uh, I, I think you'd be hard pressed to think that we were less interdependent now than we were before. Um, it might've started to move in that direction because of some of the trade frictions, but we're still, uh, as you well know, very, uh, interdependent within our industry and that's probably not going to change anytime soon.
Speaker 1:Mike. Um, first of all, I want to thank you for taking the time today and giving us your insight. Sandy, thanks for the help on the Q and. A. um, I do want to mention again, it's going to be online this afternoon. Uh, and the web resources are either, you can either enter the coven 19 through Detroit chamber.com or ms chateau.org, either one, and you'll, you'll see links that will take you to those. So in closing, uh, Mike, I just want to want to say thanks and thanks to everybody who joined us today. We will follow up on specific, um,
Speaker 2:the questions.
Speaker 1:But, you know, I think I'll leave us on this and I'll, I'll borrow something from something you said earlier, Mike. We are all in this together and it is a shared destiny. Um, and we've got a one ahead of us. It's going to be bumpy, but Mike, your insight today will help us navigate it. So thank you. And everybody on the line, uh, you know, stay home and be well everyone. Thank you.
Speaker 2:Thank you.