AAH #807 - Unboxed Assembly Will Revolutionize The Industry....Or Maybe Not

SPEAKER_1 (0:00)

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John McElroy (0:22)

Hey everybody, thanks for joining us on Autoline After Hours, and good afternoon, Mr. Gary Vasilash.

Gary Vasilash (0:28)

How are you?

John McElroy (0:29)

I'm doing okay.

Gary Vasilash (0:30)

So I think we gotta point out to the people last week who are watching the show or listening to the show when my phone went off with the klaxon sound, and we got the tornado warning during the show, and then the show went off.

John McElroy (0:42)

It went black.

Gary Vasilash (0:44)

So we actually did lose power, but we did not have a tornado. So it was just a power outage.

John McElroy (0:48)

But for anybody who was watching last week, and all of a sudden the show ended, that was why, this whole area lost power.

Gary Vasilash (0:55)

And Nora Eckert, who was with us last week when that was happening, she lost power until Saturday night. So big power outage.

Dan Hearsch (1:04)

I think it landed to the east, right? The tornado hit further east here.

John McElroy (1:07)

I think you're right. And that voice you just heard was from Dan Hearsch. He's the global co-leader for automotive and industrial practices at AlixPartners.

Great to have you on the show, Dan.

Dan Hearsch (1:18)

Thanks, John.

John McElroy (1:19)

Your first time here. It is, it is. I'm excited.

Dan Hearsch (1:21)

I know you and I have talked a number of times, but never in front of cameras.

John McElroy (1:26)

That's right. And we got Tu Le from Sino Auto Insights. Always great to have you back on the show.

Tu Le (1:31)

Thanks for having me, John.

John McElroy (1:32)

I know. It's good to have you here.

So Dan, let's get into it. You guys have published a disruption index where you look at a bunch of different industries all over the world. You interview all kinds of executives. And guess what? They all said, you know what? Automotive is the most disrupted industry that there is going.

Dan Hearsch (1:52)

And not just the most disruptive, two years running champions, right? It's great. Yeah, so we've been doing this disruption index, which is a, as you say, it's a fairly holistic view of all the industries and throughout the country, really globally. And we do, it's a bit of a survey followed up by some interviews, but it's a pulse, right? And so for the second year, automotive, this year, I think, tied with retail, general retail, but automotive is the most disrupted.

Again, to this audience, of course, no surprise, right? The number of things that have continued to pile on each other since COVID, and it just feels unabating, right?

John McElroy (2:34)

We in the industry know that, or those of us who follow the industry know that. But this really confirms it. Other industries are saying automotive is the most disrupted.

Gary Vasilash (2:42)

Yeah, isn't it like you're in auto and you score it, and you're in consumer products and you score it?

Dan Hearsch (2:49)

That's right. Yeah, so auto executives answer, they are the most disrupted, they feel the most at risk to lose their jobs or go through insolvency or all of the things that are piling up on them. So the sentiment within the industry is worse on this scale than any other part of the economy.

Gary Vasilash (3:09)

Okay, but the thing that I don't get, so this is the official AlixPartners definition of what this disruption is, because I mean, I think this is something we need to put our arms around, and I read this, and I want you to explain me what it means, because I have no idea. Disruption is the accelerated and fundamental reshaping of businesses, markets, and value networks by technological, societal, environmental, and political regulatory forces.

Dan Hearsch (3:34)

Is that not self-explanatory?

I'm sorry, no.

Yeah, I mean, just put simply the rate of change, the frequency of things just being knocked on their hands, the sales. In automotive, retail, as I mentioned, because of similar things, right? We spent years, decades, with fairly smooth, stable supply chains, right? And then when COVID hit, I mean, it just absolutely upended everything. So there were some general trends, and these things would happen over years and decades. So that's what we're seeing now, is just one of the charts that we show in our global automotive outlook, displays kind of the rate of disruption as a bit of a sine wave over time. And what's happened is these things have bunched up, it's like a Doppler effect, like the train's coming at you, and they're just compressed on you like this. It's one thing after another, after another, after another, after another, multiple times within a year. That's not what we're used to, that's not what anybody's used to. I mean, that is a really significant difference. And just when you think, you know, that one is done, the next thing comes along. And sometimes, you know, recently it's been, you know, one tariff battle after another, then it's been, you know, military conflicts that create impacts that we don't, that are very hard to predict, not only where the military action happens, but what are those knock-on effects, right? So, you know, who knew that Ukraine was the big wiring harness manufacturer, Europe's version of Mexico, before that happened? Who knew they'd make all of the xenon gas on Earth, right? And why that happened? Why was it important, right? Now with Iran, we're finding out, you know, who knew how much helium comes out of refining oil and natural gas and what the impact to the rest of the world and the economy is. And so that's what we mean by just the rate and speed of this. And in our case, it's holistic. It's the OEMs and suppliers and the aftermarket. Everybody's feeling the impact. And we talk about the things that are kind of macroeconomic that are outside of the industry's control. But of course, within the industry, we've created technology shifts that have gone this way. And then we're swinging way back on electrification, and autonomy, you know, it wasn't...