Rethinking Automotive: Key Takeaways from the 2024 MEMA Annual Conference

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MEMA: 2024

I seriously took more notes this year than I have taken in the past 15 years combined. Crazy, right? But hey, that's the way it was. There was a lot to talk about and I wanted to remember it. If I had to sum it up in three words, what this conference was all about, it's simply this: China and tariffs and AI. Oh my, that's exactly what it was. That was the theme. So, let's dive in. Day one, Collin Shaw, president of MEMA, opened with a strong personal commitment statement. Yeah, that's right. A personal commitment statement. And I loved it. The first part of the statement was this, and I quote, "To lead by example, by creating a diverse team and a high performing team." That is so powerful when a leader takes the stage or in a meeting with their team and declare who they are as a leader. And define the commitment they plan to make to their team. Or as Dan Goleman, the emotional intelligence expert, corrected me in the last episode, he said, "It's not who you are as a leader, it is how you are as a leader." What a strong way to open a conference.

The first session on day one was the OEM purchasing panel. So, you've got Jason Stein, moderating a panel consisting of Andrew Wareing, the CPO of Purchasing for Nissan Americas, Tanya Skilton from General Motors, and Ryan Grimm, the VP for Parts and Materials Procurement at Toyota North America. What a great panel. Jason didn't waste any time, he went straight in and started to talk about the election and the things that, yeah, we're all concerned about. What does this mean to us when Trump takes office? And what does it mean in terms of the industry and tariffs? And Jason simply said to the panel, "Are you prepared?" and to summarize the responses for you, this is what I got from the conference. Yes, they are prepared. The leaders at the helm of purchasing at these OEMs, they're ready. They've been, to use their term, wargaming possible outcomes and possible scenarios. They're ready. Of course, they expect some surprises. You can't possibly think of every single possible outcome. But judging by their demeanor and the way that they talked about these issues, they are most certainly ready. They talked a lot about this idea of going back to basics with suppliers. And I'm not sure how I feel about that. What does that really mean? I don't get it because I think what bothers me the most is this idea of going back. So, what does that mean going back to basics? So, I think they mean that they're going to go back to focusing on, you know, cost and quality and delivery, but I'm not sure. So, that's an area I think I want to probe in the future.

They talked a lot about the multitude of supplier issues they've experienced over the past few years, and Ryan from Toyota actually stated, and I quote, "I've seen more fires in the past five years than I've seen in the last 20," and isn't that the truth? But Toyota really led the pack on this panel with statements like, and again, I quote, "We need to support our suppliers even more. It's our responsibility to support our suppliers who make investments." Of course, we're all concerned about the fact that we have, and we'll have even more stranded capital. So, when you hear an OEM making a statement like that, I think it gives us some level of comfort. Not sure exactly where the others stand on that, um, but I guess we'll find out. Ryan also said that he plans to focus on over communicating. That seems to be one of the key parts of their supplier relationship plan is making sure that we continue to drive transparency and communication. And that's good to hear.

On talent, Tanya stated that she's seeing talent become more and more of an issue in the supply base. Hmm, so that's something we gotta keep an eye on. And on supplier relationships, Andrew noted that it's about bringing our supplier partners in closer, and having more open and honest conversations. And that's probably true because if you look at the Nissan WRI numbers, they have improved. So, we expect to see more of that coming out of Nissan.

In closing, I would say that it was overall a positive outlook in the right direction from all three OEMs and Tanya from GM said in her closing statements, "This is our time." She genuinely feels excited about what's happening in the auto industry and how we can work together to move this industry forward.

After the OEM purchasing panel, I took a little wander through the exhibitors. And I saw this bright, shiny, neon lime green car, and it was the BYD Seagull. And, you know, we've heard so much about BYD, and we've all seen pictures of the BYD vehicles, but to actually go into the Caresoft booth and touch that vehicle, get inside the vehicle, now, remember, this vehicle is priced under $10,000. It is not available in the US, although, I think that that will probably change, but we'll see. Time will tell. It's a basic vehicle, but it's nice. And I'm picky. It's got nice, clean, simple designs. And for the price, I mean, you just can't beat it, can you?

I would say that the next speaker up on day one is actually the president of Caresoft, Terry Woychowski, and the way that this man talks about his understanding of legacy OEMs and why Chinese OEMs such as BYD are so successful really resonated with me. And here's why, Terry's opening slide said this: "How can a $90,000 EV truck lose money in the US? However, a sub $10,000 EV makes money in China." And that's really it, isn't it? That's the question that we're all grappling with. Why is it that China can be so successful making money on EVs and we continue to struggle the legacy OEMs? It is a hard slog and we just seem to have such a hard time getting there. But why? Well, Terry goes on to say we need quantum changes and this is his quote, he says, "You cannot Kaizen or continuously improve your way from ICE to BEV. We need quantum changes." So what he's saying is the way that we look at improvement in this industry, these incremental steps of improvement based on the current way that we do business just isn't going to get us there. And if we look deeper at why BYD specifically is so successful, did you know that BYD has over 60% of their bill of materials produced in house? Yes, they're highly vertically integrated. One of the key points coming from Terry is integration is the key, and it is at all levels, whether you're looking at it from a design perspective, whether you're looking at how you engage with your suppliers, this idea of integration is key. He said that the Chinese approach is threefold: Imitate, Improve, and Increase. And we have seen that strategy play out over the last 10 or 15 years. He provided multiple examples of the way we design in Legacy Auto and the fact that we still use specifications designed for ICE vehicles to design EVs. So, we're over specing a lot of the componentry because we've still got ICE vehicles in our heads. Were not designing for EVs and for the simplicity of EVs. So, what must OEMs do? What must traditional OEMs do? Well, Terry presented a slide and he showed three different areas. We must first learn EV vehicle design, vehicle architecture, electrical and electronics architecture, and software and AI. Now here's where it gets interesting. He says, "We need to unlearn traditional organization structure. We need to unlearn ICE vehicle design, unlearn specifications, and unlearn design rules and processes." And yes, my friends, all of this is wrapped up in culture. Now, That's my summary of the unlearn block that Terry talked about, but it is not just about the technology, it is about unlearning the way that we've been doing business for decades. And in his third section, he talks about speed. He talks about being fast, and we have to be fast. Terry provided many different examples of the design of different components, the way that traditional legacy auto designs, and the way that Chinese OEMs design. And the difference in terms of the simplicity of the design is shocking. And in his closing comments, Terry said, in the US and Europe, we tend to say, "Yes, it's a good idea," but in China, they say "How soon?" Speed is a competitive advantage and an area that we must focus on now because the Chinese issue is an existential threat and nothing brought that point home clearer than Terry did on that stage in the MEMA conference on day one.

Moving on to day two, the keynote speaker was Noelle Russell. She's the founder of the AI Leadership Institute. She's got an amazing background. She worked for Amazon, Microsoft, and Accenture. She created some of the Alexa code, so she knows what she's doing. She's been working in the AI field for several years. Her message was clear. She said, "Think about how do you use AI to be helpful and not harmful? And start small, start inside your firewall. Don't start playing around with AI that will have an impact to your customers or to your suppliers. Start small and start inside the safety of your own firewall." And if your workers are using AI, she said, "Give them a safe playground. Allow people to play, but give them that safety and start with low risk use cases." One of the things that really resonated with me, she said, "Your AI policy and governance needs to be aligned with your core values." And she gave a few examples where, uh, she was talking to a CEO and he said, "Oh yeah, I'll get marketing in here. I think they know what our core values are," which of course is laughable because as a company you should know what your core values are. It's not a poster on the wall, it's something that you know and you believe in. And it's interesting that AI needs to come back to alignment with your core values. Noelle suggests that you start with one project, which she called the MRP, the Minimal Remarkable Product. With a specific metric or business result, she says it's about empowering your workforce and getting rid of mundane tasks. In her words, AI is a task killer, not a job killer. Interesting perspective.

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Then, there was an interesting panel called the real world view of the market. And it was a supplier CEO presentation and fireside chat with Swamy Kotagiri, the CEO of Magna International and Ray Scott, president and CEO of Lear Corporation. And I found it really fascinating. I have to admit, Swamy's presentation really resonated with me, again, because of the simplicity of his message. And he said, "Adapting to uncertainty is our one constant," and that is very true, but here's a couple of things that he said that I really liked. He said, and I quote, "We have to reframe business thinking." So again, here's this unlearning of our legacy processes that's coming through in the messaging. He says, "We have to be pragmatic. We have to do it together." And my favorite quote from Swamy is this, "It's about aligning interests, not opposing interests." It really is about working together, whether it's with the customers, whether it's with suppliers, whether it's with each other, whatever it is; it is about working together. And during the Q and A, Collin asked both CEOs, "What can the OEMs do to help?" and Ray Scott said, "Transparency, open dialogue, and flexibility in terms and conditions," particularly when we're talking about capital. And we know we felt that all the way through the supply chain. Swamy said, much like Ray, "Transparency, sharing what they know and what they don't know. We are in this together." So, I love the idea that communication and transparency is coming through loud and clear.

And then, the final panel on day two was the government panel with Pat D'Eramo, president and CEO of Martinrea. Jim Rowland, director of international government affairs for Ford Motor Company, Jennifer Safavian, president and CEO of Autos Drive America, and Anne Wilson, our beloved Ann Wilson from MEMA, executive VP of government affairs.

oyed every minute of the MEMA: 2024

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