Lear CEO Ray Scott: AI, Automation, Vertical Integration & Other Keys To Competitiveness - AAH 777

Yeah, it's great to be here. It really is special.

Yeah, it was a good call. It was good finishing up what I think was a strong year and I think gave us some really strong momentum heading into '26. You know, it's been an exciting time in the auto industry. There's always something going on, but it just feels good. It feels a little bit better.

Yeah, you're missing a couple there too. You had the copper situation with the index and the disconnect. You had the cyber security attack with a major OEM. And you're right, you had the geopolitical issues going on relative to different volumes and platforms. And so that's why I'm really proud of the team to really work through those issues and have what I consider to be a good year. And we kind of measure ourselves. What's great is we put ourselves out there. We're measuring ourselves two different ways. One is net performance, which is how do we perform above things like customer productivity, transactional changes, FX, those type of things, labor economics. And we had an outstanding year, almost $200 million of net performance. And the second one, and I think equally as important, is growth.

Yeah, we had a good call yesterday and we're talking about the second part of growth and the team did a remarkable job. You know, in e-systems, $1.44 billion of new business, second record year for us in new business wins. I think it was a really good time. We pivoted from what was EV. We saw the demise or the volume reductions in EVs and now we've re-pivoted with ICE vehicles, particularly in e-systems and in seating. There were some really special awards. The onshoring with General Motors with the Orion facility, a great continuation of our relationship. Really looking forward to putting that plant up here in Michigan. So I think that just continues with our extension of the premier trucks and SUVs for General Motors. And then, you know, we talked about some conquest wins. We can talk more a little bit more about it, but right now it was a major conquest win on the truck platform that we'll be launching in the next several years. But what was exciting about that in the seating world was it was really around technology innovation in the manufacturing processes.

Okay. $23 billion in revenue, 175,000 people globally, well positioned in seating. Seating really the core part of our business. Most vertically integrated seat company in the world. You know, luxury vehicles all the way around the world from, you know, the North American customers to the domestic Chinese to the German OEM. So, well positioned with the customers and then e-systems, wiring, terminals, connection systems and then electronics. And so, you know, two different product groups but doing a really nice job in each one.

So wire harnesses. So, from what are basic harnesses all the way to very complex harnesses on autonomous vehicles and so those get very complex. You can have some very simple...

Well, yeah, very complex with the terminal connectors and just the complexity of the harness itself from a manufacturing perspective and then terminals, connectors, more of the sophisticated T's and C's that are on the harness and then very selective specific electronic modules. You know, we just got awarded a PACE award with a zone control module and that we're going to supply with a customer launching this year. And so, you know, so we have very specific electronics business that we also do.

And we got recognized for that program around our algorithm, the software and creating a really flexible software program that allows the customer to change features as opposed to changing hardware. And so the technology that is really driving what I think are much more efficient products through technology and innovation are really helping our customers and then that's what's really what it's all about. Very similar with seating with our modularity concept where we make a much more, I'll say, simpler type concept as opposed to a layered seat build. You have a modular concept where we build thermal comfort solutions into a modular component that reduction of 50% of the part numbers and significant weight reduction. The customer's preferences and comfort improved dramatically and you build it where you can actually scale it. And everything we talk about, we'll talk about volatility and changes and we just discuss all the things going on in the industry. Well, our focus is around how we can drive durability and sustainable margins given everything else going on in the industry. And so modularity and seating being very vertically integrated having the capabilities around engineering, product engineering and the importance of how that connects to manufacturing. I think historically it's been somewhat separated but the two really engage when you start talking about manufacturing technology and design changes required to really drive the next generation of products. And so doing a really good job. That's why I think the conquest win that we talked about on the earnings call was so important because it validated our strategy and how we've been positioning ourselves because we've bought a lot of different companies where we kind of have this string of pearls approach. And Intouch, the Gorawip automation, which is a software company that does AI capabilities that we develop for our own production uses on our manufacturing plant floor. Stone Shield that was just recently announced with automation. And so, you know, we've been doing and going at this for 10 years and the combination of having best-in-class product that line up with the manufacturing competencies are getting tied together and that win was all about that. So, you know, when the customer came through, they went through an audit, a process. They came in, we have a facility in Rochester Hills where it's a lights out facility. We're showing a lot of the greatest and newest technologies on the manufacturing side and they came through and they audited us. They went to our manufacturing plants. They're looking at our modular design and saying this is the type of innovation from a supply chain we want to move forward with. And so we're awarded the program based on that criteria.

Well there'll be parts of it that are absolutely lights out. Yes. And when I say lights out, it's interesting. I think everyone thinks, okay, there's not a human in the place. No, no, no. You still have very technical skilled resources and capabilities are required. What we look at is the transition to software engineers. You know, we have very specific capital, you know, with dexterity or certain applications for the capital we're using in our plant for the modifications of the capital that we're using. So no, you still have people that would be very technical and very capable around the capital that's on the floor, but used in a different way. But yes, from start to finish, the capital itself is helping that product through the plant.

Yeah. So are trim covers. I mean, trim covers, harnesses, there are elements of it, yes, that are automated. But it's a very complex, labor-intensive job, but there's parts of it that technology will vastly improve the automation in the manufacturing plants. And so Stone Shield was a very important acquisition for us because the redundancy of taping and getting down to an automated, when you look at it and you see the people that are required to just tape the harness themselves, you say there's got to be a better way out there and there is. And so it's combining these type of capabilities. And what I love right now and why it's so exciting I think in the auto industry is technology is advancing so quickly. You know, you talk about AI or you talk about software, the digital changes, the capital side, the automation side and the suppliers or the OEMs that are moving fastly towards the technology are going to be the ones that are going to be successful because I think if you're five years ahead in this type of area of technology, you're really so far ahead that it's even difficult for anyone to catch up. So there's a need to move very fast. And I always look at it this way. So all of it's not solved when the harness is very complex or trim covers. But what I am seeing is what everyone used to say is impossible, it truly is possible. I'm seeing on the plant floor the problems being solved with technology and innovation. And I think there'll be a time when it will be solved. And I always look at it this way too. If we do have an area that we're trying to gap out because we haven't solved it yet, wait six months. I tell the team, wait six months. It is amazing. I was just in a facility last Friday and they talk about the dexterity, the fingers, and being able to do things like sewing or wire harnesses or other types of applications within a plant and now it's there. I mean, in medical areas where they're solving problems that were unsolvable, this is great as we look at manufacturing and the need for manufacturing going forward. There's and today in the US, there's hundreds of thousands of unfulfilled manufacturing jobs. You have to gap it out with capabilities because the manufacturing jobs and the requirements for manufacturing jobs in the future are increasing. Population growth rates are decreasing. The attractiveness to other jobs is increasing and so technology will gap that out. It is very helpful, but it's also a very helpful way to improve job satisfaction. Every time I walk through these plants, employees love what we're doing. You talk about quality, you talk about throughput, you talk about just the general overview of efficiency, the technology that's driving the new layers of what we're going to do as far as hiring new talent.

Well, that's more of a regional and I think it's more in different areas. Yes. We can find issues relative to shortage or absenteeism or other things, but that's more of our regional things. We have great areas. We have a great facility here in Detroit. We have a great facility up in Flint, Michigan. So, you know, it depends on the region you're talking about and where.

So it's both. You can solve problems with the products that are in place today and that's a lot of what we're doing. So we initiated IDEA by Lear about three years ago because we were acquiring all these companies. We're trying to figure out how do we pull all this together? You know, like I said, we've acquired seven, eight different companies in innovation, technology, automation, those type of things then along with the software and the digital solutions that we're bringing forward. We brought together IDEA by Lear which was, you know, innovation, it's the digital side, it's the engineered, which you're talking, the product side is an important element of this and it's automation. IDEA.

But what it did was it got the team, you know, we have 175,000 employees in our company. So you want a culture that's built on creating innovation and driving and understanding it's okay to take a little risk and push innovation in the plant floor or in the product side. So ideally, it's the combination of the product changing like I talk about with a modular solution or a just-in-time environment, but you can also solve near-term issues that you have on a platform floor through digital changes that with a current product or automation and technology that's here today. And so it really is both if you want to hit it ideally, but you can get at it with a current product that's in place today.

I think what was great about that, that's been, you know, I say when you're five years ahead, you know, so we put that in place three years ago and we're already driving modular concepts 10 years ago. And so the combination of the acquisitions we're making, it's like how do we fit them? Everyone when you go through an acquisition culturally the fit of how you can get at and scale it properly. You want to make sure you don't burn a new company that you just acquired into what you're trying to do. How do you look at the capacity that's available within their technology innovation? How do you prioritize it? So, we set up an organization around IDEA by Lear. And it was really centered on and focused on how do we optimize that? And then we started realizing, yeah, we're getting at these opportunities quickly. And when you have over 270 manufacturing plants across the manufacturing, the breadth of manufacturing that we have within Lear, how do you prioritize it? How do you, every investment dollar, how do you look at a return and how do you prioritize it? Then how do you stretch it across all your plants? And so setting up the organization. So you're giving the people the tools to do their job, but you're also giving the organization and support. So IDEA really resonated with the team. We have a great culture. Lear has a great culture of looking at innovation and driving. And I say that because I've seen other companies that, well, if it's not created here it doesn't really exist, that won't work here. We're not that, we're not built that way. We have a culture that once the grassroots within the company embrace it, it goes. So then we start tracking it. And I think the way we look at it, there's some soft and hard savings. And the hard savings are what we really want to start monitoring and letting our investors know the investment dollars we're putting in place. Here's how we're driving results. Because in today's world, especially in automotive, it's about there's going to be challenges this year. You know, last year we're sitting here and, you know, tariffs were coming out. What's it mean? And we're looking at these big numbers and we managed that very well. You know, you go into supply chain issues, you go into cyber security attacks, you got the copper issue that came out. So, we're going to be dealing with things. So, how do you create an organization that's durable that can sustain and manage change because you're going to have it, maybe it's not clear what those changes or issues are going to be today, but they're coming at us. And so building something around technology innovation that helps you scale and really allows it to connect throughout the other plants, it's very helpful. And once it's a very competitive atmosphere in some respects, too. So one plant has, I went through this fellowship program which is an AI tool that we're using through Foundry which is Palantir. And we had this absenteeism pool way to really track and define and get at what was inefficient versus driving efficiency within the absenteeism pool. And once one plant has it they all want it. And so now it's just how do you do it in a way that makes sense and it's a tremendous savings, but it's also better for the people on the floor too. It really helps out how we're bringing people in, how we're managing people, how we're not wasting somebody's time. And so I think everyone thinks about, oh, you're just looking at cutting heads. It's not that. It's actually job satisfaction. It's helping drive efficiency and the amount of wasted hours that somebody might be spending on just Excel spreadsheets and trying to get that information and having the clarity around that to drive the plants in a much more efficient manner. So, it's exciting. It really is exciting stuff. I get to sit through these projects and it helps you think, okay, we got this. We got now how do you connect the dots quicker?

Yeah. Well, I think it's that, I think it's proof of concept. I think it's the validation and the production orders we have in place. I think it's the Rochester Hills facility. I think it's a combination of a lot of different things. You know, like I said, it takes time. I mean, I've always said when you introduce a new way of thinking about, for example, in seating, a modular concept where the components come together in a design that's exactly, John, what you're talking about is you design the product differently. When you look at a seat system today, if you were to unravel it and take it apart, you have harnesses, you have thermal mats, you have foam pads, you have lumbar, you have motors. Well, they're designed individually to source individually. Well, if you look at it, you would sit there and common sense is, well, no, you design these together. Why doesn't this fit together now? Why wouldn't this just go in? Why wouldn't you get rid of this harness? Because you don't need these harnesses. And I say when you reduce a part that has been traditionally around for a long time, 50% of the part numbers, weight's cut in half. The time to sensation for a customer is changed dramatically. It's all common sense. And so looking at it and driving it. Now what's great that's going into production and I always say what's great about our industry is once you start benchmarking and somebody looks at another vehicle and they say, wait a minute, why is that so much more efficient and the cost has changed dramatically and it's much more efficient for the end consumer. Okay, that then it moves much faster.

So we tried that. And that's very difficult to bring in suppliers because you got protection, you got IPs, you got somebody that wants to make this profit, you want to make that profit. We tried that and so yeah, we went and we acquired Kongsberg and IGB and it gave us instant credibility in the thermal comfort business. And then so we can still quote independent components. What's beautiful about what we've done is we can still quote traditional purchasing strategies, that's fine, but then you have some of the more extreme, the domestic Chinese are much more open to considering all types of options. You have Tesla, you have others that are much more open to modular concepts. And I think within the middle there's probably a hybrid of different OEMs that will look at manufacturing and modularity. And so we can quote any different solution that any one of our customers want. But what we found, and again this goes back 10 years. I remember when I was in seating. I wasn't the CEO. I was in seating and I was like these relationships are very clumsy. They're very tough. And at someday at some point somebody wants to make the money or drive it. And so it wasn't gaining any traction. And so we went and we acquired Kongsberg IGB, very selective, very strategic, went after them. And now we have engineers on the product side that know exactly what they're doing, designing products that are matched up with our foam and trim experts into a modular solution. And so that's going, that's in production. That's come a long way. And so once you have in production, it's validated, you know, the ride and drives, the validation procedures, the statement of requirements, you're through all that. It's a lot easier to take it to another OEM and say, 'Hey, look, this works.' And it's agnostic to any seat frame, too. So, you can place it anywhere, which is nice.

Oh boy, we've been probably working with Palantir for over three years now. And originally started off, and if you think about Lear, we've gone through all these acquisitions. We have somewhat of a fragmented IT system. And so what Palantir brings in is immediate connectivity and connection. And so their ontology and the way they look at and the way their system works, it ties our systems together in a way that we can actually take the data and use it in a meaningful application. And that's one side of it, but their Foundry tool has allowed us to look at everything and get at decisions and drive efficiency. And I'm not just talking about the manufacturing plant which we've seen tremendous results. It's in how we look at inventory, supply chain, non-procurement purchasing, what we're doing with administrative resources. What we found was we had individuals that 60% of their time was pulling together Excel spreadsheets. 60%. Could you imagine? Talk about job satisfaction. 60% of your time is working on I have to get all these Excel spreadsheets. Boom. Done. Then now they can actually now focus and reapply their efforts to something that's very meaningful in the company. And so the use cases, we had over 300, you know, 17,000 users. I talked about it yesterday. It's just expanding throughout our company. And so what started, and I love this, what I love about Lear. I talk about culture. It wasn't something I had to push in the organization. It was a grassroots. It got pulled, or more of a, the organization kind of pulled at it. And so once one plant, we kicked it off in the UK to do some work within our manufacturing plants. Immediately, every other plant wanted it. Then it went from no one was going to use this tool to everybody couldn't live without it. And so I sat through. So we had our first fellowship program, which is a very unique program that Palantir established with us. And they trained 85 employees. And these tools are, I always tell my kids, I'm like, listen, like Excel, when you had to go learn Excel, you had to learn Excel. I mean, you're going to have to learn these tools. I mean, they're going to be part of your everyday life. And so we had 85 individuals that were trained in Foundry and then those individuals are much more engaged with what we need to fix within the company. So the projects they went forward with were truly revolutionary in my mind. And I sat through the presentations. I'm listening to these going, I never even thought that way. I mean, so you have this younger generation that's coming in. They're working on problems that I always got used to just that's what you do. They don't think that way. And so they can connect the dots a lot quicker and these projects are fixing how we look at capacity.

It's mainly using tools and part of that is AI. Yes. And it truly is remarkable how it pulls everything together in real time.

Oh yeah. Dollars and IDEA by Lear. Why we're holding ourselves accountable, which I don't know if any other company's really looking at the way we're looking at with net performance on a supplier perspective because we want to push ourselves and we believe this. So everything we're doing is net improvement to our operating performance. And so that's how we look at it. I have a whole finance team measuring this not just on the digital side, but on the hardware side too and the capital. And so, you know, I want to look back and I tell everyone 12 months I want to know exactly what our investment dollars made us and how we applied it and how we prioritized it. And that's probably the biggest issue we have right now, issue if it's an issue, is prioritizing. You know, we have hundreds of different things, how do you prioritize it based on what is the best results.

Yeah, you know, here's the way I look at it. I don't spend a lot of time on my competitors in regards to what you just mentioned. I think about more in terms of our own survival that this is something that if you're not the best and you're not best in class, I do measure where we're at relative to our own industry but in some cases I have to go outside of our industry to look at manufacturing integrators, how we look at automation. And listen, you can go buy a cobot or robot. Everyone does. That's, it's the manufacturing integration into purpose-built capital for your consumption. And so like a lot of suppliers will say, 'Yes, we use automation.' Well, yeah, everyone uses automation in some respects for a certain advantage either through throughput or quality or other things, but it's how you use that particular capital for efficiency for your own consumption. And so the companies we bought are designing the parts that go on the cobots. We created a visual system and it's cameras. It's, you know, in touch with a company that we acquired that has the visual capabilities. So for quality checking, throughput, you know, where you're actually, there was a tremendous amount of cost on the end of line on the quality and how you measure and how you look. Well, we did some AI work with, and it was through the medical, we had a woman that was from the medical industry that came in and was taking medical technology and AI to help us with how we look at appearance on our seats. And she designed a program that will get appearance right first time and it checks it and it gets smarter and it gets smarter and it gets smarter as it's working. And so there's these applications that we're using. So, I always look at it as like we have to be best. We have to be the best. And we're kind of in a survival mindset of like, you know, if you're not, you will lose. And you got the domestic Chinese that are doing a great job. You got the traditionals that are doing a great job. You have to position yourself where you're creating a value...

I think it's kind of over the last several years. I think from COVID, you know, what we kept hearing is, well, let's get back to the normal. And then you have the chip crisis, and then you have labor economics and inflation, then you have materials, then you have material shortfalls, then you have labor strikes. It just became, okay, this is the new normal. This is what we live in. This is the industry we're in. This is what we choose to do. Trade policy changing, the geopolitical stuff, the policy changes, the major shifts that we've seen with EVs. And so, I think it's over time. I wouldn't say it just immediately came. And I think, John, you and I talked when you were at our place not too long ago and watching other OEs too and how they behave and how they're thinking about things. I'm thinking about the domestic Chinese when I do meet with our customers out there. When there's 200 different OEs trying to gain the same market share to be successful and you witness that and you're watching, that's a different mentality. They're in a survival mode. If they don't get that next unit out, they don't feel they're going to be around. And if they don't get the next technology or innovation out, they won't be around. Now, it's a mentality you love to push, but you don't want to create this crazy sense of urgency that people panic. And so, there's a balance there. When I say survival, it's like understanding where you need to be five, ten years from now. We have to be there. The successful companies that will be around will be there and they're going to find a way to adapt, to move through these things, to be flexible, to scale properly. The old normal's gone. You know, and can you operate in this environment? And like I said, that's why I felt so good about last year. No, we're not where we need to be or want to be by any stretch. But I felt we managed a lot of the things that came at us with a different type of mentality. And culturally, I think we're built for that. And culture is very important. I used to talk about culture way back when, and it's not very exciting when you talk to investors and they're like, 'Okay, culture. Everyone says they have a great culture.' But culture is very important because you have to have that type of drive to not panic but still know that you have to do these things and some of them are going to drive risk, but you're going to be better off for it because we're in an industry where risk is not a word we're used to using because of a quality issue or warranty issue or anything else. You avoid risk at all costs, but we're going to have to challenge ourselves with innovation, technology, and that's going to be a risk.

Ah, yeah. Thanks. The team did a great job. And I think from a Lear perspective and others, we saw exactly what was going on in China in November of really 2018 or 2019. And so having that knowledge and seeing what was going on and being able to share that, we're used to running off a playbook and that's what we kind of put in place.

Yeah. Well, I think it started internally at Lear where we're running into certain situations that there wasn't anything. If you think back to that time, it was like wear a mask, don't wear a mask, maybe you should wear a mask. There was nothing. There was no guidelines. There was no best procedures. There wasn't anything in place that would tell you here's how you treat a certain situation or here's the type of equipment you should be using to protect people. Here's the protocols or the time that you should be thinking about. And so while we're going through it, we went through it in China. We had great people on the ground in China that were going through it. So we were learning from there. We learned in Italy. So we are learning from different experiences that we're going through and I said we need to write up everything that we have, let's start benchmarking everything because it was changing so quickly. And you're right, we did write the playbook and we're going to use it for our own internal consumption. And I was like, this isn't right, this doesn't feel right. And I was also concerned, you publish something like that when no one's publishing anything, are we going to be criticized for what do they know? And so we did put a disclaimer in there, this is just what we, at this point, these are the best practices we're using. Please use them if you find them helpful. And boy, it was downloaded over 45,000 times. I mean, I didn't think anyone would download it and use it. But boy, I heard from grocery stores. I heard from municipalities. I heard from schools that that's what they used. And that was remarkable because at the time I was like, ah, should I put this out there? And boy, I'm glad I did because I really believe it saved lives. But it was really a culmination of everyone in the company pulling together what we were learning day by day. You were learning hour by hour. And so, I'm really proud of what Lear did because of that playbook and it was a lot of hard work that the team did and then I think it really helped out the industry too get back on their feet quicker.

Yeah. Well, it's regional. And so China, we've seen more of a move from EVs to hybrids, you know, in China.

Yeah. And I think there's a lot of stories that still need to be told. You know, it's...

Well, it's definitely changing. Yeah. We're seeing more hybrids. And then in Europe, we've seen the shift from the EVs to the hybrids.

Yeah. And I think we're going to see more of those type of shifts. And I've seen the market run up from what was 12, 13% to above 25% of the global market and maybe slightly higher. So I still think that story still needs to probably work its way through. But the big change was here in North America and we did a really nice job. We did a great job positioning ourselves with EV manufacturers and EV product both in E-Systems and Seating because you're right, in seating we're agnostic. I mean we can build ICE...

Yeah. So I think last year we saw and we went through that. So I think we were, what were the customers going to do relative to their product placement? And we saw cancelled programs, we saw delayed programs and we've seen volume really decreasing on EVs. And now we're seeing the shift to onshoring. We're seeing new platforms coming out, either hybrids or ICE. And so, I think we've worked our way through that. I think we're in a much more clear position. So, commercially, we worked it through with our customers. We've kind of repositioned ourselves. That's why I think with E-Systems, I was really excited about the $1.4 billion in new business win because a good chunk of that is ICE vehicles and so we're repositioning ourselves for what happened in 2024 and 2025. And so I think that's really behind us right now. To your question, if policies change in the future, we'll see what will happen, but I think we're in a much better position as far as where we're at and things are clearer than they were back in 2024 and 2025 on what was going to happen.

Well, so okay. Yes, we've been doing a nice job of growing with domestic Chinese. But I still think that for Lear, we still have opportunities with the traditional OEMs and we're seeing that play out. I mean, I think we've done a nice job. So, I still think we can gain market share even with the traditionals, even as the market share may increase with the domestics globally. So, we're doing a nice job with the domestic Chinese and from a competitive standpoint, we're there. So we're really good with the luxury products where you have the technology innovation that's required to produce those seats. Done a really nice job and so we're going to continue on that growth path both in E-Systems and Seating. And I think there's another element too with the Japanese OEMs that we're really doing a nice job of positioning ourselves for longer-term relationships and growth with the Japanese.

Globally.

China we've done a nice job. But I think globally we can do a really nice job. And so, from a Lear perspective, I think we have a really nice balanced approach of how we're going to grow the business across those different areas of the industry. And so, yeah, the domestic Chinese I think have grown significantly over the last several years, but so have we with the domestic Chinese.

Well, so we prioritize it based on where we can create the best value for our customers. The Zone Control Module was an area where from an efficiency standpoint, you don't have to change the whole hardware all over, you get to change the software. So we saw a need where our customers needed a solution. Flex Air Foam is one of the dirtiest products that is out there. And I have a personal issue and I've been working on that for a long time. The team has been working on that.

The chemicals and just the process itself. And so what we did was we partnered with a company. We're the only ones in the automotive industry that have this Flex Air capability. And it was baby mattresses. And so it's 100% recyclable. Much better from a chemical perspective, environmental standpoint.

Yeah. Breathable. So, you think about when you're in a seat, with the foam, the TDI or the current foam situation gets hot. It absorbs the heat from the occupant. But Flex Air is a breathable foam pad. That's why you guys should come out to Rochester Hills facility and see this stuff. And it's just common sense.

Well, we do some of it. So you see some manufacturing R&D out there. I think it puts it together. So yes, we work on these things, but what we really try to do is look, is there a problem that we can solve and that's what we focus on. And so we've gone past trying to solve things that don't maybe never really materialize from a PO or contract standpoint. So you have to focus on where the customers need you and that's one that I thought was really big. Environmental sustainability is still something I think is very important. The customer doesn't really engage with it, they'll actually get from a comfort standpoint better satisfaction, but it's one that I think needs to be fixed from a seat perspective.

Okay. I think the manufacturing plant itself is a giant humanoid. I don't think the human body is designed for manufacturing from an optimal perspective. So I don't see humanoid replacing individuals on a plant floor. I think the plant floor itself will replace if you're going to go down that road. It'll be replaced with automation that makes more sense than a robotic for that application. And carrying material from one point to another point, no, you have other means to take that material back and forth. Now, humanoid robots, I think people feel less threatened from what the application would be in a manufacturing plant which would probably be bigger, more industrial. But I think that the manufacturing plants themselves through the capabilities will solve those issues when we talk about actual use of humanoid robots in a plant. There are applications you can do it. We are experimenting with it, but I don't see a long-term manufacturing.

Yeah. No, he wants a giant Optimus, not C-3PO. That looks more like a normal robot. I mean I would think that if you have a giant humanoid in a factory versus a six-axis arm that could lift a car up. I mean...

So what's the future of work then if we've got all these different types of robotics, AI, software taking technical capabilities around? You're going to have a lot more software engineers, you're going to have applications around AI capabilities, there's specific needs for the capital on the plant floor, there's absolutely going to be a need for humans in the manufacturing plant to take care of those capabilities. It's a kind of a transfer.

We're going to need those people in the... Yeah, I still think there's going to be applications under different types of product lines. Absolutely.

Shortage of jobs or shortage of work?

I think that's the missing point is there's more manufacturing jobs required than there are people. And so the gap gets solved through technology, but there's going to be jobs. There's going to be jobs. Now, will those jobs change slightly? Yeah, I think they will. Now, how, what time are you talking? Five, ten, fifteen years or longer. But the demand for manufacturing jobs, onshoring here in the US or around the world are increasing and there's not enough people. And the other thing too is there's a lot more optionality with jobs. I mean, you can take different types of jobs and do different types of things today. The attractiveness to a particular manufacturing job isn't what it used to be 20, 30 years ago. It's changed where flexibility and other things have kind of been more attractive. And I'm not saying for everybody, I'm just saying that things have changed, the environment has changed. But what we're seeing globally is a shortage of people relative to the need for manufacturing. And this, we're one industry, you got the data centers that are in need of people, you got all kinds of new technology and building of all these robots that we're going to need and everything else. So there's going to be needs for manufacturing in different types of shapes and forms of products. Here's where I'm at is that's why I think the technology is so important is that there's going to be areas where you may not have the population that can satisfy the jobs that are required.

Uh, yeah, let me ask that question again. Let me...

Okay, two different ways to answer this. From a personal perspective, I love that we're bringing jobs to the United States. And I think that's great and we can support that and in a lot of applications, it makes great sense, too. One thing I realized that when you look at the US and the types of manufacturing jobs we're not familiar with, from simple apparel to things that are basic needs that we are required to manufacture as a country. It's great. And so, it's bringing attention to those areas and we can expand those. We do textiles. I would love to expand the textile business, because there's one location where we get our textiles and the chemicals for those textiles. So, onshoring of those areas, I'm all for.

Is that all Mexico where you're getting all your textiles?

Oh, it's all China. Okay.

I thought... Yeah.

I don't work at the design studios for the OE here. But I know they spend...

I know they put a lot of time and effort to what makes sense for the customers in a region. And so I think there are some regional differences based on customer preferences. And I have been to China quite a bit and I've seen the products and there's a lot of wow features and some of them I think are great and some of them I'm not sure that they would sell here and that customers would really be wowed by them. But it doesn't mean that you don't push it and then you bring it back. But I think on that side I think there's an awful lot of work by our customers to make sure they're hitting the right markets they're in for those customer needs.

Like real estate. Every wall you want to sell your house, every wall in the house has to be gray, right? So, it's not just interior colors that have been limited. I used to have a poster, I've got it somewhere here, that showed colors of cars in the US, in Europe, and in Japan. Japan was always white and black. It didn't much change. But if you look at US cars in the 1950s, 60s, and 70s, it was a wild palette of colors. And then starting in the 1980s in Europe, Europe started to get to these very monochrome, understated paint jobs. And we followed suit. And so today we don't have the wild disparity of colors that we had back then. But I'll tell you it's mainly because dealers order what they think are safe colors.

All right. Well, check... I was talking to Mike Simcoe before he retired as head of design for GM. And we were in the design studio, like the color lab at General Motors, the exterior color was pretty awesome. And they were working on some cool stuff in design. And Mike said to me, he said, 'Buyers are getting sick of red, silver, black, and white.' I'm like, 'That's good to hear because I've been buying British Racing Green Minis for about 20 years now.' And Mini does have a pretty big color palette, but it's a funky car. Jeep does, too. But for most vehicles, your basic crossover SUV, small, medium, large, you know, five or six basic colors on the exterior and the interior is like three.

So Ray, are seats in China different? I mean, are they basically what we are familiar with?

You know, one thing that I think, you know, I've learned post-COVID is going over to China and I've been there frequently is that the quality, the fit and finish, the innovation, the technology is a whole other level. You know, they work extremely hard. Like I said, the story still to be told. They're six days, 10 hours a day in the office. They are working and they have like I said this mindset if they're not driving the next innovation or technology that they're out of business and so they're pushed differently and they're thinking differently. But the quality and the fit and finish, they're doing a really nice job. They really are.

Well, I'd like to see the USMCA stay where it's at and intact and we continue with the relationship we have and we continue to bring, you know, we talked about onshoring and one thing about onshoring is that the goal is to build here and part of it is to supply parts here and vehicles here and export. How do we get the export? You have to be competitive. You have to have the parts and the supply chain that is competitive. And some of that is not all onshoring of manufacturing. Some of it is getting the best landed part here for the consumers here with a good price and you can export competitively. And so when we first went through this, I saw some of the disconnects when some of our trade agreements and I think we all have and say listen this isn't right, we got to fix some of this stuff. But some of it for the onshoring purposes you want to make sure that you have the best cost here and then you can export. But if that starts to get too different, it's going to be very hard competitively from a price standpoint to compete. And so, I would like to see it stay in place very much the way it is today so we can still have a competitive supply chain. I mean, the supply chain's been built up over what, 30 years of this global situation. Some of it needs to change. I get it. But for the most part, keeping that balance of competitiveness in the right places is good.

Well, you know, hey, look, you're in favor of bringing back more jobs to the US and keeping USMCA or the North American supply chain competitive. And no, I think that's a good note to wrap it up on. But Ray Scott, thanks so much for coming on the show today. Really good discussion here. This is excellent.

Glad to be here.