Video Games and Volvo, Tough Questions for Ford CEO Jim Farley w/ Special Guest Brian Pasch

June 6, 2022
We’re making some big trouble on a Monday morning as we talk through Volvo’s partnership with the creator of the popular game Fortnite, Epic Games. We also have special guest, Brain Pasch on the show to talk about his direct approach to questioning Ford CEO, Jim Farley’s direct approach to selling EVs.
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Fortnite creator, Epic Games, partners with Volvo to unleash in car experience

  • (Side note)If you have kids that play the game, you know that Chap 3 Season 3 went down over the weekend in a giant mech battle
  • In a statement Thomas Stovicek, Volvo head of user experience, said that he hopes the partnership will:
  • provide "richer layers of information" to the driver without the "additional distraction or stress"
  • “About bringing astonishing game-quality graphics into our cars”
  • "provide entirely new functions and services" such as improved connectivity with other vehicles and the outside environment”
  • Will run on the Volvo ‘HMI’ (Human machine interface)
  • Take away: This is a a great example of importing the best thinking and tools from outside the industry
  • An Open Letter to Jim Farley w/ Guest Brian Pasch

On Friday, June 3rd, Industry advocate and fellow troublemaker Brian Pasch released an open letter to Ford CEO, Jim Farley challenging several statements made in a recent talk and asking 10 follow up questions on behalf of franchised retail Auto Dealers

  • Is Ford changing their building standards and facility requirements today to minimize the investments dealers need to make for new facilities or facility upgrades?
  • Who is going to work out these deals and trade values on a national Ford EV sales portal when no technology platform can do it today?
  • In your consumer-direct model, where Ford sets an online trade-in value, who is purchasing the vehicle and where does it go?
  • Will Ford be selling certified pre-owned EV models direct to consumers on your national portal?
  • What is your risk tolerance when other OEMs have local dealer lots filled with ready-to-buy competing models and you start to lose market share?
  • What happens when Ford models (and likely incentives) do not sell through national inventory that you pre-built or orders fail to meet your production goals?
  • Will local dealers have the ability to offer their own financing and F&I products, or will Ford control those offerings?
  • Are you willing to share what the PVR in your model looks like compared to what dealers are realizing today?
  • Could the complexity of trims and optional packages in the Ford EV lineup challenge consumers' ability to confidently configure, build, and purchase a vehicle online?
  • Which technology company has been chosen to design and build your national sales portal?

SPEAKERS

Kyle Mountsier, Paul Daly, Brian Pasch


Paul Daly  00:25

Yo if there was ever a Monday you're gonna make some trouble it is Monday June 6 It's actually Monday actually making trouble talking about Volvo and video games and bringing on Mr. Brian Pash let's do it the people really want alright make sure we are recording everywhere and ready to make trouble on a Monday Kyle


Kyle Mountsier  00:46

everywhere I got it shared out on the LinkedIn this is gonna be this is gonna be just all over the place this morning we got a crazy story to start with and then bringing in our good friend Brian and man that literally when we say trouble


Paul Daly  01:04

right yeah let's let's redefine trouble.


Kyle Mountsier  01:07

Yeah, because because a lot of people before we get started before we get started a lot of people think when we say trouble it's like messing everything up getting in trouble this element of like, of fighting against something right? And really what it is is this trouble that says no, we're gonna get in the we're gonna get in the weeds and like go past the boundaries of everything that like all of you know our friend Darren don't said there's these like No Trespassing signs that says you can't say this. You can't do this. You can't go there. But yeah, it's it. What we're saying is like you can inch past it, you can have those conversations you can dive in and the type of trouble that we're making this morning is definitely in that spirit. So it's good


Paul Daly  01:56

trouble. I mean, like it all innovation is trouble. If you think about it right? All innovation means that we're doing something differently than we did it before. And just by nature the people have who have established how it's done before have a vested interest in it staying that way because we're just change averse by nature. So trouble innovation, it's all the same to us. We are going to be making a lot of trouble in September at asoto con I know we've been talking about it. haven't released a ton of details yet but you can go to a so to con.com and put your email in so that you can be ready when we release everything. We got a trip we're going to Philly on Wednesday Thursday. We're going to Philly up Thursday with the whole crew we're going to check out the venue again we've been there before we're going to go see see see Oka Subaru go to their grand opening the flagship Subaru store in the country so just you know stay tuned for that stuff. We'll probably post some things on our socials about it but yeah, we're making some trouble this week as soda con is happening summers in full swing. Do you have a summer weekend? Like what is Nashville Summer Start like in February.


Kyle Mountsier  02:56

We had a very summer weekend I told I told the crew this morning we we hit the pool for the first time and so that that's like official Summer Start yet your feet hit the pool. Yeah, that's it. Yeah, exactly. You


Paul Daly  03:09

Will Smith summertime right. Music starts you're like now we're having summer. Well in upstate New York. Summer starts around now. Right because it was snowing last week. So summer starts now. And like for all of you that enjoyed some great summer weather over the weekend. We were feeling even in Syracuse, it was like mid 70s which is my happy place. Right? Paul was


Kyle Mountsier  03:28

out singing We on a boat. It was it was all the things.


Paul Daly  03:31

We busted out the pontoon boat. We were just cruising around in hoodies, and hoodies naturally. But it's all good. So a summer summer is a great season to get going. You know the kids are home from school and things are going you know my kids over the weekend. We're playing fortnight and if you've ever heard of the game fortnight it's by a company called Epic Games. I don't know how you could have not heard of the game fortnight


Kyle Mountsier  03:52

you've at least seen a kid doing the like that? Yeah,


Paul Daly  03:55

dancing was dances like 90% of those started in the game fortnight just so you know, they started into video game and this weekend was the launch of a new season. So fortnight the way the game works is they launched seasons, and then they have these big epic scenes and everyone shows up at the same time to see what's going to happen in this involve the space station and these big mechs that walk around and some collaborative destruction of, of asteroids, which seems really cool. But the reason we're talking about fortnight so much is because Volvo has announced the partnership with Epic Games, the creator of fortnight to further develop the in vehicle experience using their proprietary technology, which is called Unreal Engine. So we thought this was a great time to bring up the little Volvo partnership because all of a sudden, I'm really interested in buying a Volvo. I


Kyle Mountsier  04:45

know I'm like where can I get the Volvo with that experience in and this is what I think OEMs really in my opinion. There's this like chase after Evie, and we're probably going to get into this in a second with Brian. But what I would say is that What people really want out of Eevee. And this kind of new mindset is not maybe not particularly easy. I think there's a large swath of culture that wants the Eevee. But I think what Evie actually opens up is this collaborative effort in technology, not necessarily, Oh, I get a battery car, it's, oh, this car opens up the mentality of all of the software that comes alongside of that type of innovation. And this is this is a lean into that for sure. Absolutely. I


Paul Daly  05:30

mean, the goal is to provide what they say atomics Thomas. So Dova check will say that, yeah, there you go ahead of user experience, said, they hope in this recording from an automotive news article, they hope that the partner, the partnership will provide rich layers of information to the driver, without the additional distraction or stress. You know, they want to bring game quality graphics into cars, and provide new functions that people aren't used to having the car. So you think of the way people navigate through video games. And when you're in a video game, you have all this information coming at you at once. So it makes sense that they would be an expert at processing that and then displaying it in a usable real time fashion,


Kyle Mountsier  06:10

allowing you to keep your focus on the main thing, right? Because Because literally, wow, this entertainment system in my car is unbelievable Said no one ever.


Paul Daly  06:24

You shouldn't you should see my son, my 15 year old son, any of my kids, tapping through the infotainment system, flags answer, like I'd rather look out the window. Like the trees are green again is weird, right? Yeah, they just it's disgusting, right? So I think we're gonna see a massive step forward. And just the processing speed, the natural integration, you know, and this is just just a great example of importing the best things from technology and culture outside of automotive, and bringing to bring it inside automotive. And I think the Evie revolution is a great excuse is a great excuse to like, level up all the areas of the user interface. And like I think you're right on how he said, it's not just the Eevee thing, but it's easy to tie the technology because of what Tesla did for the for the user interface in a vehicle. And it makes sense that this would be the next step. So fortnight maybe there'll be a fortnight edition, maybe there will be


Kyle Mountsier  07:21

that would be a sick car would be


Paul Daly  07:23

but regardless of this is a great it's just a great I think step forward that Volvo is doing for the whole industry because you know, others are going to follow suit, or are already in the hunt. But speaking of EVs segue Okay, okay, this is the main event of this Monday. On Friday, Mr. Brian Pasch, a fellow troublemaker longtime he was a troublemaker before we coined the


Kyle Mountsier  07:49

phrase troublemaker right before this guy has been doing trouble for years and years.


Paul Daly  07:53

And I have to say he's been really instrumental in just my career in automotive. He's always been very open handed with sharing, because it's in his nature to share advice, to share knowledge to introduce people. And so it's fun to to watch this progression happen. But he wrote an open letter to Jim Farley, and he put it out on LinkedIn. And I don't even know what the count is. We'll talk about it in a second. But it was over 12,000 I think as of this morning, but we brought Brian Pash into the show so we can hear from him directly. Brian, Isaac dropped right into the stream. Come on come home, we're in Boston, got a shirt that just says boss, when I reposted his his his letter on Friday I hashtagged boss mode because it was just a very direct and respectful and honest questioning of okay, you said these things. Here are the questions your dealer network has. And here's some thoughts that might push back a little bit on on some of the thinking I like in your LinkedIn profile. Brian, I just noticed your job. Your title is contrarian, which is fantastic. But Brian, welcome to the program. And why don't you tell us a little bit about what spurred you to write the letter?


Brian Pasch  09:05

Well, thanks. Both of you for inviting me in. You know, when Ford first announced a number of months ago that they were going to split internally, basically their Eevee and ice. Around that time, Wall Street was hoping that Ford would actually break into two companies because they investors saw that the value of Tesla would really take Ford stock and in that Divi company really allow them to afford an amazing multiple. Now Jim Farley in the I guess the Board of Trustees decided not to do that to create an internal division. And at that time, there was just a few little hints it was the EVs are going to be one price and that we're going to have some national portal for them to be ordered. And I started talking to dealers about this So when people read this letter with the 10 questions, and they're like, Brian, that was well thought out, I want to give credit to the dealer community, because I would ask them, What are you concerned about? What are you concerned about? And these 10 questions really are now a response to Jim's interview at the Bernstein conference last week. And these are just sincere questions to start a dialogue to help dealers prepare for the future. Yeah, so go ahead, Kyle,


Kyle Mountsier  10:32

you're gonna Well, I really, you know, obviously, if you are listening to the show, make sure you go to the show notes and read the whole questions. There's no way we can go into all 10. But there's, I think, a few that that I have, you know, distinct, like, I want to have the conversation with you around them. And maybe there's one that's more poignant to you. And we can have that discussion as well. But what I love about this is, it's not like you didn't come at it with a question in an answer format. I because I do think that for me, and correct me if I'm wrong, but these are probably questions that a lot of dealers are actually struggling with internally already. Yeah. Right. We've been in digital retailing land for two years. And one of the questions that you pose that I think is, is probably the most stark when it comes to all digital retailing or national sales portals, is this either negative equity or credit challenge situation that has the most struggle going into any store of online purchasing portal. And that's something that both dealers and OEMs are going to have to figure out no matter whether it's agency model or franchise model.


Brian Pasch  11:44

Yeah, the the tools that are out there today, and there's a lot of great tools work really well for perfect credit. And they work really well, when someone has a clean or trade with equity. But you know, in these last two years, people are paying MSRP MSRP. Plus, let's roll this out. There's not a lot of EVs that Ford needs to sell everything in their small production is sold out. But let's go out to three years. It's gonna be a very different picture. And I think that this idea of 100% that was the claim 100% online. I'm not sure if the Ford executive team really talked to some of their digital retailing partners and auto fie has been a big platform for for dealers, right, it was kind of their first real big push. I don't see auto phi dealers pushing more than 10% of their sales through digital retailing. I mean, and that's a big gap.


Paul Daly  12:53

Well, that's that's kind of what you said in the in, in the letter, you're like, you know, it was kind of a question like, are you do, do you realize that still the feedback on the ground that can the consumer feedback, and I'm saying like they're voting with their feet, right, they're walking into the stores, when they could purchase completely online? You know, you you did a great job, I thought of saying, like, let's listen to the consumers, and then listen to the people that have closest contact with consumers, right? Not a focus group. Not a survey says, right, not a perception of what what Tesla's doing or what people like about Tesla. And you really brought up this, like, actually, this is what the consumers are saying about this very point.


Brian Pasch  13:36

Right. And, you know, the bigger issue, and by the way, there's been hundreds of public comments and dozens of private comments, because some dealers and industry folks do not want to publicly course, you know, identify with the letter.


Paul Daly  13:50

It's been a largely respectful conversation, which I think is setting an awesome tone for collaboration, because we do need each other and that's really the point. But so you're saying,


Brian Pasch  14:00

Yeah, and I think what the general mindset is, is from the dealers like, Brian, these are the questions we're worried about, like, thank you for putting them and I and I hope Jim Farley does reach out and set a tone whether it's speaking at the MRC conference in the fall, or just doing an interview. But what I'm hearing is, Brian, you've kind of encapsulated a lot of concerns and think about this, think of a dealer who's going through a renovation, or will is building a new point. So some of these points can be 20 million, they can be $30 million, even some brands highs $40 million for the build out. And if Europe is a predictor of United States, Atlantis, which cancelled every one of their OEM contracts with dealers, they're coming back and saying, Look, you're gonna be an agent, and we're gonna pay you for a sliver of Have your overhead for your showroom, because we just need you to put a few models, you know, that big thing that we told you to build years ago? Well, sorry, we don't need that anymore. And so I'm wondering, you know, does Ford have the conviction? Right now, when they're going to a local Ford dealer and say you need to update your facility? Are they changing today? The facility upgrade plans to minimize dealer cost. These are real practical questions. And if I'm a Ford dealer, building a new point


Paul Daly  15:33

out to write a check. Right. Right, most practical question.


Brian Pasch  15:37

Most practical question is should the brand standards should the brand refresh projects and they're going on across the country should really be thinking of a mini Evie facility? Like is that where we're going? In? There's so far we have no answers on that.


Kyle Mountsier  15:58

No, we were actually talking last week. And we talked to our good friend, Liza Meyers Borgess, who you know, as well, about how it seems like Honda is the only one starting to work toward a showroom that is smaller, that's more compact that is focused around a delivery center model, as opposed to a very, like large showroom state model. And I do think that that's another, that's another piece because I here's the thing, I don't think that that dealers are not cut out to be innovative and be profitable. Even in an agency model. If we move the agency model, I think dealers are cut out to do it. It's just that if the work over the next three years doesn't prepare to that end to be financially profitable from a real estate marketing and inventory perspective than one then then it will not be kind of thing doesn't


Paul Daly  16:51

work. Exactly. The whole thing doesn't work.


Brian Pasch  16:53

Right. And that's what the 10 questions are, you know, in this national portal, when someone goes to buy a 40 V, are you taking in the trade? Meaning, are you taking away that income? That trade vehicle? Are you providing the f&i? Or do you don't like these are just some practical things? Oh,


Paul Daly  17:11

there's so much practicality. Yeah.


Brian Pasch  17:13

And, and also, I also feel that some of the public's saw this coming sooner than others, like with Sonic with Echo Park, where they peeled off their used car business in a separate brand. Yep. I'm wondering if they saw the day where their franchise new car facilities were much smaller, and that they needed to separate us cars. And because in that model, right driveway


Kyle Mountsier  17:46

that was ever drive, a small


Brian Pasch  17:49

new car franchise facility taken the trade push it down to eco park, you know what I mean?


Paul Daly  17:55

I wonder if that was part of the if it was, that's amazing to have that level of foresight and knowledge and understanding back. Back home are one of the reasons I always advocated for that, that breakout is just just as a practical level of control, control over brand, like in the automotive manifesto, I talked about like, just the brand control that you have to build an experience without, you know, without the restrictions and limitations to be something that's uniquely you. So regardless of why they did it, the people who did that have like an even bigger advantage going into this Evie world, especially if things migrate more to a delivery Senator model, right? They have the leverage and the scale to say, okay, we can do delivery center crush it do really well realize the OEMs vision for how they want the consumer that transaction to be, and at the same time, still exercise that entrepreneurial level of control over revenue and fixed ops, and all of those other things. I want to get to one question that you brought up in your 10 that I thought was, it was like for me it was like yeah, that because everyone talks about Evie ordering and how it's so easy in Tesla, right? It's like buying an iPhone. Well, it's like because there's only two options. I think your color and you want this one or this one. It's like when you give your kids a choice what they wear. Do you want to wear this blue one or this blue one? Right there. Like I want to wear that one. You're like great, you just picked your own outfit? Not really. So your question and I'll read it here. You said Could the complexity of I can I can always hear your voice when I'm reading your writing, right?


Kyle Mountsier  19:26

It's your cadence and your pace and cadence. Yeah,


Paul Daly  19:30

I'm not gonna do my impression because you're here but I do a good impression when you're not here. Could the complexity of trims and optional packages in the Ford Evie lineup challenge consumers ability to confidently configure build and purchase a vehicle online? So you use the Bronco as an exam? Yeah,


Brian Pasch  19:48

I mean, think of the Bronco and when you go to the Bronco website, there's a couple different models and then within each model and tons of accessories and cool things to consider. Bigger. I remember when I bought a Ford truck. I remember sitting down with a dealer and this guy was brilliant. He knew all the opcodes. And I was like, Well, you can't use this opcode because that cancels out this I told him what I wanted. And he was like, Oh, we looked at women. And I'm like, I think you know, all those hackers, I've been doing this for a long time. So wondering like, even on the BMW, do you want the cold weather package? Well, what's in the cold weather package? Well, that cold weather pack, you're going to need this other package. And I'm just wondering, what happens when the consumer orders in the car and it's wrong? Like, like, there'll be like a realistic thing that somebody who's gonna happen, right? What's gonna happen, right? And what is, is someone going to call the consumer back and say, let's review all this? I don't know. But I just think literally,


Kyle Mountsier  20:56

it's literally Paul and I. Sorry, Paul, and I have had this discussion. And I keep I go back to this Brain Games episode, where we actually put consumers in a more stressful situation, the more options we give them without without controlling guidance, right. And so there's, there's literally the potential for stressors to enter the buying process, where people are trying to move out of the quote, unquote, stress of going to a dealership, they're actually introduced to a new layer of stress, because they have to take ownership of all the decision making, which is pretty wild.


Brian Pasch  21:33

Yeah, it's like those of you on the East Coast, it's like going into a diner in New Jersey, now we open breakfast. 10 things that people eat for breakfast, you go into a Greek diner in New Jersey, and there's 100 choices on the menu,


Paul Daly  21:51

and turkey dinner, goulash lobster tail, right.


Brian Pasch  21:58

But the idea is people will spend like 10 minutes going through all this? And then they'll like, Yeah, I'll have two eggs. So the question is, is there's no downside, it's a low risk investment. But I just wonder, you know, Kyle, you brought up the challenge credit, then you have to be able to have an educated consumer that knows all the option and trim packages that apply. And then the big, you know, unknown is who's handling that trade? Who's valuing it? Where does the car go? I mean, in Europe still Lantis has its own use car model where they're like Echo Park, you know, is Sonics, but still Atlanta. So think about this, what happens if the if Ford decides, well, all of the vehicles that come into trade, we're going to take in, we're going to control what markup and sell the dealers are, will put out. I mean, that's a very different model than what we understand is possible today.


Kyle Mountsier  23:03

Yeah, well, and look at all of the trouble that every dealer that I talked to, that's dealing with car Bravo right now with GM, it is it is a like, it is a rough user experience. And they are trying to own both sides of it from an inventory perspective. And they're like, they're they just weren't prepared for it. And all of the education that came through dealers that you know, the hours of calls that I've that I've talked to these dealers about that, neither side is handling that well. And that just that just means a bad consumer experience in the end, which to Paul and to Paul, and my argument is that the consumer experience is the problem that we're all trying to fix and collaboration is necessary. So we're going to do the same thing. We're actually going to invite on this call right now, we're going to invite Jim to both asoto con and MRC, because we'll be at both. Obviously, we're all be about MRC. And I think that we can't this is not a one and done conversation. It's impossible. So probably look, they can be a podcast with me, you and Paul. And we'll have we'll do a sudo con and we'll do MRC. And we'll keep going because conversation is key. I do have that question of how many conversations are they having with the dealers that are boots on the ground right now.


Brian Pasch  24:22

And let's contrast something let's contrast the Ford communication flow to dealers and have dealers are filled feeling with Toyota. Toyota has been working collaboratively with their dealers on smartpath. Okay, and here's what I love and I just think of my good friend Glenn Brazeau at SCT. He said Brian, we want dealers to experiment with digital retailing so they gave them five or six approved vendors. And here's what they told all the dealers. You get the experience you work on the customer handoff, you create that consistent online and in store experience in meantime, we're going to be developing smart path. And we're going to show you where we are. And then here's what Toyota said, we believe at some point, we'll get it right, because they weren't like other OEMs, who pushed an incomplete product onto the dealer network. And they said, when we get it, right, I believe that you're going to want it'll be so good, right? So I saw an update. It's probably now three or four months ago. And some of the new features they added, were so cool. Here's what I said, if I was at a Toyota dealer, I would definitely be looking at this platform. And here's what they said. But Brian, it's still not ready. And we're not doing anything to impact our dealers negatively. So when you talk to dealers, what they think about smartpath Someone say, that's great. I think I eventually be on it. But there's no animosity like, when's the Lantus announced overnight? Everyone had to use E shop? It was a shock. Like why would you bomb your franchise dealers who were using competent tools like roadster or Gerber goo or car now or Cox? Whatever? And why would you tell them overnight, cancel them in 30 days, here's a different product that basically was a payment calculator. Now it's gotten better. But it's been a year of trouble. So. So I think we also have to ask Jim and other OEM leaders, why can't you be more collaborative like Toyota? What, why this closed doors and then the bomb gets released.


Paul Daly  26:34

I mean, it's the key. I mean, it's the center point of what typically happens in any dysfunctional relationship, right past experiences past, you know, past things that have happened. Lack of trust in the president, right leads both parties to do things that aren't in the mutual best interest. So I think that this is a great time to just reset the meter. Dealers are ready to listen, if you know, Farley and Ford and all the great people that are working hard there too, because they believe they really want to win. If everyone can just take a step back for a second say, Okay, let's take a lead from some people who are doing it right. SCT great example, a smart path. And let's just have a dialogue, and just do everything we can in our minds to just believe that the other person has our best interest in mind. Yeah, just for a second, just long enough to have a conversation. The first one, Brian, I'm gonna give you the parting word. What should people do? What what is your advice to dealers, um, aside from I want, I want everybody to click on the link in the show notes and go read that links right to his LinkedIn posts, go check out the article, like it, share it, comment on it, because 14 is probably monitoring this at this point. So if you make a comment, it's probably going to be heard and read. That's right. That's right. What's your final word?


Brian Pasch  27:49

Last word for the for dealers watching this recording? Forward, my open letter to your regional rep and and encourage them to push that up the chain to just say, Jim, have the have the interviewer come out to the conference, you mentioned the asoto con and the modern retailing conference. I want Jim to share his vision and answer questions. This is not a roast, this is not a bait and switch. And so for the Ford dealers do that. And then the second thing is for the other dealers watching, please ask your brand's the similar questions that are in that letter you could take out forward, start the dialogue now, because what you're going to find is some are prepared, some are preparing, and some are really still looking for the dealer network to solve the problems that need to change for greater operational efficiency. Well, Brian,


Paul Daly  28:53

as always, thanks for giving us some time on a Monday morning. This is the end. All of us have a lot of trouble plan for later this year. We're going to talk about it more about that modern retail conference and a soda con. Lots of stuff coming but right now. Thank you for joining us to get to this meaningful work that we're doing here.


Brian Pasch  29:11

Thanks guys for inviting me and let's have a great week.


Paul Daly  29:14

Let's do it. All right, Kyle. I think we probably that's all the time we


Kyle Mountsier  29:18

always guy we knew we needed extra time today.


Paul Daly  29:22

So whatever else you're doing today, leave with some empathy, ask honest questions and be ready to flex a little bit. give someone an honest answer.