Motley Fool Money - Time to Take Stock in Automakers?

Episode Date: June 5, 2015

The government reports stronger than expected jobs numbers. Automakers report surprising sales. Yahoo! partners with the NFL. And Herbalife goes on the attack. Our analysts discuss those stories and share some stocks on their radar. Plus, Chris talks Ford, GM, and leadership with best-selling author Bryce Hoffman. Learn more about your ad choices. Visit megaphone.fm/adchoices

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From Fool Global Headquarters, this is Motley Fool Money. It's the Motley Fool Money Radio Show. I'm Chris Lowe, joining me in studio this week from Million Dollar Portfolio, Jason Moser and Matt Argusinger. And from Motley Fool Deep Value, Ron Gross. Good to see you, gentlemen. Hey, you do. We've got an historic first in the business of sports broadcasting and a big smackdown in the world of activists investing. We'll look at the ever-changing landscape.

the auto industry with bestselling author Bryce Hoffman. And as always, we'll give an inside look at the stocks on our radar. But we begin this week with the big macro. On Friday, the U.S. Labor Department announced 280,000 jobs added in the month of May. And earlier in the week, auto sales for May were announced strong sales pretty much across the board run. Would you make of the big macro this week? I like this report, especially on the heels of last week's data that we got, which was, what can we call it less than stellar? A little troubling. I like this strong. job report. We're on our way for more than a million jobs so far created so far in 2015.

Hope that continues. Unemployment ticked up, but it's really a function of the math because more people return to the labor force, which is actually a good thing. The bigger measure, U6 stayed the same, 10.8 percent. So I like this report. I think we're gaining some steam that we needed to gain. Maddie, anything stand out to you from either the jobs or the auto sales? Well, the auto sales, they've been strong this year, and they were certainly strong this past week. I worry a little bit that that is a bit of a, it could be a bit of a blip in the sense that we've, you know, oil prices have been lower, so gas prices have come down quite a bit.

There's been a lot of pent-up demand for autos, especially larger SUVs and trucks. And so I think that's a bright spot for the economy right now. And of course, the auto industry feeds into so much of the U.S. economy. I just worry that that might be a little bit of a short-term bump. I don't think I still don't think consumer spending power and earnings or wages are certainly where they need to be to support that continuing, but certainly the labor numbers were great. Yeah, we should highlight the wage numbers, which has been kind of the weak links as this recovery has taken hold. We did see growth. We saw 2.3 percent growth in wages, which is pretty

good, but it's not where the Fed wants it to be, which is at about 3.5 percent. So we're on our way, but we still have a ways to go before we get there. Thanks a lot, Ron. You just stole my point. I was going to say, let's make it again. No one was listening to me. Let's focus on the wage numbers, right? Because I think, I mean, the wage gains are the things to keep an eye on. That's the thing to keep an eye on. That's going to dictate what the Fed ultimately does here. And, you know, the big question whenever these jobs reports are released now is like, okay, what is the Fed going to do when are rates coming up. And so to Ron's point there, it was a little bit better than expected. And really what they're looking to see is sustainable wage growth that gets us back towards that sort of 2% inflation target. I do think as long as we see some sustainable growth there. I think that a rate hike is certainly on the table for this year. I'd like to get back to some kind of sense of normalcy in regard to that. In regard to autos, I mean, this is where I start getting a little apprehensive because I feel like 2015 has been really the year of the truck. Oh, it has been. Gas prices low. Everybody's out there

buying a new truck. And that's fine. I mean, I have no problem with that. But I mean, you remember what happened last time, right? I mean, everybody had a truck, and then gas prices went through the roof, and you had to take out a mortgage just to fill up your tank. So, everybody freaked out. So now I start looking at this and thinking, okay, well, at some point gas prices, we'll start going back up, and then how will the consumer behave at that point? And it's not like these automakers are all that cheap. I mean, Ford's closing in on 20 times earnings. GM is like 16. You know, I just don't find them to be the most compelling opportunities in what's a very cyclical industry, which is also cyclical within,

you know, itself. I mean, those brands kind of have their ups and downs as well. And I realized that Fiat Chrysler is working off of a lower base than Ford and GM, but that stock has been a monster over the past 12 months. Mitsubishi was up 32% in terms of car, their growth, but again, a smaller base. One final thing on autos, May is typically a strong month for autos because people put their tax refund into a purchase. So that could be what we're seeing here. This week, the NFL selected Yahoo to deliver its first ever live video stream of a football game. Guys, set your calendars. October 25th, the game is in London, the Buffalo Bills against the Jacksonville Jaguars.

Maddie, I feel like there's some pressure on Yahoo, but if they pull this off without a hitch, that could be pretty big for them. Yeah, let me first say, though, let's be clear. I mean, the Buffalo Bills and Jacksonville Jaguars, no offense to the fans of those teams. This isn't exactly a marquee game. It's also happening in London at an interesting time, so it's not conflicting with other NFL games. You're saying CBS was fine to let this one get away? I think so. In a way, I think for the NFL, this is a small experiment. It's a small bet. And they're getting, I think, reportedly 10 million from Yahoo. So for them, there's not a lot of risk here.

For Yahoo, though, I would say this is an interesting thing that can happen for Yahoo. I mean, Yahoo's, you know, we kind of chide Yahoo is an old internet name, but they're very popular in sports. Their fantasy business is huge. And so it's a natural platform to showcase this type of game. And I think if it's done right and there's a huge fan viewership for this event, it could pave the way for piecemeal sports games online, which I think is huge. And a big threat potentially to direct TV. Yeah, I think if you're a direct TV, you're not happy about this move. I also think that, again, if Yahoo pulls this off, it enables them to go to not just the other major leagues, basketball, baseball, et cetera, but even to sort of smaller sports and make a business. bid to be the destination for them as well.

Absolutely. And this is, remember, we're dealing with a demographic, a consumer demographic that's cutting the cord rapidly, yours truly included in that, who's yearning to pay, I mean, you know, if I, I'd rather not pay DirecTV $250 a year to showcase a bunch of games that I don't really care about. But if I can follow the Patriots, here I am in Washington, D.C., stuck with terrible Rescans games. If I can follow the Patriots and pay $10 a game. Same mail, too. There you go. Yeah, the Redskins are. But $10 a game on something like Yahoo or another online, I want to do that. And so there's

Certainly demand, and I think this is an interesting first step. Investors wondering about Twitter's business strategy got a gift this week in the form of an unsolicited memo from venture capitalist Chris Saka. Jason, this was really well thought of, a very lengthy memo that he put together, basically saying, this is what works, this is what Twitter needs to fix. And one of the themes of his entire memo was they need to figure out a way to make Twitter easier for people to participate. Yeah, I mean, to your point, if ever a management team that's on the hot seat was given a gift, I mean, this is it. I mean, this is basically the blueprint of what they need to do

going forward to really, I think, exploit the true value of Twitter in its real-time platform. Because, you know, for the core Twitter user, and I would put myself in that group, I mean, it's, you know, it's one thing. But for the general user, for all of those other hundreds of millions of people out there who maybe have tried it once or should try it, it's a scary proposition. It's not exactly the easiest thing to just pick right up. And so, yeah, Chris Saka is a venture capitalist out in California and Silicon Valley, I believe. And he's a very early and large shareholder in Twitter. And he's a really bright guy with a terrific track record. I mean, he's gotten in on early on Twitter, Uber, Instagram, Kickstarter. So he has a record of

seeing things that are really going to take on. And these are notes that he's kind of cobbled together through the years, and he put it all together. And I thought a very eloquent and well-thought-out piece there in that there are a lot of different ways you can make Twitter easier. And really, you know, he focused on things like Twitter live, you know, utilizing that real-time dynamic to bring a live audience, you know, to the platform there. And other things like channels, I thought, was a great idea. You know, we've talked a lot about, or I've talked a lot about how Twitter lists are very nice to have. I mean, you can make a list of all of the NFL. teams and during the football season, it's a phenomenal list to be able to refer to. But it's

not something they highlight, and you've got to kind of dig for it. So they really need to make things a bit more easier for the average consumer to try out. I really, really hope that management does latch on to this. It's not something they can ignore, and I'm certain that the next earnings call, there's going to be something said about it, and subsequent earnings calls as well. I mean, they need to take note here. I totally agree, Jason. And, you know, reading it, It felt, and we talked, Chris, we talked about before the taping was that this wasn't just an analyst saying, hey, Twitter, do this. You need to focus on this market or, you know, you need to focus on your margin here.

No, no, this was, this was like a heartfelt piece, almost as if this was a, he was a fan of a sports team and writing the ownership and saying, gosh, I love it. I follow this sport on this team for 30 years. Here's what you can do to help the team. And this was really, you know, from a really power user of Twitter. And I think I just hope that Dick Costello and team listen up because it'll take Twitter and better to, at a better direction for sure. Precisely there. This isn't an analyst saying

you need to grow your users. This is a real thinker here who's saying you need to grow your users and this is how you're going to do it. And just a touch of irony that Twitter which limits you to 140 characters this memo goes over 8,000 words. Coming up, the first inductees

in the World Video Game Hall of Fame have been announced and you won't believe who got snubbed. Stay right here. This is Motley Full Money. As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against. So don't buy ourselves stocks based solely on what you hear. Welcome back to Motley Fool Money, Chris Hill here in studio with Jason Moser, Matt Argusinger, and Ron Gross. Bill Ackman, the hedge fund manager and

activist investor has accused Nutrition Company Herbalife of being a pyramid scheme. He's also shorted the stock to the tune of a billion dollars. And Herbalife has decided to fight back very publicly, Ron, with a website. the real Billackman.com. My word. Anyone ever put together the real run gross dot com back during your hedge fund days? Thank goodness, no. This is unprecedented.

I've really never seen anything like this before. Typically, a company will fight back, and they'll do so in the form of a letter, which shows up in a regulatory filing. And they'll say some very pointed things if they need to. But to create a website for the sole purpose of taking down this activist investor, it's going to be interesting to see if this is just the first and this is going to be common. Well, Maddie, it's a little bit of damned if you do, damned if you don't. They probably need to respond in some way.

On the other hand, really, they're dedicating time and resources to putting something like this together. Yeah, I mean, it doesn't look good from either side. It certainly doesn't look good from Herbalife side. But you know, the only thing I have to say is, you know, Bill Agman has made this so personal. I mean, this is a guy who's done. How many presentations about Herbalife? And two of which I think he's cried at, or at least had been emotional at, in bringing his father.

I mean, he's made, he's kind of built a personal vendetta against Herbalife. I still don't support what Herbalife is doing with his website and all this stuff. But, you know, to be honest with you, I almost think Herbalife had or felt like they needed to do something like this, just to counter it. Yeah. The whole activism is an interesting thing. All activists want to make money, right? Let's face it.

But there are those activists that want to improve a business and enhance shareholder value. In this particular case, Akman wants to destroy the company. He wants to destroy value, and he wants to make money that way, which is not the kind of activism that I'm a fan of. I mean, he's called this his highest conviction idea ever. And, I mean, to me, like, I don't understand how you call a short your highest conviction ever. Your outside's kind of capped there. At this point, I mean, he's making it very personal. I think there's a really valuable lesson in here that we talk about all the time.

Don't let your emotions get in the way when you're investing it. He's clearly, I mean, his emotions are completely in the way. And, you know, I mean, on the site, it's pretty funny. I mean, I wouldn't do it, but, man, I'll tell you, the guy's been asking for it. I mean, he's certainly not asking for it. Well, and to Ron's point, I mean, there are those activists, John Malone from Liberty Media leaps to mind. He's been in the news recently when, you know, with charter and Time Warner, Kim. I mean, among other things, Malone is an activist who sort of sticks to his knitting, right?

Yeah. He stays in the realm of media, whereas Ackman, who certainly has had. his successes kind of seems to be all over the map. The Strong Museum in Rochester, New York, announced six inductees for the inaugural class of its World Video Game Hall of Fame. Here's the list, guys. Pong, Pac-Man, Tetris, Super Mario Brothers, Doom, World of Warcraft, among the finalists who did not make the cut, Angry Birds, FIFA, Sonic the Hedgehog, and Space Invaders.

Come on. How did that not make the list, Ron? impossible. Where's asteroids? Where's Donkey Kong? Jason and I were just talking about it. I mean, Donkey Kong. There's no Super Mario Bros. Without Donkey Kong? What about Madden? I mean, this is the number one sports game every year for like the past 25 years, and there's not a, you know, Madden wasn't even in there. I am glad to see Tetris make it, because I probably wouldn't have thought of it, but it is so addicting. It's unbelievable the amount of wasted time.

We're not. I spent on Tetris. We're not quite at the point to talk about the stocks on our radar, but let's bring in our man, Steve Rudder, from the other side of the glass. Steve, any of those video games resonate with you? Like, if you get one vote, which video game are you putting in the Hall of Fame? I think I'd have to go Castle Wolfenstein. Do you guys remember? Oh.

Wow. Well, they put, yeah, you know, that was the precursor to Doom, which did make it in. So, I agree. Big deal. Yeah. That's a throwback. Totally agree, Steve. I'm going to go obscure.

I'm going to go George Plimpton's video falconry. Just to throw it out there. Radio at Fool.com is our email address. I got an email from Scott Crawford. On last week's show, Jeff Fisher asked why Amazon doesn't advertise on their boxes. Apparently, Jeff's some kind of wizard or Amazon was listening because this showed up at my house today. And he sent a photo of an Amazon box with the minions from the Despicable Me movie. Yeah.

So clearly, the movie studio is paying for that. I was reading more into that afterward. And this is something we're going to see more and more of. I was talking to Jeff after that because we got pinged on Twitter a couple times about it as well. And, I mean, you think about it. I mean, e-commerce is only growing. My house, there's a box on the doorstep. It seems like three times a week at least.

And that's just empty space where advertising could be right in front of you. And a company like Amazon, I mean, they are certainly going to be able to target that demographic. So we'll definitely see more of this. This could be a huge lever for Amazon to pull to generate sales. Is Jeff a genius? I would say yes. No, he's a wizard. Oh, you were talking about Jeff Fisher.

Jeff Bezos. How about yes on both counts? Definitely. And from Hunter Price regarding our conversation last week about McDonald's, Hunter writes, I don't think bringing back the hamburger is going to help. People are willing to pay a little more for better quality food. I just graduated from college. I have no money, and even I avoid McDonald's.

So there you go. All right, let's get to the stocks on our radar, and Steve will hit you with a question. Ron Gross, what are you looking at? Steve, a new wreck from our inside value service looks interesting to me. Graham Holdings, GHC. Do not let the price tags scare you. away. It's over $1,000 per share. It's a conglomerate. They own education and media assets. The Graham family from Washington Post fame. They sold that to Jeff Bezos. Speaking of Mr.

Bezos, it's a really interesting collection of assets. The Kaplan family of educational, Cable One, they own TV stations, some social media. Stock looks cheap to our inside value, guys. I have to dig into it too, but there's at least 20% upside it looks like to me, and they're doing a nice job buying back stock as they share. shed non-core assets. Steve, question about Graham Holdings? Sure. My question is, when you own a company like this, how do you know what you're actually owning? You're owning a big, diversified bucket that can some do well, some do poorly? Yeah, it depends if sometimes with the conglomerate, they own a lot of public things like

Buffett and Berkshire owns a lot of public stock and you can value those easily. Then you have to look at the private businesses and that's a little more hard to understand and you've got to dig deeper. The better the disclosure, the more the easier your work is as an analyst and different companies are better with different disclosures. Matt Argusinger, what are you looking at? Sure. Well, you know, Chris, you mentioned John Malone earlier in the show. I mean, he's the guy, you know, behind the charter, Time Warner merger. He's involved with Lionsgate and stars, really big in the media space. And so I think there's going to be a lot of consolidation

continue to be in that industry. And one company in particular, I think, is going to be in someone's crosshairs is AMC Network's, ticker AMCX. This is a studio in the network behind Breaking Bad, Mad Men. And of course, Cables, big, his TV show, The Walking Dead. The spinoff is coming later this summer, Fear of the Walking Dead. There's a lot to like about this network. So, AMC. There you go. Steve? Is it a Feaster Famine business? I mean, Mad Men was, I think, the definition of AMC, and it's gone. I don't know.

Well, you know, it can be, but they've got some great franchises now. Breaking Badhead's its own spinoff, Better Call, Saul, which has proven to be successful. So I feel like they built some sustainable franchises in the business, but sure, it is still a hit or miss type of business. Jason? Well, speaking of feast or famine, Steve. You know, investing is all about being opportunistic. And like Peter Lynch says, sometimes the best names out there are the ones you already own. Chipotle shares, ticker CMG, these shares have been on a bit of a selling spree lately. And I noticed that earnings multiple has come back

down below 40. This isn't one we haven't talked about before. I think, you know, yeah, we've talked about it all the time. So I think you get the business. But again, I think it's all about being opportunistic. And I think there is an opportunity here for long-term investors. So you want to keep your eyes on Chipotle. I know I will. Steve? Did people get tired of that diet, the Chipotle diet, which is so just static? They have something new. Don't they have a new?

Well, they are branching out. So, I mean, it's beyond just the Chipotle concept. You have the shophouse and the pizzeria locale, which those will be much slower to grow. But, yeah, you can't eat too much Chipotle. My shareholder, I'm not complaining, but it gets a little old. Those lines are always out the door, though. What do you like, Steve? I'd have to go with the diversified Ron's.

Remind me the ticker Ron? G.H.C. Graham Holdings. Sounds interesting. All right. All right, guys, thanks for being here. Up next, bestselling author, Bryce Hoffman. Stay right here. You're listening to Motley Full Money.

Welcome back to Motley Full Money. I'm Chris Hill. Bryce Hoffman spent two decades covering companies in the automotive, tech and biotech industries. He's a contributor to Forbes, author of the bestseller American icon, Alan Malali, and the Fight to Save Ford Motor Company. And he joins me now.

Bryce, welcome back. Thanks, Chris. Always great to be on. Earlier in the show, we were talking about the strong auto sales for the month of May. And you know, it was just a few years ago that we were talking about the auto industry in terms of bankruptcies and bailouts. When you look at this industry today, what stands out to you? Well, what stands out to me, Chris, is that we are back.

I mean, the auto sales in the United States are back to the level that they were at in July of 2005, 10 years ago, before the Great Rest of, session before the collapse of GM and Chrysler, before the near-death experience that the entire industry in the United States at least went through, it's back. It seems, again, how the narrative changes a couple of years ago. There's a lot of talk and a lot of attention to electric vehicles, to hybrids, but now you've got the price of gas where it is, and all of a sudden, a big part of the story is everybody's buying trucks, everybody's buying jeeps. Is that a surprise or is that just to be expected? You know, unfortunately, it's not a surprise. It is to be expected. And it's been the underlying

narrative of the mix in the U.S. auto sales for the past several decades. Because, you know, Chris, almost alone amongst the major industrial nations, we have no energy policy in this country. And without an energy policy, the onus of meeting fuel economy targets is on the companies, not on consumers. So automakers are constantly under pressure from the U.S. government to produce, you know, cleaner, you know, more economical vehicles that use less gasoline, which is why you see the big push towards hybridization towards electric vehicles. but the price of gas in this country remains among, you know, radically lower than it is in Europe, for instance. So consumers, when the price of gas falls, they just go back to what they love, which is big trucks and SUVs. And it makes it incredibly difficult for automakers in this country to come up with any sort of rational long-term plan. Well, let's get to some of the automakers specifically.

One of the standouts in May was General Motors. and despite that month, there's still the possibility of facing criminal charges over the faulty ignition switches. She's been the CEO for about 18 months. How do you think Mary Barra is doing at GM so far? Well, you know, I think it's important to start by saying that Mary has inherited an incredibly difficult situation. I mean, you know, literally just daze into the position this recall.

scandal, the switch scandal erupted in her face, kind of like a hand grenade. So I wouldn't wish that on anyone. But I think she's done okay in dealing with it. It's hard to, you know, it is a hard situation to deal with. The problem is, is that, you know, some of GM's initial reactions to the recalls, to the criminal investigation, to all of this, really kind of smacked of old GM. And I think that in recent months, that's changed. I think in recent months, we've seen under Mary's leadership, GM become more responsive and become more proactive in dealing with us.

But, you know, she talks a lot about culture. And that's great because culture is important. You know, it's not just important. It's vital. You know, the saying goes, culture eats strategy for breakfast every day. And GM's culture is the problem. So I applaud her for wanting to change GM's culture. But changing GM's culture has to go farther than some of the initiatives that she's talked about recently.

You know, she was a keynote speaker at the Forbes Forum in Detroit a few days ago or last month. And, you know, she talked a lot about culture, which was great. You know, she said things like you can't fake culture. You've got to have an environment where people feel engaged. Those are great things. But culture has to go beyond just making employees feel like their views matter. Culture has to get into things like transparency. like accountability, like owning the problems the company has.

And I think there's still a lot of work to do on that front of GM. Well, you got to study up close to someone who was effective at turning around the culture at a major American automaker. When you look at the work that Alan Malali did at Ford Motor, do you think that unwittingly he provided a blueprint for a company like General Motors and that maybe, in fact, Mary Barrow was looking at what Malali did at Ford and tried to take some of that and sprinkle that magic dust on GM? Waiting at all.

I think that, you know, nothing would make Alan Malalley happier than to see more American companies, more American manufacturers follow Ford's model of creating a working-together culture, culture of transparency and accountability. because Alan at the end of the day, I'll never forget, you know, I was covering Ford for the Detroit News back in fall of 2006 when Bill Ford stepped aside and brought in Allen to run the company. I will never forget. I asked Alan that day, that first day on the job, why are you here? Why are you left Boeing, which has been your life's work, to come to an automaker where you have no car experience? And he said that day, he said, I am here to fight for the soul of American manufacturing.

And that really is kind of what his life's work has been about. He believes America should make things. So I think he would love to see GM be successful using the same techniques. And I think you're absolutely right, Chris. I think that's a big part of what's happening. I know for a fact, having talked with some of the people who are advising Mary Barr actually right now, that they've looked very closely at some of the things that Alan did to change Ford's culture. But, you know, here's the problem.

Ford's culture changed because Ford made the decision to fix its process. problems itself and not ask the American taxpayers to save it. You know, under Allen's leadership, Ford withdrew its request for a bailout and did the hard work that was required to save itself without that money. GM took a different path. GM didn't do the hard things that were required to save itself. It went bankrupt. It wiped away many of its liabilities with the stroke of appendix we see right now.

They're still trying to argue that they're not liable for these. ignition switch problems because they happened before it went into bankruptcy. Ford still owns all the mistakes for Ford was responsible for over the years, and it's addressed them. So you can say that changing culture is important, and it is, but to really change culture, you have to do the hard work of actually digging deep into the organization and changing the way it does business, changing the way that it approaches its problems, and pulling, you know, kind of cutting out the cancer that created those problems in the first place. Ford did that under Alan Malalley's leadership. That's still a work in progress at GM.

Alan Malali retired in 2014. Mark Fields is now the CEO at Ford Motor. If Malali's biggest decision had to do with whether or not to take the bailout, what do you think is the biggest decision that Mark Fields has faced yet or is currently facing? You know, I think, let me just, let me just start by saying that I think that Mark is doing a great job of continuing the momentum at Ford. And I think that's the hardest decision, honestly, is something that maybe doesn't look that hard unless you look at it at work closely, which is to not fix what isn't broken. You know, we have a culture in American business that's developed over the past decade and a half, I would argue, you know, kind of thanks to guys like Jack Welch, that is the culture

of the rock star CEO, right? Where, you know, to be viewed as a good leader and effective business leader, you have to come and put your imprint on everything you have to do. It all has to be you. It has to be you're the guy with the answers. You're the guy with the plant. You're the guy who does everything. You know, it's not a good model.

Alan introduced a different model, which is a team-based model. And Mark Field is a product of that model, and he's doing a very good job as such. But, you know, it's a huge, it's got to be a huge struggle for someone as talented and who's as good a leader as Mark is not to want it, you know, just start fiddling with things just because he wants to put his stamp on them. And if you look at Boeing, if you look at what happened at Boeing after Alan left, his successors couldn't do that. They couldn't, they could, even though Boeing when he left was, you know, firing on all cylinders, you know, his successors couldn't resist the temptation to start dismantling some of his. management systems that have proved so successful just because they weren't theirs. And Boeing as a result has gotten into some really deep trouble. And I think that the challenge at Ford is to not do that.

And there's another challenge, too, which goes to kind of the employee side of the equation. And this is something that I've talked to Bill Ford about a lot. I know it's something that keeps him up at night still. And that's guarding against complacency. Because, you know, Chris, if you look at the history of Ford Motor Company, It has had several near-death experiences over the past century. And it has clawed its way back and been amazingly successful after each of those. But then at some point, and the old bad behavior starts to flip back in, and next thing you know, it's fighting for its life again.

And I know that, like I say, Bill's greatest anxiety in right way to make sure that Ford doesn't become a victim of its new success, that it keeps that sharp edge, that it keeps its foot on the gas, It keeps doing the hard work that it pulled it through the Great Recession without a government bailout in the face of success, just as it did in the face of the threat of imminent collapse. That's a huge challenge. Coming up, more with Bryce Hoffman. Stay right here. This is Motley Full Money. Welcome back to Motley Full Money, Chris Hill, talking with best-selling author Bryce Hoffman.

From the standpoint of stock performance, the real surprise in the auto industry has been Fiat Chrysler. Over the past year, the stocks up 80% that's easily outperforming the likes of Ford, GM, Toyota, and yes, even Tesla Motors. What is going on with Fiat Chrysler and CEO Sergio Marcioni sure seems like, among other things, a very interesting business leader? He's got to be one of the, he's a journalist's dream come true because he speaks his mind and he doesn't censor himself. and he's a man of very strong opinions. And it made a lot of fun when I was a journalist to cover him. I think that what he has done with Fiat Chrysler is amazing. You take in a company in the former Chrysler that was, you know,

just clinging to life thanks to the life support provided by the U.S. and Canadian governments. And there was, had really been gutted by, by Germany's Mercedes-Benz when it, when it sold off its, it's a majority. stake in the company a few years before the Great Recession. There wasn't a lot of there left. And so I think that he has been very successful, but he's also been very successful starting from a very low, you know, kind of baseline. And so it's easy to make big progress, you know, it's kind of like the old songs that, you know, starting from zero got nothing to lose.

And that's kind of the story of Chrysler. Now he's getting to the point where things are getting a little bit more challenging. Sergio has always said that, you know, he needs to survive long-term. Fiat Chrysler has to become a true global automaker that can compete with the big six. It has to become one of the big six, which is, you know, Toyota, General Motors, Ford, Volkswagen. You know, it's the big global automakers. and they're not there, and he knows that they can't get there from where they're at right now. They can't grow their way into that.

They need a third leg to the stool as how he's described it to me at various points. And he spent the last few years searching around for that third leg, and that's a challenge. Well, and based on which reports you read, he's reached out to Mary Barra at GM about a possible merger there. He was rebuffed. He recently met with executives at Apple, including CEO Tim Cook. And speaking of which, we've been talking about the traditional automakers, but Apple and Google are big, successful companies with very deep pockets that both seem very interested in possibly developing their own vehicle of some sort. So when it comes to maybe not competitors today, but potential competitors in the future, who do you think worries automakers more, Apple or Google?

That's a tough call. I think they both do. I think that, you know, it's much, I think I would say that Google is more likely to bring their own vehicle to market than Apple is at this point. Not that they've been more clear that that's part of their strategy. I think that still remains to be seen. Apple is, I think, more of a partner at this point, but a partner that could turn into it. They're a friend of me. They're a partner that could turn into a competitor at any moment.

And, you know, that's the lesson that the new economy, you know, keeps trying, keep schooling the old economy in, right? You know, I mean, everybody, you know, for every Ford and GM out there is waiting for, you know, the next, you know, Tesla or Google to become the Uber of their industry and just disrupt everything. You know, that is a huge threat. Now, that said, the barriers to entry in the automobile industry, as Tesla has learned, for instance, you know, are a lot higher than they are in, say, the taxi industry. And it's a lot more difficult to become a major player in the global automobile business

than it is to, you know, change the way that people buy books or change the way that people hail cab, you know, get from point A to point B in a big city. But that does not mean that these new entrants to the automobile business are not real threats that have to be taken seriously by the Fords and GMs and the Toyotas of the world. You're working on a new book. You've been spending time at the Command and General Staff College at Fort Leavenworth, where the Army is doing a lot of work on something called cognitive dominance. First, what is cognitive dominance, and how does it apply to business?

Well, you know, it's really amazing, Chris. I've been down here for several months. You know, the Army has really realized because of the hard lessons of the past couple of wars we've been fighting, that if it's going to be successful, it needs to, you know, it's not better guns and bigger bombs that are going to help it. It's thinking better. It's thinking through situations before it puts troops on the ground. It's out thinking, you know, America's enemies.

And they have been pouring a huge amount of resources into developing new cutting-edge tools for planning and strategy and leadership and developing good ideas from, you know, a bottoms up approach and their organizations that really, I think, have huge applicability to American business. And that's what I've been here doing is studying those methods, you know, and the military is developing these techniques, you know, for security, you know, to defend the nation from threats, but the same techniques, threats in the marketplace. And also to find new opportunities you might be missing in the marketplace. And that's what I just think, I think people have no idea the kind of cutting edge work that the Army is doing. I'll give you an example.

I was just talking with a general here who helped develop a system that was used in Iraq to create a network to the al-Qaeda got its hands on it on a huge batch of these Chinese grenades that could be used to blow up our armored humbies and stuff. So they were very lethal. And it was having a huge impact on our forces there a few years. ago. And they created a system using using basically a social media approach to get good ideas from soldiers, literally soldiers in the foxholes, you know, up to the top of the command structure. And within a few days of putting out a call for ideas on how to deal with this new threat, a soldier had literally sketched on the back of a napkin and scanned in a design for putting tarps on the sides of our armored vehicles that basically, if, you know, al-Qaeda paid a teenager

or 20 bucks to throw one of these hand grenades at a passing American convoy, it would just bounce off the tarps and the vehicle would be unscathed. You know, within a few weeks of getting that through this social idea generation system, the military had prototypes being tested at its proving grounds in the United States, and within a few weeks after those successful tests, these tarps were actually being deployed on U.S. vehicles in Iraq, and there was never another fatality from these. grenade since then. Now think about that. That same approach could be used by businesses to develop great ideas that are percolating, you know, at the bottom of their organizations. Because we all know

that those exist in our companies to get those types of ideas and bring them to the surface where they can be turned into real marketable, you know, tools or products. That's just one example. Well, you have to come back on the show when the new book is out. But in the meantime, the Wall Street Journal named American icon Alan Malali and the Fight to Save Ford Motor Company, one of the best business books of 2012 so you can pick that up while you're waiting for Bryce Hoffman's next

book. Thank you so much for being here, Bryce. Thank you, Chris. Always a pleasure. That's going to do it for this week's show. Our engineer is Steve Roydo. Our producer is Matt Greer. I'm Chris Hill. Thanks for listening. We'll see you next week.