One of the biggest debates in the business world right now is how major manufacturers will respond to fresh tariffs from the Trump administration. If you’re Apple (AAPL) CEO Tim Cook, can you uproot decades of supply chain work in China and build iPhone manufacturing sites in the US to beat tariffs? Or does it make more sense to absorb the Trump tariffs on China while also passing some of the pain on to consumers? Apple isn’t alone in this dilemma — automakers such as General Motors (GM) and Ford (FORD) have large plants in Mexico and Canada, also targeted by the Trump administration’s tariffs. Yahoo Finance Executive Editor Brian Sozzi speaks at length with former Siemens (SIEGY) and Alcoa (AA) CEO Klaus Kleinfeld. Kleinfeld — author of the new book Leading to Thrive — is no stranger to interacting with policymakers and world leaders. He was still CEO of Alcoa in 2017 when he was among the executives summoned to the White House to meet with then-first-time President Trump. He also joined other CEOs in exiting Trump’s special councils. Kleinfeld weighs in on the industrial and economic impact of Trump’s tariff actions, warning they will prove far from just a US headwind.
Welcome to a new episode of Opening Bid. I’m Yahoo Finance executive editor Brian Sai. Like I always say, this is the podcast that will make you a smarter investor, period. And, uh, also, like I always say, all these episodes will make you much smarter, and this will indeed make you a much smarter investor. I wanna welcome in former Alcoa and Siemens CEO Klaus Kleinfeld, Klaus, good to see you. Last time I, I saw you was right in the middle of a pandemic. I was at a kitchen table talking to remote, so it’s good to see you in person here at the big beautiful NASDAQ in Times Square. Love it.So there’s no, the state of global business has really been rocked by everything we’ve seen from the administration, notably on tariffs. Now someone that led iconic industrial businesses, where is your head out uh head out these days in terms of tariffs?
Well, look, I mean tariffs can play an enormously strong role and for me the big question is what is the goal of these tariffs, you know, I mean, are we basically saying we need to level the playing field, then we should sort out these industries and these countries where the playing field is not level, but broad based doesn’t make much sense. Are we saying we need to bring strategic.Street back OK then let’s define the strategic industries and let’s also do something that attracts them, not just a barrier but also that attracts them. I’m happy to talk about that situation, you know, in in the US which I feel needs to be strengthened, or do we say, you know, we want employment, you know, but in an environment where you have full employment like the US, it’s hard to say I create more employment, you know, and you.Have to do something then with the workforce and that then comes together with I mean how do you get no new workforces in here so I am a bit confused and what exactly do we wanna do, you know
I talked to a lot of CEOs as you can imagine uh in this in this gig, but you’re one of the first ones that led manufacturing operations like in the trenches within Alcoa.How difficult it is to stick a plant that is in China producing let’s say iPhones and building it in the US. How hard is it and can products be made profitably here in the US?
Well, the interesting thing, I, I, I, I have recently spoken to some of these folks who are over in Asia and who are making electronics for the US and.And they wonder, you know, they, they have factories here in the US. I mean they can increase the capacity that’s relatively easily doable. They are highly automated, but, but what they are saying is the biggest issue here is get good people, you know, because the type of people that you need are very often people who have a higher level of qualification who can program a numeric control machine programmable logic device because a lot of this is automated, you know, these type of electronics very often.So sophisticated that making them with the humans, you know, just with human hands doesn’t make much sense, you know. So I think the real issue that they have is where do I get the qualified people here in the US, even if I were to build out my factory, you know, building out a factory has probably, depending on what industry you’re talking about, you know, you order some equipment it probably takes 6 to 6 to 9 months until you get it here, get some land, and many industries it can be done relatively quickly.No, but then the question is where do I get the qualified people and I mean what we have seen at the time at our core that the level of qualification in the US, you know, you need, you needed community colleges to basically drum up, get micro degrees. I mean I can’t tell you how many locations, you know, we work together with the community colleges to give them a welder degree, you know, to make them basically appropriately educated to fulfill the jobs that are needed today.
To that end, I, I recently spoke to Treasury Secretary Scott Bess, and I, I put to him that question of why can’t we build iPhones in the US? And he remarked, we don’t need a PhD to put an iPhone together. Um, I guess true, but you still have to have people to do thesejobs.
Yeah, and it’s not about the muscles that they have, you know, you, you have to know. I mean, Europe, I’ve seen this firsthand in in Germany, you know, because Germany 25 to 30% of the economy is driven by the.Automotive industry automotive, if you look at an automotive factory uh 20 years ago, it was all of it is manual. Today it’s almost all robotic, but the people who are in there, you know, they know how to program the robots. They know how to handle the things when they are wrong. So what did the German industry do? I mean, they, they basically started a long program, you know, where you can get a normal workforce person in a micro degree to basically upgrade and work in that.you know, higher pay, better working conditions, and a better employability long term, you know, and I think that’s the connection that we need here, you know, to bring people up to that scale to have a future job. It’s not the old jobs that we should defend, you know, it’s the future jobs if you think that in China they’re all sitting there in sweatshops and putting this together, you’re dreaming. I mean many of these.Places, you know, I just saw a report from somebody who’s recently come there and they talking about the dark factories. They are so highly automated that during the night shift, not even anybody is in there anymore and they switch the light off, you know, that’s today’s reality, and we can do that here. Yes, we can do that, but the critical aspect is we have to educate our workforce.
But this takes, this takes years. I mean, you know, you know the makers. I look at Mary Barra, chair and see a long time over general.Voters, she’s not, she can’t move a plan from Canada to Mexico, flip a switch, and she’s making cars tomorrow. I mean this is a 66 or 7 year project and what do these companies do in the meantime?
Well, and the question is, does that even economically make sense and does it strategically make sense, you know, I understand that when we’re talking about, uh, certain, certain type of electronics, you know, let’s say semiconductors, semiconductors clearly are of strategic importance for.US and for actually I would say any any nation you know so I clearly think that we have to think through on a government level, you know, how do we bring these type of strategic industries, how do we bring them here? How do we make sure that the value chain works and uh and even if it works a little bit less efficiently, less cost high higher cost than in other places, it still has a high value to have them here.But if you think about toy makers, you know, I mean, why would we want to be the world’s capital of Christmas toys, you know, so,
so can we, we have in that sea a couple of months ago was Hasbro’s CEO. He said, Brian, I would probably have to raise prices by 50% to make toys in theUS.
Yeah, exactly. It’s not about can we, it’s more about, I mean, if you look at the last 30 years where globalization has moved forward, what we’ve seen is countries have specialized around these things where they are particularly good.I mean, to take an example of flowers, you know, Holland is the capital of tulips, you know, has always been we know it here in New York, you know, they’re very good at that. You, you go to you, you see what what greenhouses they have, how efficient they are fantastic, you know, why would we wanna compete with that? I mean, if they are great at that, let them do their thing. We are great at other things, you know, we have look, Google.Amazon, you know, Facebook, you know, these are all companies, Nvidia, you know, companies where the US dominates. I mean, is tulips more important, you know, than Google? I doubt it. I doubt it, you know. So those are industry when it talks about AI, you know, who dominates in the AI world, you know, I think we still have a very strong position, you know, and I think we need it.You know, when you talk about quantum computing, absolutely important for the future when you talk about nuclear fusion, critically important in the future, that’s industries that we need, that’s industries that where we should basically make sure we have the right people, we have the right research facilities, we attract the best and brightest like we’ve always done here in the US, you know, this is our big advantage that the best and brightest always want to come to the US. If we go away from that, we’ve lost.Or most important competitive advantage that the US has
it’s a very good point, uh, Klaus, is you think this administration is forgetting the investments international companies have made in the US, and I look to Germany and I look at Mercedes, and I talked to the CEO of Mercedes 3 months ago after the company reported earnings, and he said, Brian, we are an American company. We employ thousands of people here, but now he might have to pull back on what models he sells here in the US. I mean, where, I mean, does the administration understand this?
I, I don’t know what the administration, the administration should understand. It’s not that difficult to understand. I mean, if you, you actually just have to go to to the Carolinas and see the large amount of European and Asian car companies that have established itself there, you know, and who have brought a whole supply.Chain with them. So in terms of automotive supply chain, that’s all there and they can do it. Now the interesting thing is they are not producing all models that you sell in the US there, but the models that they are producing there, they also export, you know, now with the current.Conversation or unclarity on where are we going to end, you know, they might be doubly punished, you know, the ones that are export get dinged by wherever they go from the US and the ones that they bring here, you know, get dinged from the terrorists that we have established here. That is not a win-win solution. That is not a win.Solution for the world, you know, and just one last thing on this. If you look at the biggest winners of globalization, in fact, you know, have been the third world countries. If you look at how many nations have been moved out of poverty, clearly because globalization allowed them to play with some type of goods, with some type of produce on the world scale, you know.I don’t think we want to just completely wipe that out, so I wish, you know, we’ll get to a point where we are a little bit more kind of pointed, you know, and say this industry we want here, more strategic this industries, you know, we would like, you know, and for those ones we would have a very, very open market.And by the way, it’s good to have friends around the world, you know, so um I mean people like in Europe, you know, they, they feel very much um relating to the values of the US and uh I think we wanna make sure that uh that continues this way, you know,
stay withus class we’re gonna go off for a quick break we’ll be right back on opening bid.All right. Welcome back to Opening bid. Having a really awesome conversation with, uh, former Alcoa and, uh, Siemen CL Klaus Kleinfeld. Um, so let’s say you were still leading Alcoa. Um, what do you do right now in thisenvironment?
Well, the, the Alcoa that I mean I split Alcoa iconic you know so so the the the Alcoa today is basically an upstream company. So the tricky thing there is they are extremely dependent on energy.You know, it’s either oil or gas for the refining site, so heat or for the smelting site.It’s power, you know, and that’s one of the reasons why Canada plays such an important role also in the aluminum industry because they have a lot of cheap and clean power. They have hydropower, you know, so in here in the US, many of the the the the power prices have shot through the roof and, and many of these facilities have just not been economical because of that to bring that back to life is.Not a short term thing, just not a smelters here in the US. I don’t think anybody’s building smelters here in the US, you know, and for that reason, you know, you would have to, you would have to come with very cheap stable power, and I’m talking about huge amounts of power and it has to be stable, so it can not just be, I mean, a few windmills or or a few solar solar panels, stable power, you know, so
you havealuminum.When you would be if you were on the phone with the CEO of a car company, do you say I’m gonna have to raise prices on you by 20% because of this tariff? Is that the real is that what we’re looking at here in theUS?
I mean, in the end I think that’s one of the things people have to understand, uh, the, the tariffs, the money goes to the government.You know, and, uh, and then the question is what does the government do with it, but the first effect that it has, it makes the good that comes into the US more expensive. And then the question is, I mean, is the, the, the one who imports it, will they bear the additional cost or will they give it to the consumer? I think in many cases you will see they will not bear it, they will give it to the consumer.And you or they might decide as we currently see I mean if you look at the logistics chain, you know, a lot of the incoming goods have already slowed down drastically drastically, you know, so they might decide I’m not even going to ship that much to the US anymore.
Should CEOs prepare for a recession and how, what is the playbook to to prepare for one?
Well, I think you always have to prepare for change and in the current environment with the volatility and the uncertainty, I think you have to prepare for a different world, you know, and the typical playbook is.You will be careful with your costs, you know, so with your spend, so you will look for cash. Cash is the most important thing and probably you will say, hey, you know, before I spend too much on this, you know, I’d rather wait, definitely wait for the next 9 months, hopefully sorting itself out, you know, and we’re gonna go to a very wonderful environment which has the potential to happen, you know.But you probably today and the uncertainty you would hold your cards very, very close and uh look at, look at the cash. That’s what would you,
would you pull guidance now we had, there was, uh, I got the air, the airline may have been United. They gave two sets of guidance. one I believe it was for session. The other one was if no recession, what would you do?
I, I was surprised that I think it was Delta first who decided to not give guidance, you know, and the stock went up, you know, so that’s a surprising response, a very human response, because in a way, I mean how do you give guidance in a in a world that can change literally in a day, you know.
You uh have a very global view. You spent a lot of time in China. What do you think China needs China policymakers need to see from the US to meet them somewhere on trade and like what’s the end game in terms of relationships?
There’s a great book on China which is called On China written by my long time friend Henry Kissinger and and uh the book is probably 6-7 years old, you know, and he gives a great overview on on China and what has happened there and how one should think about some of the things, the internal makings, and the book ends.And with two scenarios because he says, well, if I get asked what’s the relationship between China and the US, you know, I can see two scenarios and he takes a comparison to economics and he says it’s basically two superpowers andIt’s an oligopoly and also if you have an oligopoly in the economics research, you only have two stable states and the one state is co-optic, so you cooperate and you compete, and the other one is ruinous competition. These are the two states, two stable states of an olligopoly, and he describes both states in the book, so I would highly recommend you to go back and read that.At the time when it was published, we were clearly in this phase of co-optition. Yes, we were, we are cooperating on some sides, but at the same time we knew that we’re not friends. I mean we are competing, you know, so we have to use the market forces, everything we got, and we got a lot, you know, and we’ve won in many, many places to to compete. That was the phase that we were in then. I feel that today we are in this phase that I would call ruinous competition.And history on that side has taught us exactly what the word says. It’s in many cases we have seen in businesses now you have to allow the analogy of two nations being seen as businesses, but in businesses this has not ended well, mostly for both sides.
Does China ultimately bear the most pain?
Um, having dealt with Chinese leaders on so many levels, uh, I have to say that, uh, they have a very long term perspective and um.A lot of breath, long term breath and so.Not so sure who would have the shorter of both straws, but my suspicion is
more dug in the US thinks.
China will never be dug in. I mean, China will not take a position because of the position, you know, Chinese, um, um, Asian, Asian thinking is not chess, you know, it is go.And you think in the goal you think about uh degrees of freedom that you have to move on the board, you know, so they will always look at what degrees of freedom do I have to move on the board, and they would look at a perspective of a longer term perspective, you know, than here of 3 to 4 years of of a government, you know, and um.But I think one thing is for sure. I mean, it might be that both sides are losing in this, you know, not just one side is losing in this.
In the last 1.5 or 2 minutes, I should say we always love to get a take, uh, one final take from our guest. I remember you visiting President Trump in his first term, part of the CEOs that went there and visited him and I guess advised him on certain things.It feels different this time around class where I don’t know if the president is listening to CEOs the way he was in his first term. If you saw the president again, what would you tell him about the state of business and and about his policies that are maybe more hard line than his first time around?
Well, I think the general idea of loving our nation and wanting it to be great and making it better is exactly the right point to start with, you know.Uh, at the same time, I think you wanna look at the unintended consequences, you know, and be very clear or more clear on what exactly do I want the end game to look like, you know, what do I want, as I said, I mean, do we want to bring employment here.And there’s a certain amount of things that we should probably do. Do I want to have strategic industries, and I think it’s pretty easy. You name the strategic industries, and you also have to deal with that and you always have to look at how do I get the best and brightest from around the world to come here, you know, because that’s going to give us strength and my strong belief.I’ve also put that in the book, you know, so my strong belief is in the end the only competitive sustainable competitive advantage is the people that you have and the way they work together.
Isn’t it great you don’t have to give earnings guidance anymore?
I agree.
Yes. Oh, it’s good to see you. This is a real treat to, uh, catch up with you in person. It’s been, uh, it’s been a while. Uh, former Alcoa and Siemen CO Klaus Kleinfeld, good to see you. Thanks for stopping by here at the, uh, NASDAQ in Times Square. We’ll talk to you soon. Pleasure. Thank you. All right, and that’s it for the latest episode of Opening bid. Like I always say, continue to hit us with those 5 stars on the podcast platforms, thumbs up on YouTube. I appreciate all your comments. I learned a ton from them every single time. We’ll talk to you soon.