I think as much as anything, that was a performance put on by Michael and Vito for the benefit of Carlo.

Think about it - Carlo was kind of a flunky slapD##k in the NYC operation, (but he was originally from Las Vegas, as we know from the GF novel), yet Michael is planning to make Carlo his "right-hand man" (i.e. consigliere) when the family makes the move to Vegas? Makes no sense.

Michael and Vito have to make it convincing for everyone, that they think they need to move Tom out of the consigliere position, so they put on this performance, which lulls Carlo into thinking he is moving up in the family.

Michael and Vito know all along that Carlo is dead meat.