20 Episode results for "Detroit Bureau"
Auto Icon Carlos Ghosn Could Be Facing A Catastrophic Ending
"Bloomberg peon L is brought to you by Heimer funds. Oppenheimer funds has almost fifty years of experience investing beyond borders to find tomorrow's opportunities. The horizon isn't a boundary. It's an invitation find out more at oppenheimerfund dot com slash global. Welcome to the Bloomberg piano podcast. I'm Pimm FOX along with my co host Lisa Abramowicz. Each day, we bring you the most important note worthy and useful interviews for you and your money. Whether you're at the grocery store or the trading floor. Find the Bloomberg PNL podcast on apple podcasts. Soundcloud and Bloomberg dot com. One of the biggest stories of the day is that Nissan is removing Carlos gone as chairman after he was arrested in Tokyo violations of financial impropriety, and this of course, has sent the eighty ours down by more than five percent of Nissan. Joining us now to talk a little bit more about this. As David Welsh Detroit bureau chief for Bloomberg news as well as our own Matthew Miller of Bloomberg television, and bloombergradio who is in New York and our eleven three oh studios. I wanna get to Matt David. Let's start with you. Can you lay out what the most important details? Are that have come out so far about the financial improprieties and what it means for Nissan going forward? Sure. So what they've accused him of. There hasn't been an official accusation by Japanese authorities. But what they're saying basically, he understated how much income he was making by about forty four million dollars. And then in in a very damning, but also vague press conference. Nissan, CEO, psych, how a said that he is also misappropriated company resources, and from there, you have to think he was you know, who could this be over using the company plane is it abusing expense accounts and drafting cash resources out of the company. I mean, it it sort of couldn't encompass all those things and they were moving him immediately Mitsubishi Motors, which is also part of a three way alliance with these three car companies has done the same thing. And when I was looking at the Renault board was reviewing the whole situation and figuring what they're going to do. This is huge. Because donors the guy who saved Nissan back in the late nineties when Renault bought a big chunk of accompany for six billion dollars. Nissan was really can teetering on bankruptcy and with six billion from Renault and Carlos Coen's cost cutting and product plan and factory turn around. They came roaring back. And he is run these three companies as an icon for almost two decades. And four to end this way is catastrophic for him. And it's going to bring about massive change for the for all three companies involved. Matt Miller I want to bring you into the conversation. You've met Carlos gone on number of times. Tell us a little bit about him his background, and what you take away from your personal meetings with them David points out that he is an iconic figure he is known as the rock star of auto see title, sometimes is used for other people has been frown Mulally in the past. It should have been for Sergio Marconi as well. But gone is the longest standing rock in the auto industry as far as those three kind of biggest turnaround CEO's, go cut his teeth in Australia. I believe. Yeah. Absolutely. And he's he's one of these just like Sergio was sort of multinational citizens as well. I mean, I think the the biggest problem right now of the three is Renault. You know, their share? Fell the furthest in France. And he's still the C over. Now. Remember he was kind of stepping back from the alliance. He gave up his title a CEO of Nissan. He was chairman of the alliance, but was making making arrangements to make it permanent. So a lot of investors were expecting. I think it's fair to say that all investors were expecting this was headed towards a merger. If not an official Thai up at least something more efficient than it is now, and that's what's up in the air. I think that's the biggest concern for shareholders right now. Although it's important to mention as David said Japanese prosecutors haven't filed official charges yet, and he's not considered guilty. Although he has been arrested. He has gone with prosecutors. It's not clear where he is right now is let's say being detained. Yeah. He also was removed as chairman. So there is not changing that thank you so much both of you for joining us. Matthew Miller wonderful to see when person that'd be thanksgiving. Bloomberg television and radio host is well, also, thanks to David Welt Detroit bureau chief thank you so much for joining us. Well, you know, these just earlier we got to listen to Ray Dallaglio of Bridgewater. Give his thoughts about the business cycle about the money management business. He was speaking with Barry ritholtz of Bloomberg opinion. But on the cover of Bloomberg markets magazine. I dare say is an interview that is of equal weight. And this is an interview with Abby Johnson of fidelity. And it also includes Kathleen Murphy who leads their personal investing unit. One of the quotes out of the story is that we're in the midst of quote, a twenty two trillion dollar shift in assets to women, and I thought that was fascinating. And here to tell us more about it. And how the company is reacting and dealing with. This change is Peggy Collins our expert when it comes to all things investing or investing team leader for Bloomberg news, and you can follow Peggy at M K M Collins on Twitter. And she joins us here in the Bloomberg interactive brokers studio Peggy, a pleasure to have you tell us about this interview. And particularly about this shift in assets to women and it coincides also with Fidelity's effort to make sure that a lot of their new hires, particularly at their branch level are women. That's right, Pimm. So essentially, Abby Johnson is the top woman in fund management in the US. She runs fidelity. She's the third generation of the Johnson family to run it. And she looked ahead with Kathleen Murphy who runs personal investing at fidelity a giant business unit for them. And basically what they're seeing is this transfer of money into women's hands for one of the first times in our history for several reasons one of them being the fact that women are just living longer than men. So a lot of women are finding themselves in a position in their life. Where maybe they didn't run the money earlier in their lives, but they are getting transferred assets later. In their life. You're also seeing more women. Stay Maher knock get married. You're also seeing more women get divorced and have to deal with assets at some point in their life as well. So they're just really seeing the whole demographics of who's investing in controlling the pocketbook change. So I have to think that this is a person who has been at the forefront of the move to index funds and to cheaper funds, and we talk about expertise. I just wonder did how did she sort of reconcile the tension right now between active and passive management, especially given their zero fee funds that they just recently launched. It's such a great point Lisa because fidelity under her grandfather and fathers of leadership was essentially known for its stock pickers active management. You had people like Peter Lynch, one of the most famous investors of all time who really draw drew a lot of investors fidelity, but will abbey's overseeing the company at a time where millions and billions of dollars going into pass. Lo fi index funds. So she really talked about how they've been somewhat late to the index investing game she admitted that, but she also says she feels like the company is caught up one of the things that they did is. He said this summer was decided, you know, what we're going to be the first to offer a free index fund to actually they came out with in August, they now have four and Abby Johnson was saying, you know, what she's not really a fan so much anymore of traditional advertising, and she thinks in order to get more people to give fidelity a chance they have to do things that are even more surprising and splashy, and essentially they did surprise a lot of their competitors. When they came out when they were the ones given that they're known for active management to come out with the first free index fund one of the other areas that she spoke about also Kathleen, Murphy, speaking about is robo advisors. That's right. Fidelity has a robo advisor called fidelity go and we've seen a lot of the asset managers incorporate robots into their investing process, particularly for people who are of middle wealth. The billionaires are still getting the whole wealth is not excessive and they can't make great fees out of those clients. So this might be the way to get them to death. Deathrow any managed at fidelity, right? And get it managed earlier. So back in the day. You would wait until you had maybe tens of thousands of dollars to go to some a wealth advisor. But Fidelity's now saying look, we can offer you a six multiple choice questionnaire that you can fill out all online, and then we can help you get invested one of the interesting things. They also said was they're designing products and user user interfaces now four millennials, and then the calibrated up to two older people. So that's who they have in mind now a days when they're thinking about how do we put this product out there? It's really interesting you were talking about how. Traditional advertising since early be the way, they would track investors. It also may not be the way to make money. And I just have to wonder I mean again when you start talking about, oh, it's a good gimmick to get people to to like fidelity yet. But they're making nothing on these funds. So how do they plan to make money? Well, they essentially are saying, you know, what we need to get get people in the door. And once we got them in the door. We can offer them a lot of different things fidelity was talking about. It's brokerage platform, for example, in terms of war trading as you get older and potentially have more money. Maybe you're not only using the road vise or maybe you're not only using fidelity through your 4._0._1._K plan. But maybe you're going to open up a brokerage account. Maybe you're going to offer as you get older a managed you're going to be offered a managed account offering where for people with more money. They may have more high touch a wealth advisor involved. So they essentially see it as a way to get people in the door, and then offer them different things. Well, it also is a way to beef up the asset management business which. Is the most profitable division of fidelity? That's right. I did ask AVI about whether or not she thought the asset management industry. The mass asset management part of the business would still be the most profitable five years from now in she said, you know, what a lot of it is dependent on the markets. But it still is their most profitable business line. They have workplace benefits. Like, I mentioned 4._0._1._K's. They have the brokerage unit. They have a number of different business lines fidelity, but stock picking mutual funds. Those are still the big engine for them. Pecci Abby Johnson is not known for being a publicity hound in any way, shape or form. This was a rare interview. Do you get the sense? Just lastly here that she's changing her approach here. It was interesting. She knowledged that she has been speaking out more the company had issues with a sexual harassment claim last year and choose out in front very quickly. After that talking about zero tolerance in the workplace. She did acknowledge that it doesn't seem like it's her the thing. She wants to do. I. She's not a total fan of being out there in public speaking in part because it takes up a lot of time and travel, but she did acknowledge that investors want to see their leaders out there and talking more. She did also acknowledge that she's not one to make calls on the market. You know, we see a lot of leaders of investing firms who actually do that a lot. And she said, I'm a leader of this company that has to do well, whether the markets are doing well or not, and so she feels like making calls in the market is not something that she wants to do picky Collins. Thank you so much and great story. Thank you for being with us. Bloomberg PNL is brought to you by Oppenheimer funds. What percentage of global GDP is the United States half two-thirds? Guess again America is just twenty four percent, which means that seventy six percent of global GDP comes from outside the United States up and Highmore funds believes opportunity. Look similar in every language with almost fifty years of experience investing beyond borders to find tomorrow's opportunities up and Heimer funds knows the horizon isn't a boundary. It's an invitation find out more at Oppenheimer. Funds dot com slash global. Topic? Now, our global rates and a foreign exchange strategy in here to help us understand what's going on in the world is and Matthias global rates FX, a strategist for vanguard and Matthias. Can you tell us whether you believe there's any fallout from the APEC summit or should we say the APEC pickup peppers summit? They could not actually put together a common communicate between the United States and a variety of Asian countries. What is this mean for global currencies? Well, I to keep going with your analogy. I think they picked a peck of pickled peppers, but they didn't know how many pickled peppers. They pick on him. I love it. You get ten points. Good good. You know, as an interest rate strategist here vanguard that is trade is the top topic for our teams, and for, you know, all of the people that we talked to in the markets right now, the US treasury gets pushed around by a lot of different factors at different times. But I would say just for the last few weeks for both equities and fixing the number one mover has been talk on trade. And it's just too early to say, you know, trade is one of those topics that takes for ever for those of us who are old enough to remember NAFTA that seemed like it took absolutely forever to move from concept to an actual trade agreement. So any new trade deals just take forever? So it's hard not to react to headlines, but people should try to keep the big picture in view. We'll the and I wanted to say are markets responding to the headlines that we got because they were pretty negative. I mean, Mike. Pence came out with a pretty harsh tone and markets are gather risk off a little bit. But you're not really seeing a major move today. You're right. You're absolutely right. It's quite interesting teams like just just today, and maybe even just in the last couple of maybe week or so you see more equity market reaction to the trade talk and a little bit less sixteen come market, a little less treasury reaction treasuries, maybe taking a little bit more in stride. Maybe maybe those of us in that part of the market have a little bit longer term perspective. It's definitely rocking the equity markets, and interestingly rocking, the growth components of those markets. Then does that mean that there's an opportunity here, or should you stay away until the dust clears, you know, it's we're we're in that point of the economic cycle where we're close to sort of close to the end. Or are we at the beginning of the end or at the end of the beginning. But I think that we are getting to sort of a late stage in the economic cycle. You know, we can almost see over the hump with the fed to see when they will. Probably finish hiking rates which are economics team here at vanguard thinks is probably middle of next year. But second half of next year. So you're seeing a bit more diffusion in terms of what people think is going to happen. I think that there are some gross undercurrent that are, you know, starting to be a little bit more concerning. And if you have growthy parts of the market not doing well with trade concerns. It may not be the perfect time to buy the dip. You know, probably better to be a little bit more circumspect. And I want to pick up on what you were saying, which is you expect the fed to stop raising rates somewhere around the middle of next year. Recently, we've seen a lot of traders sort of ratcheting back their expectations for just how much the fed will hike rates. Do you think that they are sort of late to the game? This sort of been the play all along or do you think that something materially has changed that will now slow the fed down more than than previously thought? I think they're a little bit late to the game. And I think they're probably has been a little bit of an overreaction too far the other direction, you know, underpricing the amount that the fed will raise rates over the next year. You know, we see near certainty of a hike in December, and then to and probably perhaps three hikes next year and not enough has changed in a fundamental economic picture. Just throw us off that track. I think the market has moved a swung a little bit too far toward a dovish tilt, and we could see probably a bit of a reflecting of the yield curve as the shorter dated treasury sector starts to kind of get a little bit more realistic about what what's likely to happen. Next year. We haven't seen enough deterioration in economic data to really I think throw the fed that far off well and matai let's be that's sort of conclude a little bit where we began having to do with that APEC meeting and the disagreement over trade between the. The United States and China. Do you believe the Chinese government will work to reflate their economy? And do you believe that they will also try to lower the value of their currency? You know, I think that the currency piece is something that just tends to happen when you have a lot of tariff activity because the the the exported items just have to be reprised to remain competitive. But I do think that there was a bit of probably a bit of positioning going on right now because you have the upcoming meeting between the president, and and she China coming up, and I think it's you know, it's too early to say that that was a, you know, a truly meaningful change in the trade dialogue or positioning for the for the real negotiation between the two principals and with ice. Thank you so much for being with us and Matthias is global rates and FX strategist for vanguard. Thanks for listening to the Bloomberg PNL podcast. You can subscribe. And listen to interviews at apple podcasts. Soundcloud, or whatever podcast platform, you prefer. I'm Pimm FOX. I'm on Twitter at Pimm FOX. I'm Twitter at Lisa Abramowicz. One before the podcast. You can always catch us worldwide on Bloomberg radio. Bloomberg PNL is brought to you by Oppenheimer funds. Oppenheimer funds has almost fifty years of experience investing beyond borders to find tomorrow's opportunities. The horizon isn't a boundary. It's an invitation find out more at oppenheimerfund dot com slash global.
Commercial Real Estate Set Up For 'Profound' Recovery: MMI CEO
"Why settle for seven percent returns from your 401k? Whether you're an experienced investor or new to the game the Motley fool wants to help you find great stocks. That's why they've created a report on a group of five stock picks for the next generation of investors. And it's free for all listeners at full dot com slash the number five stocks. Welcome to the Bloomberg podcast. I'm Paul Sweeney along with my co-host this Abramowicz each day. We bring you the most noteworthy in useful interviews for you and your money whether at the grocery store or the trading floor find the Bloomberg pl podcast on Apple podcasts. Or wherever you listen to podcasts. As well as at Bloomberg Dot Com we continue to dig into the economic ramifications of some of the closures. And we've seen a number of retailers furlough or layoff hosts of workers. The latest being macy's today saying that it was going to close after closing. All of its stores Martine. Now going to furlough most of its one hundred and thirty thousand workers. This is led a lot of lead to a lot of questions about commercial real estate values rent payments and the like joining us to say I'm really pleased to say Hassam no G. He's president and chief executive officer of a major commercial real estate for Marcus. Millichip based in Columba's California and I'd love to take first of all given the macy's news given the fact that we've seen retailers across the board. Just closed down stores in mass. Will this have a permanent effect on Commercial? Real estate values have not even yet been priced in the morning. Thank you for having me on the program. First of all this is unlike anything we've all experienced in the risk of Sit in the obvious. And that is really a health crisis than most of our clients and everybody's participating. Our industry is first and foremost concerned about the health of Their their employees and their and their families. So it's very difficult to separate the emotional component of that with the business component of this minute. Which is unusual From anything we've seen in the past but To answer to your question what's happening around us right now. Is Hastening the trend? That was already playing out for retail as you know. E commerce is really profoundly changed brick and mortar retailing and a lot of the Obsolete older shopping centers and a lot of shopping centers that relied on department stores have been hurt badly by what was already happening. This is just speeding that up. I think there's GonNa be more short term pain because of its clearly. There's no way around that but I also WanNa point out the rebirth of retail. Where we've seen so many examples of renovations repositioning and repenting of retail that has been widely successful and has become a great investment vehicle and there are components of retail like stable grocery anchored Type of retail. That is of course doing very well right right now but was doing well even before the help prices began and fast food restaurants drugstore single tenant retail where you have one tenant on a long term lease and is much less risky those are doing very well and in great demand by investors taking a look at the two trillion dollars fiscal stimulus package. What was in there for real estate from your perspective? I think the most important part of the package is the fact that there's three hundred fifty billion dollars. Allocated FOR SMALL BUSINESS. Forgivable loans and five hundred billion for large companies as as much help can be delivered to companies to stay afloat during the worst of this health crisis. In order to limit Employee layoffs is the most important component because that has to do with tenants and tenant has to do with occupancies of commercial real estate in addition to that the way that the Fed has stepped in at an unprecedented speed and scale very different from two thousand eight hundred thousand nine when we absorbed. You know the lack of a playbook taking months to come up with solutions. has now resulted in their ability to be much nimble and much more Both in the way that come in to basically backstop equity and ensure the functioning of the of the credit markets. That's a profound health for not just commercial real estate but but all businesses and. I think it's really lays the groundwork for a rapid recovery. Just as much as it's going to be a very deep painful downturn and hopefully short-term won the recovery because of the action that's being taken should therefore be just as just as profound Osama. There's some talk about the de freezing of corporate credit markets is the Fed steps in Says it's going to buy certain securities. They're given the fact that you're one of the largest commercial real estate financing companies closed transaction. What's your sense of how much We are looking at a possibility for just a complete shutdown or a freeze in the commercial transactions. Going forward what we're seeing deals continue forward. We're seeing deals closed in the last two weeks in the last few days because they still make sense in the buyers and sellers are comfortable with execution and lenders are still coming through. Many deals are not moving forward Some lenders have stepped out of the market. There are a wide variety of reasons for that and locations where that it is in one two trends but the most important thing to remember is there will be a short time window where pricing will be difficult and being able to Kinda read. The market will be very difficult but we expect as soon as the markets. Kinda gets his footing on valuation and begins to see the bottoming of the health crisis first and foremost and then secondly the You know the beginnings of some kind of economic normalization. I think the market is going to move very fast with as a significant amount of pent up demand and transactional activity. I think the feds backed off is critical during this uncertainty windows on certainty because it's going to prevent You know a Lotta loan defaults and a lot of if you will fire sales expectations. That really justified. You know. We have to remember prior to this crisis commercial. Real estate was in great shape. We had to build it. We had over leveraged it. The economy was in great shape that added added to the all the actually got being taken by the federal government really spells. It was pretty Pretty good shape in Assam. Not thanks so much for joining us some though Jesus. Ceo of Marcus and millichip talking to us about the commercial real estate business and clearly some tough times coming up for that business at least own again. We saw some. You know it's going to be really really difficult on a lot of small and mid sized businesses and obviously that'll be that'll trickle down to the real estate as well looking at Wti crude twenty dollars twenty cents a barrel just extraordinary so when we talk about commodities like oil we talk about supply and demand and it doesn't look good on either side for royal right now that's why we were fortunate to have our next guest ellen walled. She's a president of transversal consulting a Bloomberg opinion contributor. Alan thanks so much for joining us. So we know the demand picture is bad and seemingly getting worse by the day but let's start with supply. What are the Russians and the Saudis thinking about today? Exactly well the Russians are probably thinking about the phone. Call that president trump says. He's going to have with President Putin later today during which he plans to discuss oil but the interesting thing. Is that the real problem is actually Saudi Arabia. In fact there's been indication that Russia is very not increasing production and possibly Interested in cutting it We heard some indications of this from some of the Russian oil companies last week meanwhile. Saudi Arabia is coming out and saying not only are they increasing their production. Twelve million barrels per day Starting April first. But they're also planning a starting in. May of making ten point six million barrels per day of oil available for export. So essentially they're taking They're dropping domestic demand and they WANNA put that on the market to all right. This has been leading to fears and the reality of storage space being filled up literally. There's nowhere to put all of this oil and we saw in the US here a driller actually paying someone at one point to just take their oil. 'cause they had too much of it needed a place to put it. What's the end game here? The end game is that Production is going to have to decline That's that's really the only option here. drillers are. GonNa have to start plugging well They're going to have to start reducing recounts. We've already seen recounts GOING DOWN IN THE PERMIAN. But the reality is unless they WANNA feel every ship on the sea with a crude oil and products and every idle jet with jet fuel They're GONNA have to con- down with this production because The demand problem isn't going to be resolved immediately Demand is going to take some time to come back. Gasoline demand could come back pretty quickly once Social distancing lockdown restrictions or ease. But it doesn't seem like we're going to be Getting that anytime soon. All right so give us a sense ellen of what the Saudis are thinking about here. What do you think is their mindset? Here dating can see where global demand is is not and they can look ahead and see where the storage capacity issues are. What are they really thinking here? And this is. This is the big question. When when this whole issue got got started In the beginning of March the Saudis actually had a pretty good plan before The Corona Virus lockdowns started across the US and then in In Europe and now in India demand was down particularly from China. But it wasn't bad and so their plan to increase production was actually had some merit. The idea would be increased production. You'll increase revenue even if You send oil prices down by. The problem happened when first of all they got into this price war kind of narrative and that sent prices down further than they probably would have liked and then on top of that you had in the corona virus lockdowns which were just killed demand almost immediately and that sent prices down further now even if they're producing and selling a lot of oil if they're only selling it at you know twenty twenty five dollars a barrel. They're not making more revenue and sooner or later they're going to have to realize that this is a serious problem And I think we're going to start to see that in April as we see. The big question is Kentucky. Arabia actually sell all of this oil. Does it have buyers? They say they do anecdotal evidence suggests that maybe they don't but we're GONNA have to watch this play out basically in the tanker space. Are we going to see these tankers filling with oil leaving Saudi Arabia and then unloading and if we don't then that's going to expose Saudi Arabia's problem and what does this mean for the shale patch when we see Pipeline operators actually saying to drillers? Just stop just keep it in the ground guys. 'cause we don't have any space. Are they all going to go bankrupt? It's likely that a lot of them will go bankrupt. They'll be bought by others They're going to be a lot of consolidations it's not gonNA be pleasant. We're going to see production slowdown in the United States. We were already looking at a somewhat of a production slowdown coming on By maybe this is going to be a much more dramatic. Drop the good story and all of this is that the oil is still there and when this is all over when demand picks up which you will then then will still be there and even if this name companies aren't there new ones will likely form Or the few that kind of bought up the assets of the others will start producing again. So the America's future as an oil producer is not over. This is not the end of that story Ellen. Walled thank you so much for being with US Ellen. Walled President of transversal consulting and Bloomberg opinion columnist joining us. I gotTA Say Paul my favorite quote that I've read over the past. Few weeks has been rocks. Don't go bankrupt that. That's that's the silver lining for the patch. Right now. Yeah there's still oil in the ground as Ellen said when the market comes back there will be some some oil people out there drilling and bringing it out. Yeah although I do have to think what does it say if you have pipeline operators literally saying just keep it in the ground. It's not going anywhere could right. Now guys Looking right now at Brent crude. That's really what's taken on the Chin this morning. It's down to twenty two dollars and sixty cents a barrel lowest in seventeen years years. Yep investing can be confusing especially with ticker symbols and charts flying back and forth like it's the runway at lax where the urine experienced investor or new. The game. The Motley fool wants to help you find great stocks. They give you straight talk without the fancy jargon and noise. Their Flagship Service Stock Advisor provides to brand new stock recommendations. Every month with daily analysis and coverage sent directly to your inbox go to full dot com slash five stocks to learn more and claiming exclusive discount only for listeners. That's full DOT COM SLASH. The number five stocks interesting to see what's going on right now in credit in the meantime because you have sort of dual forces given the fact that oil prices are falling to the lowest in seventeen years. Then you also have concerns about growth. Then you have the. Fed trying to backstop the whole thing which is leading to this jumble with a lot of dire predictions and yet people still saying. It's time to bypass this audio moment. where there seems to be an opportunity here but people aren't sure whether they're going to get to quote unquote. Walsh speak their faces ripped off in process And someone who's been tracking this really well and has been frankly on the ball. Every time we speak to him is Great Han. Who wasn't necessarily as enthusiastic earlier about the enthusiasm we're seeing in the markets and now joins US chief investment officer for winthrop capital Management Greg. I'm curious from your perspective. Is this a time of opportunity in the high yield space or is this a time of growing risk so so in the high yield space we have to separate it from the hot? The high yield basis in the we take the energy sector out. Because of what's going on with oil prices we think the energy sector is going to go through turmoil And it's a it's a I think at the end of the day it's a buyer's market but you gotta do your homework and you gotta be selective but there's some good companies out there that are on sale. So what are some of the sectors or the companies that Had are on your screen at the woman. So we've been focused candidly. We've been focused on the up and quality trade so in a way from high yield on the investment grade sector new issue market has been extremely active and where we can buy in the short end. The short end has had some serious dislocation so we were by two and three year paper that had yielded six percent which was just from four selling. We're also seeing opportunities in the C. N. B. S. market and. That's where the problems are going to occur as we see you know. We expect Rent payments on the corporate side. We're going to miss rent payments for April we're going to probably miss them for Bay In so we're going to see some deterioration at some increase in delinquencies and CBS. So that there's four selling CNBC sector. That's put a lot of paper out on the street. And that's eight to ten percent yields. What are your baked in Assumptions Greg? I'd love your sense as you extrapolate out of. How deep and long recession will be and whether that even matters in terms of where things are being valued in the opportunity there. Yeah so for us to make sense of this. We have to separate what's going on the economy and what's going on in the financial system with what's going on in the capital markets. So we put those into the it all gets together but if we if we focus on on the capital markets piece of it Just specifically to your question we think that the sector right now is going to be challenged but the way that it flows through in the commercial mortgage loan space We we expect businesses to miss their April. I you know we're GONNA see a decline in April. I rent payments. We're GONNA see a decline in. May I rent payments? And then we'll start to see some Improvement after that as businesses. Just get back up and running and that particularly isn't that strip mall space reassess restaurants nail salons barbershops. That kind of service stuff. That's effectively shut down for this period of time so greg. What kind of economic assumption are you guys kind of working on? We had a bunch of Wall Street. Investment banks over the last week coming out with GDP forecast quarterly for twenty twenty and most had I would categorize his kind of a V type of recovery with a sharp sharp contraction in q two but then a rebound cues three and four. Is that what you're modeling? Yes so I can't put numbers to it but we if we look at shapes of letters We're we're not looking at a v-shaped recovery right now. This one's going to be. It's going to be shorter than financial crisis of two thousand and eight but this is going to be extended This was going to go on for two quarters. Greg I WANNA talk. More about speculative great credit in general. And you were talking about the opportunities in higher rated junk bonds. I'm just wondering about investment grade. Downgrades the fallen Angel Kind of syndrome. We've seen an escalating number of downgrades. I'm just wondering at what point that's GonNa Cause forced selling that bleeds out into the top tier of high yield. How worried are you about that? Well it absolutely will the I mean we saw Ford get downgraded last week. I think it was last week or two weeks ago We're we're going to see it it. This happened in the late. Nineteen nineties early two thousands where we saw Georgia Pacific or GM a number of investment companies get downgraded with with low interest rate and tight credit spreads. It's not gonNa have a fundamental impact on the company that doesn't it's not going to increase their firing costs As long as they can access the markets it's going to have a bigger effect in the capital markets for those of us who navigate. Where where we want to allocate dollars so big a big amount of a large amount of credit coming from investment grade into high yield. We're going to have to digest that into that you'll space. Yes because a great challenge. Yeah what's your sense of the financial system the health of the financial system maybe say now versus two thousand eight thousand nine right so in two thousand eight two thousand nine. We were dealing with a a growth in subprime loan. Space that worked its way into a structured product different types of product. We don't have from our view. We don't have shows kinds of excesses in the residential space We thought the commercial mortgage loan space was a little bit extended And so there. There's been a lot of development over the last eight years the fan the but the financial system is significantly stronger than it was twelve years ago. Because we're we're talking about banks now that have capital levels. Excessive percent in a context for that is back in the financial crisis I think the banking sector was closer to four percent so I think the banks have enough of a shock absorber to to absorb this much better than they had an and part of this is the. The Fed has responded so quickly to put programs in place to help support commercial paper and repurchase agreements and in really does support the financial system. So it's got the shock absorbers. It needs to to help absorb these This this crisis so one thing. I've been struggling with taking a step back the entire. There's a theory out there. Anyway that there's a big shift going on that's getting accelerated by the crow fires to a digital economy. You're seeing slack. You're seeing zoom all surge. You're seeing sort of anything. Having to do with online delivery too well and a lot of the high yield market is tied to the old economy and industrial companies that are struggling arguably the most. What do you say to people who just argue that you have all these over leveraged companies that are going to not be able to grow into their capital structures? It's going to lead to a whole host of defaults with bigger Low losses on them loan-loss recovery's than during the two thousand eight crisis. I keep hearing more about that. Is that a real worry. Yeah the difference between the the New Economy and the old economy. The Old Economy. If if there are assets tied to those businesses there's value in the new economy Where you've got a technology based Businesses. There's there's just from a credit standpoint there's fewer assets so that your your assets actually your client base. It's not necessarily your website The technology to support it But IT'S A. It's a valid point. I mean it's we've got this whole shift. Every industry is going through some tectonic shift right now and I always joke. We never saw. We never got a memo. When typewriter left the office back in nineteen eighty seven or whenever it left you know it just starts to happen and then the typewriter repair shop goes out so some of this is going to have an impact on literally business. Great thank you so much for joining us and hanging on their on chief chief investment officer for winter capital management. There's been a lot of back and forth between President Trump and general motors about ventilators. Are they making them are they? Being are they charging too much? Let's get the latest with David Welsh Bloomberg Detroit Bureau chief. David Give us the latest on. What's going on with General Motors and switch pivoting into the manufacturing of ventilators. So they actually. You started tearing down the original Machine had been tech which is jammed partner tournament machine down at Auto Parts Plant Kokomo and rebuilding it and really kind of perfecting the the coldness assembly line. But it's really a room full of people assembling me sent At the factory that will make these things. So they're they're getting to the final throes of Really setting up a whole process to make thousands of Benoy and this is important to Ben Check Which which makes this critical curve and later that can be used with Kobe. Nineteen patients they were used to making one hundred fifty. Maybe a good month. Two hundred fifty units and working with GM. They're going to try to get ten thousand a month. So this is a huge week for a company that makes something that While important was not here in four in such great demand. There was some controversy David over General Motors and how much they were charging for. Some of these ventilators president trump's singling them out and talking about this. Where are we on that so from kind of a complete about face in his press briefing yesterday and GM? It's during a test job but the the written initial controversy was trump just came out Friday and so they weren't moving fast enough. They were gouging To to be blunt either book. Kind of dodging claims Your General Electric or trying to make these and they were saying happy reading until June and GM Production in mid April. So there ahead of every other venture out there That at least it's been discussed publicly. Gm is actually not really negotiate with Ben Tech negotiates tons of the deal. Gm contract mania pressure. They can buy Bente. Gm is doing. The work had caused inventec is charging They told me the same eighteen thousand dollars a year that they've been charging all along with me. I'd be totally appreciated invent. Thanks just one of the cheaper critical care. Units out there It's actually a five and one unit handles for other respiratory therapies. That you need patience when the other. Benoy there's are chosen that are on the market are just Bentley. This you have to buy the other four pieces of equipment separately. There's some target. Maybe that wasn't totally appreciated By the president when when he started complaining race but he seems to be happy with everything now because two days after his ranch. So David you mentioned mid able give us a sense of the ramp up here in terms of timing number of units of production. What's the best guess at this point? I think when they start using April. It's going to be pretty small numbers right now. Gm has three hundred people working that plant and they need to overtime. Get up to a thousand so they're looking for volunteers Who who've been laid off at their current there's imprint and Kokomo Indiana. They're looking for volunteers from a metal stamping plant in nearby. Marion Indiana and they're going to have to do some new hires they're going to have to. They're still kind of finishing the process. That's used to make these keep in mind. Engines or cars or assembled goal on the rolling assembly line. And we're sort of you know if they do certain tasks that robotic arms as the car goes by making ventilators. There's a lot more like making watchers assembling cars. You have a lot of people sitting at tables with small tools looking through land and screwing small electric components together. That's troops planets an electron components plant. Yeah that's what he did before. But it's still a different process. Gm has never done it before their suppliers. These are all automotive parts suppliers. That are doing kind of work perk for them and they're gonNA have to validate this. Make sure works. We're going to start in mid April. GonNa see pretty small amounts and maybe by the end of April. You know you'll be up to hundreds or you know they're they're really good over a thousand a month so we we're not going to see huge numbers there the other place. We're not GONNA see. Huge numbers is just the auto manufacturing in general. How low our auto sales can it be? What are some of the predictions at this point? So we're probably looking to march. That was pretty well decimated by this. Everybody was saying the first week was pretty good. And then all the shutdowns started hitting people were avoiding dealerships You know there were Townsend and states basically keeping people inside except for essential industries and so forth. You know about all of that. So that's really hammered sales. It's it's going to be a rough quarter when we see a seat. Number's on West. They and going in April. Expect the same thing because probably still going to have A lot of people staying home even if they're allowed to go out states just to avoid contact with others David Waltz. Thank you so much for being with us and all the best to you and your family. David Welsh Bloomberg Detroit Bureau. Chief thanks for listening to the Bloomberg. Pnl podcast you can subscribe listened to interviews at Apple podcasts or whatever podcast platform you prefer on Paul Sweeney. I'm on twitter at P. T. Sweeney and Lisa Abramowicz. I'M ON TWITTER AT LISA. Abramowicz one before the podcast. You can always catch US worldwide on Bloomberg radio.
Midday Brief for Thursday, April 25th
"Join the Wall Street Journal may twentieth. Through the twenty third in New York City for the future of everything festival here from over seventy five renounce, speakers and visionaries touch taste and interact with the products that are redefining tomorrow to learn more and buy tickets. Visit our website at F O E festival Dodd w s j dot com. Twenty percent off with code podcast. I'm Jay are Whalen and the newsroom at the Wall Street Journal in New York former vice president Joe Biden has officially launched his third campaign for president. He joins twenty others seeking the twenty twenty democratic presidential nomination in a video posted Thursday morning, Biden said quotes, if we give Donald Trump eight years in the White House. He will forever and fundamentally alter the character of this nation who we are. And I cannot stand by and watch that happen, unquote. President Trump has called Biden his dream opponent taunting the former VP for his poor showing in past elections. Meanwhile, President Trump and a tweet Thursday morning denied he ever asked. Then White House counsel, Don Mcgann to fire special counsel, Robert Muller that directly contradicts an account in the Miller report. And the Wall Street Journal Detroit bureau reports the petite SUV has emerged as a car category all its own as a result of Americans appetite for sport utility vehicles. In fact, the subcompact SUV category. Very has grown rapidly in recent years from only one model in two thousand nine to roughly sixteen this year, including models like the Nissan, kicks Ford. Echo sport. Toyota, see HR and hyundais venue unveiled at last week's New York auto show for more on these and other stories of the day, go to wsJcom or the WSJ app.
TSLA Underperforms as Election Results Come In, BMW Tweaks EV Strategy? (11.04.20)
"Everybody rob our here and of course today. We're gonna talk a little bit about the. Us election primarily tussles reaction to it. I'm sure at this point. People are a little bit tired of hearing about everything going on. Of course the race is still ongoing. Votes are still being counted. The next twenty four hour should provide a lot of clarity but regardless it does look like we may be in for a weight of days or even weeks before. The election is finalized a quick example of that especially for our international listeners. For example my state of wisconsin. Joe biden is ahead by about twenty thousand votes. The associated press has declared biden the winner of the state but the margin of victory is less than one percent and that will allow president trump. to demand. recount and those recounts. Wisconsin can take up to thirteen days. We're gonna see probably similar actions taken in other states. Maybe north carolina michigan nevada. You still got arizona georgia north carolina pennsylvania all sort of unclear at this point in time and depending on how things go one of those states could make a difference and many of them. If not all of them could fall within the margin that would allow for a recount which just adds a lot of time for example in michigan. That can take up to thirty nine days for a little bit. More context on wisconsin as an example. We did have a recount for the two thousand sixteen general election and that changed the result by only one hundred thirty one votes. Of course this election has sort of a different beast with all absentee voting. So long way of saying it might be awhile before everything is fully done but as of market close today v election betting odds put in as an eighty two percent favourite to win the presidency. And that's probably our best clue for how the markets are reacting to what has unfolded over the last twenty four hours. Of course everyone's going to have their own numbers. Those odds are gonna vary by source that eighty two percent number is a conglomeration of a few sources but feel free to look up if you prefer to use a different source so that brings us into the market reaction. The market actually had a strong positive day today. The nasdaq was up three point. Nine percent on the day the s. and p. five hundred up two point two percent but on the day actually trail that down zero point seven percent. This is after tesla was strongly positive in the pre market. When the betting odds were a little bit more even between the two candidates with the democratic party being seemingly more open to adding incentives for solar electric vehicles and perhaps more interested in implementing stricter emissions requirements that the overall market's reaction was to be up that tesla would seemingly be right there with it or maybe even be outperforming clearly down zero point seven percent today that has not been the case a pretty significant underperformance with the nasdaq being up four percent. It wouldn't be too unusual to see tesla being up six or even eight percent on a day like that so let's look at a few other stocks that may fall into a similar bucket to tesla. Let's look at electric vehicles. Let's look at solar. Let's look at the infrastructure and ridesharing stocks and we can see some mixed results here across the board but a general underperformance in a lot of these electric and renewable type of categories. So let's run through these and then we can talk a little bit more about maybe the reason for that so tussle down zero point seven percent. Byod electric automaker out of china up two point seven percent but still trailing monastic. Nikola down to say whatever you want about that stock. But it still falls into this grouping workhorse down eight arkham odoyo down one fisker down six finally then outperformance here from lordstown motors obviously. Some of these are pretty small players. But then we get to neo ex paying. We auto all of these out of china with neo percent expand up twenty three percent. We auto up five percents. I put an asterisk on these in my chart here as they all seem to be pretty influenced by updates from city so city increased their price target on neo by about fifty percent today and they initiated coverage on x. pain and the auto so all three of those stocks had a pretty significant other influence today aside from just the election even including those three the average across the board here was two and a half percent. That's still trails. The nasdaq if we exclude those last three. The average was down. one point. Four percent for these av makers similar story if we look at solar so we've got first solar here down eight and a half percent sunpower down about three percent son. Run flat and phase up. Just one point. Four percent five. In solar down zero point three percent solar edge basically flat so the average across the board their down one point seven percent against significantly trailing the nasdaq and then if we look at infrastructure similar story here though. I'm sure i'm missing some companies in this list. I've got plug power down two percent and switchback which is acquiring chargepoint down four point seven percent finishing off with ride sharing and then we'll circle back uber and lift both up significantly today. Ten to fifteen percent. This is due to california passing the highly anticipated proposition. Twenty two which means that uber and lyft can continue to classify their drivers in california as independent contractors rather than as employees. I haven't personally done enough research on that to determine if or how much of an impact that would have on possible tesla network. Anyway if we shift back your to two vs to solar to infrastructure to me definitely seems like a pretty consistent under-performance on the day my personal best. Guess on this. I would emphasize again that this is a guess where all working purely in speculation here would be that these moves have been at least partially driven by what seems to be an underperformance to the expectations of democrats for how the senate races have got again. Here this is still early. A lot of these races also still being decided but it does seem pretty clear that the democrats have underperformed and the odds of the republicans holding the majority of the senate seemed to be much higher than they were heading into the elections. At least certainly going from what the pulling was indicating so i think what the market expects right now is democratic president republican senate democratic house and with that split it may be a little bit more difficult for the democrats to push of their agenda items through some of those being an electric vehicle. Incentive extension of the solar federal tax credit perhaps stricter emissions requirements. So just in my personal opinion. I think that may be pulling down these stocks a little bit today but who knows it could even boil down to technicals where people saw weakness in these stocks and shifted their money into stocks. That were going up six or eight percent today. One thing i will say here is that even if there is a democratic president a republican senate a democratic house. That certainly doesn't mean there's no possibility of an electric vehicle tax credit or a solar tax credit extension on occasion. There has been a little bit of bipartisan support for bills such as that most recently back in the summer of twenty nineteen bill that would have raised the cap for each manufacturer in the us from two hundred thousand vehicles to six hundred thousand. Vehicles seemed to almost make it through but then seemed to have been shut down with the white house forbes at the time saying quote in last minute negotiations over a massive package of spending bills designed to avert a government shutdown. The ev provisionals was lost in the shuffle and that was the outcome. Republicans and president trump wanted and quote and then around that time many democrats in congress the main push back was coming from the white house so republican senate in and of itself does not eliminate that possibility. There's always a lot more complexity a lot of things that worked as give takes in those type of situations so just to kind of wrap this up the recent. I'm talking so much about this. As because i think it does have an impact on the stock. Personally i don't really care all that much about it. I think tussles going to have enough demand to sell every vehicle that can make for quite a while here. I think the tax credit would be nice personally. I'd rather just see a level playing field. Whether that's with tesla and other electric vehicle makers or with electric vehicles and internal combustion engine vehicles and some of the subsidies that benefit those but i think if things remain status quo and nothing really changes tussles in a really good spot on additional credit. Wouldn't hurt but if we think longer term tells gonna be trying to deliver a million two million maybe eventually even five million vehicles per year in united states and at some point. It just doesn't make a lot of sense to have a credit on all of those sales. Maybe you could do something around income or something like that but it's not like the. Us is going to put a seventy five hundred dollars. Credit on five million sales from tesla that would be more than thirty five billion dollars per year so long term. I don't think it's really gonna matter too much and short-term think tussles in a good spot but still think that perception is important and probably influential on the stock at this point in time or so. Hopefully we made it through all the political stuff. I'm not trying to give you on one side or the other. I'm just trying to share my thoughts. On what i think the reactions are here. And how that may impact tesla's specifically and obviously there are other factors here but there's no way to kind of capture that entire political feces of both parties and that would probably take up the rest of time of tesla daily for eternity so we will move on now to some other. Automakers will talk about bmw here. They had their earnings report and quite a few of you on twitter today. Tag me mentioning an article from the detroit bureau about bmw earnings call with the title of bmw does a complete u-turn on its ev program. So as somebody that has been extremely critical of bmw's power of choice strategy which is their strategy of developing these apparently or so called a flexible vehicle architectures rather than dedicated platform. I was excited to see this headline so let's take a look at what. Bmw's ceo oliver zips said on the call. He started out by saying he wanted to focus on two things in the skull. First perspective up to twenty five and then their perspective for the second half of this decade so after talking about their vehicles and their short term plans he said quote. Let's move on to the second topic perspective for the second half of the decade. We expect demand a man for fully electric vehicles to continue increasing significantly from twenty twenty-five exactly then just at the right time we will launch phase. Three of our transformation here. In addition to electrification the focus will be on digital connectivity and volume capability and ten years. We aim to have more than seven million electrified. Bmw group for on the roads. Two thirds of them fully electric. The company is already scaling for this both strategically and technologically and quote. Someone a pause there that seven million vehicle target. That's nothing new from bmw of heard that before. Same thing with the two-thirds fully electric target. So that's about four and a half million vehicles that are fully electric by twenty thirty. That's only four hundred fifty thousand per year on average or less than tesla's current annual production rate. And of course that would likely follow some sort of scaling up s curve meaning. Bmw and actually hit for fifty thousand fully electric vehicles per year till sometime after twenty twenty-five so nothing new there then continues on to talk about in digitalization. But then he says quote second underlying product development and its implications for our vehicle architecture from the middle of the decade. Our new cluster architecture is geared toward electric. Drive trans it is organizationally connected to all divisions from markets finance procurement development and production. All the way to sales and marketing this gives us greater leverage and makes us much faster also in our cooperation with partners. The objective is for the new architecture to create an overall optima. Our new plans and hungary will play a key role in this ramping up. The new b. e. v. centric architecture from the middle of the decade and quote. Okay so here. Bmw is talking about trying to create an overall optimum with this new architecture which they call be centric so we don't get a ton more information than that this could be. I guess a step in the right direction of a dedicated fully electric vehicle platform. But they do say be v. centric and that is not necessarily the same thing of course as we have come to learn. Those little differences can be important. I was hoping there would be a little bit more information or questions on this and key. When a portion of the call but bmw doesn't seem to of posted the audio of that available online yet. And i haven't been able to find a transcript for that portion so keep an eye out for that hopefully somebody asked because i don't really think the detroit bureaus characterization of bmw. Doing on their strategy here is accurate if we go to be. Mw's earnings deck also from today. We can see that they talk again here about one platform that serves all highlighting that it can be used for combustion engine plug in hybrid or pure electric. They talk about that. Being from twenty twenty one on and then another slide. They continue to mention their power of choice saying quote our customers decide what is right for their needs and quiet so when i saw that headline from the detroit bureau i thought maybe. Bmw had done a u-turn and had somehow very quickly figured out the what i believe to be flawed strategy that they have but after digging in here. I don't think as any evidence that that is the case if anything maybe they're just sort of are slightly starting to figure out that eventually they're going to need a dedicated electric vehicle platform and are starting to at least consider talk about that idea so maybe a small step in the right direction but probably not far enough or fast enough all right. That will wrap it up for today as always thank you for listening make sure subscribed and signed up for notifications can also find me on twitter at tessa. Podcast and i'll see you tomorrow for the thursday november fifth episode of tesla daily. Planning to have an interview episode tomorrow. Not tesla focus but hopefully something. You're all still interested in so i'll see events thank you.
Voting Continues On United Auto Workers' Tentative Deal With GM
"Get fast speeds even when everyone is online working to make WIFI simple easy awesome more at xfinity dot com restrictions apply this message comes from NPR sponsor xfinity some things are slow like a snail races other things are fast like Xfinity X. by for N._p._R. News I'm Tracey Samuelson location votes with lots of vote no posts all over facebook and we know that naysayers tend to be more outspoken five facilities that GM is closing or has already closed most of Lordstown dhs workers are now at plants in Flint Michigan Fort Wayne Indiana or Arlington Texas he's but clearly what was upsetting committee members is the fact Lordstown will remain closed Lordstown being deep but the union has agreed to let gm close a plant in Lordstown Ohio and that move could doom the deal Michigan radio's Tracey Samuelson has the story it rained all day Monday in Romulus Michigan strikers at GM's powertrain plant got a fire going in a big barrel to warm their hands it's not that bad but this was before the vote at GM Spring Hill Tennessee plant yesterday which has a much larger workforce I think devoted spring Stephen Boyle walked the picket line undeterred water streaming off his orange Poncho my grandfather was a sit down strike if he was capable of locking himself inside a building mine is editor of the Detroit Bureau Dot Com and has covered every contract ratification since nineteen seventy nine he says social media is a new factor in these Radin and it could potentially send union negotiators back to the table with the nearly impossible demand that GM reopened the orphaned Lordstown Plant Hill a narrow rejection of the agreement is a cause of concern put things to come Harley Shaken Labor expert at the University of Kelly applying in Berkeley this is a local union that received considerable investment in the new agreement a billion dollars for new suv a big margin striker. Kenny Bulls was predicting ratification there. We're going to hang in there but I think it's it's a rap I think it's going to go through snot whatever you want eighty five days bring on negative twenty degrees and I'd still be out here wouldn't make a difference to me. Some smaller plants had voted that day to approve a tentative for your contract with General Motors Search. She says the message isn't always well received yeah it can get rowdy and has gotten rowdy police for called to the local in springhill was the tentative deal shuts the door on any hope of them moving back home to Ohio and chicken says the closure sent a worrisome message to a lot of other union I doubt Lordstown is a preview of what could happen to other plants but there are still some compelling reasons why GM's striking workers on line but they may be in purse. It's a great place to get a very strong opinion out to abroad since Nicole haning works at GM's plant in workers at General Motors biggest factories vote today and tomorrow on a tentative contract if it's ratified it would end the longest strike at GM since nineteen seventy vote to ratify the most basic is the need to get back to work and a regular paycheck the tentative deal also provides new benefits for GM's temporary workers are people so it's kind of hard to get how everybody feels about the contract a no vote would mean even more financial hardships for workers and big financial costs for and for others union officials visiting each GM facility to hold rollout meetings to explain the contract. Kristen Dietrich is an analyst with the Center for Automotive Race Lansing Michigan. We're voting won't wrap up until Friday she says there is really no way
All Of Michigan Is At Risk Of Coronavirus, Not Just Metro Detroit
"Dilly Detroit is brought to you by the community support our work at Patriot dot com slash daily Detroit on your daily Detroit. What if the corona virus spreads as it has in southeast Michigan but statewide a recent piece by the nonpartisan Citizens Research Council of Michigan Highlights? How unprepared and dangerous. That could be for out. State Michiganders' as many of the same problems. That Detroit is facing rural Michigan has but with even less healthcare support. Tim Michelin joins me. I'm Jareth stays in. We're recording on Earth Day Wednesday April. Twenty second twenty twenty but first. Let's get into some of the things that you should know around Michigan and Detroit. Our top line statewide number of confirmed corona virus cases sits at thirty three thousand nine hundred sixty six. That's nine hundred and ninety nine cases since yesterday there were an additional one hundred thirteen fatalities in the last twenty four hours bringing the death toll to two thousand eight hundred and thirteen. The city of Detroit now has more than eight thousand confirmed cases and seven hundred. Forty seven fatalities. We'll get into some news about the city in a moment. Oakland County is approaching sixty five hundred cases and five hundred twenty nine deaths mccomb more than forty six hundred cases and four hundred seventy three deaths and the rest of Wayne County. That's not Detroit. More than sixty five hundred cases and five hundred seventy two fatalities in a press briefing. Governor Whitmer said that more details on the plan to reopen the economy in phases may be coming within the next few days. Her key concern is a second wave but the data in her view is looking cautiously. Optimistic and currently hospitals are discharging more patients than they are admitting. What probably won't happen. What's been done down in Georgia governor? Brian Kemp there is allowing bowling alleys fitness centers hair and nail salons and massage spas to open on Friday and movie theaters and dine in restaurants. This Monday in an interview with. Msnbc's Chris Hayes. On Tuesday night whitmer said that those would be among some of the last things to come back here in Michigan Wayne. County is investigating the circumstances behind approximately fifty bodies that were discovered at a makeshift morgue in Beaumont's Wayne Hospital following up on tips health inspectors discovered the deceased on Tuesday after initially being denied access Beaumont for their parts. They got approval. From the city of Wayne's Department of Community Development and planning to convert a section of the warehouse into a temporary morgue most of which is being used for essential supplies. The hospital system in a statement said that they're storing the bodies in a quote safe respectful and appropriate way unquote in another sign of the impending budget cuts to come. The State of Michigan has notified state employees. That temporary ten day layoffs are coming because state tax revenue has severely dropped as of this recording. We know of two hundred workers impacted at the Department of Health and Human Services and one hundred workers at the attorney. General's office unknown as of this recording cuts the Michigan Department transportation as well as the Department of Education. But that's not all in previous episodes. We've talked about the city of Detroit's nearly three hundred and fifty million dollar budget hole but today's news that Wayne County is expecting a budget gap exceeding one hundred fifty million dollars or at least a loss of twenty percent of their projected revenue. Details are still to come on how they'll address. The shortfall cove in nineteen testing is continuing to expand a drive through facility has been opened in the parking lot of the Henry. Ford Centennial Library in Dearborn. That's at sixteen three. Oh One Michigan. The site is in partnership with CVS and there is no cost to eligible michiganders' for a test. You also do not need a doctor's referral but you do need to go to. Cvs dot com slash minute clinic slash Cova Dash Nineteen Dash testing. Don't worry we will put a link to that. You are L. in the show. Notes to prescreen. The governor's office says that the site will be able to test between five hundred and seven hundred and fifty people daily speaking of drive through testing. I wanted to take a moment and clarify the testing requirements at the State. Fairgrounds IN DETROIT. It was recently expanded to include city employees and essential workers without symptoms. But one thing that's important to note is that essential workers need to make sure their employer has registered with the city. I A worker cannot just call and schedule an appointment without that key. Step once the employer registers and they can call the same number as everyone else at three one. Three two three zero zero five zero five. Their request is reviewed by the city and the employer will be provided a special code. Then workers can call with their employers code and schedule and appointment so far about two hundred employers have been approved to participate a quick note in the private sector. Well-known Michigan brand founders is laying off more than one hundred sixty employees as uncertainty around cove in and the reopening continues. Wd IV TV four reports that their retail employees at their tap room's in Detroit grand rapids as well as their company store. Joining me via squad cast. Is Tim Michelin? He is a research associate for healthcare policy with the Citizens Research Council of Michigan. Welcome the daily Detroit Sir. Thanks for having me absolutely so I wanted to talk to you for a bit. Because you have an interesting article that you've written on CRC mich- Dot Org talking about how all of Michigan is still at risk from Kovic nineteen first off. Kind of what inspired you do this. And what about your work at the Citizens Research Council kind of inspired you to put this piece together? Sure so just a little bit about the organization citizens. Research Council of Michigan was founded in nineteen sixteen originally. The Detroit Bureau of Research and overtime grew to have more of a statewide focus. So we're a statewide independent. Non Partisan Research Organization that focuses on state and local of a policy so as part of our mission in working to give citizens information so that they can make better informed choices and understand We always say the right to criticize. Government is also an obligation to know what you're talking about so it's our obligation to try to put those facts out there and help people understand what's going on obviously a situation with Kobe. Nineteen is consuming the new cycle and affecting everyone's life throughout state. So we've actually put out a series of several pieces until nineteen the first of which was a few weeks ago before the staying home order him out and I wrote about the importance of things like paid sick time in supporting people in the event of a pandemic and now we see that were there and we're taking steps to try to bail out different industries extend unemployment benefits but all. This has been clunky. People have been having a lot of trouble and a lot of people are hurting and so the most recent peace looks at the idea that cove in nineteen is sort of a southeast Michigan or Detroit. Problem and that it's not really affecting the other parts of the State. West Michigan and Northern Michigan and. I think there's dangerous to making that assumption. Well let's talk about those dangerous. I think one of the things a lot of folks realizes that there is a lot of income inequality healthcare issues throughout the state of Michigan yet. There is a kind of popular belief that covert nineteen is a Detroit problem. But it's not quite paper but your peace talks about how some of those issues are shared from southeast Michigan. Detroit and rule Michigan. You talk about that a little bit. Yeah in terms of health risk. I think in terms of a lot of things you know. We have more in common than than not when we look at rural areas and inner city populations and so Detroit obviously has has been hit. Really hard like coke in nineteen and one of the reasons for that is these huge structural inequalities that exist in the city that are not only healthcare access but the things over time that affect people's health status like access to help food safe housing the stress and trauma that people experience this erodes their Health Hotel Lane and you have higher rates of heart disease diabetes. Those those things in Detroit along with a long history of of racial inequalities have really created an outsized impact the city looking at the other side of that. When you look at rural again we have a really old population tends to be poorer population less educated population higher rates smoking higher rates of disease hiring of disability. It all of these things speak to high risk of having adverse outcomes and couple that with the fact that rural Michigan has really limited healthcare capacity. You could see situations that are even worse. Usually we see diseases and I don't WanNa make the comparison between Kobe. Nineteen of the flu. Because it's not just another flu but because it's a new disease we have to look at what we know that other viruses. And what we see with things like Flus and other infectious diseases in the past or that. The impact in rural areas comes later but it often gets hit harder. You know one of the lines you say is one. Shouldn't talk about class differences without also discussing race. How does that work into this? This whole equation. Yes that's a great question you know sometimes people like to talk about inequality in a single dimension and that's where it whether that's a racial dimension or whether that's a socio-economic dimension and the issue is that these factors both had an impact so when you live in poverty that affects your health and so when you stratified by race and look at the health of white Americans versus black Americans. Black Americans have outsized exposure to poverty and they also tend to have worse health but the issue is that you can't assume that all of those address health outcomes are just due to factors like poverty because even when we control for income and education level and all these other things. We still see that black. Americans tend to have worse health and a lot of the research points to the fact that it's the stress of dealing with racism and racial inequality that really has a cascading effect throughout people's lights. And some of this can even be heritable across generations. So it's a huge issue. One of the groups often not talked about in. This crisis is the indigenous population. Michigan has tens of thousands of people who are definitely fellow Michiganders' but also not necessarily traditionally part of the system and they face a very unique set of challenges. Can you talk a little bit about how this could impact them him? Yeah absolutely and that's a great question. We talk a lot about historical trauma when we look at health. Disparities affecting the black community and this is a really significant thing that affects people's health and those historical trouser also really key to understanding the risks and challenges faced by the indigenous population in Michigan and the US in general and so are indigenous. Population has some of the worst health outcomes. In the state shorter life expectancy really high rates of tobacco use high prevalence of chronic conditions and in terms of cove in nineteen When you look at factors like intergenerational housing that puts elders at risk and are indigenous people tend to be in rural parts of the state and have really limited access to healthcare and so they face a lot of the same challenges that the rest of Rural Michigan faces along with having some aspects of historical trauma and health disparities. That'd be seen with the BLACK COMEDIAN. Detroit so I think he will really need to pay attention to this and prepared to try to mitigate the damage before it could occur. So Tim one of the things that strikes me about all of this is that there is so much health support here in Metro Detroit and even that has been creaking under the weight of Corona Virus and cove in nineteen. You've got hospitals that you know have too many bodies to deal with. You've got situations like here in Detroit with DMC Sinai grace being just basically a mass but I did some background research before talking to you. There are a whole counties in Michigan. The don't have a single. Icu Bad there are far fewer hospitals. And you still got a lot of people living in various areas now imagine a place like grand rapids might have a little bit more support but it feels to me like there is not a huge amount of emergency and trauma services out. State and cove in nineteen. Seems like it takes a lot of those resources to fight. Are we prepared for this? And what are we looking at if this and possibly win? This spreads to rural Michigan. So you're absolutely right at. The healthcare capacity in rural Michigan would not be prepared for the kind of massive outbreak. That could happen without policy interventions and other things to slow the rate of spreading the infection. We typically for special services see that folks from northern Michigan have to travel a long way to get hostile services really relaxed Bella medicine and in many ways that can be effective but in terms of someone who needs an ICU. Bed or possibly a ventilator. The capacity. Isn't there if we had some sort of big outbreak. And that's what strength Metro Detroit. That has helped us mitigate the damage that we could have experienced it takes a really heavy population density to provide the kind of financial support needed to maintain that hospital capacity. And we just don't have it out state and finally you can wrap up with this idea of that. Health versus the economy is a false dichotomy. Can you talk about that? Because I think there's this really big push in some circles In some places in the country and then you've got some folks in Michigan who are just itching to reopen the doors on everything. And can you talk about this kind of false dichotomy that you see? Yeah I think we live kind of any age of false dichotomies in many ways and hand. Dimick's are dangerous. Kind of issued politicize. They affect all of us in viruses. Obviously have no political affiliation or cultural or social biopsies and so. I hear a lot of arguments that on the one hand we need to protect health at all costs and on the other hand you know we need to open up. The economy costs that. We're facing are worth health savings but the two are so interrelated that you can't separate them. There's some value to recognizing that people stuck at home losing their livelihoods are GonNa Experience. Negative health outcomes from that at the same time just opening up the economy and going back to business as usual puts us at risk of facing further costs from Iris. And certainly those Kospi and healthcare we were talking about hospital capacity even amid the surge in need for ICU. Beds IN METRO DETROIT. We see health systems like Oman having to lay off employees because they're experiencing losses due to the cost of treating code. Nineteen that could affect Michigan as well and so they're they're costs than either side of this economics is a thing where we like to think about. Just Johnson money really. Economics is a system of feeling the wants and needs society in doing so. Ideally an equitable way. One of those wants and needs being healthy. You can pursue your own happiness. If you're not healthy you can't experience liberty if you're not healthy you can't have productive worker or an entrepreneur if you're not healthy and so. I think there's a shared importance in investing in things like public health going forward one of the reports that the Citizens Research Council release and twenty eighteen looked at the fact that the state of Michigan over time really disinvested in public health. And when I say public health I don't mean Medicaid or government paid health insurance or health care if this is really the kinds of population health initiatives that governments are responsible for safe food a clean environment and surveillance and testing and contact tracing at all things that do to control the spread of infectious disease whether that's HIV AIDS Hepatitis A. Or any other number of diseases and investable things over a long period of time and so we need to get the economy going. We need to make sure that people can provide for themselves and have some sense of purpose and the likelihood but that requires some expenses and chances scaling up whereas do ongoing surveillance contact tracing the other things that are necessary to keep people safe while we do it. Well Tim Missing from the Citizens Research Council of Michigan. Thank you so much for your time today. If people want to know more about what you're doing or follow you. What can they do? Anyone can visit our website at CRC Mish Dot Org and we're on most social media platforms as well so please follow us. And we provide all of our research reports blogs our own odd cast webinars returns to the public a quick reminder before we go that daily Detroit as powered by the people through their direct support. It allows us to do in-depth coverage and since we're not only dependent on ADS. We don't need to do good bait weaken focus on smart news for very intelligent listeners. You can join our other members at Patriotair dot com slash daily Detroit. Another way to support us with no money. You can share the show with your friends. Send me a screen shot if you did to daily Detroit. A G mail DOT COM or tag us on facebook instagram or twitter. We'll be sure to say thanks also working on a newsletter to go with this if you have ideas for that that same e mail address daily Detroit gmail.com. We're taking suggestions with that. I'm Jareth stays take care of each other and we'll get through this together. Talk to you tomorrow.
Hi-Yield Opportunity In Beat-Down California Utilities (Podcast)
"This portion of PNL is brought to you by pimco for investors who demand more than the markets deliver. All investments contain risk and may lose value. Consult your investment professional before investing. Welcome to the Bloomberg podcast. I'm Paul Swinney along with my co-host these Abramowicz each day, we bring you the most noteworthy and useful interviews for you and your money whether at the grocery store or the trading floor. Find a Bloomberg PL podcast on apple podcasts or wherever you listen to podcasts as well. As at Bloomberg dot com. It has been one of the best starts to the year on record for US. High yield bonds returns exceeding five percent. The extra yield investors are earning to own the debt versus safer notes has compressed to the lowest in months joining us. Here is someone who can weigh in on whether it is time to start pairing this riskier debt around the edges that is Greg Hahn president and chief investment officer at Winthrop capital management normally in Indianapolis, but joining us here today in our Bloomberg interactive brokers studios, Greg what's your view on this? Is it time to sell high yield bonds actually right now, we're actually still buying high yield? We think there's value there. The the spreads have come in since the fourth quarter, but there's still room for it to move in volatility's down. So a spread vol down. We think that you're going to see more spread contraction. So what are some of the sectors in a high yield space that you're looking at right now so energy telecom both there's areas there that we like we've been in the in the financial side. Higher-quality the double B space on financials. Are there any sectors that you're just no matter where the value just staying away from now, we'll look at anything? I mean, I honestly, especially when you look in the utility space in with what's going on Pacific, Gas and electric dope. That that area. We we think here buying PGN, Yvonne. No not right now. So here's the thing, but look at so so look at so Cal Ed and mission energy us in other words, just because the other utilities that are getting slammed PGN as issue there in order to get out of the bankruptcy. They've got to fix the legislation because you can't you can't leave bankruptcy. And and still have that legislation in place where the the utility is liable for the next fire because you haven't fixed anything, so they got to fix it. And I think that bodes well for all this other new tilles? Basically, this is a bet buying the bonds of those other California utilities is a bet that California will be forced to change its legislation. So that these utilities are not held responsible for all of the damages of wildfires apps, and that's. Fascinate that is that is a I would say gutsy call because you're basically waiting for Sacramento to come and kind of make it all right for you. Well in think about it though in a capitalist society. Can you really have a publicly traded entity that is not playing by the same rules as every other state it in our in our form of capitalism. I don't think it makes sense. So I want to shift gears a little bit we've seen a rash of de leveraging recently, we've seen a number of companies that are triple be rated who have agreed to pay down debt. I'm thinking of some of the big communications companies AT and T Verizon, you're laughing. I will find out why right now why are you laughing so AT and T has the debt level of Portugal? So and the if you look at the the total size of AT and T debt is the equivalent of one of the top twenty five sovereign indebted nations one hundred seventy billion dollars or something like that. It's up to like that. So in other words, this de leveraging is yeah, they have to do. In order to say in order to stay triple be rated now really this. This is a cusp credit. We're going to expect a right down on the direct TV side. So they have they have to deliver this. Wow. Interesting. Interesting. How about like another name that's similar to that? Comcast at that looks like a better profile. Yeah. We like Comcast. And this this whole space. This is this is amazing. So in our generation to see the shift in technology that's taking place by going to streaming. And what's what's happening with all? The cord cutting is so type to be fully integrated. Comcast Disney, this is this is going to be interesting. See sound pretty sanguine right now on US credit. So you well, okay. We've had a heck of a rebound. So we're we're benefiting from that be honest with you December was tough because we gave up a lot in the in the last two weeks of the year. Well, let me say how tough it was. I believe when you were here in December. You said, quote, the financial position of the US is a disaster. And quote, have we changed as you has. Up your apps. No, we haven't changed. We still think it's a disaster. But and there's no so it's going to be interesting because we're gonna come into the elections now. So two thousand twenty we're going to start to hear dialogue on it. The debt levels is it's not part of the dialogue. That's taking place right now. But you can't ignore it. So here's my question, especially at a time when J P Morgan and now what we're saying with Toronto dominion, Bank and Canadian Pirro Bank of candidate both out today with results all raising issues about deteriorating credit worthiness of some of their borrowers shaping Morgan's. They're starting to tighten their credit. Credit conditions a little bit just to to make sure that they don't deal with a lot of losses in the next downturn. What do you think could or or will cause the next credit crisis and wen? So we and we talked about this last time too as we're on the front, and we think we're on the front end of a potential shift in the credit cycle. We still believe in cycles. So it's going to it's going to show differently this time because traditionally would go through the banking sector. We'd see an increase in a loan reserves and higher non-performing loans that actually hasn't happened. So we're starting to see the front end of it. But we think it's going to be expressed in the public markets through leverage loans. So we're seeing you know, one of the telltale signs structured security issuance is up ceelo's are up and we're seeing credit light loans. So I'm sorry, covenant lite loans that are coming to market. So these are these are all signs the volume increase, and we'll look back. I think on vintage two thousand seventeen two thousand eighteen in two thousand nineteen vintage structure. Securities could be problematic. How about? You know, we have the fed on the sidelines. We have you know, earnings were pretty much done earnings. Do you think the market is fairly discounting some of the geopolitical issues out there? Whether it's sports China today North Korea today Brexit yesterday. What's market, absolutely not? And this is the part. I just I just don't understand. I'll confess this. But growing up in the in the business in the eighties nineties when you had geopolitical events, it moved markets, but to have Brexit, which is probably one of the single biggest events in the capital markets in the last thirty years, and there's I think Barclay's last week had a reserve set aside for it. But it's the only Bank that we've seen that's put reserving against corporate. Corporations are not set up for it. And I don't I don't think the markets are really discounting it. I think the markets are looking at it. You know, this is going to get fixed somehow or the markets are profoundly bored by all the discussion that's been going on for two years. And then they're saying show be something I can hook my teeth into otherwise forget about it. Just real quick here emerging markets. Are you bullish or bearish? So we this is Lisa. This is one area we really want to go into its leg. The last three years in we still think it's early and what we're looking for is credit flow. We're looking for credit that's flowing into the emerging economies. And we're not seeing it. But we think we're on the cusp of that. So I think by the end of the year, we're going to have an increase in that particular for what we look at the big four. So it's it's and we're not in the big four China Russia Indian in Brazil, and it's a thing China's going to dictate what's going to happen here. So interesting very, very good. We'll take we'll have you back when you're starting to get into your merging markets, and we'll we'll certainly take a look at that. Greg. Holland, president chief investment officer winter capital management based in Indianapolis. But we're fortunate to have him here in our Bloomberg interactive brokers studio here in New York, thank you so much, Greg. Well, the US and China continued discuss discussions about possibly having discussions about trade. It is so unclear to me where we are in this process that I have to call upon our own Dr Sam Nadda PA who is a frequent visitor here to our Bloomberg interactive brokers studios, Dr Sam to is president of empire, global ventures. All right Sam what what's going on? We have this deadline March. I it's gonna get kicked to the kennel get kicked with tariffs. What are you looking for for real progress here? Well, it's very clear the President Trump needs to listen to more Kenny Rogers because he doesn't know how to hold him, and he doesn't know how to fold them. We have some sense of what the deal is going to be. When a president Xi Jinping will come to Florida tomorrow law. Go to sign this agreement one. They're probably going to agree to hold the Euan stable and not devalue in order to make Chinese goods cheaper to come into the US market. To the Chinese will clearly commit to buying hunting. Billions of dollars of more of US goods. They've already committed to buy think ten million tons more soya beans, which is about three point five billion dollars already this year. But since the US China trade deficits going to be four hundred billion dollars this year that's less than one percent of that deficit. So what's that really going to me yesterday? Bob lighthizer announced that there's now a mechanism by which they will handle this back and forth internally and bilaterally instead of going through the WTO. In other words, the US has a chance to reimpose sanctions if the Chinese don't do what they say they're going to do. So there's a lot of talk and the top line thing is Donald Trump wants to lower the US trade deficit, which doesn't really mean anything the things that really matter the intellectual property issues force technology transfer the protection for US companies going to do stuff in China. None of that is being discussed and no progress will be made on that. Why are those big? Items not being addressed those are the ones that move the needle, those are the ones that corporate America is most concerned about how why are they not on the agenda to be clear US Trade Representative Robert lighthizer has dedicated thirty years of his career to focus on this issue. He did this on Japan. I he's doing it on China. Now, he's deeply focused on that issue. He is being overruled by the president of the United States who so desperate for a headline that he undermined the structural integrity of the US economy going forward. All right. Let's listen to something that Bob lighthizer said US Trade Representative Robert lighthizer, speaking in bay speaking yesterday in front of the ways and means committee of the US house of representatives. Take a listen to what he had to say. I'm not Pauling. An I don't believe that this is going to solve all the problems between the United States in China. We have very different systems there in a process of reform, or they're not depends on who you talk to if they're in a process as reform will we'll make headway if they're not we're going. Go right back to having problems. That was US Trade Representative Robert lighthouse or Heiser speaking in front of the House Ways and means committee. I have to wonder Sam just how many allies Bob laid Heiser has among other people who could kind of force President Trump to to sort of consider his point of view a little bit more the US chamber of commerce's on his side. The American Association of manufacturers is on his side. The problem is none of those people work in the White House. And even if they did Donald Trump wouldn't listen to them. Well, will it be considered a victory if President Trump get some sort of agreement that has to do with soya beans? We'll bark. It's rally that I mean because that's essentially how President Trump is valuating it, right? It is. But markets are smart and markets are going to understand that this is lipstick on a pig and pig is of course, the number one consumed meat in all of China. So nothing's going to change. All right. Who you take a look at the two sides. And you take a look at some of the bigger issues are out there. But we don't have to do them all at once. But piecemeal maybe over the next couple of years this China becoming increasingly incentive to make some changes. Their economy's slowing maybe even slower than people believe isn't there growing incentive on China to actually come to the table and some of these issues. Yes, there is tremendous incentive for China to change that doesn't mean there's incentive for them to compromise with the United States in twenty eighteen the Chinese economy slowed to six point six percent GDP growth, which is the lowest recorded since the nineteen nineties over the last three months factory activity in China is the lowest it's been in since the nineteen ninety. There's a tremendous indicators showing that the Chinese economy is slowing and that g Jinping has to do something. But forgive me, the one thing is he's under tremendous domestic pressure himself, politically he opened the path for him to be able to run for third and fourth term as president. But if he doesn't deliver that's not gonna come true. So just a push back a little bit. And this idea that President Trump is going to make an economic mistake on a pretty big proportions. If he just leaves the trade agreement at soybeans and other agricultural and other imports and exports. Isn't this just the opening salvos of ongoing discussions isn't the idea that the US and China can have some sort of agreement laying the groundwork for for future negotiations over the more substantial issues could be if President Trump were consistent enough to hold the line because the lesson the Chinese just learned is we're going to go through two years of economic turmoil globally. And in the end will get a deal that we would have signed two years ago. Sorry. So Sam they're going to Palm Beach. Florida lucky them they signed a deal. Good for them. What our next steps in the China US trade negotiations. Robert lighthizer will again in intend and try to put pressure on the Chinese to make structural changes. Particularly on the intellectual property side. It's technology transfers side and the treatment of foreign companies inside China MasterCard and visa cannot function in China. And that was one of the things that people were looking at Indus negotiation to see if the Chinese would open up their domestic market. They're not going to the question is Robert lighthizer is in a difficult position. Because he just got his legs cut out from under him by his boss, and the Chinese assume they'll do that again. That's what I was gonna say is sort of, you know, the seems like some of these issues are gonna have a hard time getting yourself, can you give us a sense of why visa MasterCard can operate in China? This is a specific regulatory issue that both the the Chinese ministry of finance and other Chinese regulators have not granted them a license to operate inside China. So that is a Chinese governmental decision. An it's we'll call it a non tariff barrier if you will. Dr Sam Netti pot. Thank you so much for being here as always Dr Sam Nepad is president of empire. Global ventures talking about the latest between the US and China trade negotiations dollar gaining a a little against the UN today. Today fixed income demands more than a fixed approach it means. Staying ahead of ever changing markets making the most of traditional strategies, but also looking beyond them, not just finding opportunities for investors. But creating them we didn't invent fixed and income, but we reinvent it. Every day pimco all investments contain risk in loose value. Investing in the bond market is subject to risks. Consult your investment professional prior to making an investment decision. Right now. It's shift our focus to the retail sector. We've gotten a host of earnings from TJ X to Macy's JC Penney. Really? The question becomes are. We seeing a turn in the tide. There were a lot of shortsellers targeting. These companies. Are they being blown out of the water and forced to offend with actually a relatively healthy, retail sector? Joining us. Now is Evan Clarke deputy managing editor for women's wear daily. Joining us here in our Bloomberg interactive brokers studio, so Evan is there a big takeaway? So far from all of the retail earnings we've gotten so far, right? So I think going into the holiday season there was big expectations around sales. And I think that hasn't really panned out. I think sales were we're not quite as bad as the overall number that came out from the government. But it's really didn't turn out the way that the industry was hoping. So I think the overall story that we are seeing right now is that retailers are being cautious. They spent a few. Two years really kind of spending ramp up their online businesses. But now they're starting to hit that kind of exp- the expense line a little bit. They're cutting back there being more cautious going forward on how they spend their money. For instance, Macy's just cut one hundred million dollars out of their expense structure, kind of reducing their top management and simplifying things there. So that will help them be more flexible should the economy turn, you know, when and if that happens so Evan really over the last several years as I listened to earnings conference calls from these retailers. It's a combination of cutting costs as you mentioned with Macy's reducing footprint closing stores. We heard that JC Penney closing eighteen stores. What is your sense for how much more the industry has to go in terms of reducing its footprint of physical stores to deal with? What is now a commerce growing ecommerce economy? Yeah, you know, I don't the numbers. I don't have off the top of my head. But the US economy historically has had something like six times more retail space per per capita than the next closest market, which is the UK. I think that number has come down some lately, but I think there's still a long way to go. I just wear the right balances. I don't think anyone really knows. But the buzzword we get in retail right now is experience. So everyone's trying to figure out how, you know th this stores, and the website are very clearly, you know, you've got the same brand the same products, but they're very clearly a different experiences. So when stores ju- get people when retailers to get people in their stores. What did they give them? How are they keeping them there? What kind of you know, what are they doing to engage them? That's why we've seen a whole lot of food come into retail. We're just seeing more sort of like testing with a Canada goose has cold rooms where it drops to minus twenty or something and you put on their jacket and see how cozy you feel. So I think that that I don't know the answer is I think more. I I think we'll see the foot print kind of go down some more. I don't know when it ends, and that's sort of the ten million dollar question. I think this is also been an earnings period where there's been a huge divergences between the winners and the losers. I'm looking at Macy's. You mentioned them shares down seventeen percent so far year to date, whereas TJ X, which is banked on the whole experience of treasure hunting and finding bargains up nearly fifteen percent, right. And so it it definitely has been a sort of shaking out of the of the sort of weaker players, and sort of putting them a side and saying, you know, you still need to figure out what your experience is what you're sort of claim to fame is versus the winners that are consolidating that power. Right. Right. Absolutely. So I think you mentioned the treasure hunt at TJ Maxx TJ has just been a phenomenon and it's been growing tremendously. So it's kind of really transcended the initial kind of business model of taking leftover goods in the market. And selling it. And they've really this national brands at a discount price, and it's like new new, and it's the frequency is very fast. So if you go to a marshalls today, it's different it's going to be different next week. So I think that that model continues to resonate so people want brands at a good price in like, a an environment that this fun or engaging in some way. And I think you know, Macy's is very much trying to kind of figure out how they do what they do. And how that works for the future. I mean, they're they're working very hard. They've got their program where they're really trying to sharpen the sharpened fifty of their stores to kind of give give different look to shoppers, and they just expanded that to one hundred fifty so so there, you know, the changes they're they're trying to be they're trying to figure out exactly where they need to go. And that's the big question. In retail is exactly. Where'd you go? What is the model of the future that kind of really works? So I think. We see a lot of testing across the industry and kind of incrementally moving forward. I mean across the board for retail. The question is can people change fast enough? How about just the consumer as we go through here these fourth quarter numbers? What what are these results? Tell me about how the consumer's right now. Real quickly twenty seconds, right? You the consumer is is still strong. They still have money. They just have a lot more stuff to spend it on. They've got you know, the new iphones or thousand dollars there's net. Flicks costs every month. So there's more places to put the money. Interesting. Thank you very much Evan Clarke deputy managing editor women's wear daily. Joining us here on Bloomberg interactive brokers studio in New York, thank you so much. Well, the automobile once both a badge of success and the most convenient conveyance between points, a and b is falling out of favor and cities around the world is ride hailing and other new transportation options periphery and concerns over gridlock and pollution spark a revaluation of privately owned cars to tell us dig into this issue is David Welsh David Detroit bureau chief from Bloomberg news coming to us from Detroit. And this is I have to notice the cover story of the March fourth Bloomberg BusinessWeek coming out, so David thanks so much for joining us. Are we at P car? We're getting pretty close. And so here's here's what's going on. You see in the US? We hit record car sales two years ago. We'll going on three two thousand sixteen still healthy levels. But it's been kind of slowly coming down ever since in most companies kind of see that happening for a while last year in China. We saw go backwards for Jesus the first time since I've been covering the industry, and that's more than I care to admit China will continue to grow kind of long term, but the ears of double digit growth, and it's kinda bindis. So those are two biggest markets Europe. You're not gonna get growth there Japan. No way. There will be growth, according to the General Motors in places like Russia. India South America, but all those are problematic. India has huge infrastructure problems. When it comes to cars, Russia has political instability problems and South America has currency instability problems. So you boil that together, and even if there is some growth, it's going to be slow in really the bottom line is car company. To gain any kind of sales. They're gonna be beating each other over the head to gain market share. There's not a lot of organic growth out there going forward to they've got to find other ways to show investors that they're growing the business. I guess David. There's a broader question here aside from some of the trouble spots as far as the growth generators, which is how much of a threat are ridesharing services. How much have people ditch their cars altogether? It just shifted to Overson lifts of the world. It hasn't happened in mass yet, but it is happening. You're seeing some families that maybe have three Kerr's go to two or two to one and it's not a lot, but it will happen. And especially as people continue to move to cities, you know, already the US more than seventy percent of people with urban areas, and that's supposed to get up to about eighty percent. And that's so rating in China as well. And you know, if you live in a big city having a car is just onerous insurance tends to be really expensive parking is expensive and just kind of tough to find. So that that's. Why urban dwellers of often not head cars? And there's more people move that way. They're just going to give them up and not have them. So. David. You're under statement about how difficult it is to have a car in the city. I mean, really aside from alternate side of the street parking insurance people bashing into your fenders. Oh my gosh. Episodes about George trying to find a parking spot. I've lost years of my life tall safety. Exactly. So so David how about mass transit is that contributing to the decline of the car we saw this week in California where they ran into some trouble getting their railroad system approved as mass transit making any inroads on the traditional auto ownership. Actually, masked mass transit is sort of one of the victims and all of this because as more people go to Uber, and lift and other services people who make pretty good money have been opting for those services instead because yeah, hey, what can you take a new with? You don't have to sit on a platform when it's ten degrees out or a hundred and ten degrees out wait for a train to come by someone picks you up on your schedule. So people have actually left though services the same way they've wept. Owning their own car in some cases. So you see in some cities that they're actually putting in taxes on ride sharing companies like Hoover and lift and then funneling the money to public transit because it's it's become an issue that. Way. You know, you're going to see that battle play out. Public transit authorities. Do not wanna see they don't want to go into a loss position because everyone's going to lift and then the cities themselves. Don't wanna see terrible congestion because people are are getting those cars, and look this is one of the meeting mitigating factors for P car. If people give up owning a car to take over, and if you're going to need more Uber and lift and Waymo, and maybe GM crews cars, and you know services, we don't even know exist yet as more of those coming to play you're going. They're still gonna be building those cars, they just might get FOX kind into building the hardware in, you know, instead of selling the services fast kind, of course, a company that makes your iphone and apple makes all the money off the content. David just real quick here. I'm wondering so we may not be heading for peak auto kind of our, but okay. So we are, but we're not heading for like a nosedive where autos go out of fashion, and nobody drives anymore necessarily at least not in the next couple of years. Peak truck in thirty seconds. The idea of perhaps they're just too pricey. And I just too many of them out there. Oh without a tough one. I not yet. But we're going to get there before too long because the average price vehicles over thirty six thousand in the US, but a lot of money for a lot of people. All right. David welsh. Thank you so much for being with us David Welch Detroit bureau chief for Bloomberg news. Thanks for listening to the Bloomberg PNL podcast. You can subscribe. And listen to interviews at apple podcasts, or whatever podcast platform, you prefer. I'm Paul Sweeney. I'm on Twitter at PT swinging and Lisa Abramowicz. I'm a Twitter at Lisa Abramowicz. One before the podcast. You can always catch us worldwide on Bloomberg radio. This portion of PNL is brought to you by pimco for investors who demand more than the markets deliver. All investments contain risk and may lose value. Consult your investment professional before investing.
TCW's Rivelle: Cautious on EM Debt This Late In Cycle
"Welcome to the Bloomberg PNL podcast. I'm Paul Swinney along with my co-host these Abramowicz each day, we bring you the most noteworthy in useful interviews for you and your money whether at the grocery store or the trading floor. Find the Bloomberg PL podcast on apple podcasts or wherever you listen to podcasts as well. As at Bloomberg dot com. Often people say that high yield bonds are a leading indicator. They tend to show weakness before US equities. If that is still true. There is no sign of weakness. US Heil bonds return nearly seven percent in less than three months of twenty nineteen our markets overly complacent, or they signaling that the good times can last a bit longer. Joining us here in our Bloomberg interactive brokers studios, Todd rebel chief investment. Officer for fixed income TC w helping to oversee a hundred ninety one billion dollars a management normally based in Los Angeles. But your grace in our presence here. Thank you so tad. What do you think? I mean, this six point seven percent gain dramatic and indicating that there is not any concern about attorney in the credit cycle. Well, the the the headline is very impressive. But actually when you look underneath the hood, you actually see something a little bit different in particular. You'll notice that the triple C category. So the lowest tier? Of junk rated issuers out there actually hasn't participated. So the spreads of triple C's are still I think about eight hundred fifty plus basis points over treasuries, plus or minus. So that's indicative that the fear level that investors experience in the fourth quarter of last year hasn't actually been completely dissipated must much of the rally actually has been the investors are in fact, more discriminating in the current quarter than we've seen them in periods. That were similar in terms of high returns like two thousand seventeen for instance, so tad given where we are in terms of the economic cycle the credit cycle where you on the risk curve here. Where do you think investors should be going in terms of return here? How much should they be taking? I think you're supposed to be defensive. You're supposed to be highgrading. Your your bond portfolio. You're supposed to be focusing on a combination of traditional risk off instruments. That would be things like agency mortgages with some treasuries built into it. And then allocations to what we describe as bendable assets. So that would. Include. Triple A rated commercial mortgage backed securities. Aaa rated asset-backed securities and investment grade credit provided that you've done your your credit homework. Properly and are properly thinking through in controlling for the for the fallen angel risk. What you're not supposed to be doing is adopting. What we would describe as an early cycle strategy and early cycle strategy would be where you're essentially dipping into and making significant allocations to things like high yield emerging markets down the capital structure taking on a lot of financial or operating leverage. You shouldn't be doing that said emerging markets. You're not you're not a fan. Well, the the the emerging market asset class has many many opportunities in it, obviously. But I think that as as a general statement, it has many of the features that are similar to high yield at the end of a cycle. You tend to experience significant downside volatility when there is a traction and credited leveraging environment, so. How far away are we from a contraction or downturn in credit? Well, looks like we were heading there and a couple of months ago, and then chairman Powell decided that we were getting there too fast. And so he decided to do something about it. And of course, that's the whole Genesis behind the most recent fed, flip flop and movement to to being patient. So here's the question of the day. And the question of the cycle, which is can the fed alternately direct, the movement of the clouds are they that skilled and that powerful that they can delay the end of the cycle forever or have. They simply delayed it for for now. I think we're in the camp that says they've delayed it for now. And when when does the market essentially decide to in effect veto, the Fed's decision will say so you talked about the fed flip-flopping. Obviously today we're going to hear from fed chairman pal this afternoon. What do you expect to hear that? Maybe the market's not discounting today. Do you expect anything unusual coming out of the fed today? Absolutely not. I I think I think that the the bravado with which the fed spoke of five months ago, right? We it was only I think in September. Where Powell said something to the effect? We are a long way from being being neutral. We got lots of rate rises. We're going to shrink that balance sheet. Look how quickly or how easily a whiff of cold winter risk blowing into the market's changed the feds mind. I think that they are going to be very careful and measured in what they say today to keep investors on the on what they would be as the straight narrow before we let you go. I want to get in the weeds a little bit with respect to energy high yield bonds because I think that there has been a really notable underperformance in this space, and there have been some huge potholes. I was looking yesterday, for example, EP energy, which has more than fourbillion dollars of debt bonds falling forty cents in two. Days after disappointing earnings. Do you think that there are more bankruptcies to come in the shell patch? Yes is the short answer. And I think that I think that your example is an excellent one. I think in terms of illustrating the a symmetry with which investors are approaching the market, which is that all you saw as far as I know was disappointing earnings number come out of the company, and that was enough basically to utterly reprise the capital structure of the business. So the complacency with which we saw investors operate a couple of years ago doesn't really seem to be enforced any longer. So tattoos are any just ten seconds any area that you just voiding like the plague. Whoa. Yes, there there are areas to to avoid like the plague, but they tend to be I don't want to give you a broad brush stroke, there, are there are specific areas in sectors that you should be very careful and thoughtful about okay, but you're generally risk off. That's got on taking away from from tag. Thank you very much. Thank his cautious cautious. It's a better way. Tad reveal chief investment officer for fixed income for TC w joining us in our Bloomberg interactive brokers studio. We thought it'd be very interesting to get a sense of what local and regional banks how they are dealing with the current interest rate of environment and how their customers are reacting. So we're very fortunate to date to have Frank sore and Tino, join us in our Bloomberg eleven three studios Frank as chairman and chief executive officer of connect one Bank, which trades on the NASDAQ under the symbol C N OB, Frank. Thanks very much for joining us. I know you have your finger on the pulse of kind of where rates are going. That's your business. What do you expect to hear from the fed today? Well, thanks for having me again. But I don't think anyone's expecting any big surprise today. I think the fed has done a great job of telegraphing what's happening here over the last thirty or sixty days. It's pretty it's pretty clear to me that the fed is on pause for right now and looking for some additional information. All right. I want some additional information housing market in particular. And I know that you have a quite a long history of expertise in this area used to actually be a home built, right? That is correct. So what are you seeing right now? I'm really having a hard time getting a read on the US housing market. Whether it's slowing down or whether there was just a pause when mortgage rates rose and that it's now up picking back up. You know, I'll tell you I from what we see from our client base in it's really dependent on specific market areas. But certainly in the market that connect one represents in the New York metro market. We've never really fully recovered from the recession and there still a lack of available brand new housing. That's I think is required. And so at various price points there is you would you wouldn't believe tremendous demand for for that product. And with mortgage rates still close to four percent. It's a very compelling time to purchase a home. Builders. Just can't find enough property. Can't put up the product fast enough in certain markets. Now, of course, we keep reading the headlines about some of the very very high end real estate that's lagging on the marketplace today, but that's not really indicative of what's going on across the rest of the country. Sa- Frank, your your your your Bank, your institution is a metro New York institution. What are your local regional mid size customers telling you about just the overall economic community their their their willingness to invest in their in their company. Look people were very nervous as we came into the beginning of the year thought that the interest rate cycle was going to be a runaway train rates. We're going to go higher and people started thinking very hard about some of the transactions that they may have been contemplating whether they were going to buy something invest in their company's editorial, staff, whatever I think as the as the year has unfolded. And we're starting to see that the fed has backed up a little bit. And we believe now that we're more in a more neutral environment. Relative to interest rates, our clients are actually bullish about where things are today. And you know, this whole notion of climbing a wall of worry, in my opinion is a really good thing. It's making people be very thoughtful about every decision that they make. But at the end of the day acquisitions are happening investment is happening. Hiring is happening. The biggest complaint where we're hearing about is the availability of qualified staff today that is hindering certain people's growth plans. So so pretty bullish is what our clients are reporting to us notwithstanding what we're reading in the news, right or what we're reading the newspaper. So Frankie talk about consolidation. There has been consolidation. A number of different sectors, including in the banking sector. And I know J P Morgan CO, Jamie diamond came out and said he expected quite a bit more Bank of America reiterating that from your perspective connect one has about six billion dollars in assets twenty nine locations. Are you seeing opportunities for acquisitions, or do you think that there will be a sort of ungoing consolidation that will? But you so as you know, we've taken advantage of the merger and acquisition marketplace, we did a large merger of equals back in two thousand fourteen and we just completed a merger at the at the beginning of this year starting on January second which increased their size in. And yes, there is I believe a build up in desire for smaller banks to want to get together in order to share the expense base. That's required to run a financial institution today. And when we look at what the marketplace looks like today, you know, as I said before twenty years ago, there was some twenty thousand banks this five thousand banks today. I think we're headed very rapidly to closer to three so Frank the news that Amazon was coming into queens and then not coming to queens as a New York metro lender. What are you take away from that as a as a relates to is New York open for business? So look, I think New York is definitely opened for business. I I'm not sure I don't wanna get into the political discourse about what may or may not have. Or what was or wasn't said. But at the end of the day. Every major company is investing here in New York. And whether it is Amazon and notwithstanding what you know, the the HQ to conversation, but they're investing in New York. Google's investing in New York. Facebook all the technology companies all the financial institutions there is tremendous amount of investment coming into this area. We're feeling it. We're seeing it. And I think it's a big positive for New York. And I would say today New York is definitely still opened for business. Just lastly here I'm curious about consumer confidence because this is sort of been an ongoing strength of of the market that consumers just continue to be confident. Are you seeing any potential headwinds to that at this point? You know, again, I think this wall of worry concept is is something that keeps coming up in when rates started to run up quickly at the end of last year. Or by the end of last year. I think that really put a little ding in consumer confidence in what was coming down the pike. You know later on. On. I think as we stand here today, though, I think the consumer feels pretty good and his out there spending Franks Argentina, thank you so much for being with us. Always one full having you on. Thanks are in Tino is chairman and chief executive officer of connect one Bank. Based in Englewood cliffs, New Jersey. His joining us here today in our Bloomberg a Bloomberg interactive brokers studios in New York. Let's give you a sense of what is happening in markets head of that fed meeting the answer, nothing not very much at all. The markets are pretty much flat for quite some time. And this is sort of to me one of the big question marks in markets today. Which is there has been such a reduction in volatility at this point that a growing number of analysts are saying that it does sort of foretell some kind of broader whiplash akin to the 2013 taper tantrum. We saw volatility shrink to the same kinds of degree. Well, there certainly is a lot of news out of the auto industry today, including him BMW's profit warning which not that stock down five percent. And also news that a Ford Motor Company where the company plans to spend about nine hundred million dollars in higher about nine hundred workers to build electric and self driving vehicles in Michigan while moving production of a small commercial van to Mexico from Europe. Tell the stick through those issues we bring in and welcome David Welsh David is Detroit bureau chief for Bloomberg news joining us from the Detroit bureau. David, welcome. Let's start with that Ford news how big of a news item. Is that for Ford? How materialises? This is pretty big because all we've heard about recently from the car companies is cutting jobs, cutting back, even the BMW news. You mentioned is sort of kicking off a big steady program for them to get their profits in line. Everybody's just cutting jobs out whether it be white collar engineers or blue blue-collar assemblers in the areas where they make conventional gasoline powered cars. So you got a couple of things going on with four not only it's an interesting that they're adding jobs. If it's quite a few of them nine hundred is a lot last week General Motors. So they're going to hire thousand people at its cruise automation subsidiary that makes self-driving software and technology. So look at the bottom line here is if you make electric cars have you make self driving cars, that's a good place to be if you were an engineer who releases brake calipers or you're an assembler of gasoline-powered sedans as you're in trouble. And and and that's what's really going on. But what Ford is saying hiring nine hundred people for a an under. Us plan near Detroit to make electric cars. That's a lot of people said tells us they're going to be making a lot of EV. It also tells us that forward is making quite an interesting public relations moves announcing this the same day that President Trump visits in Ohio tank plant after sharp criticism of General Motors. How much is this sort of politically motivated as far as timing goes? Oh, I would say the timing of announcement. Absolutely. Now for GM all the carmakers. They don't just flip a switch on and say, we're going to add jobs or do something at a plant overnight. So this has been planned for some time because they had engineer the vehicles, but on the eve of a or I should say the morning of an evening rally. President Trump is having after he spent the weekend bashing General Motors over cutting jobs in Ohio. Yeah. You know, this is for its way of kind of sticking sticking it in the knife into their crosstown rival, I think and also look early and Trump's. Presidency. He really was beating up for it for not producing enough in the US and GM kinda got a free pass for awhile. Even though GM has more factories in and makes more vehicles in Mexico than four does. Now that that Ford is is kind of you. In good stead with the president over adding jumps. Why not make hay out of it? Especially when GM's the one giving the beating these days that from a corporate perspective is for doing the right thing for chairs down two point two percent, right now, I'm wondering this comes after BMW issued a profit warning saying that will fall level. Oh last year's level citing among other things the cost of making electrical vehicles. I mean how much is not paying off yet. This is the problem. The car companies have is you have to make electric cars because Tesla's driving this whole thing where governments and increasingly consumers want EV's now where they're going to write not every consumer does. But that's where the market is going. Whether it's from a regulatory standpoint or eventually from a consumer standpoint problem is winner consumer really going to be buying a lot of these and win will these cars make money GM says that its next round of EV's will make money starting at about twenty twenty say they'll be proper willing to be as profitable as the current vehicles. Investors are dubious so when they see these investments they know that the car companies have to do this. But that doesn't really help them. It didn't help investors because they're they're worried they can make any money on these vehicles. And if they do it'll be lower margin. So why should they put their money? Elsewhere, very easy for investors to hey, you know, what let's let these guys start making vs and see if it hurts or doesn't hurt her even helps about him wine. We'll put our money somewhere else while that whole thing is playing out this interim period. Here when everybody is an investing in self driving cars electric cars waiting for those businesses to pay off. It's going to be tough for them to deal with investors in this time because it's a wad of money being spent the you're not gonna see return on maybe for several years, maybe a decade for some of this stuff. So David where is Ford Motor Company relative to its peers in terms of its electric and self driving vehicles from a competitive perspective China market, now, they really they have more hybrids than the have puree vs. It's really tesla. General Motors Nissan to a certain degree. They have any out there. It's it's not a great one in terms of battery range, but they've been in that business for quite a while. Those are the three main players the German car makers are coming out with a lot of electric vehicles in the next year or two so you're to see a wave from the what's called the portion Volkswagen combine you'll see Audis Volkswagens Porsche EV's coming out there already taking orders. I think on the Porsche. Can EV so for it's kind of trailing behind those players right there. But the fact that they're they're gonna be staffing this plant up. So that they're they're going to be racing and catching up pretty quickly. Beyond electric vehicles. I'm wondering BMW's profit warning comes sort of a tenuous time for the auto industry at large. I'm wondering how concerning it is that they did say that earnings would fall so far below last year's level at the same time as Nissan saying that it's it's not gonna necessarily see as much of an expansion in China as it had previously thought. There's a kitchen sink aspect would be BMW today. Right. Everybody has to invest a lot of money and cars in electric cars time right now, and it's costing them. And they're not getting a return. So we you know, we talked about that. And that that was a big piece of what BMW said this morning that that those costs are really hurting their bottom line. So it's a pretty big deal from that perspective. Now, I think they're doing this at a time when they know the markets are getting soft China took a step back last year. And it's still kind of uneasy the US still very strong levels, historically, but still stepping backwards in the other markets the emerging markets wherever cease growth places, like South America, Brazil, especially India in Russia. Just a lot of reasons that that things aren't growing there. A lot of instability either with infrastructure in the case of India politics with Russia. So no one's really seeing a lot of growth in their car business right now. So if you're going to tell investors that EV. ABC's that's industry parlance for a ton of vehicles. They're gonna cost you lot of money. Hit the bottom line. You might as well do it. When the markets are. Wow. Seeing the big places where you've been seeing some growth kind of kitchen sink, everything at once take the hit on your share price, take they hit on your profits start leaning up, and then when things start to grow again when the cycle turns up, and you can start boasting about how your e are selling great, and they're breaking even are making money, and maybe we'll get some enthusiasm. But I get the sense that the car companies, they're just clouds all around the the business isn't bad. Everyone's this isn't crisis time in terms of companies threatened with bankruptcy like we saw a decade ago, but it is Christmas time for investor interest. But if that way, and I think you're gonna see the stocks competing for a while. Thank you so much for being with us David Welch Detroit bureau chief for Bloomberg news coming to us from Detroit. Well, I think both employers employees agree that health care costs. The inflation of healthcare costs is getting very much challenge for both parties recently. They're Senate hearings on drug pricing where senators challenged top executives of seven pharmaceutical companies on the spiralling cost of prescription drugs to help us look at this complicated issue. We welcome Michael Ray Michelsen founder and CEO of our ex saving solutions based in overland park, Kansas Michael joins us in our Bloomberg interactive brokers studio. Michael, welcome everyone agrees here that drug prices are too high the inflation associated with Brooke jug prices and drug therapies are very much of an issue for both employers employees is what is the best way. Or is there any way to kind of manage these costs? Yeah. I think that excuse me, a transparent market where information flows freely is the best way to manage it. I think that when consumers have access to information about pricing and therapy. Options they can make decisions that are in both their best financial interest. And also that of the health plan employer that ends up paying a lot of that cost of the drug. So it's interesting because we are heading toward the twenty twenty election season. Joe Biden is expected to announce his his his Furling his hat into the ring to become a candidate for the Democratic Party. I'm surprised we haven't heard more about reducing drug prices. Are you? I think that what has become evident is this is a difficult subject and topic to really address and actually bring about meaningful change everyone agrees with the idea that, you know, both bipartisan support that we want to lower drug prices. But how to actually do that has stymied most efforts to do? So thus far. It's another words because it's complicated. And because it's not a very sexy. Topic candidates are not going to necessarily make that a sort of campaign issue of the way that perhaps otherwise they would is that. Well, I think I think it is a sexy topic that most people can identify with. And so, you know, you're gonna see candidates talk about it, more and more. I think it hasn't probably been as much of a focal point recently, just given the lack of progress that's been made in the bills that have kind of come before the Senate and the house, and thus far, but it's clear that big pharma, there's really very little leverage that can be placed upon big pharma to live. Literally cut drug prices. Is that correct? Yeah. It's a free open market. They can set the list prices for the drugs they own if I'm a large corporation. Let's if I'm a small to mid size business. What are some of the ways that I can manage my healthcare costs, and my employees for the benefit of my employees. There's a few ways in most employ a pharmacy benefit manager that that brings about negotiation tactics to to the market tries to set up formularies that, you know, get rid of the expensive drugs and an advantage the less expensive drugs. Ultimately, though that information does not get to consumers the way it needs to right? So you go into the doctor they prescribe medication. You take to the pharmacy and fill it. What if there was drug be that was ten dollars instead of one hundred that information gets lost? And so there's this missing component that that does not translate it to the consumer that needs to be so Michael what is the Bill that you think is most promising either currently going through? Congress or that you've heard some candidates or current lawmakers discuss I would say illumination the rebates. It's the most basic it's easy for most parties to understand, you know, I think there's bipartisan support for it. But the specifics of how it's crafted a we'll make all the difference in whether or not it's affecting lowering costs you please just remind us what the rebates are. And who would lose out if if they did remove these rebates. Yeah. So rebates are money flowing from pharma manufacturer to a a third party entity could be a PBS a health plan, a wholesaler or employer who who are the winners and losers is the question, and I think you'll see fights to keep them in place. Most pronounced by the folks that are probably gonna lose lose the big which is the third party intermediaries such as. Probably the PBS and wholesalers. He doesn't wanna say. Foley adventure? So it'd be so Michael what is the sense of timing? And that we can get anything meaningfully done here or the congress can get anything meaningful done here on on pricing. Is there enough by Parsons support to get something done in the next? I don't know months. I don't think it's realistic. I would love to tell you something different. And I would support if they did do it. But I don't think it's realistic. What about on the corporate side, the private sector? We did hear a little bit about J P Morgan and Berkshire Hathaway teaming up to create some sort of in-house healthcare plan to try to lower drug prices negotiate directly has been any movement on that front. Maybe not even with disassembly JP Morgan and Berkshire Hathaway, but any other corporations have really done a good job at this. Well, there's a number of groups that have formed to try to address this issue in a kind of co-op type way, I think some groups like the health transformation alliance are probably further ahead in in kind of grouping. Companies together to try to create Bryant buying power. Yeah. I I mean how much is that actually effectively lowering prices. In other words, is that actually like a competitive aspect in markets? Now, these these teamed up corporations, I think it depends on how how it's position and how much it's utilized. So when you look at a medical cost, you've got a unity conomic, and you're trying to get a discount with drugs. We're actually saying there might be a different clinical therapy. That is not two or three percent cheaper. It's you know, thirty forty eighty percent cheaper. And so that's where the power lies with drugs as compared to to medical and hospitals. Some Michael this seems the healthcare industry in general. It's certainly the pharmaceutical part of it seems like it is ripe for disruption where from a technological perspective. Why hasn't Silicon Valley come in here and looked at this big issue and done an Amazon dot com. Amazon did to retail and consumer as ever been is that you think that's a focus of Silicon Valley seems like such a huge mess that is ripe for technological solution. Yeah. I think it is in we hear from them often from the folks the the equity backers in that area. There have been a number of companies that have come and gone with the promise that they can address this issue. I think what has occurred as most of flamed out because this is such a complex space. When I look at what we do today. I mean, we serve as five million peoples. We have market proof not just PowerPoint, and that peace will become more and more important for anybody. Who's trying to solve it? You got it. You got to not just say, you gotta do it. Gotta do it. Which is definitely been challenging when it comes to tackling drug prices in the in certainly in the United States, Michael right? Thank you so much for being with us here in our Bloomberg interactive brokers studios, Michael refunder and chief executive officer of our ex saving solutions based in overland park, Kansas. Thanks for listening to the Bloomberg peon L podcast. You can subscribe and listen to inter. Views at apple podcasts, or whatever podcast platform, you prefer on Paul Sweeney. I'm on Twitter at PT Sweeney and Lisa Abramowicz. I'm on Twitter at Lisa Abramowicz. One before the podcast. You can always catch us worldwide on Bloomberg radio.
It's Very Implausible That Powell Will Pause To Please Markets
"They're big investment opportunities. Beyond our borders. Mega-trends is a new podcast from Oppenheimer funds that explores the trends reshaping the global economy. I'm your host Minita Huda subscribed to mega trends now on apple podcasts or wherever you listen. Welcome to the Bloomberg PL podcast. I'm Pimm FOX along with my co host Lisa Abramowicz. Each day, we bring you the most important note worthy and useful interviews for you and your money. Whether you're at the grocery store or the trading floor. Find the Bloomberg P and L podcast on apple podcasts. Soundcloud and Bloomberg dot com. There are some out there who are waiting for Jay Powell to take the podium on Wednesday at the economic forum in New York and say, you know, what guys we're going to take a little pause. We've seen the stock selloff and orange going to make sure that we don't go too quickly. Our next guest says not so fast on authors. A senior editor for Bloomberg markets. We are so lucky that he joins us here in our interactive brokers studios in New York, John, you think that this is an implausible scenario is that right? The fed woods would call off change its coast. Just because of a off in the stock market's just the extent we've had so far all frankly, if it fell another ten fifteen percent for here. Yes. I find very implausible. They've learned the lesson from the last two cycles the feds got it wrong by being too easy. And allowing very big bubbles to infer. Late that hurt when they best tech stocks the first time, and then credit the second, they will at least make a different mistake, this time least, they're activists. They're not gonna make the same mistake. What is your reaction to investment professionals who blame the Federal Reserve either because they don't raise interest rates enough or because they? Have raised them too much already when they use the Federal Reserve as a whipping post for why the market behaves in a certain way, I find it a little rich personally. I mean, Cincinnati we all of us a nice way of saying. I'm trying to be nice. But those of us around this table, we will make a living commenting on markets, which means that we spend a lot of time commenting on the fed because the fed is incredibly impulse and play a role of that is evident, generally speaking. However, the feds is not just an activity. It's also passive recipients of conditions. It does have to response. And what it's I think it's fair to say the single most powerful actor in markets. It's not on patent by any leap of imagination at the moment. It if you really think that the fed is already over tightening. That is I think ridiculous, given the historically how low interest rates still are. And while I don't want say comments on any particular politicians, you might be taking any particular positions to save at the fed should be hiking less than it. As when we can all agree that it's still being very cohesive means that you're saying the economy is a lot weaker than sitting politicians might be claiming there. There's no way out of that. I that the fed is doing the right thing. Or if it's going too far. That's because the economy is in real trouble. If it can't stands interest rates two percent. So I do have serious problems with people who say that the that the fed is already going to find that the the the significant problem we have all right? Well, just looking to one aspect of the tightening the balance sheet reduction that gets less attention than the right hikes, perhaps shouldn't and they're still a big question, which is at what point will the fed say all right enough. We've done enough rolling off here. I'm going to keep our balance sheet at what two trillion three trillion. I mean, we don't really have a number guidance on that this week. Yes. I would I suspect. This could be where we get quite an ugly surprise if you look through the volumes of fit speak threat, then fed governors as they should fairly transparent at least in thinking out loud. There is almost no thinking it loud about the balance sheet. Just none the implicit implicit. Conclusion you can draw from the public pronouncements is that on the balance sheet reduction they are on autopilot. It is the idea of the balance sheet is going to very steady reduce month over month. You don't hear hear plenty of risks potential risks on the horizon being listed by Powell and the other governors resorts a certain community results. Reserve resists guest he is not among them. You hit plenty of people complaining about already about a shortage of dollars in the market. You do not hear that reflected by fedspeak and just real quick here to give a sense of the balance sheet, the balance sheet has been reduced from four and a half trillion at its peak in January twenty fifteen down to four point one trillion dollars. So we have seen a bit of a roll off. But there's still a lot more to go. If they want to right. I mean, this has been a yes a decline, but. It's completely realistic to think that they will keep doing this for more than another year and the balance he would still be utterly enormous in historic terms, but the change at the margin, which is all important. I suspect is much more. What people should be worrying about an exactly have any more changes. We get to target fit funds. Right. This may sound bizarre. But is there any value in noting the difference between two thousand eight and twenty eighteen when it comes to the accessibility of social media apps in the ability to report crises when the two thousand eight crisis when broadcast mainly via television and traditional media. Do you think that it means something different now? Very much. So my farewell piece when I'm still at the financial times. My farewell piece was about how. Yeah, I remember. I it's blazoned into my mind that that I went I went to my city brunch. On possibly the worst day of the crisis infanta were dozens of very well dressed, Wall Street is evidently shifting money around to make sure they still had to ensure the cats, and we wrote a very very very negative story that day, but I didn't actually do what I might conceivably do now which somebody definitely would do just take a photo of a bunch of panicking. Wall Street's is in their suits trying to get their money out of a Bank such a photo. Now on on social media could have could have been the spot that lit an even worse plane. So yes, I I think that's a very worrying scenario. I don't think he'd has a particularly big effect by you. The president's focal diplomacy of over Twitter, which which the fed seems to be knowing Scifo. But so far, I don't think it makes a great difference. But if things get as nerve wracking as they did in two thousand eighteen could be critical just real quick here is your sense that if the fed were to indicate that they are ready to slow down a little bit or that they're showing more concern. Do you think that that will correspond with a substantial pop in US stocks? Quite know. I suspect not I mean in the in the very short term if of operative word is substantial. No, if we get if we get unusually dovish fit speak at some points in the next week, then yes, you'll catch a pup on that day. But ultimately, I would enough trust in the fact that the only reason I believe the only reason they'd be doing that is because the underlying data particularly from China will be wondering. That would cancel out the fates if the the extra dovish this from the fit, thank you very much for spending time with us as always John authors is senior editor for Bloomberg markets talking about the Federal Reserve potential rate increases, and what they might do to the US economy. Facebook shares of Facebook they are higher right now by about three and a half dollars one hundred and thirty five dollars a share for Facebook. Joining us as David Garrick chief market strategist for late law and company and you can follow a David on Twitter at GV research. David Garrity, speak to the issues that surround corporate governance at Facebook. This is coming at a time. When report is that Britain's parliament has actually seized some confidential Facebook documents from the developer of what is described as a now defunct bikini photo searching app, and this has to do with data protection policies. What does this have to do with Facebook's corporate governance in terms, locate Facebook's corporate governance was pretty much very clearly set forth in the perspectives from the company. Public back in two thousand twelve that Mark Zuckerberg would have because of many class dual classes of stock that he would have super voting rights, and then the company since then it introduced another class of stock that had no votes at all. So effectively Zuckerberg for owning about a five percent economic interest in the company has you know, majority voting control. He also has the right to be the sole person to select who his successor as CEO will be. So from that standpoint zuckerberg's hold on corporate governance. Facebook is affectively a hammerlock. It's impregnable. There's no way that you're going to get rid of Mark Zuckerberg anytime soon. Unless he chooses to step down for some reason. Obviously, there's a question here does this Pierce the corporate veil when it comes to looking at some of the liabilities that Facebook may face, but going specifically to the case that you mentioned that was being examined by parliament and the invasion of privacy rights. It ties into the committee in parliament that is investigating what Facebook had done in terms of providing user information to Cambridge Analytica for the purposes of interference or campaigning around or targeting advertising around not only the Brexit campaign, but also the two thousand sixteen elections. And so from that standpoint, if we look in the context of Europe that's been introducing new privacy regulations. This is separate and distinct, and is very much focused on bad actors such as Cambridge Analytica. Okay. But when you talk about regulators can stepping in our lawmakers investigating Facebook and its role in some. Recent elections. I just have to wonder what could come out of that. How much does this sort of threaten Facebook's existence in its current form? And how much is this already priced him with Facebook shares down more than twenty three percents this year? True. No. I mean, you certainly have seen the stock come off, you know, but it was about two hundred and twenty dollars a share back in July in the sense sort of come in to a level but one forty so it's lost about a third and. Yeah. Barons over the weekend and come up with a favorable article saying, here's a company on a double sales, but it's cheaper than WalMart. The issue. Here is is that WalMart's business model isn't under regulatory scrutiny. You have a situation with Facebook where you know, the company arguably given how important it's become four people getting news. You know, if something barks like a dog or walks like, doc, you know, it's Ducker. It's a dog in Facebook's case, we could say it's actually media company there. Distribute news, and from this standpoint their media company that's trying to say that they're not an in the event that the government were decide to say, look, you're a media company, despite whatever your protest stations. Otherwise might be. We're going to start regulating you like media company. This changes the dynamic for Facebook in terms of their internal costs and in terms of what they may. And may not be allowed to do. Because this also that would mean libel laws would apply to Facebook precisely and possibly, you know, there may be scrutiny here given the governance structure. You know, what is management's responsibility. Here. Does it does the corporate veil actually apply? So I just expanding out. I mean, we did get the news today that supreme court justices appear poised to allow antitrust lawsuit to go through it accuses apple of using its market dominance to artificially inflate prices at its app store. Apple shares have been falling steadily for the past few weeks. And I'm just wondering, I mean, do you view? This sort of existential threat to the business model to be similar at other big tech companies just by virtue of their size. And in fact, that regulators are kind of getting more concerned about that. I don't know if I necessarily wanna go out looking at Facebooks problem. Facebook's problems the problem with social media and the abuse of social media, and how a regulator is going to exercise appropriate and proper oversight in terms of social media companies as we look to other technology companies whether it's an apple whether it's Google whether it's microphone Microsoft, whether it's a net flicks. Where an Amazon, you know, certainly, we have to look at companies that have grown to a fairly substantial size wield substantial economic influence, and as a result, you know, are they introducing anticompetitive behaviors there has been the case being made quietly but steadily over the past six to twelve months that the next administration onto becoming back in and looking at trust busting. We ought to be going back and looking at what? Happened in earlier economic cycles. Back nearly twentieth century, you know, teddy Roosevelt came in basically as a trust BUSTER have these companies gotten to be too large. And it's interesting here with this news with respect to apples that this is something that's actually rising to review by the supreme court. David garrity. The one name we have yet to mention is Sheryl Sandberg, Sheryl Sandberg is responsible. I believe for the direct scrutiny of advertising as well as legal and policy issues at Facebook who gets thrown under the bus if anyone because of the. Perilous situation that the company faces right now. Well, one certainly has to argue that Sandberg is going to be sort of squarely in the crosshairs. And but I'll give Sandberg credit is that when it has come time for this company's management to appear before various government bodies regulatory bodies to testify. It has generally been Sandberg who's been the standup person out of management to be held accountable. Zuckerberg has tried to stay in the shadows has tried to Dutch dodge duck, Bob, we've, but it's been Sandberg who really has been the standup person here. And unfortunately, given the way things are set up in terms of the governance, we discussed earlier, it's most likely going to be Sandberg who takes the first fall, David Garrity. It's always a pleasure to have you. Thank you so much for coming. And David Garrity is chief market strategist at Laidlaw and company in New York. Joining us here in our eleven three oh studios. Hey, everyone. I wanted to tell you about a new podcast. From Oppenheimer funds called mega-trends. There are big investment opportunities. Beyond our borders. Mega trends explorers and explains those opportunities, I'm your host Mineta who Jay I'm in a ward winning business, journalist and author. Tune in to hear me talk to the experts about thinking globally when it comes to investing. Subscribe to mega trends now on apple podcasts or wherever you listen. General Motors shares are surging after they announced it will cut more than ten thousand salaried staff and factory workers closing five factories, and this comes after surprisingly good results. David Welsh joining us now Detroit bureau chief for Bloomberg. He is at GM headquarters. David why are they doing this? And why is it being so well received by shareholders? A couple of reasons one they see the market moving toward electric vehicles autonomous vehicles, and they're still hiring people in those areas. But as they cut passenger car models that aren't selling and as they try to develop the cars of tomorrow, they just don't need as many assemblers traditional mechanical engineers. You know, electric cars have fewer parts they're easier to engineer. They're easier to build they see a future there. People are buying more SUV's and fewer passenger cars. So they're getting rid of some of those nameplates Chevy Cruze compact. They're getting be palace to Dan. You don't need passenger car engineers to do that. And you know, I think they're not really admitting this part. But I think they see the global auto market softening China's downturn this year, the US is definitely coming off. It's two thousand sixteen peak. It's not gonna creator. But when things are getting softer, and you don't need as many people to engineer this myriad of nameplates that they've had a long time. You can. Make a lot of cuts your the thing is Mary bars under a lot of pressure because the stock price hasn't been doing great, and it all together, and she's got to show some money. David Welsh, could you just continue on the theme of electric and hybrid vehicles. And the number of workers that it takes to build them compared to what it takes to build a fossil fuel powered automobile or vehicle. I don't have any numbers for you one that. But imagine this one of the reasons electric cars are so expensive. It's just because they have one big hunk of battery cost so much, but that's coming down. So so the cost is getting more competitive what that will replace an obscene Tesla's torn down. I've seen a Chevy goal torn down. You know, this giant battery and you have one electric motor that replaces in internal combustion engine. A transmission on a whole exhaust system whole fuel intake in management system. A bunch of pumps you take all of those parts and Utah some and you got these two big pieces that you know, that that battery is basically the floor of a car, you're kinda bolted in and connect everything it's simple to me when I couldn't do it. But it's wild west complex than that whole suite of internal combustion parts. I just read a lot. So David though, I have to wonder whether that is going to be an excuse for the other point that you mentioned, which is that GM. Probably sees the global auto market slowing substantially and they want to make sure that they're the correct size to meet waning demand. Because honestly, we haven't seen electric car sales pick up that much, and frankly cars and trucks gas guzzling trucks have continued to be the most popular road. So I mean is that basically a red hair herring for the real issue? Which is the the slowdown. It's not a red hearing in the sense that they are hiring software related people to do a ton of cars and the power latronic and battery engineering you need pretty vs. But they're absolutely using the cover of that in order to really just get leaner, number one. And number two pair for what is I think is going to be a slow down, the US, and some other forecasters are are making that point that they could be we can go from seventeen million vehicles in the US this here to you know, maybe fifteen and a half or sixteen in the next couple of years. You know, there there's a forecast out there like that for someone who's not crazy. So yeah, I think they see things softening up a bit. And they're they're allocating more in China as well the perfect. They're not talking about here is vehicles. They're killing in the US or still going to be sold in China. And they're probably gonna engineer them over there in the future. We'll probably hiring engineers there as well. So it's kind of all. These factors. And, you know, th they put probably the the best and most futuristic spin on it. But yeah, they're they're they wanna get leaner. And they they see the markets often. David Welsh, just give you a couple seconds here. Do you think that the same issues face the large German automobile makers, and they have big labor unions to deal with? Yeah. It it. It's going to affect everyone in into honest with you. I think the US market is probably a healthier market. Then Europe is even though they sell luxury cars over there. That's always been a tough market than the US. Because here you got pickup trucks and big SUV's that hide a lot of problems and make a lot of money to help you deal with you other problems. They've got luxury cars over there. But then that that's just a tough place to do business in the US. So absolutely thanks very much for being with us. David Welsh star Detroit bureau chief for Bloomberg talking about GM and its announcement that it will cut about fifteen percent of its workforce and shutter five manufacturing plants in twenty nineteen. Fernando camera is the co founder and the chief executive of sky our and he's here to tell us how you can actually book and give flights and travel to someone else. Hint hint, right? Using the website that he is co created called sky our dot com. Thanks very much for being here. Thank you. How does sky our work? Thank you for having me guys. So it's guy. Our what do we do is? We sell flied towers for sixty dollars an hour, and you can use those hours spoke any flights on the biggest four hundred airlines in the world. So it all starts with when I was trying to give a flight one. Oh, five best friends, and I couldn't find a way to do that. So I I was trying to book a flight that I had to know the person who tells this nation dates I was going to surprise airlines took a flight for because of security reasons, then try their line miles of if I give you buy off chapel. You can I'll try. On doubt. There's a loft out dates and restrictions. And so it's almost impossible to use them. And it's exac exactly the same thing. We their line keeps carts. Give scarf JetBlue doesn't work on doubts. It's almost impossible to use to use them. So there wasn't like, easy smart. And he Spiring great ski someone to fly. There's a gift, and so I'd sky our you can buy as many hours as you want for sixty dollars, and you can use those hours any flights on the his four hundred airlines in less than two minutes to be it seems like a cheap price sixty dollars an hour, especially when you think about peak travel times to say Florida places that are populated donations in the United States. During those times. I is it. I mean, how did you get the airlines on board here? So, you know, people don't know, but it's more than ninety five percents off all the flights in the world. They cost less than six dollars an hour. And so these only around five percents, which is all the super last minute flights on busy routes, and we have a very fair model because when you look at five on scour, we always give you rewards back. So we always give you hours back can use civil jury next flights. And so if you do the math. And you see that as we are never more expensive. We have a very fair model in looking at just the sort of sample trip, and I very from New York to London. Yeah. A came back and told me that I needed fourteen I needed fourteen hours right because that's a round trip aspirants. So I that would be fourteen hours fourteen times sixty exactly so, you know, probably fights from New York, Sundays six thousand thirteen minutes and their return flights is eight dollars and ten minutes. So the total is fourteen hours and fourteen minutes. Okay. So how does that actually work? In other words, if someone goes to your site signs up buys, those fourteen our gifts them to someone else. How does the airline manage their inventories? But we do everything happens on scour. So you go sky dot com and Kim by hours for yourself. And you can use those our spaghetti fights on line or you can these those are your friends. And so, you know, if you tomorrow, I gave you ten hours and can use those ten hours to go anywhere anytime, and if the fights ration- if the booking total booking causes fourteen hours, and you only f Dan you can buy another four hours on the checkouts. And we also allow you to crowds on the flight. So if you are students or your for charity needs to book a flight, so you don't have money, you can ask your friends and Tammy for hours, and they can you hours in less than thirty seconds. Even if they are not the members off scour. So what's the incentive for the airlines to work with you? Because I I assume that you capture some differential to keep your operations going, right? I mean, they could just get more. If they went directly so airlines, they they left sky our because they believe that weekend, essentially, be the most important solution channel for them in a couple of years, so now because of the gifting industry, so I will give you an example right now in you, ask them ericans, they're spending one hundred and forty billion dollars per year and gift cards and less than one percent is spent on travel. Because you know, before scoured there wasn't a way to give a fight someone and our generations, Venezuelans, Armindo and experiences. That's very what would we wanna do? And the most exciting troops are the ones fire way. They'll inset normally starts and it'll be the flights. So, you know, by allowing people to keep scour switch other where you're gonna essentially, you know, bring a be percentage of those fourteen billion that people spend gifts cards, so they're lying to street. So they see as a new channel bringing more money to the industry. Now does this include any of the extra fees? The I everything is included everything everything's take your bags and everything's glue. Oh, so one thing I'm wondering is does it remove pricing power from the airlines. We know it's not not exactly because essentially we sell hours for six dollars an hour. But you know, most of the times actually phrased she fair the fly super, then sixty dollars. So we give you the difference back in minutes. So airline no-one loses money. Everyone makes money I'm saying that, you know, especially just in general I've seen delta raise their prices. You know, American people have basically been saying airlines saying we need to we need to charge more because of the contracts, with pilots, etc. I mean does this sort of remove their ability to do that. Because it's sort of capping things at sixty dollars an hour. Now, we are not doing that. Actually, we know airlines. They you know, we we make our lines super happy. You know, we are bringing more money and we respect their visas models and support them on percent. We need them to operate. Do you travel a lot all the time? Yeah. Favorite destination? Oh, that's a very tough question. You know, I. Favorite accent this nation? I love skiing. Probably you know, we slur. I love it. I always go there for ski. We'll have a great time. It's like getting to that season Fernando comer is co founder and chief executive of sky our in New York and Lisbon. Thanks for listening to the Bloomberg peon L podcast. You can subscribe. And listen to interviews at apple podcasts. Soundcloud, or whatever podcast platform, you prefer. I'm Pimm FOX. I'm on Twitter at Pimm FOX. I'm on Twitter at Lisa Abramowicz. One before the podcast. You can always catch us worldwide on Bloomberg radio. They're big investment opportunities. Beyond our borders. Mega-trends is a new podcast from Oppenheimer funds that explores the trends reshaping the global economy. I'm your host Mineta Huda. Subscribe to trends now on apple podcasts or wherever you listen.
Mercedes Launches EQB - Third Electric Model This Year | 19 Apr 2021
"Coming up on show. One zero five. Seven benz launches the e. q. B. is the third av this year as stick around and go over days aisles. Also on the show today. Gm and lg commit to another battery. Factory care has a load of six preorders and the well debut of the bmw x. Put haven't we seen it already. Okay we'll dig into that one. Good morning good afternoon. All could evening wherever you are in the world. Welcome to evening news daily from monday. Nineteenth of april is martin lee and i go through every story so you haven't got a tons of stuff happening out there so i'm filter if you like. I'm here to save you time and we'll start with a new car. Loan always loved one of these always love new talk about mercedes. Benz have launched the e. Qb that third electric model this year ramping up there on the electric car It's an suv. It was shown at the shanghai auto show that was really busy this year. Actually there's loads more to come from it. It's seven seats well up to seven seats but all the specs that The picks you see how the seven seats in store the day. Nearly a week after mercedes benz unveiled the q. S this of course much cheaper car than the s class equivalent according to the detroit bureau the mercedes e. qb's dimensions are identical to the g. l. b. butts like the rest of the mckee family. The new model has batteries. And they've put them down low and a skateboard like design butts. If you do lift up the bonnet the heard of the qb as i saw one of the The youtube channel had look underneath. And there's a lot of stuff in there and no funk so a lot of stuff's been moved out of the cabin to make a lot of passenger room but saying that the back two seats they got the ice affixed points for baby seats. They really off a kids if you go. Grown adults in the second row than the third row is way too much of a squeeze for anyone but kids of the new model has the new mercedes benz. Navigation with intelligence is the official corporate. Name of that is how they integrating charging driving your life getting to your destination navigation and where you're going to charge and by all accounts. This is the system is used using the us. And my buddy kyle. Who's sniff around the us in the us. I must say Hey says it works. It looks like it will work very very well because they've spent a huge amount of time trying to integrate the charging which of course tesla i think do best because tesla the cars they own the well you you on the you know what i mean by that. Some would argue with that but what we test tesla dipping in turning off people's charging a thing but anyway in theory you own the cop. I'm on the charging network and anything. That really is the trinity. They they buy in. But it's so vertically. Integrated is the best charging experience. A lot of people who have tested off. Say oh do you ever just make sure that it starts charging they're like no. I don't even wait for the green light. I just pull up to the take. Take it off the handle off the show. The at the end of the cable the flap opens i plug in. I walk away. I know it's just gonna work. That is so difficult when you've got a ton of different charging networks all using hardware built by a ton of different hardware manufacturers and often those networks layering their own protocols and software on top of hardware built by a bunch of third party companies all over the world so to make it join up and work is no easy task. Mercedes-benz tries to do a good job of this. And i can't wait to try out in person it's really important part of owning a for those unlike me. I'm guessing maybe unlike you as well like kind of get some pleasure in opening up my app and working out my route and charging and where i'll stop but a lot of people wanna get into drive and tell them hey. There's a super fast charger here. And it's free and it costs this much. And i'm going to navigate you to go on sale in europe and china later this year e. Qb going to the us in twenty twenty two targeting a group of competitors that seems to expand almost weekly now like the e q a the trades. It's open grill. Because you know having to suck in oxygen to then burn it so you can close off the knows for better aerodynamics. According to autoweek is comes to the drive train be offered with all wheel drive in front wheel drive at least in europe when he goes on sale later this year in europe. It'll draw juice from sixty six point five kilowatt hour battery not the biggest the smallest. That's about two hundred and sixty eight horsepower and arrange for about two hundred and sixty miles on the wwl tee p. test cycle so again driving speed when it's cold. You probably looking at somewhere around two hundred miles. Kind of audi eight-run fifty-five territory. You'll get to twenty how good day if it's warmer. If you sympathetic. Maybe thirty miles real world. So that's what the know the the bigger battery Audi so fantastic. I think mercedes upbringing some great interior design to that cars. I've never really paid much attention to their combustion models butts that drink models look very similar by pleasing to my own tastes. Which of course is very subjective. The actual electric stats of the mercedes. Okay I think you need to look at the custom as going forward to the mercedes benz e q. S the big hundred grand s close equivalent bill auto navy platform and no compromises. Might these cars are built on a platform that can accommodate a combustion. Engine can accommodate ev and plug in hybrid power so always going gonna be compromises made and that's just the way they're doing it and you can kind of tell that in a few places but i think it looks nice You can't you can't tell it's an easy from the outside he's gonna go incognito again. Lots of reasons why mercedes-benz brand fans would like this car. And i think it'll be good. It'll be a good solid choice next. We'll talk about gm l. g. committing to a second battery factory. It's going to be in tennessee. General motors is expanding. Its battery building base. Ltm cells is the name they gave to the project announced last week it will construct a second plant for manufacturing av batteries. Gm says the new two point eight million square foot plants is going to cost two point three billion dollars. It'll create one thousand three hundred new jobs. According to the website industry week this new factory is going to be in spring hill. Tennessee and l. supply gm's nearby springhill assembly plants gm saying lost. It was october that That got transition to produce only vehicles that like the cadillac models the hammer. Gm and lg first announced this battery joint venture called ltm nine the give him the cells almost giving giving the whole powertrain these days back in twenty nine teen when the original rnd center and factory was announced lordstown in ohio. Next i'll talk about polston. One of guilty talking about it because it's a big gas guzzling engine inside it but it's a pretty good plug in hybrid as well. Postal one is getting a limited edition in goes and it's very gold inside gold stitching outside gold brake calipers either on the car itself gold obviously gold accents but matt go not blinky premier league. Football ago It looks good. The color shows up on the various bits around the car. They were gloss black elements in the grill. It looks mean it looks bad. It looks brilliant. I can't afford one by one because of the big engine but If you wanna post on one according to moto on You can get Some limited edition wants now. He's got a supercharged and turbocharged two liter four cylinder with two electric motors so on power nor to sixty four point two seconds on a navy powerful seventy seven miles Which is fine if you wanted to make a noise and take to the petrol station a lot. I just think they were very compelling. Ev out there these days right. What took them back next over. Thousand prios for the six in the uk of the companies received a load of orders that make very significant coming to you than other european numbers but of course in south korea the hallmark over twenty one thousand reservations for the key on day one says mark kane for inside The pre reservation window here and at the end of the month. So you go until april thirtieth to get you hundred quid down. It's fully refundable if you change your mind the six and there's the jt line and the gt arriving in october. Sorry the first two. Ev six and gt line. Arriving in october there was a top spec one The is just going to wipe the floor with everything in that comes next year. The price start at forty thousand eight hundred ninety five pounds i five grind i six grind over the threshold of the common ground that we hear some money off the car. You get two and a half grand car if it falls below the threshold but that of course doesn't so that makes it quite an expensive if you're going to start comparing it to advocate The compared to the in the kona. I know that they are in a way. The last generation of which is mad because they just redone. The course still really amazing. And i've got a kona ultimate arriving tenth of may should be here have a month to of course we'll review for you and i don't know why i feel like that kind of previous generation but i suppose they are because these new bill on a brand new platform and they've got all the toys They've got vikas load the plug sockets on you can charge other events from them. You can power your house from them all kind of good stuff and we're just waiting to see how efficient they are going to be charging speed. We know it's going to be crazy. Good those youtube videos of of Of people that have spotted the testers from the company plugging in To twenty to thirty kilowatts can't believe. I talk about that with with such kind of casual like yeah charged. Two hundred and fifty kilowatts. That's insanely fast. My goodness me when we start this podcast. Look and dream of that. So it's just brilliant and yes not cheap but you're gonna get a heck of a lot car if you've either pre-ordered five eighty six next. We'll talk about bmw. And the i x making its world debut in shanghai as part of a show and tell day in the shanghai auto show. Bmw showing off the i x. all electric suv. And i thought we've seen this car already. And of course we have seen it already but what they mean by the well debut. They hadn't actually put one in front of public is just have pictures maybe renders. I don't know but anyway So according to the website one-two-three dot com the bmw x. is noteworthy because it's an all electric ground up designed using the latest. I drive system made on the best generation latest generation. Bmw ev platforms. They've got of course. It is a puree from the ground up and there's been some other. Bmw's recently they've had some good headlines. I x three four. But the x. I believe is the one that is purely the ground up designed blank sheet of paper kind of thing so the system is designed around to electric motors. Five hundred horsepower. Hundred kilowatt hour battery. Pack six hundred kilometers rain. Two hundred kilowatt charging the price. Well we don't know who. But surely it's gonna be up there in. I a mercedes benz e q c territory maybe bit more actually The bmw x. fascinates me because. I'm not tall enamored with the looks inside out and we'll see more about the imax from bmw account. Weizer seymour next. We'll go to hawaii. I wish i genuinely could go to. Hawaii traveled in a year. We used to travel big time before covid and then three things happened a pandemic and a child so so i'm not sure travel is gonna be happening too much this year but hawaii. It's a dream of house and the hawaii department of transportation has just picked up that. I i love stories like this another public body going. Walk getting rid of combustion cows and bringing any visa because you want to keep the act clean somewhere as beautiful and it dick as someone like hawaii. Now we hear this is the result of a new Way of bringing public vehicles to electrify their fleets over there ninety days replacing regular vehicles to begin within the state highways division. Thirty four more coming by the end of may says. The hawaii star advertiser website under the contracts. They lost ten years any of these kind of agencies state agencies and county agencies actually have to purchase the car up front but they can procure them and all the charging that comes with it and stuff and they just pay on a per mile bike. It's not a love. These kind of innovative ways of funding either because they are still expensive. Only vehicles are expensive if he's do have a premium but we want to get them on the road and i love anything like this that allows these various to say you know. Well we couldn't afford the upfront cost of thirty four vehicles. Bub bringing financing in some sort of system or way of paying for them over a period of time. And i love that next. Volkswagen in the knees expanding their id family and we're going to get some gt aches cars coming at the end of the month. That's when we find out more. I imagine it will be the four to begin with because that seems like a natural car to make a gt x twenty eighth of april in europe it replaces gt is and gt as the exes. We'll be all wheel drive so an additional motor on the front axle. So the id cards. That he called the id gts. He'll be all-wheel drive intelligence switching so sometimes when you are just cruising it'll disconnect the front motor and you'll be driving a rare wheel drive cobb of course. Electric motors within milliseconds will power when you need that interaction driving mode permanently on according to green cow congress. Volkswagen wants to become the most desired brand for sustainable mobility and a reminder of that goal that is pure electric cars. Seventy percent of everything they sell by twenty thirty and when i read that i'm sure people think. Wow that's so admirable. But i just think in thousand thirty flip around thirty percents of your sales are still going to be. Does he combustion cows. I mean maybe. But i just find it hard to see that that seventy percent number looks too low to me. Maybe i'm a hopeless optimist. Let's talk about question of the week with immobility. Norway dot com. This is interesting and it's coming time we've got the chinese motorshow also shanghai's on lot cars being talked about so here. We go question for you to answer. Would you buy a chinese-made ev. You care where the car is made. Email me your thoughts. Hallo even use daily dot com. Mike always to the people in the companies fund. This program couldn't do it without your support. Thank you to patriot. Fans you can check out patriots. Pat reo dot com slash news. No pressure never already pressure Butts the price of maybe five or ten dollars posh coffee or two. Once a month you can be directly responsible for spreading all the amazing good news every single day around the world about electric cars in clean energy. I think it'd phil robertson. Electric future are premium pont nebraska. Crosby porsche of the village. In cincinnati audi of cincinnati east volvo cars of cincinnati east national charging dot com and a low hajjaj dot com derek riley from the review on youtube channel. Richard an e. they'll cut it. Uk for buying selling visa in the uk and mobility dot com. Have a good see tomorrow and remember. There is no such thing as a self charging hybrid.
Dutch Plan To Install A Million Chargers By 2030 | 05 Apr 2021
"Coming up on show one eight four three. The dutch plan to install over a million koch oranges by the end of the decade. And how they do it. Stick around. i'll tell you more on the podcast today. Vw ceo who takes the blame for a pretty bad april fools. Joke audi explain why they are moving to electric car racing and why battery technology in the mercedes s. saddam. If talking about plenty recently could be a bit of a headache for tesla. Well good morning all good evening wherever you're listening in the world. Welcome to av news daily. I one of the week. Monday of april. My name is mall stanley every story. So you don't have to a quick mention for electric racing series over the weekend. The kicked off extreme a and it was roseburg's team making history as the first extreme a winner. Roseburg ex racing made history the oval race in saudi arabia on the desert sands the final race of the weekend so nico roseburg's teen lewis. Hamilton's x forty. Four team andretti united with the desert. Expre- now done and dusted pardon the pun because plenty of dust in the air The cows will be loaded back onto the ship. The saint helena extremists floating centerpiece to set sail for senegal. The setting for the ocean expre- which is going to be at end of may by the way so we've got a few weeks to wait for the i was talking about. The ship is sailing rather saint saint helena. The ship which is sitting around the world with the extremely vehicles and all the infrastructure. And things like that and i was saying well you know. I'm not sure it's exactly. Vats green took about electric racing. Then stick it on a big dotty ship to sail around the well. They had to run on bunker fuel. And then andrew one of the listeners of this podcast sent me a lot. I was skeptical as well about the diesel ship but he was talking about it on facebook and a few people said actually not using the usual. Really nasty dirty diesel. It's a bit cleaner is an old post chip. Was used to serve helena now. It's converted hence the name and it tends to run on slutty cleaner fuel. I think but i couldn't get to the bottom of it but anyway. So let's talk about tesla collision course with german unions or other a big german union is tesla works to get a huge new gigafactory germany up and running. They want to do that. By the summa. A few things of disrupted them reptile habitats water usage. And things like that. But now the biggest worry tessler in germany is going to be a big union after sparring with locals over deforestation. Now they are set to go to head to head. According to business insider with the two point two million. Strong i g towel now. Unions over here. I must say Pretty strong in germany. Very strong in france. Non strong here in the uk after a political movement in the seventies and eighties did reduce the strength of the unions. But it's not like the us where unionization don't plant by plant factory-by-factory so the unions in germany will be industry. Why not even you know company by company it'll be across sectors like metalworkers and so yes. You can operate in germany without being part of a union butts. The unions are super strong and this. Big union edgy metallica. Go down without. According to this article allowing massive nonunion plant to build cars in germany would be a very dangerous precedent that they don't want because a collective bargaining it would also mean thousands of members but potentially go without some of the things that come with being part of a union so contractually enforced things like job security wages and benefits that everyone else in. The industry does enjoy Again when i talk. I my american friends and colleagues. They can't believe how much job security we have over here. You can just turn up to work one. Daniel says you'll find you can go home now. There's suddenly a procedure that's know you have to go through. That's very long and it's not easy to get rid of staff if they've done nothing wrong. You just decided that's person no longer works. They have the you have to prove that they didn't do their job very well. And so getting rid of stuff very hard. There's a lot of job security over here you know. We do have good labor laws. Generally i would say in europe particularly in germany with the also unions doesn't mean that everyone working tesla in berlin will be policy union or they won't some of them will but if a loss of them off and that will certainly be increased pressure. I think and tensions there which tesla would have had to deal with Outside of the us and china but an often forgotten th. i talk about and often forgotten. Part of tesla is their german factory already. They brought they bought a big family firm called groman. Who used to all kinds of automation hardware and just making factories run better and they had contracts with the big german car. Companies tesla bolton cancelled contracts. Is that you only work for us now. And they had to do a deal and without going back in and looking into it. If i recall correctly is not unionized. But they did to give the workers in germany. The same pay deal. I think even goes cher options or stock options and so it was a pretty attractive deal for the the the german employees of the company they bought in germany years ago now Not going strike. And so i'm sure this enhanced won't be new to them like this article suggests like oh. Oh my goodness me elon. Musk never realized unions. They of course they knew they were getting into. I'm sure they'll be fine but it'll be another headache next. We'll talk about vw and they see oh taking the blame for volts wagner. Volkswagen america that chief executive responsibility and apologized for a pre april fool's day prank this week which the company claimed was changing the name to volts wagner with a t g or sorry a To signify that electric ambitions The guy unraveled on april fools day. When they revealed it was a prank and vw acknowledging that there will be no renaming. A volkswagen According to the detroit bureau website the problem is the vw is struggling to rebuild his reputation off the damage of dieselgate. Now it's been willing to lie and least play fast and loose with facts. Not many folks were amused. The i m mentioned it on this podcast by the way i didn't really catch. It was was a teacup but let me quickly explain to you. I sometime a week before. April fools or whatever this You know there was an apparent leak. And i'm doing this in air quotes now a leak. Well always be careful when things accidentally get put onto the vw website. And then take it off immediately but not before they were found by somebody posted on social media then vw out with a tweet of their own saying yes. That's right you've rumbled our ruse. You discovered us. Oh my goodness we have to admit it. We have renaming volkswagen of america. Two volts with a t volk but volts volts. Vogg because we're going to be an electric company. I thought i didn't think it was april fools day by the way when i first saw it. I thought that's cute. Cute social media post. I would run in marketing. So i would say you know maybe on social media campaigns you know volkswagen becomes volts wagner with a team maybe like color at blue lightning bolt. Something really key marketing phrase. I would have done the same if i was working. Volkswagen does it. Hey we could be volts logging but what implying whilst they were gonna rename the whole company. I saw that in one of the articles. Like in the automotive press. And i just i'm being wise after the event but i wrote it off but i'm not talking about this on my podcast because it's clearly bs and they're like yeah they actually gonna rename the whole company but not the whole company own volkswagen of america. Which was the first red flag. They would never do that but also how many bits of paper have the volks vogg with a k. on how many. Pdf's how many signs. How many big illuminated signs outside dealerships. How many badges inside cars. How many billions of pieces of car a stamped with that word on you know stamped into the metal cop policy etc. They would never in a million years going to the company but the minute one person reports it we seem to be living in a world now where the media and i didn't i didn't talk to the story festive. I've talked about it. The everyone's more prepared to be wrong than lights. And so once one person went with there was washington post new york times and the automotive press went with it. It was clearly it was it was always a fake story in my view and i'm not being wise after the event but here is the problem that i here's where i am sympathetic. I have a couple of friends that do work and you know. Us automative media. This is such a bunka story. They told me personally. And i'll just recount the story at least seventy one of the guys on a very senior in a news. Organization heat cools the press office his contact and a good friend in the press officer volkswagen america and said look you three days early with well as at best a pretty gb april fools joke. But this is april fool's right and they said no. And so when you have your press contacts the people you've worked with for years and bill and they lied to your face and say no. We are changing the name of volkswagen america to votes logging of america. He has to go back to his staff and say look. I've called and said on the record or off the record mind you can tell me in confidence will go along with it if april just tell me is it real or not because it seems kind of fake and was told to his face. No this is real promise. Hundred percent and that's where many of the journalists have been so upset. Now volkswagen about to come out that chief executive in america he runs w america. Scott co has said. Hi i'm gonna hold my hand up and say i'm taking responsibility for this. Journalists noting sources within vw participating in the prank and openly lied on the record off the record to their faces is an issue for vw. isn't it because local the reputation for telling the truth. And i do know but it does hamas reputation the next time you know you wanna get the media on board with something. It's just the way the game works. Sometimes you got call the media and say story here but you can't talk about it until tomorrow will this time. There's an embargo publish it till midnight. Demi favor you know all the media can come and test drive a car. But you can't talk about it for a week. Come out because you know we call it however one coming on the same day you play that game. You go along in partnership with with media contacts. And they've destroyed that trust and so i didn't affect me talk about it. Saw plenty of uk publications kind of hop go with it and be like we still don't quite believe it by the american. A big news organizations just went with it like it's a shame it's a shame it happened. Shameful vw shame fell for it. Not even that good a joke but it's actually acute play on words like it's the same ruined that now. Let's move on all toyota and subaru planning a performance. Ev well a if you look at this forum a user on the gret six form has found. Some patents filed by toyota together detailing a new electric caa the body and structure. Looks like it's going to be hot. Hatch being co co-developed between the the two could be a new platform man on the forum. They were look at the patents and looking at according to boswell. Rumors have been brewing about a jal corolla an all wheel drive subaru's performance vehicle as co ventures most likely hot hatchbacks. That would be any reference to motors in the patent is a traction motor. But it's clear pattern for an electric vehicle and we'll wait and see that you know. They're going to catch up to turn subaru increasingly falling behind the rest of the pack especially toyota. who who. just don't let go the early. They that first mover advantage in hybrids. They come that. Innovators dilemma isn't it. They need to to to kill off what they were. Good app to to move onto the next thing next audi explaining their decision to favor. Dot com audi says a greater freedom to develop new technologies in the dakar rally. Was one of the key. Reasons white quit formula. The news coincided with audi launching two new motorsport programs returns and lebron twenty four hour an l. d. h. sports car racing and an electric project in the dot com rally. Alex expanded on that decision to join doc saying it was lured in by the technical regulations which giving it complete control over designing electric cars according to one dot com that said it's in stark contrast to formula a all the teams use a spec chassis inspect batteries supplied by the parties. Even loose it in that previous guys as it before lucid lucid making the making the bits for the formula recalls they've got form that dot com rally promotes said during january's events. That's is betting on ev technologies in the short term mid future goal of moving to electric racing by twenty thirty in dot com. Next the mercedes benz s could have tesla little bit worried. Always be careful with these stories. Because i think test a worry too much about the competition that own on that pretty good as well but recently talking about mercedes benz plans to introduce full puree vs by this time next year so tests that will be facing the most competition ever faced at the top end of the market for those real high end. S is an xs that tesla. So there's the s sedan plus. They'll be the e sedan and as she versions of the us in the and all sitting on this new avio new platform from mercedes-benz battery. Pack is going to be one hundred mates kilowatt hours offering four hundred seventy nine miles or seven hundred seventy kilometers of driving range. That's on the european sexy european. It's china reusing wwl's vp now as well. So that's on the world wide testing but of course americans use the epa which is can be more realistic but it can be wildly wrong as well like with the porsche. Tycoon but often a bit more pessimistic. So it'd be quite four seven nine miles in the us Easily beats the current. Long range tesla model s having its refresh to the model plaid plus. But that won't be out for at least a year now scheduled mid twenty twenty two using those new cells from tesla and so although do five hundred and twenty miles you're white a year and a half to get it whereas the mercedes benz e is coming out later this year so rather rarely tesla on the back foot this time but then of course when the car comes out. It'll smash everything in the meantime as lucid with the air and the lucid. add doing five hundred and seventeen. that's crazy five one seven miles. I can't wait to see. Some of those test. Drives come out on youtube next. Amg the loud brash noisy. Bits of mercedes Vescio talking about future. A lot of goings on with dime la the moments talking mercedes-benz. Img and this week. They took the veil off. Their new platform is a plug in hybrid platform. Because they don't wanna give up engines. Because i think about Amg mercedes the whole point of img's really which is the tuning. Bit is too loud and brash. Earn noise and of course you can't do that with all electric plug in hybrid platform the ceo. Philip shaima took time to talk to car and driver saying his task is to move. Img electric era talking to a younger more female audience base butts. He says we will not be politically correct. That's interesting of course. Img is all about just drama and theater and loud exhausts which often no interesting mix was about the dutch plans to put a million charges in by twenty thirty The netherlands discover they need one and a half million extra car charges by the end of the decade. How do you do that. Static all installed well. Those charges needed over half a million private charges installing them as a concern for private parties. But nearly a million of the public semi public charges says clean technica. And how do you do that. When a third of people not able to charge off streets well you do with the coordination of local municipalities when ordering a pure electric in the netherlands. You can also order a curbside charger now. With lucky arrives around the same time as your car arrives. The municipality gets involved and puts a curbside charger as close to. Your house is possible within one hundred meters the red tape the paperwork all taken care of to ensure that you can charge your car if you go straight talking. That is brilliant. I didn't know about this. The netherlands plans to go from one hundred sixty six thousand this year last year in total two million and they have serious about it and i love that but there is a change to the contacts rules. Mrs kind of funny because yesterday on the podcast we were talking about cbs but they have changed the car tax rules that which is seen sales really go down and an audit mind the negative story on this podcast because it's kind of reality isn't following changes in tax rules company the car association a by told in total Four and a half thousand electric cars were sold in the first three months of the year down fifty percent on the same time last year. Bad news the dutch. Ev buyers. of course a lot of them were loaded to the end of twenty twenty company count. Drivers had to pay income tax of eight percent rather than twenty percent vichy which is as diesel which is crazy. Why have we got the same tax rate on visas. Diesels in the netherlands. So that seems a bit odd. It's a tough game. Isn't it but we tried to out together high in here in the uk by the way They are trying to also work to get more. Private buys to buy eady's Just four point. Six percent of privately bought cars were puree vs in all of last year here in the uk whereas nine percent of business cows were ev's so you get households. It's more electric cars. A third of the houses having off street parking so you've got to get more public charging points on the road and the sem mta. Which is the motor manufacturers lobby organization lobbying for a reduction. Vat funnily enough as we talked about yesterday. Coincidentally on this podcast a reduction in in vat compared to diesel cars next. Here's a cute story that was published on the first of april another reason. I hate april fools. Because i don't know if this is a joke but the drive website published on the first of april. They talked about the italian job. The remake in two thousand and three not the original classic italian movie but the terrible remake with marky mark and shelley's thorough they electric minis in that movie The the minis rather to be electric because the production team with a three cooper s cars. We're told by the city of los angeles. You can't go on our subway tunnels because they drive through the subway tunnels in them. And he's in the remake of italian job With fumes coming out so no we allow that off. We make them electric. They said yes. You can do that so back in two thousand and three. They were probably the only three electric minis probably in the world. Maybe if you me projects or something for the movies if you ever get to see that film which you shouldn't because it's terrible but guy watch a clip on youtube and save yourself two hours of wasted time. Just watch that scene where they're going through the subway. This article says that they have to invent electric minis to do that scene. I hope it's not april. Fools joke seems believable. It wouldn't be funny if i did make the story up. I wanted to be true. Little bit of trivia for you final story today the moment that vw decided to go all in on electric cars. It was october twenty fifth thing and it was one month off of the company confessed to rigging diesel cars and legally high admissions at least in the uk here. They've never admitted it because well actually there were no rules here to break. We didn't think anyone would do something as stodgy what they did. So never had the rules. Full them to break broken no rules as they will. I'm sure would want to remind me to say but in the us the rules were there. They did break them and they have had to pay billions thirty four thirty five billion. I think their pocket so far because of dieselgate the executives were shellshocked and they all gathered a month off these okay in the brick clad high rise office building topped with the big vw logo. The looks over their main factory. Invoice bike hub. At dece at the time was head of the vw brand now of course to be chief executive. The group presided over one meeting off hours of discussion. What came out of that meeting. Was they decided to shake off. The reputation of being this cynical polluter by moving two zero emissions says the new times the final commitment the volkswagen night on that day when sales were minimal. Remember you twenty fifteen either. He's not even thought about seriously by most people now buying off because all of that investment the companies now rolling out and very quickly align and many many across the groups go doesn't say etc of pure electric vehicles designed from the ground up running on batteries with more interior space more appealing than gasoline vehicles. Silent to run cheaper fuel more fun to drive and it was that moment they decided. I didn't know that i never read that story before. So i thought. I'd bunga in the podcast that i as a cute little now. You know husband rights question of the week with my ability norway dot com what. Ev do you wanna see your favorite carmaker launch. Which they haven't already brand new question of the week this week send meals on email. Read them out on sunday. What do you want to see your favorite comic launch in electric form which they haven't done all ready. My dress is hello. Avian use daily dot com. I do appreciate everyone on patriot. Push the hand in that pocket for five dollars. Ten dollars to push coffees a month which would probably not getting does a bit anyway and supporting the show financially. I couldn't do that. Those individuals on you may be thinking and our premium partners get daily mentioned phil robertson electric future bride crosby porsche village in cincinnati audi of cincinnati volvo cons of cincinnati national charging dot com and aloha charge dot com derek riley and his view on youtube channel richard. Rsvp dot cut it uk for buying of selling he in the uk on e. mobility norway dot com. Have a good say tamara remember. There is no such thing as self charging hybrid.
Glut of Cars on Dealer Lots Could Benefit Buyers
"And. With what's news from the Wall Street Journal. I'm Jay are Waylon in New York after several years of strong car sales now dealerships have glut of vehicles on their lots. We could see some more production cuts, although it doesn't seem like they're forecasting too much. And we could also see more discounting to try to move these vehicles off the lads that's journal reporter Adrian Robertson, Detroit. She'll join us in a moment on how consumers could benefit I some other top stories army general Joseph Votaw, the top military commander for the middle. East told the Senate Armed Services committee Tuesday there President Trump did not consult him before announcing the withdrawal of troops from Syria. You also added that despite Trump's assertion during a Sunday interview that US troops will be staying in Iraq in part to as he put it watch, Iran. Military officials have not received new orders to change the military mission there, which is focused on these law McStay terror group Goldman. Saks plans to make cuts to its commodities division after a months long review showed the business uses too much capital for two little profit. The Wall Street Journal reports cuts to the commodities business or among a series of plan changes that executives will present Goldman's board later this month. CEO David Solomon is reexamining each of Goldens businesses, looking for cost savings and more profitable uses for shareholders money, and in response to the breakdown of a Cold War era nuclear treaty with the US. Russia says it is working to develop new missile systems, including a long range rocket that would travel faster than the speed of sound. Russia's defense ministry says it aims to develop a ground version of submarine-launched caliber system with a long range cruise missile as well as ground-based system with a long range hypersonic rocket. The defense ministry says it is taking retaliatory measures to what it describes as US plans to create land-based missiles with a range of. Than three hundred miles over the next two years still to come cars piling up on dealership. Lots does that mean now's a good time to buy a car? That's next. The past several years have been happy days for the US automakers. But now sales are turning a corner and dealers are seeing a glut of cars on their lots. What does this mean for consumers? We've got Wall Street Journal reporter Adrian Roberts on the line from our Detroit bureau with some answers. So Adrian their around four percent more cars on lots than there were in December and pretty much throughout two thousand eighteen so we're up in inventory here. Which normally I think in the past two years sales have been at record highs or near record. So that would have been okay. But this year is kind of the year that sales are expected to drop off. So we've been above seventeen million sales since twenty fourteen that was the last time it was under seventeen. And now that we're heading into this sixteen million territory for sales, the inventory doesn't match. It's more that's inventory, we've seen when there have been record sales. So it's it's gonna come down to how our auto makers can handle this and in the past. I they've been kinda chastise for leading up to the recession in the bankruptcies of Chrysler GM. They would just push inventory dealers dealers. Really, we don't need this. So they're showing some restraint here, and that they're not putting on these really deep discounts and they're not selling ton to fleet just to get rid of cars. But what this could mean is production cuts, and we saw a little bit of this last year with with GM saying they're going to end production at five factories North America. So we could see more of that moving forward here. You did mention in your store that even with the glut of cars on the lots automakers plan to build about seventeen million cars in North America this year, that seems like a lot given all the cars that are sitting on the dealer's lots. That's what this this alum Seattle motive is forecasting. We're still gonna see seventeen million in production, which is about what we've seen in the past two years. So something's not adding up. It's it's the math doesn't work here. So. We could see some more production cuts, although it doesn't seem like they're forecasting too much. And we could also see more discounting to try to move these vehicles off the lattes or or selling more to fleet to just kind of get rid of the not get rid of them. But but to sell them in take some pressure off the dealers in terms of selling them at retail in your Wall Street Journal store, you mentioned that higher interest rates and better deals on used cars or at work here can just explain that of it. New vehicles are really expensive. They are tapping thirty five thousand dollars, then that's an average and the average payment on a new car loan was it was five hundred fifty dollars last month. So it's really pushing a lot of consumers out of the new vehicle market, especially as interest rates rise. That's makes it more expensive. And and there's a good selection of us cars, and it's because a large part of the car market is going to leasing, and you know, at the end. Of two three years of your releases up that car sometimes will go into the used car market. So there's these these barely used used vehicles that are really attractive to people. So that's part of the reason why sales are expected to drop off in twenty nineteen and why they might further drop off and in the following years. So if I'm a consumer, and I'm looking to buy a new car, not necessarily a used car. Does this tilt the balance of power in my favor because of the dealers twenty get rid of these cars on their lots? That's a good question. I think I'd wait. If I was a consumer, I would wait, and I would see how this plays out because right now incentives or discount the on a car. The automakers aren't offering a ton of them. So I mean, it's still a good deal. You're getting on average thirty seven hundred dollars off a new car, but that's less than it has been. So I think as the year move moves forward, we could see some more movement here in terms of car companies saying, okay, we're going to need. Discount more because we have all these cars sitting there in dealer saying I wanna make the sale, let's get it. Let's get moving. So. So if I was consumer, stay tuned. Let's good advice. That is Wall Street Journal reporter Adrian Roberts. Joining us more Detroit bureau Adrian, thanks for coming on the line with us. Thanks for having me. And that's what's news. I'm chair Whalen in New York for the Wall Street Journal.
NPR News: 06-29-2021 7AM ET
"This message comes from npr sponsor. Virgo your family. Reunion is more important than ever. That's why virgo has whole vacation homes for the whole family. And just the family no shared room or spaces. Download the virgo app. The time for getting back together is now live from npr news. I'm trial snyder. Search and rescue operation at that collapsed condo building and serve side florida. This now in its sixth day it's slow. Work described as deliberate and treacherous to additional bodies were found yesterday. Raising the confirmed dead to eleven. Npr's jasmine guard says scores remain missing. There are about one hundred fifty. People that are quote unaccounted for complicating. The search efforts are thunderstorms and stifling. Heat at a press conference last night chairman of the miami dade county commission. Jose the us. Think of the rescue teams from around the state as well as crews from israel and mexico to assist tall so the clouds remains under investigation. But the focus is on structural. Problems identified three years ago in an engineer's report released by surf. Side city officials. A federal judge has dismissed two major antitrust complaints against facebook. npr shannon bond reports. The decision is a blow to the federal trade commission and state attorneys general. Who were pushing for the court to up the social media giant the federal trade commission and forty eight attorneys general sued facebook in december. They accused the company of crushing competition by swallowing rivals including instagram and whatsapp. But the us district court says the prosecutors failed to prove facebook has a monopoly and social networking and that the state's waited too long to challenge. Its purchases of instagram and twenty twelve. And what's up in two thousand fourteen however the cases are not over. The judge is allowing the states and the ftc to file new complaints against the company shares of facebook which is among npr's financial supporters rose on the news sending its market cap over one trillion dollars for the first time shannon bond. Npr news smooth national hurricane center says the remnants of tropical storm danny could spark flash flooding in northern and western georgia into central and northern alabama today danny weakened into a depression as it came ashore near hilton head south carolina last night in the pacific tropical storm in rega- also losing steam enrica expected to reach the southern california peninsula late tonight. Israel's new foreign minister is in the united arab emirates today. The first state visit by a high level israeli officials since the two countries normalized relations and pop tennis reports from jerusalem. Foreign minister your lupita scheduled to meet with his emirati counterpart today as well. As representatives of jewish communities in the uae lapierre will also inaugurate the first israeli embassy in abu dhabi and the first consulate in dubai in the nine months since israel and the uae joined the abraham accords which was brokered by former president. Donald trump both countries have signed extensive trade deals and tens of thousands of israeli tourists. Tourists have visited the uae. Five montana's npr news jerusalem. This is npr. After nearly eight months of fighting. Ethiopia's government has declared a ceasefire in its t ri- region and rebel troops. Say they are back in control of the regional capital. A government statement says the cease-fire will remain in effect until the farming season ends of fighting in to grind erupted in november. Thousands of people have been killed and many more have been displaced united auto workers union board members have elected ray curry as unions next president alex maclennan of member station w. d. e. t. reports. The announcement comes days before outgoing president. Roy gamble is set to retire. Ray curry will serve out the remainder of gambles term which runs through june of next year. Paul eisenstein his publisher of automotive website. The detroit bureau. He says a priority for curry will be rebuilding the ws reputation after a scandal that saw several of its leaders convicted. So you'll have to deal with that you'll have to rebuild the trust of its membership. But he'll also have to starts setting up. The union for the next round of contract talks raker. He has been serving as the united auto workers secretary and treasurer since two thousand eighteen. His first day is union. President will be delight first from pr news. I'm alex maclennan in detroit. New york city planning to resume counting votes today in the democratic primary election for mayor the city's board of elections expected to announce the latest vote. Tally sometime this afternoon. Book on Brooklyn borough president. Eric adams currently has a tentative lead in the race but it remains possible that two other candidates could come out on top under the city's new ranked choice election system. This is npr news.
The U.S. Auto Industry in 2019: Twists, Turns and Bumps Ahead
"Podcast is brought to you by knowledge award. All this month. We're featuring series called two thousand nineteen to look ahead today. We're going to turn our attention to the auto industry in two thousand eighteen carmakers announce the end of many lines of sedans, coupes, to focus on more popular as these trucks companies like four General Motors and Toyota are looking to spend more resources on a ton of vehicles and electric cars. They're also dealing with rising interest rates and trade tariffs that impact steel prices as well as ails in China the new year started with the auto shows, including the big one in Detroit. But if the disappointing reviews coming out of the motor city are assign twenty nineteen could be a rough year for auto companies joining us to discuss this here in studio John-Paul mcduffie management, professor here at the word in schools. Well, as director of the program on vehicle and mobility innovation at Warton's MAC institute. And also joining us on the phone Paul Eisenstein publisher and editor of the Detroit bureau dot com app. You knew your John Paul great Siham Bank, seven in good veer, new your Paul great to catch up with you again. Great to be with you. So I before we I want to look back in a second. But how do you feel John Paul about twenty nineteen for the auto industry because we just laid out there were so many different things that are in play here. Yeah. I think turbulent that's not unusual. A lot of things are turbulent these days. I was thinking through the set of issues that might come up today. And I felt that for each one. There could be a positive spin and positive angle on it and a negative spin a negative angle on it and with a decent amount of uncertainty about quite a lot of them. So I'm sure we'll get into that. But I don't have an overall optimistic pessimistic. I just think we live in interesting time Serbian time when you when you think about what you've known about the auto industry over the years. How unusual is that aspect of having both a positive and negative potentially on almost everything you see? Yeah. I mean, it's not unusual, but the range of issues that the current auto industry is dealing with. I think is a perhaps a broader range than I've encountered most of the years I've studied the industries, so both the technological changes and the new things like electric autonomous vehicles. The. Current state of trade and the threats of tariffs. You know, we had a long period where there wasn't really a big kind of issue. We have a lot of concerns about the strength of various economies, the US, but also China, you know, actually think as big a concern as the tariff risk is the risk of China's economy slowing way down when that's been a main engine for a lot of the goal bottle makers is is pretty huge. And so and so forth down the list. You know, there's just a incredible range. And I wonder what it's like to be senior executive in these auto companies and have to deal with this amazing complexity and this amazing uncertainty. Paul what are you thinking about for twenty nineteen? Well, it's it's a real. It's a real guess right now what's going to happen? And I say that because you may recall we spoke early. Well, this time last year, the general consensus was twenty eighteen would be year of decline in the US market and China would grow slower much slower than a hadn't past years, but it would grow. Well, exactly. The opposite has happened. The US actually gained allbeit by just a hair's breath in twenty eighteen and China posted its first decline that we've seen since the explosion of that market back around the turn of the new millennium. So most people expect the China will rebound a little bit this time and the US market will again slow. I think an awful lot depends on what happens with that Philo in the White House. He is of course, declared war on much of the world in this continuing to talk about ramping up his trade. Wars as you know, there is there are some key negotiations about that will affect the auto industry with negotiations with with the European Union. So we just don't know we just don't know what what Trump will do. But we we can say that by and large the Dempsey's Terry well for the auto industry. Well, when you think about China, John Paul most recently, we've had Alon musk and tesla say that they're going to build the factory over there. And obviously that's the next step. He believes in trying to brand tesla he got the approval for the model three over in Europe as well. So when you think about that market, at least, tesla is is really trying to even though they have various issues in terms of their structure economically. They are trying to make a large step forward in twenty nineteen in terms of building that brand out. Yeah. Yeah. You know, Tesla's always out there, the risky edge of something. And I think building a brand new factory in China at this point, given the generally stretched situation of their finances cetera. But you know, again it several new features. It's the first time a foreign companies being allowed to build a plant on its own without having a joint venture partner in China. That means less chance of you know, knowledge leakage and having to share formation, but it also means the risk is not shared anymore. But you know, China is pushing with the government pushing on several fronts to be the biggest electric vehicle market in the world. And they have a lot of levers at their control to make that happen, including being able to require that for Nata makers make a lot of electric vehicles to sell their in the big push. They're putting on their own domestic. So it's not so risky for Alon musk to figure that building capacity there. There that they'll be demand for electric vehicles. And you know, a lot of the Chinese startups that have come in to try to compete at the high end have struggled a lot fair day futures one that had seemed to be amply finance and have a lot of good talent. And they've had nothing, but trouble. So I think that's actually it's a risky bet to make that big investment. But I think as a bet on a market that's going to have electric vehicle demand, not so much. But it seems like Paul that. If you're talking about electric, and even Thomas that we have the opportunity, I think to see a fairly good leap Fortier because of all the money that has been invested, and seemingly the want of almost every automaker here in the US and many around the world to really look at those two sides as the future of the auto industry globally. I think the general consensus of the street now is that electrification is the way of the future. And you're seeing you're seeing some growth that belies what the critics and sceptics have been saying over the last few years. There's no question that globally sales of of all electrics, which include hybrids plug ins and pure battery electric vehicles still runs below the five percent, Mark. But when you start to look at the growth just to the last seat of very definite and increasingly sharp upward curve that tells you you avoid the electric market electrification if you will at your own peril, China is no question a place. You have to be looking at electric if nothing else because they've. Very new generation vehicle rules, which will require you to produce a certain level of plug based models that can operate at least in certain conditions in zero missions moat. And we're going to be seeing the same thing basically here in the US because of the twenty twenty five standards, despite what the Trump administration has said it was going to roll them back. Nobody seems to believe that will happen. And what's interesting is that none of the automakers. I spoke to our have spoken to a belief that they're going to adjust their their product plans to any great degree telling very very telling has been the announcement just within the last week. The Ford Motor Company will be launching an all electric version of the big F-series pick-up that is a huge that's a best selling vehicle and in the United States, and that's gonna have an electric version and. I break a story. You can find today on the Detroit bureau dot com, but Chevrolet and general GMC the two to heavy truck brands from General Motors are working up electric versions of their pickups Silverado and Sierra. Eight four four Wharton is the number of you would like to join with your comments or questions eight four four nine four two seven eight six six or if you'd like send us a comment on Twitter at biz radio one thirty two or my Twitter account, which is at Dan Loney? Elo. Anyway, twenty one jump on when you think about the business side of this for second. How do you think the the US auto industry is set right now? And I look at it from the perspective of of employment for a second. And I mentioned GM obviously, making some cuts the Hamtramck plant is gonna get shut down. But then you have Volkswagen coming in and committing to add. You know, eight billion dollars. I think it was or million dollars. It was and a thousand jobs at a plant in Tennessee. So it seems like that there is some struggles for some companies, but there's also the potential for some growth areas. Well. Yeah. Absolutely. I mean, the the GM layoffs got a lot of press. And of course, a lot of attacks on GM and Mary Barra from from the president. It wasn't a big surprise. If you simply looked at how much demand for the products made those plans had slowed way down over period of a couple of years, the general shift away from sedans to SUV's, and I think the hard won wisdom that it's better to make these cuts in good times than wait for bad times. And when you may have actually made them worse. So this kind of adjustment of employment to the market demand is going to keep going on. And of course, it's a global industry. So some productions moved out of the US, and you know, there may be employment growing there for the four Nado companies. The US is still the biggest market in the world for them or close with China. And so to come here to build here to build brand here to build a reputation here still make sense. So there's the Volkswagen investment, but Mazda nounce that they're going to do joint plant together in the southern US, which you know, they may have done partly. To win political favour, but you don't make a big investment only for those kinds of reasons they've got demand for those vehicles here, and it's a way to be protected against some of the risk of tariff. So, you know, employments going to go up and down across plants across companies Jenner. It's the overall picture of of growth for the industry in the world Konomi that probably these companies are really watching Paul. One of the big trends, I think we have to watch this coming year is is how automakers start to pair up. It's interesting that Tesla's going the China on its own essentially, we're as almost everywhere else you see in the world manufacturers continue to. Spread the cost by picking up. So that's one of the things. I am watching this year. We have the Honda VW. I'm succeeded. The Ford VW deal, the Honda General Motors deal Toyota, Mazda, which surprised many folks, and so on and this is just going to be the way of. World not gonna see many of these alliances become fulltime partnerships marriages, if you prefer the other element that we're going to be seeing is that these are limited Mun anti monogamous of venture. So great example. Toyota for most of its existence shied away from anything tying it to another manufacture. But just in the last couple years, we're seeing up with BMW Mazda Subaru, and and so on and this is just going to be one of the things I'm watching. Well, it was continua trend in two thousand nineteen and beyond and toy a announcing recently tying up with with Panasonic in terms of the development of electric batteries, which is the neck Botherway, which by the way, the company that partnered with with ten. There's a great example of these marriages, not Menachem jumble. Of course, also paint the longtime supplier for the priests. So that's a relation that goes way back. Yeah, I think, you know, full Sergio Marconi who passed away this year was famous for many things his turtlenecks that he always wore. But also for predicting that the industry was inevitably going to have to consolidate to a small number of big players because he felt scale con Amies it was incredibly wasteful capital to have all these developing all those vehicles. Well, there's a long history of failed mergers in the auto industry, the Nissan Renault, and then eventually Mitsubishi alliance was what we all pointed to as the most successful long-term relationship that wasn't an outright merger. That's obviously troubled right now. Although I think still has some inherent strength. They can figure out we. I'm sure. We may talk about that the Carlos Ghosn scandal and the the new governance and bounce a power between those two countries. But I think the auto I mean, I've always thought that consolidation. Do small number of companies was unlikely that what was more likely would be a whole lot of projects in which costs are shared where it's advantageous for the partners. Sure. And so exactly as Paul described. You know, you get to companies work together in an engine project to improve Joe had a big diesel engine project in Europe, which they did for number of years worked for both partners, then onto the next generation technology. They disbanded it. You know, Toyota, how to deal with Volkswagen to make pickups a long time ago, they moved in and out of that you could see these failed projects or you could see them as very pragmatic often short-term calculations to deal with cost pressures needs for technology needs for product in the short term. And I think it's actually a healthy adaptation to all the volatility uncertainty as opposed to the big bat of. Like Damer classroom merger which we know eventually failed. Well, wouldn't it? Also, you can take it from the perspective of some of these partnerships that may work in the short term. But they don't go very long is that you're testing a next set of processing that may lead to something five to ten years down the low down the road, either by yourself or with another company. Yep. Exactly. Yeah. Exactly. One of the things that you'll see is that many of these joint ventures are what what they refer to as pre-production you've seen that with General Motors and Ford when they tear it up to develop a new range of these super-efficient transmissions developed, some of the basic technology that allowed them to build Newton. And at the -ffective cost. But as they got closer to the stage when they could migrate from the from the CAD Cam designs to actual manufacturing. They split off. And there are significant differences between versions of each of the automakers produce, and that's something. You see street and for good reason, especially when it comes to products Toyota, and Subaru you may recall developed a pair of low end sports cars the Toyota eighty sixes. It's now called the soupy ours e but they're all but identical. What what in the industry, we derisively call badge engineered. Break teamed up with BMW to develop a high end vehicle return of the super it made. Sure that that vehicle looks extremely different from the BMW version disea- for the Toyota super which returns to the US for the first time in twenty one years is a coupe and the the m w Z four is a roadster, right. I wanna switch this for a second Paul and talk about the the growing market. It seems like in the us car market for a second because we see now if feels like because of the prices and the way that they have risen a new cars over the last few years that there is more and more of a market for the consumer out there for the used vehicle whether it be a two year vehicle coming off of a lease a four or five your vehicle, obviously seeing more companies that are dipping into this market. They're trying to innovate in terms of being able to sell these eagles and deliver them, right? At your doorstep some companies, how is the growth of the used car market, especially in the last couple years either going to continue or maybe level off in twenty nineteen and maybe the next few in your mind. Well, the best thing that can happen for the used car market is to continue to see everage transaction prices. Price vehicle when it rolls off the lot including discounts and accessories. Those prices have gone up to near or actual record levels. What are we paying between thirty five and forty thousand dollars today for a typical vehicle and that is pushing a. Mendosa potential new car buyer market out of out of range. They'd simply can't afford it. What's interesting is? I'm talking to more and more people who can afford new cars, they say, why should I why don't I just get these so called certified pre-owned vehicle typically were were off lease which means that buyers kept real good care of them because they they would otherwise be penalized on the return. They're like I say a year or two old very often identical to the model. That's in the showrooms new vehicle right now, and they get like new. Aren't used thousands of dollars less. So that that has become something industry. Cre- that's become a threat to its own new car market, jumble. Yeah. I mean, I think from a dealer point of view of one of the I guess relatively well known secrets of dealer economics is that new cars have lower margins than us cars, which have lower margins than repair, whichever margins than aftermarket parts. And so to the extent that the dealers are the ones in the certified pre-owned vehicle market. They probably do okay out of this. You know, it's we observe this. Prolonged period of pretty darn good auto sales in the US. You know, even as Paul said a little bit higher this year than last year. And of course for a long time. We said, well, it was the depressed manned during the recession and then come back, but to me it's head more legs than that. And I've wondered how many people have decided that you know, there's so much new technology new safety technology other kinds of things that I want access to. So even if my older car is okay, I'm going to. To invest in doing that. Maybe that's propelled the last couple years of somewhat higher than expected demand. But at some point you can go into the used car market couple years old, and you can still get all that new technology. So I think that could be a piece of what's happening why not get the twenty seventeen which had the full set of safety future. So unless there's a bunch of new safety stuff rutan's features that happens new new technologies. Do always drive a piece of demand. But if they're rapidly in the used car base than that helps us car market too, Paul. Yup. Exactly, there's all sorts of factors. I mean, jump just nailed it. They're all sorts of factors that are that are causing a lot of shift in the market who is buying and what they're by one of the things we'll be watching very closely this year. Is the the ride sharing and car car-sharing business? One of the most significant developments of twenty eighteen occurred very late in the year. You may recall when Waymo the Google spin off announce that they were going to go to an autonomous ridesharing service called Waymo one out in snot, quite the breakthrough that some people would have you believe the fact is for safety reasons, and because it's turning out to be much more difficult to develop truly autonomous vehicles. Oh, each of those each of those cars feel by backup quote unquote operator behind the wheel ready to take over and emerge and emergency John craft Jack the former Hyundai chief who now runs Waymo has backed off a bit from his glowing forecast that they would be having fully self-driving vehicles with. No, oh in them. So we don't know exactly when that will happen. And in fact, if anything it's actually adding cost you have a more expensive vehicles and a driver behind it. So that that's you know, that's the caveat here. But if they find out that they're able to really make this work if the drivers don't have to constantly intervene. They make it approval within the next year or two to start fielding driverless vehicles completely driverless and that changes the equation because you take the driver out the biggest cost of a ridesharing vehicle and the ridesharing service goes away. Suddenly, you potentially make it possible for companies like Waymo one goo- Uber lift and some of the others that are coming to actually undercut the idea of owning vehicle and particular particularly in urban markets that may get thousands even millions of drivers to abandon the idea of personal via. Colona shit. If feels like John Paul and we've talked about Thomas now for the four and a half years we've been on the air with you have salute. But it feels like and correct me if I'm wrong, if feels like we've made pretty significant steps in the last couple of years on the technology side. But also, the understanding I think by the public, and maybe the government is well that this is a technology that is coming that at some point. It's going to be there. And maybe it is even a little bit sooner rather than later. And I mean, it's always been a topic filled with a lot of hype. And so at the hyped end of expectations. I think this year was a year of a little bit of realism and retrenchment. There was the Uber death in Phoenix. And all that. But we're going to see more and more experimentation, more and more pilots. If you take the percentage of total vehicle miles traveled is it going to be a huge percentage. No. But the pilots help the companies learn and get better improve their algorithms. And it lets the public see these new things kind of be more realistic about what works, and what doesn't, you know, you're going to find them slow in that they do weird quirky things of stopping at times. You you never would as a driver because that's part of working out. How it how it goes? But all of its kind of slow movement. I think towards both improvement and public acceptance that maybe in a couple years, we'll say wow below the surface things really work celebrating. On the phones in Panama City, Florida. Jason is on the line. Jason go ahead with your question. Can you hear me? Yes. Yes. Go ahead. Yep. Okay. Yeah. Hey, I was curious. You guys see a recession in the car market with used car sales eating up all these new car. Carcelle as you know, we just had this hurricane recently for him on city, and if you go to dealers there, so some new cars that everybody's trying to eat up the used cars because they just can't afford the new car prices. Right. The that was improvisation can have up the leases. And all okay. Jason got Paul. Go ahead. Yeah. That Jason that was exactly the point. I try to make these CPO's certified. Preowneds art such an attractive alternative. I'll be honest with you. I'm looking at one myself my wife wants to get into a pickup because we kayak a lot. And we want something that we can haul. It we can't with the current vehicle. We have we're going to add that and we. There's a very PO as opposed to a new vehicle, and I think that you're seeing that more and more. It's probably one of the reasons that that you growth that we saw during the middle of the stayed in the US new car market has has not screech to a halt the pretty pretty during. So now, by the way, I should say that seventeen million units. Even if we do drop, again, another fraction of a point. Or even a percentage point these are still numbers that are up where you know, what would have been records not that many years ago. But I guess Jason thanks for the call. I guess the question is jump all is that if even if as Paul says, let's say we go from seventeen point two million to sixteen point eight million in terms of new auto sales this year. Does that start a trend because of the fact that we are seeing more companies want to jump into the used car market, and the consumer may be conditioned more to think about that. Because because of the costs that they're having to look at when they're when they're potentially trying to fish for a new car these days. Yeah. I mean, I think it's possible. I think the prices of new versus used makes a big difference that cost a financing makes a big difference. You know, one factor that we haven't talked about for awhile is for a while. Said millennials don't care about cars anymore. They only care about their gadgets, and that's a generational shift. That will shake up the auto industry. I don't know. Now looks like as money get older, they get married. They move out of the cities to the suburbs. They have kids they're buying cars, and maybe their finances now allow them to do that too. So that's kind of unexpected source of demand. Now, maybe they'll go for the recent used or the new, but it's there's so many things, and I, you know, it's a very cyclical industry. Like, you say if we go from seventy two to sixty eight it's actually not a tragedy for the industry. It's almost expected because we've had these surprises that it hasn't made that dip yet ball. Well, I should point out that suppose, absolute, right? What we saw last year was millennials basically safe the industry from a second consecutive year of decline. Every analyst I've talked to said that it was largely an increase in millennial sales that surprise them. And we are likely to continue to see. As they get older. They get wealthier and they can start buying new vehicles. At that said there will be several things that everybody is watching when it comes to millennials and they about to enter the market jen's e and that well, let's see number one. Will they go for used? Vehicle just being smarter about their money tied with their budget. Many cases saddled with with college debt. Secondly, what sort of equals will they buy? And here are two trends, we talked about one earlier, which is the rise of electrification. We'll they in fact, follow through on what high school and college years and actually switched to electrified vehicles vehicles. And also that said, we'll they also go more and more continue the push in into crossovers and conventional sport utility vehicles. Most people believe that trend will continue going forward. But if you manufactures that some of their data suggests that you're seeing younger buyers really just getting into the market buyers saying I don't want my dad hat and some of them are saying give me something that's more like a conventional sedan. Yeah. So there's a lot of uncertainty about. Your they Shen and the next generation will go, you know, it's funny. You say that and I have to end this here. My daughter said the exact same thing about my oldest daughter said the exact same thing about my car two days ago. So I I'm living this exactly right. Where you're talking about Paul great to catch up with you. Thanks again. And we'll talk to you again down the road. It's pleasure to be with. Thank you jump all eighteen to John Paul mcduffie from here at the school applies and Stein publisher and editor of a great website. That follows everything around the auto industry the Detroit bureau dot com for more insight from knowledge of Warton, please visit knowledge dot Morton dot U, Penn dot EDU.
Good Time To Sell Oil Into Rally: Cantor's Cecchini
"This podcast is brought to you by Columbia. threadneedle investments income matters always has always will so when markets make it hard to find trust the income experts at Columbia threadneedle all they know income welcome to the Bloomberg. PNL podcast. I'm Paul Sweeney along my Co host this Abramowicz each day. We bring you the most most noteworthy and useful interviews for you and your money whether at the grocery store or the trading floor find a Bloomberg penal podcast on apple podcasts or wherever you listen to podcasts as well as at Bloomberg Dot Dot Com right now we are looking at markets that are slightly down not perhaps down as much as summit expected after oil prices surged and continue to surge even higher the most on record in the wake of the Saudi Arabian attacks on the or the attacks on the Saudi Arabian and oil production facilities joining us now Peter Cecchini global market global chief market strategist at Cantor Fitzgerald Peter. Thank you so much for taking the time. Let's just start with are you surprised that there isn't a more market selloff in US equities in the wake of this disruption oil production in the Middle East. Yes hey good morning and thanks for having me you know. I the reaction I think is is about right. the broader markets are obviously off overall somewhat frankly offset by the benefit to energy companies with the with the spike in oil prices. the the spike in oil prices itself it doesn't really come as much of a surprise to our target for oil this year has been fifty to fifty five dollars on. WTI but we wrote recently that we expected geopolitical risk to come into play with spikes in oil between sixty and sixty five and in fact quite frankly. I think this would be a time to sell oil the old rather than to buy it. I think Aramco in particular has an incentive to to cure this problem as quickly as possible may not be easy but obviously they don't want to deliver their IPO any longer than they have to so market action seems to be about right in response to this attack but for us you know more broadly. Um mm-hmm we think as we've been saying we're sort of in the red zone for US equities for other reasons so Peter I know last week you wrote a note suggesting that the credit markets might be getting a little bit frothy sense what you're thinking there. Yeah you know we've we've been careful not to overstate this because one of the things that's been going on is the capital flows into US high yield really because there's there are very few people places and the rest of the world on a risk adjusted basis. You can get the kind of return that you can get in. US high-heeled default rates have been relatively low about two point one percent for trailing twelve months and you know with seventeen trillion dollars dollars of negative yielding dad about to China that being incorporates the flows into high yield in the US have been have been pretty pretty pretty strong. couple couple that with the low default rates until one sees cashflows starting to roll over it's difficult to get bearish of high yield however however the signs of froth are there where we're seeing Pik toggle deals come coming out like the corn deal recently. We haven't seen very many of those. I think there were one or two last year but that tends to be a very market toppy kind of event especially when they go to pay DIVIDENDS TO L. B. O. Sponsors and so we're seeing that and even just the issue in volumes of late have been a gigantic with I think last week probably the third or fourth highest I on record depending on whose data you look at so so I think the signs in terms of issuance volumes as well as the form of the deals are sort abs singing to that that's frost and it's just really to me a question of how much longer it can last so then there's sort of a flip side to this which is when you see. Froth Rothen credit markets and a real robust demand that typically is a positive for US equities at least in the short term so do you view this as being potentially constructive even the F. in the longer term not great yeah no. That's that's an interesting point tonight and I would generally tend to agree with that. I think in most cycles when you look at the history of credit it's cycles credit actually tends to to lead equities in the high yield market in particular. tends to be pretty important to that. I think there are some interesting differences disciple bowl one of which is the the dependence of equity markets less so on high yield in more so on the leveraged loan market in particular in my view and we're we're seeing some some real signs of frosted hair as well. You know for example twenty percent of the of the names in the leveraged loan index are now demonstrating interest coverage ratios below one and a half and leverage above seven times which is which is really quite something and we're starting to see a trend in cashflows for those same companies really the growth and cash flows for those companies is close to zero at this point so so yes. I would agree with you in the near term. I'm I would say. Overall credit markets are still providing support but I think in particular equities are going to be very sensitive to returning cash flows especially asleep for some of those levered names and we're starting at least in in the form of the second derivative of cash flow is starting to see that rate of growth slow considerably. Peter thanks so much for joining US Peter Satini global chief market strategist for Canter Fitzgerald joining us on the phone the the United Auto Workers Union is leading its first strike against General Motors in twelve years digging in for a fight over jobs and benefits that could cost the car maker Dealey for an indefinite period of time time to get some more details. We welcome David Welsh Davis Detroit Bureau chief for Bloomberg News located in our Detroit Bureau right now David. Thanks so much for joining us. Just give us a sense of how far apart you think the union and DM are right now. There's a key issue here that I think really has them apart by quite a bit and that is the use of temporary workers. GM wants more of them because they get paid less. They have weaker benefits. They do cut their labor costs overall but you can also get rid of them much more easily. If there's a downturn so it kind of makes the workforce flexible they want fewer are they want more and the UAW wants to not only fewer of them but they WANNA pass to make those people permanent employees so there's not a lot of middle ground there. Someone's GonNa have to give on that one GM had made an an offer over the weekend that had pretty hefty raises in signing bonus. They're gonNA hire more than five thousand new workers so there's some job security and there was a pretty nice offer to start with but the one issue I think is going to be a big sticking point for them. You know I'm looking right now. General Motors share price down three percent and I'm wondering why the the Union is doing this. Now I mean sort of WH- catalyzed this strike well we we waiver agreement human expired over the weekend and this is kind of the one shot in four years. They have to go out on strike and get a really good deal. There's a lot of pent up anger over the plan closing is the GM announced back in November that four plant including a very big one in Lordstown Ohio that president trump has taken a personal interest in so there was a lot of anger there especially in the GM putting out near record profits three years in a row and actually affirming guidance that they might hit that number something let me close to that prophet number again this year so you have a prosperous GM plant closings and and the workers are already pretty angry. They want a pieces of the record profits even if we are possibly headed into a downturn and and this is their one chance to get a piece of this profits while the company still has a lot of money so but that's that's the weather pulling at this point in time so what's the sense here early days of this strike. Is this something that is expected to drag drag on for a long period of time or can be relatively quick issue honestly. I think this less maybe a week because GM did. D- with their first offer that the union really won't talk about yet but GM made public they did address Awad the issues and those issues things like pay things like investing a lot of money and plans for the GM announced as part of this that they were gonNA seven billion dollars in their US plant over the next four years that the words town plant will not get a vehicle to build but they would make a a battery plant it would build a battery electric vehicle battery plant in Lordstown and that would hire some of the workers who I have not transferred out of there already and the plant in Detroit. There was at risk of being close. There's also going to get a vehicle to build so that there were a few bones in there for the workers who are waiting to see what their fate is going going to be but these other issues could take some time and look. There's also a bit of Vaudeville here at the Union. Negotiators have to show the rank and file who by the way they have to vote to ratify the deal. They gotTA show them that. They're putting up a good fight mistakes way to do that and so I thought that part of the story was pretty interesting that the piece that she wrote I do have to wonder though it's been twelve years right. This comes up every four years. They have to negotiate a new contract. This time is different and they're going to dig their heels else in and you said that the deed and part of the backdrop here is the record profits and the fact that General Motors has been closing some plants but you also in the story pointed to a corruption scandal plaguing the UAW as part of what is sort of setting this setting the stage here. Can you give us more color on that sure so there's been a corruption scandal at the union that's gone back for well over the past year and I it started at Fiat Chrysler on both outside Union and management people been indicted and convicted basically giving union leaders graft out of a union training fund in exchange for giving Fiat Chrysler or a more lenient contract that investigation has moved to GM. If slightly different in that the union leaders and current including past President Dennis Williamson Current Practice President Gary Jerry Jones are being accused of stealing money from Union charity funds and Community Activism Funds and the General Fund for this lavish lifestyle they wouldn't in Palm Springs California renting villas for a month or two expensive cigars expensive scotch to kind of crazy stuff so the union and everybody even some of the what's called analysts who watched the union say that they won't really play into this but I think it it does. I think when members don't trust you. You've gotta drive a hard bargain. ticketed deal ratified because the the membership is. GonNa be looking at any deal really scrutinizing winging saying okay do we. We trust these people. They're they're stealing our money to to buy macallan eighteen and some good cigars Why would I trust them to give me a good deal. They've got to drive really hard bargain here. David Welsh thank you so much for being with US David Welches Bloomberg's Detroit Bureau chief talking about that GM news the first strike strike of the Labor Union in twelve years in this podcast is brought to you by Columbia threadneedle investments. The income landscape is changing. Are you search Columbia threadneedle income and evolve your strategy. Ajayi Columbia threadneedle they know income there is that surge in oil prices that we're seeing today and Brent crude at one point it was the most on record is reaching the highest level since May but jumping more than eleven percent the question is how long will this disruption oil production out of Saudi Arabia last will be the implications for the Middle East in terms of Iranian relationships with the US and Saudi Arabia to help us understand it. Let's bring in John Killed. The founding partner of again capital so John. Let's just I get your impression of how much oil prices are rising juvie this as a temporary blip or something that has longer-lasting lasting legs and potentially even higher leg up. I think the response has been somewhat measured even though it was the biggest jump since at the invasion of Kuwait by Iraq back in the day we're GONNA have to see how quickly the Saudis can get the situation under control troll claiming that they can get a good portion of the production back online then they're also claiming that they'll be able to supply everyone as needed out of available inventories he said are in the country the the big thing to watch from here really is what the response is going to be it seems now that the US in a few moments ago the Saudis themselves are accusing in Iran of having done this and it's hard to believe that the Saudis won't respond or the US won't help them respond but if they don't you're gonNA look incredibly incredibly weak so it seems to me that they'll be vulnerable to more attacks and that the security premium in prices only going to inflate John. You you know someone who follows a these markets closely. Are you surprised at how much this facility again one of the larger facilities and we're not maybe the largest facility the road how susceptible it was to attack yes or no look to the extent it wisk was cruise missiles coming from Iran. If that's the case you would have think they should have been picked up by some kind of anti-missile defense at the Saudis have purchased from the US drones are almost impossible to stop and the Saudis are particularly bad at it. This is not the first drone attack I think is most people know on on Saudi infrastructure. that has occurred. It's been going on for months and the Saudis have really done nothing about it. which I have found remarkable they tried to put more pressure on the WHO and Yemen and and do other things but for the most part as far as the direct response goes you know there's been nothing so this day was almost almost inevitable but if you look at the satellite imagery you can see there is unbelievable precision in where these these round tanks that they have their store? The oil got penetrated almost the exact same spot in each tank that are in a row together so high levels fisticuffs and certainly roll the money the Saudi spent on their defense. They should have had some kind of anti-missile -nology at in place here so it's it's it's a remarkable failing on their part so John. I want to go back to what you were saying about how the response and markets has been somewhat muted especially given the backdrop you were just talking about which is sort of a lack of protection protection on the part of Saudi Arabia against an attack like this. I'm just trying to understand the counter argument to that that there's lots of production that can be the increased elsewhere and that the US can increase shale production and this will offset any decline in production out of Saudi Arabia. What do you say to that. I think it's partly right. I mean as far as there being any kind of you know spur of the moment shower sponsor that I don't buy that at all I they've. They've not built that way. We don't our guys don't necessarily gals don't necessarily dial up and down the production in reaction to price. We all know they just plod along pump as much as they can and and and deal with the prices as best they can there is spare capacity out there though because of what OPEC and Russia have done to try to curtail the price lied so we know Russia has spare capacity you a some of the other countries also to the other levers that are out there argument against the greater price increases is certainly the existence of all all this achieved petroleum reserves around the world and China in particular which has almost two years worth of supply to cover a complete cutoff of Saudi supply to China China so you know we're sort of well banked in terms of oil supplies for now the the problem you have though is that this turns into any kind of sort of hot hot war and it's also remarkable. He's just say quick. the fact that these prices aren't up as much much more in light of the fact that we have already lost ran in Venezuela oil well to the global market as well so it shows you just how sloppy the situation has become supply wise in the face of diminishing demand as we were speaking about a few weeks ago John that's kind of I would want it to go. It seems like when we talk about crude oil obviously trying to get a handle on the supply demand dynamics and what had been driving price. It seems to have been a demand side of the equation investors concerns that trade wars and other issues would be slowing down demand for crude but this news coming out of the Middle East brings the supply apply story right back into focus here. What do you think will be the driver of oil over the next several weeks the supply or demand or some combination of the two the situation at all calms down and we're in the situation looked like it was going to calm down just generally with the overtures that were being made to the Iranians by president trump in the past couple louis slide right back down lower. There's really no no two ways about that. The key economic data that we were all waiting for it to China last night for example was horrific again. Seventeen in your low on industrial production growth goes right to the heart of the matter in terms of energy demand growth it just continuing to slip. US China trade war is is really wreaking havoc on these manufacturing intensive economies in Asia and that's oil demand so you know to the extent it doesn't break out into a war and it looks like my sense of it is that it's not going to. It's not going to break out into a war. The trump administration wants to avoid at all costs. They're gonNA take this one too. I guess and no it'll it'll L. stabilize and and had lower until something else more horrific happens so John I just WanNa wrap up with the idea of gas prices in the US and the bleed through effect on the Economy Konami. Do you think that if prices were to stay where they are go materially higher that will translate into higher gas prices in the United States. Yes I mean on the Nymex today. Gasoline prices are up about that over ten percent up seventeen cents a gallon. you'll see some of that ripped through to the to the retail pump over the next couple of days. You'll take longer for that to go through. We're still at a relatively low price at the pump but to the extent consumer start to get anxious or if the price goes even even higher you'll see another. You'll see a hit to consumer confidence and you'll see a hit to freight rates and other industries that rely obviously on fuel for transportation it also at the grocery store. You'll see the pressure veggies things start to clamp Giancarlo. Thank you so much for joining us John as the founding partner of again capital joining us to discuss what's going on in the energy. Is Your market certainly an eventful day with the ongoing trade disputes between the US and China is whips on currency markets around the globe presenting hedging challenges for a whole host of companies can get a sense of how some of these companies are managing currency risk as well as their cash overall all we welcome Marnix guests Wolfgang Coaster Wolfgang Senior Strategy Officer at cairo-based in Phoenix Arizona but joining us here in our Bloomberg Interactive Brokers Studio so Wolfgang. Thanks so much for joining joining US splitter again you know one of the issues with the uncertainty presented by the US and China trade issues is currencies. Give us a sense of how well you you think. Companies are managing their currencies. The currency risks yes so I think that one of the things that we're seeing as unfortunately it's all over the map right. You have some companies companies who do a really good job and the key thing is to actually understanding your exposures really having a good grasp around where our exposures homemade exposed not just on the revenue new site on the on the expense is and what's the net impact of that and then what do I do to manage that properly. That's really the gist of it. The execution of that strategy strategy then of actually putting hedges on etc isn't as hard so as we see these companies doing it the ones who are doing it. Well are the ones who are ahead of the game. I want to talk a little little bit about your company because I find it really interesting and it sort of builds on what we've been hearing a lot. Basically you do liquidity management for companies right and what that means is is helping them manage their cash and risk as well as just in general operations and it's the software that you that you provide. God and I'm just wondering why is this such a growth area that companies are increasingly outsourcing some of the basic functioning of the way they run their businesses to software software such as yours yeah. I think that it's an evolution really over time of how things are going and quite frankly. Treasury and finance are often. The later part is to the stages than sales organizations marketing organizations. Are you sounds like you say exacted like a salesforce. They're typically in the forefront finance more conservative and little bit difficult. GEICO more difficult to open up to that because what you have to do when you help companies at the very basis of it you have to help them get at their data and that's a really tough thing to do. They have these enterprise systems like these. European like an oracle or an sap but now they have bolt on so they have treasury management systems systems as one of our offerings that we also have that help them manage that in the pre-trade and the post trait era so raw data to decision then they'll make make some decisions and actually execute on that and then they need to book that and track those transactions as well and automating that was not easy and quite frankly being able to be cloud driven ribbon made that lot easier because installing those softwares was a very difficult process and quite frankly is a very difficult business prospects so we're purely cloud driven and that's why all of a sudden this incredible growth because all you do is you hook up your API as we do it for you you implement and you're ready ready to go and all of a sudden. You're impacts are the major so you mean we see thirty to fifty percent risk reductions on the currency side. We're seeing much more efficient use of capitals so the our eyes on on that are pretty significant but you know sometimes it's harder for people say well my my great excel spreadsheets or my this is good but that's what kind of kind of where. I wanted to go like like if I think about the world is becoming a smaller place arguably through technology global trade despite some of the moves against global trade so even small and mid sized companies have international exposures defined. Somebody's midsized companies. Did they know what they're doing when they're hedging. I mean but I think a Microsoft. I'm sure they've got one hundred under people thinking about hedging and their finance department I think somebody's small and mid sized companies. It's probably a blackbox for them. What are you what's your experience been there a you're absolutely right and the difficulty for these mid sized companies and we see there as a major growth area for ourselves as well as you really have unique you require all these different disciplines so from let's say a risk management on the on the foreign exchange side a you need really understanding purely accounting then from that you go to really financial risk management mm-hmm and then you need to understand the markets you need to understand how to actually execute those things and technology facilitates that because typically small to mid size company doesn't even have you know they're not. GonNa hire three people to do this. It's not very cost effective for example but we help the largest companies in the world like the one mentioned do the same thing because for them. It's we're we're all over the world we may have two hundred and thirty currency pairs are going to stick to the currencies they all. INTERAC- and even if they hired one hundred people to do it the technology doesn't split a second and if you have one hundred people doing it will still take four five six hours to do now you right at the pulse of it so as we talk about the currency fluctuations and which companies companies are able to better weather some of the less predictable fluctuations that we see emanating from tweets which companies do you sort of hone in on the as potential benefactors frankly a lack of volatility in the wake of that yeah so. I think you have a few different categories. Let's start with as an investor. I'd first of all if I WANNA GONNA. Stay out of this. I'm going to look at companies that are not very international. Big companies like General Mills. She's listening. I don't WanNa. I don't understand this stuff. Don't know how good they are wondering under stay in the the area where they're much more focused on growth they only have eleven percent of their sales are international so that's an interesting one. That's very stable. That's that's kind of an interesting strategy to stay out of it quite frankly but then you go into companies like an apple or a Boeing Texas instrument. They're really struggling doing with this right. They have macroeconomic moves have all these sort of things and what they have to do. They have to go in there and say okay like a like a Texas instrument forty five half percent of their revenues Arta China. That's a major impact. What do I do with that. So some companies like General Motors. They've gone really good you'd figuring out what their exposures are both on the revenue and they're expensive and they try to match it as close as possible so they're not exposed to terrorists but then what they do they'll actually take part of it like the. Apple Cetera doing or flextronics for example is doing really well. They're actually looking to go somewhere else. They're going to Cambodia. They're going to Vietnam. We all know that's big the the currency therefore strengthening significantly so what this whole trade were does it does whether one likes it or not disrupt the supply chain of of China and that's the intention of this whole thing at the end of the day and as investors you have to look at a are they going to be impacted like General Mills Know B. If they're going to be impacted how good are they managing that risk and quite frankly if you read their ten ks and you can actually figure some of that stuff out. Thank you so much for being with US my pleasure for having me. It's really interesting. We'll gain coaster senior strategy officer of Kariba based in Phoenix Arizona joining us here in our Bloomberg Interactive shipbroker studios talking about what he is seeing out of companies in terms of how they are planning ahead for their currency risk amid the CR- the trade wars. Thanks for listening to the Bloomberg Piano podcast you can subscribe and listen to interviews at apple podcasts or whatever podcast platform you prefer on Paul Sweeney. I'm on twitter at PT Sweeney and Lisa Abramowicz. I'm on twitter at Lisa Abramowicz one before the podcast you can always catch us worldwide on Bloomberg radio. This podcast is brought to you by Columbia threadneedle investments. The income landscape is changing. Are you search Columbia threadneedle Lincoln and evolve Your Strategy Columbia threadneedle. They know income.
The Future Of Autonomous Vehicles
"Welcome back is Barada a podcast takes just ten minutes to get you smarter on the collision of tech business and politics. I'm Dan for MAC on today's show. Airbnb takes a giant step toward an IPO and Elon Musk thinks he's got a very good chance of traveling to Mars, and then dying there, but I the rise of self driving cars. So let's start here. I'm a believer a believer that hopefully in my lifetime cars will take us where we want to go without ever having to press a pedal or steer a wheel. And in fact, I'm not even sure that my daughter who's currently just eight years old will necessarily even take driver's test. Or at least not one that anyone today recognizes. And I also believe this is all a positive advancement as tens of thousands of Americans are killed each year in car crashes, most of which are caused by human error autonomous vehicles should at worst significantly reduced the number of deaths or at best almost eliminate them entirely. The big question, though, is what happens as we try to get from here to there autonomous vehicles simply aren't ready for prime time yet, no matter how many of them might be tooling around the streets of cities like San. Francisco, and they're going to be some big challenges along the way, everything from labor dislocations as drivers lose their livelihoods, costly changes to transportation infrastructure, particularly inside a cities, and that very awkward period when self driving cars and human operating cars coexist on the same roads. So in short there is no clear path to self-driving even as companies from Detroit to Silicon Valley, a recent full speed ahead in fifteen seconds. We'll go deeper on this with axios autonomous vehicle reporter, JoAnn Muller. But first this axios gives you the news and analysis you need to get smarter faster on the most important topics in our unique smart, brevity format. We cover topics from politics to science and media to tech subscribed to get smarter faster at sign-up dot axios dot com. And now back to the pro rata podcast. We're joined now by JoAnn Muller who recently joined axios to focus on a Thomas vehicles after having led Forbes's Detroit bureau, so JoAnne. There's this gospel in the self-driving community that these cars will basically end car crashes because human error will be eliminated. But you wrote last week that's actually based on a government study that doesn't really apply to self driving. Could you explain back in two thousand eight the government department of transportation did a study looking at the cause of accidents? And that's duddy found that like ninety four percent of vehicle crashes. Serious crashes are due to human error and that ninety four percent continues to get bandied about here. We are ten years later, and the implication is that since ninety four percent of crashes are due to human error. If we take the human out of the equation, all those crashes will go away and all those deaths will. Away their forty thousand people killed almost every year. It's about thirty seven thousand last year in the United States but half of those deaths happen in rural areas where people are speeding or driving drunk or just on deserted highway, right? And so the reason that we wrote this story to kind of examine this common perception that take the human away all the deaths. Go away is that because of half half. These crashes happen in rural areas. Most of these autonomous vehicles are only going to be deployed in urban areas. So let me play devil's advocate or just argue with you. I guess we which is the idea. Correct. If you're thinking long term, you know, twenty years thirty years forty years is that well avian will I be deployed kind of his fleets in urban areas in theory, right? They would eventually get to rural areas and the experts. I don't know if that's actually going to be true. I don't have a perfect crystal ball. Right. But where can you? Autonomous vehicles. Do the most good in crowded congested area, right or perhaps on highways where big trot, heavy duty trucks are just going on a straight long road, and you can link them together in in the platoons. Okay. So that I could see that happening, and I can see I can see urban areas having a Thomas vehicles. But I, but I do wonder whether suburban families are going to even in twenty thirty years are going to go out to the garage and push the button and the car takes them where they need to go. You're not of the mind that we're going to be in situation probably in our lifetimes where there's going to be a giant political fight literally over the right to drive on public roads. Just like you can't take a horse today on a highway. Okay. Well, I I don't know. I mean, I suppose that's an interesting argument. Here's here's the deal. I'm I'm in my early fifties. Right. And so I say by the time I cannot drive anymore. These cars will be available to me. And that to me is a really good thing. Right. So that's another thirty years from now. So so I do think it's good for people. I I I'm not arguing with you. I guess stand is what I'm saying. It's okay. We we can that's not. You know, this the story that we wrote has to do with death rates, and we should not assume that death in cars goes away simply because they're autonomous. There were three factories you cited in there for the three kind of leading causes of the Taliban. None of which are kind of how we consider traditional error. But one of them is drunk driving was not wearing a seatbelt. And then the third, of course is speeding, and I wonder could and this is theoretical, but ABC's in theory should take care of speeding in the sense of they're going to go the speed that they're supposed to go. That's kind of part of the benefit here on the drunk driving and not wearing a seatbelt. You. Don't believe that in general autonomous vehicles are going to require those things. In other words, that it would not allow a person to take over if they were drunk, and that it would not require a seat belt to be worn in order to take off about feet belts. I I do think that it's possible for the autonomous vehicles to be rigged in such a way that they will not move. If people are not wearing a seat belt. However, humans are clever and can easily override stuff like that. Right. So let's not. Assume it's fail-safe, let's talk about drunk driving. All right. You know, this is often held up as as, you know, this is so brilliant. I can go to the bar all night and party. And then, but he was my phone to call a car that comes and picks me up and takes me home safely, and nobody gets hurt. And that you know, I think a great thing going forward. However, think about how we get from today to this utopia thirty years from now where I can go out and drink all night, and that is that cars have sort of levels of autonomy. And it is certainly passable perhaps that a drunk driver who is being asked to take back control of the vehicle in a certain situation will be too drunk to be able to do. So. So we kicked assume that drunk driving goes away completely either. It sounds like what we're really talking about. Here is a question of graded steps. Right. And for example, today autonomous vehicles aren't necessarily better at making decisions or identifying things. Humans are it's really a question of technological perfection. And we're far away from that. Is that a fair way to to kind of view where we're at that? There may be utopia down the road. But it's going to be very bumpy and arguably dangerous path to get there. Absolutely. I think very dangerous in that transition from today to utopia. Absolutely. Thank you so much JoAnne Muller axios as chief av. Correspondent my final two right after this. There's more news out there than ever before. But these days it's harder than ever to find it and to know what to trust axios. AM takes the effort out of getting smart by synthesizing, the ten stories that will drive the day and telling you, I they matter subscribe at sign up dot axios dot com and now back to the program to podcasts. Now, it's time for my final two and first up is that Airbnb today filled. It's chief financial officer position with Dave Stevenson, a seventeen year Amazon veteran who's been CFO for its global consumer business, which includes everything from Amazon prime to whole foods disastrous. Why it matters that Airbnb has been without a CFO since this past February and one is needed before the company can put an IPO in motion and finally Elon Musk appeared on last night's axios on HBO program and said this about his Mars travel plans. What is the likelihood that you personally will go to Mari seventy percents? You're probably dying. Mas is much higher than us. Really? The avid to Mars would be like Shackleton's apathetic Antarctic that's going to be hard. A good chance of death going into little canned through space, you might land success believe once you get there. You're working on stuff to both of ace soon not much time for leisure, even after all this very harsh environments. He could translate there so Elon Musk visionary entrepreneur terrible travel agent, and we're done thanks for listening and to my producers, Adam Grassi and Tim show. Vers have a great cyber Monday. Or if you don't wanna shop a great national cake day, and we'll be back tomorrow with another pro rata podcast.
What's Wrong With the Car Market?
"David kelleher started working as a car salesman in nineteen ninety-two. His plan was to earn money for law school. And i got really good at it. Really fast. I mean more money than i ever thought i could and i said i don't think i can be this good alert so i just kept selling cars. David been in the car business for nearly thirty years. Now he owns a large chrysler dealership outside philadelphia. And he's never been in the bizarre situation. He's facing now on one hand. Sales are through the roof. Probably the greatest market. I've ever seen the customer. Demand is crazy. I mean i still thirteen cards yesterday. I sold sixteen the day before. I've customers waiting in the morning hoping that we got to deliver you the day before. I've never seen that before on the other hand. David is facing a big concern. He's running out of cars to sell You can see that right on his emptying lot. You can land a helicopter on right now. I mean a huge gaping hole in the middle. So we've been very strategic in outlining the cars away from the street. You can't see this from the street. It looks like we're jam packed. But once you go past that facade it's a barebones. This is the bizarre state of the car. Market demand for cars is skyrocketing but a shortage of new cars. The fear that i have is. I'm gonna walk in one time with all these sales in one day. There's just not going to be anything on the line and you can't sell what you don't have. Why is this happening. It's all because there's not enough of one small part that all cars need computer chips. Welcome to the journal. Our show about money business and power. I'm kate weinbach. It's wednesday may nineteenth coming up on the show. Why a computer chip shortage is causing pain through the entire auto industry. The reason david's carl is showing more asphalt. These days is because of a shortage of computer chips also known as semiconductors so i got a briefing on this about six months ago and they said we've got this chip issue and i said what kind of what's a chip since that briefing david's come to appreciate just how critical these computer chips are to the product. He sells they control everything from the brakes to the steering to the engine to the air bags to the navigation system. You know there's so many different usages for these things so the supply of the chips is a serious thing and you understand. These chips. Isn't one per car. Each kifah requires chip. And it's a lot more than just key-fobs a new car might have hundreds of computer chips. This problem goes beyond david's dealership. The auto industry has been caught off guard by this chip shortage and it's costing car companies billions things. Today are worse than the industry expected even just a month ago. That's our colleague. Mike elias from the detroit bureau. Mike says manufacturing computer chips is difficult. It requires big factories in highly controlled precise process and car companies. Like ford and gm. Don't make these chips themselves. They purchased parts like say a braking system from another company. And that company buys it's parts from a third company and so on you know it's one of the most complex and efficient supply in the world. I mean it's you're talking about tens of thousands of suppliers multiple levels sourcing small components from around the globe the companies that produce the computer chips are mostly in asia. Way up the supply chain from carmakers last spring. The auto industry's entire supply chain was rattled because of the pandemic. us auto plants closed for about two months car companies lost billions of dollars and it was a scary moment. We didn't know how long it's gonna last so they weren't worried about what they were gonna make three months out six months out nine months out. They were worried about preserving cash so they cut their production schedules pretty dramatically and so did their suppliers up the chain carmakers cut their production and that rippled through the supply. Chain all the way to chipmakers but other industries like the electronics industry were cutting their orders. They needed more chips. Because demand for things like playstations and laptops was surging and so these semiconductor companies. They thought well cars are cutting way back. The electronics customers their big need some of that capacity that we had saved for cars. Were going to allocate those guys but carmakers predictions that demand would dry up in the summer and fall. Were wrong instead. A lot of people started buying cars because they moved to the suburbs or wanted a road trip all kinds of reasons. It was the beginning of the car. Boom and detroit. Automakers were relieved and by the end of the year. I think there were high fives and a lot of executive suite saying we got through this and right about that time is when all the sudden they start looking out and seeing. There's not enough computer chips and without them. The industry has served seized up. That's because chipmakers can't quickly ramp up production. You can't just flip a switch and add more production of these chips and it requires big capital investments to build a semiconductor plant for example and with that finite supply of computer chips allotted elsewhere. Carmakers have been out of luck. I think there was a lot lost along that long supply chain. I mean these i mean. I realized very quickly that some of the car industry executives. They didn't even know the names of some of these big chip companies. They did not have direct contracts with these guys and so when this realization occurred sort of collectively across the industry. Hey we don't have enough chips to support our production and coming months. There was a lot of finger pointing. Okay what was it direct supplier to the car company. That was at fault was it the tier upstream from them. And there's there's still a lot of murkiness today around software. That breakdown happened. So it's not like somebody went to. Gmc oh mary. Barra or four. Ceo jim farley and said okay. You're cutting your forecast so we we're reducing the amount of chips were making for your company's for the next twelve months. no. I don't believe that's how i think the way it happened was nobody had any idea that this shortage was coming. Until the end of last year and caught people completely flat-footed car companies were scrambling to deal with chip shortage. And then something happened. That wouldn't make it even worse. That's after the break were a few months ago. Automakers were hopeful that the chip shortage would be resolved by the end of the spring but then in march there was a fire at a major japanese chipmaker which further setback the industry and it kind of threw everything out of wack again. There was light at the end of the tunnel and that problem exacerbated things to the point where it looks like going to be a year long problem which is why you have dealers freaked out. Which is why you've had the car. Companies come out and you know warren of a couple of billion dollar losses from this faced with an even tighter supply of chips car. Companies have had to make tough choices some have diverted their limited chips apply to their most popular vehicles. We'll take these chips from these cars that don't sell all that. Well they're not that popular and we'll save them for the stuff that's our most profitable big pickup trucks. Suv's but that means. Some automakers have had to shut down factories making less popular vehicles. For instance gm stop production at a factory near kansas city. The produces the chevy malibu and the cadillac. Xt four. that's meant some two thousand workers. There have been laid off for months so the effect on the industry and the people that work in the industry has been really uneven depending on how luckier unlucky. You are to be working at that specific factory and making those specific vehicles. Danielle anderson is one of the unlucky ones. It's been five weeks now with absolutely no income coming to my house and you know it's been a disaster for the past three years daniels worked at ford's assembly plant in chicago pleasing steering wheel consoles in ford explorers. It was hard work but reliable until april when the chip shortage shut down production. Line the message. Danielle received from ford was short. Just that we were going to be laid off the father notice. Did they tell you why they were making this decision I think among question exactly what they said. It was for the parts and we understand that these shutdowns or caused by a shortage of chips. Did that surprise you. I really didn't know too much about the chipper. Would they what they are used for. I mean it makes sense. You know nowadays. Your car is basically a computer but other than that. I really didn't know much about at first. Danielle thought a little break might be nice. She figured she'd only offer a week or two and that her unemployment benefits would come quickly but they didn't and the shutdown has dragged on. How are you supporting yourself. How are you buying groceries My daughter receives Linked food stats. So we've just been trying to manage autho. What little she gets. Danielle says she's missed. Rent payments and car payments when bill collectors call is to explain her situation last week. Danielle received her first payment. But it was only one week's pay not all the back pay that she'd been expecting. How has this whole process made you feel discouraged to the honest has been really discouraging to have to continuously. Go and try to explain your situation cow salon. When would have their money. You know as is discouraging. Danielle says she's ready for the break to be over to get back to work. But she doesn't know when that will be in the meantime she's applied to be a lift driver danielle's one of thousands of auto workers at factories across the country who've been laid off because of the chip shortage meanwhile car executives have been thinking of ways to prevent this situation from happening in the future. We've heard executives talk about having direct contracts in place with the chip which doesn't happen today. It's all done through their supply base. There's talk of having buffer stocks of chips available to avoid this from happening again. The ford ceo just recently talked about redesigning some of their components so that there are less dependent on certain ships. That might be tougher to get and there's been a lot of talk about we'll hey do. We need to start making these in the us to prevent something like this from happening again. President biden has called for fifty billion dollars to invested in domestic production of computer chips. But that won't fix the current bizarre car market in which dealers like david have more demand than ever but not enough cars to sell. And where factory workers. Danielle aren't making cars. Even though they wanna be all because of a chip shortage. Here's david again. If this thing gets worse or drives up or doesn't improve. I could be out of cars by july first so no matter. How good a car dealer. I can be and i think i'm okay right now as a car dealer. You can't do anything if you don't have product do you blame anyone for this predicament. Now no look. Everybody thought that when we went into the pandemic we could be going into a new recession. So you know the the fact that they cut back orders. People are blaming the manufacturers to that. I can't blame them for that. That was that made sense right. Nobody thought we were going to run it. These numbers are you worried that you might have to make cutbacks at your dealership. My nightmare in the last resort for me is i have to cut back people but right now i'm saving a ton of money on floor plan interest which is the interest we pay on the cars on the lot right. So that's a great resource that i can use to offset some of the lost revenues. And i've cut my advertising. And half. Because i don't need to be out on the street telling people they need to come see me because what are you gonna come see an empty parking lot. So would those two resources. I'm hoping that. I don't get to the point where i have to look and say. We have to trim any of my ninety eight employees because their family. They need me the depend on it. Can you imagine again in. Perhaps the greatest car market of our time. Having to face recessionary tactic it would be insane. You really would. Because i have people begging to buy cars and if i if i had to cut my business back or hurt anybody it would be really crazy to think that that could possibly have. That's all for today. Wednesday may nineteenth the journal is a co production of gimblett and the wall street journal additional reporting for this episode from ben folds and nora naughty. Thanks for listening demarco. When a man schizophrenia disappeared from his boardinghouse the police didn't think much of it they sent. He was more likely missing than moderate. Social worker disagreed. And i explained what we were gonna do. We were going to go out to sea by birth in. She tells me you better take a shovel's with you find out what happened. Search crime show spotify. Follow the pink footprints.
Automakers Adjust to Pandemic After Steep Losses in Sales
"Facts allow you to make decisions and unpredictable times. Get the facts you need. From The Wall Street Journal from Free Corona virus updates to daily deep dives, and our podcasts and videos WSJ is a trusted source in uncertain times visit wsj.com as the number of corona virus cases hits new milestones. Those on the front lines are facing more stress inside packed hospitals. Like ten to twelve hours. It's overwhelming work. It's exhausting at times. We'll look at New Challenges for America as global past ten million plus the bumpy road facing the auto industry. industry-wide and he had this impressive situation where nearly every assembly plant in the US shut down for almost two months. We'll talk about pricing and the future of electric cars. And the Mississippi flag is about to get a new design. It's Monday, June, the twenty nine I'm mark, Stewart with the Wall Street Journal, and this is what's news. There are now more than ten million reported cases of Corona virus worldwide, five hundred thousand people have died globally about a quarter of those confirmed deaths, one, hundred, twenty, five, thousand are in the US where cases are rising, and that's leading to new restrictions with the dialing back of reopening plans Florida. Texas Arizona and California accounted for many of the forty two thousand new cases reported Saturday in Texas. The governor ordered bars to close. We spoke to our reporter. Rem Campo Flores, who covers the southeast? As we look ahead to the new week, there are a few things that public health experts think we should be keeping an eye on. One is the potential for the virus to spread from young people who make up the bulk of new infections right now to older, more vulnerable populations that could increasingly happened as people go, visit their parents or grandparents, or as young people work in close proximity to older people, so that's one concern. The other is hospitalizations which are climbing steadily and numerous parts of the country, and in some parts including in Texas. You're seeing some hospital. Systems reached their capacity, which is a really worrying trend that officials are keeping an eye out on. Healthcare. Workers feel the strain facing Texas is significant. We talked to Dr Ren to Iraq Oh Brown, a physician working on the front lines in a Kovic Unit and a South Texas Hospital. This time in the hottest Nov.. Personnel. Not What we are dealing we. We, went from like four or five patients tool more than sixty patients in one week. I don't think we are actually where moment yet, but we already running out of capacity. In a recent statement, the governor of Texas says he's focused on slowing the spread of the virus while maintaining sufficient hospital capacity for covid nineteen patients. We have a video looking at the challenges facing healthcare workers in Texas on wsj.com. Mississippi is the last state to have a confederate battle emblem on its flag, but that's likely to change a state lawmakers approved by a wide margin, a bill to redesign that flag after one hundred twenty six years. The Republican governor is expected to sign the bill which would require the flag to be taken down within fifteen days, and to create a commission to come up with a replacement. The move comes at a time when historical symbols and monuments across the US are at the center of a debate over the US legacy of racial. Discrimination. Chesapeake. Energy filed for bankruptcy protection on Sunday. The company was once a trailblazer and fracking and the second largest gas producer in the country, but now it's emblematic of the challenges facing the industry for the big picture. We talked to WSJ reporter Rebecca who covers oil and gas. Chesapeake bankruptcy filing reflects the tremendous strain that much of the US oil and gas industry is under as the coronavirus pandemic can home around the world and depresses demand for fossil fuels, though it's important to note, the Chesapeake has been heavily indebted for years. The oil and gas prices. We've seen this year were simply the final Straw. fracking is by no means going away anytime soon, but it's likely that the shell patch becomes increasingly dominated by larger companies as many smaller American producers file for bankruptcy. It's unclear at this point. Whether US oil output will return to the highs that we saw earlier this year of about thirteen million barrels a day. Boeing seven, three seven Max has been grounded for more than a year now key test flights of the aircraft could begin as early as today. The test conducted by US regulators and Boeing are scheduled to last three days. The jets have been under scrutiny. After two accidents killed more than three hundred people, a Boeing spokesman said quote. We continue to work diligently on safely returning the maxed service, some industry and government officials expect the planes to return service around the end of the year. And a shooting at the Stock Exchange in Karachi Pakistan has left several people dead. A separatist group has claimed responsibility for the attack. We talked to our correspondent in the country side Shaw. Is At least four armed militants trying to storm the Stock Exchange building, which is in the hot, of Rachi, which is the biggest tea commercial capital releases saying that all terrorists have been shocked at this stage and acting slower of the area. We believe that are dead among the police and the security guards of stock, exchange building. It is unclear if civilians died in the attack. What's the police are saying? Is that the attack? Never laid it inside story, exchange. And indeed trading at the exchange continued throughout he just likely, they were chosen as a symbolic economic target. We've seen a similar attacks. In the past where it is attempt to reach a an important economic target. So I think the stories change does he has a high profile? That's why they went for it. Coming up as the number of corona virus cases hits a new milestone, markets overseas are moving. We'll take a look at what could drive the markets during the week ahead. Move! What does the rise in the number of corona virus? Cases mean for investors. Some traders are more cautious than they were a few weeks ago, or while some are not as optimistic as they were a few weeks ago. Here's our Asia. Markets, editor Quinton Web Friday's market action in the US and headlines over the weekend and Monday trading action in Asia, all points the same thing really, which is that neither ficus seems to have shifted a bit more towards the risks of re-opening, and you know this grim milestone chiefs over of the weekend of ten million Corinne of ours infections around the world. Audibly helps shop not fake so too I think these repeated headlines from different states in the US. States have being forced to rethink some of their reopening strategies as they encounter upsurges and infections. So you think back a couple of weeks. That was a bit more optimism I think about the shape. This recovery signs that economic indicates bouncing back very sharply and now maybe a bit more cushion coming into play as investors tried to digest. Difficult, this thing will debate. After a quick break, the auto industry looks to reboot after one of the most dismal times on record. When the world is at a standstill facts can move us forward. Facts help us make decisions and bring us together even as we're apart the wall. Street. Journal has the facts. In these uncertain times get the latest on the corona virus outbreak with free coverage of the crisis and its impact on the economy, politics, culture and daily life. Find the clarity you need with America's most trusted news source, visit wsj.com and stay informed. Just, like many other sectors of our economy, the pandemic has hit the auto industry hard. It's dealing with losses and significant production slowdowns as we await the latest sales numbers were taking a look at what the industry and car shoppers are facing. We're joined by the Wall Street Journal's Detroit Bureau chief Christina Rogers Christina. It's great to have you here. Thank you for having me. It has been a rough few months for the auto industry. I was looking at the numbers. A Big Dip April. The worst months is at least the Mid Seventy S. Are there any signs of optimism. Actually? Yes, I mean. The sales did collapse and April no doubt they were down fifty percent industry-wide in May. They were still depressed, but it wasn't as bad as it was about thirty percent and I think many auto industry executives expected much worse. Yes, sales are depressed, but they're not down nearly as much as they expected, and they are like we are seeing some signs of a bounceback, particularly in some vehicle segments like trucks and trucks are huge moneymakers for the companies, and we do see that there's been. Some heightened demand for pickup trucks so much, so that dealer say they're running out. And you know I think there's a lot of debate in the industry about how this recovery is. GonNa look, but certainly they are encouraged that people are still buying and that they kind of see like as the summer goes on that that people will start returning to showrooms as far as the reasons for optimism. Is it because? Consumer confidence is back or is it because perhaps people aren't so eager to hop on an airplane or a subway or other form of public transportation and and I think that there's certainly been a shift in thinking I mean before the pandemic. There's all this concern in the car industry that people would opt more for a ride, hailing firms like uber or take public transit versus buying a car in this was becoming a bit of an existential crisis. For the industry now you know the thinking among consumers like shifted being in close quarters as not exactly where they want to be so there are a lot of executives at think that there's going to be more interest and personal transportation, and that could help lift the recovery. The other reason is simply that you know in China sales really fell off a cliff and we didn't see that as much here their reasons for that. Some of it is just that you know early on here in. In the US automakers move quickly to discount their vehicles, and so that gave I mean we were seeing some kinds of promotions that we hadn't seen since the financial crisis, you know zero percent loan for eighty four months guarantees that the company would buy back the carve if the customer lost their job, and that really did help bring people into showrooms. I mean sales are still going to be depressed. They're going to be depressed this year I think everyone in the industry is expecting that. But I don't think anyone is interdisciplinary will be kind of a two thousand, nine, two thousand ten repeat. Inventory, how that looking right now? Are there new cars available or used cars? The hot market? industry-wide, we had this unprecedented situation where nearly every assembly plant in the US shut down. For almost two months they started opening up again in in May some earlier than others and have only been gradually increasing their production I mean there's all these new social distancing measures that they've had to put in the safety protocols I mean. That slowed their ability to reboot quite a bit, and so in the meantime, people have been buying cars and we have dealers telling us they are just simply running low on certain models. Mostly trucks trucks are in short supply. I think when you go to the lot. If you'RE GONNA, go to the line. You will have slimmer pickings. You may not get that color you want. You may not get that feature you want. We heard from one customer who said they tried to order a vehicle and were told well, not till October. If you're going to buy a car right now, you may have fewer options in the other thing is because there is very limited inventory. You're not gonNA get quite the deal. You might have got if automakers are tight on supplies. They don't feel like they need to discount them. Obviously before the pandemic, there was a lot of interest and discussion about electric cars. Is that still going to continue? Yes, I will say that we are still hearing a lot of discussion in the industry about new products coming out on this front first off like the economics of buying an electric vehicle have obviously changed I mean with the drop in oil prices. You know it makes it much harder sell, but what hasn't changes the regulatory environment and countries like China and Europe. I mean they're all moving ahead with limiting tailpipe emissions and the car companies still have to find a way to design and build vehicles that meet those regulatory requirements and the one way to do that is electrification, and so in the US. Regulations aren't as stiff, but automakers still feel that there. There's a need. There are different views on this GM and Volkswagen have been more aggressive and converting their lineup to two full electric vacation Ford also has plans in the works to electrify its line up, so the longer short of it is. Companies are going to move in this direction. Their plans are baked in years in advance, and they can't just do a u-turn here. you also have all these startups coming. That's putting pressure on traditional automakers. They don't want to see the lead to Tesla or to some these newer start ups like Ribian. They WANNA be in the game, and so this whole race is going to continue. Christina Rogers is our bureau chief in Detroit. The Motor City Christina great to have you here. Thank you for having me. And that's what's news for this morning. If you like our show, please rate and review. US wherever you get your podcast. We're back with another updated episode this evening. I'm mark, Stewart with the wall? Street Journal. Thanks for listening.
Will Americans Buy an Electric Truck?
"The best selling vehicle in america for years has been ford f one fifty truck. It's an american institution whenever you need to invoke the heartland the ford truck is. I would imagine if we did a A surge of a country music songs. I believe ford probably has chebbi beat three to one in terms of shoutouts and mentions thought trans screen. Down to take the ford is taking its classic gas guzzling american truck and making it electric and now the truck of the future one fifty lightning ford's move is a big gamble for the company and a big test for the future of electric vehicles. The f one fifty s a cultural lynch pin of american autumn ability and get ford truck bars to sign on. You've gone a long way Welcome to the journal. Our show about money business. Power caitlyn lamble. It's thursday june third coming up on the show. why ford's bet on an electric truck is a watershed moment when it comes to electric vehicles. Ford hasn't exactly been seen as cutting edge. I think ford has been viewed in the last few years as lagging on their electric vehicles strategy. That's our colleague mike. Elias who covers forward out of the detroit bureau plenty of wall street analysts have noted that sort of you know taking digs at ford in their research reports as saying you know. We're not quite sure what for it's up to here on on electric vehicles back in two thousand eleven ford out a small electric vehicle arrive. And you're the first wisit here. It is for focused. Almost every major car company had a small car that they introduced that was fully electric and the problem with all these small cars. Like beyond that subgroup of environmentalists and tech nerds there was no market. Nobody wanted you know the sale ford sold about eight thousand focus electric's over six years for comparison ford would sell that many of the gas version of its focus in a typical month. There was no market for these electric vehicles. These small electric cars is sort of dawned on the industry that the combination of small inexpensive to wasn't wasn't going over very well and meanwhile a new electric car company was gaining steam and showing that detroit's mindset about electric vehicles was wrong. Sorry bala tesla has always been to create caused that no one thought was possible and so here elon. Musk is building this entire brand around cool electric vehicles while the rest of the industry was trying to sell like these ikano box battery powered cars. What if you could have a car that has more functionality than a minivan mo- style than an suv and more performance center sports car. That's the model x. So like tesla showed. You can do cool vs that people want to drive. They like the electric aspect but they probably would be drawn to the car anyway. Tesla was selling a lot of electric vehicles and getting a lot of buzz and traditional automakers. Couldn't say the same thing and so the industry eventually got on to. Maybe we should change our approach. Detroit automakers needed to revamp their electric vehicle strategy back in early two thousand eighteen. Mike spoke with now. Ford ceo jim farley who admitted the company's previous strategy hadn't worked he flagged this whole idea that we're not gonna have success putting batteries in our smallest least appealing cars. Like we've got a bunch of really popular nameplates. But he said we've got these emotional products like we want to bet on those as we go into electric. In other words ford would take its most popular brands and make electric versions of them. A few years ago four designers were trying to put together a new easy farley saw the designs but he wanted more he sort of came back and decided. You know. I know you guys are trying on this. You're not trying enough. We need to make this design more appealing more emotional and eventually you know designers took that back and they came up with a design and everyone liked it and decided you know what let's like plato or mustang routes like have we called it a mustang. Could could we make this good enough to where we put our most iconic name on this electric vehicle ford wanted to electrify one of its classic the mustang but this decision had to go to the top of the company. The highest levels of the company said okay. We think this is good enough to put the mustang name on it. This became ford's mustang e which came out last year. Ford will say that. They're selling more than they had expected. That demands stronger than expected. And it's gotten generally really good reviews from critics. They consider it a home run. And i think with some justification but the mustang was just the beginning next four took on its most popular vehicle. The f one fifty the classic for truck. This is far and away their most important product. I mean f. One fifty is the selling vehicle of any kind in the country. Let alone truck. It's been the best selling truck for forty plus years and so you know that's the golden goose but will anyone actually buy it. That's after the break. We have a message. The co pay. It's simple on. And i just wanted to give you a call. I know i know how vintage just let me know about my new show. It's not passed it and it's all about the stories. We can't quite leave behind every wednesday. I pick a moment from that. We can history and explore how shaped our world today. Let's real his curve our country on your cable. They're good intubate not passed it is out now follow and listen for free only on spotify. So let's start as we always do if you could introduce yourself and tell us what you do at the wall street journal is dan neil and believe it or not i am the you papers automotive critic we still have an autocratic or yes in a very opinionated one two. That's that's the hard part to believe as the wall street journal's auto critic how would you describe the experience the driving experience of an electric vehicle over a gas powered vehicle. It is a dream like in hallucinogenic compared to gas-powered vehicles. Imagine you're driving but you're dreaming and in your dream you're driving and you don't hear the car appropriate acceptive of feelings of moving back and forth g-forces. Those are still there but the sound has been muted more than that. You have this This impetuous power right at your command in gas powered cars. You have people aren't aware because they're used to them but you hit the throttle and her electric car doesn't do that at just goes Like about rocket and now for all the reasons are for all the right reasons to unitarian and for reasons engineering and performance. And all of that. It's better than guests. But do you miss the sound in the rumble. This is important question that is often asked and It's the comfort of the familiar. That is being negotiated. Their people think they will miss but they often don't. When ford introduced the f one fifty lightning last month. It looked a lot like the gas powered truck but the electric version doesn't have an engine under the hood this is american innovation and this is a moment of tremendous pride for all of us at ford. The lightning has ten thousand pounds of towing capacity and can go two hundred thirty miles on a single charge. It holds us and toes like a beast. Metaphorically it might as well have a superman. Cape and a captain america shield. It will cost about ten thousand dollars more than the gas truck and won't go on sale until next year but dan says in the coming months ford. We'll try to drum up demand. Car manufacturers have pretty sophisticated marketing departments. They know exactly who they're talking to and so they have a lot of options they'll be the adventure component. You know the people wanna take these things out for days on end plug everything. They've got go camping. And plug everything into that. And then the commercial side. I remember a lot of pickup trucks. a lot of the sales about four hundred thousand pickup trucks. Year are sold the people who neither tote nor hall. They're called never never's and so they're commuting vehicles which means that The coles latest greatest is also desirable. I think it will do very well and suburbia within the first week of the lightning's introduction about seventy thousand people put down a hundred bucks to get on a list to buy the truck but damn still has questions about ford's electric push. To what extent will these great promises turn up on the street. They have a good start. The got a lot of hundred dollar orders. But that doesn't mean a lot i think. I think they'll have a challenge. I think they're going to have a little bit of a challenge. It selling after the first of all our colleague. Mike says. Ford is aware of those challenges. The company knows it could have a hard time selling the lightning to some of its core. F one fifty buyers. They know that a lot of their traditional the the vast majority of their traditional pickup truck buyers the rancher in texas isn't going to be running out to buy this thing and pickup truck buyers. Don't they don't like a ton of change. They want utility they want features. They want cool stuff that they can show their buddies. Mike says ford's banking on high sales from commercial customers people who use the trucks for their jobs. These buyers could see the truck as a long-term savings opportunity despite the higher price tag. That's because the electric version would cut out gas costs and require less maintenance over time and commercial customers generally have sort of like more predictable charging patterns. Don't take these things on road trips. You know a lot of times. They have either fixed routes through they can charge them all in the same depot overnight and ford's bet on the lightning is getting attention from the nation's highest office president. This sucker quick last month. President biden was in dearborn michigan visiting afford test center to drive the lightning here. We go ready. Why is this important to biden number. One for biden his administration's climate agenda. They're heavily focused on electric vehicles domestic battery cell production. You know they see it as a as checking two boxes of helping climate change and creating american jobs and so it is going to build this truck right in dearborn at its most important factory the rouge plant and so that's going to create a lot of jobs american jobs and that's you know right in line with what the biden administration wants to see. They want to see manufacturing jobs in the us ford announced last month. It will invest thirty billion dollars in electric vehicles and it's not just ford. Gm volkswagen and others are spending billions on developing new technology and evt's. They're basically not spending any more money to develop new gas engines. It's all of your future capital expenditures going to the electric side of things. Even though right now it's like a tiny fraction of your sales you know might be less than one percent of sales right now for four globally. But they know there's are betting that this is really going to happen over time and that's where the money needs to go. What are the risks for ford and turning the f one fifty electric. I think the risk anytime you try to do something this new and different with such an iconic name in an iconic product is that it's perceived by your loyal customers as something that's less than authentic create something that doesn't measure up and so the f. one fifties always been like this built ford tough thing right and reliable dependable and so if it doesn't do what the customer expects it to do. It's going to be a reputation hit and those things can be hugely damaging in the car. Business and poor sales could also have bigger implications for how quickly and broadly the us will embrace electric vehicles. You've got this mainstream very popular very successful vehicle and this is the first example. Were seeing really of okay. You you like this so much. Here's an electric version. Now let's see how much you like it and you know. I think it's gonna tell us a lot about the appetite. People have for electric vehicles. Generally that's all for today. Thursday june third the journal is a co production of gimblett and the wall street journal. You like our show. Follow us on spotify or wherever you get your podcast. We're out every weekday afternoon. Thanks for listening. See tomorrow technology. It's in your pocket your car your business and the wall street. Journal's tech news briefing is tracking all of it from consumer tech to cybersecurity from the giants to the startups every weekday. We bring you the latest stories about the companies and advancements that are changing the way we live and work tech is remaking the world. We'll make sure your part of it. Subscribe to the wsj tech news briefing from the wall street journal wherever you get your podcasts.
Why 46,000 Auto Workers Are on Strike
"After weeks of frustration in contract negotiations forty six thousand autoworkers walked out on General Motors on Monday. Guillaume hasn't seen strike like this in more than a decade union leaders are angry that their demands for a bigger share of GM's prophets better healthcare and a promise that factories won't close those aren't being met on the other side of the table. GM management which is living in the shadow of the company's two thousand nine bankruptcy in government bailout and GM led by CEO. Mary Barra is dedicated to making sure the company stays profitable strong. General General Motors is the best way for me to provide and maintain the ninety thousand plus jobs that we have across the United States today on the show a legacy labor union union and a legacy car manufacturer are at odds what both sides want and why they wanted welcome to the Journal our daily show about money business and power. I'm Kate Lime and I'm Ryan Knutson. It's Thursday used as September nineteenth. Christina Rogers is the Wall Street Journal's Detroit Bureau chief. I have covered. Gm Ford and Fiat Chrysler I've been an auto journalist for nearly a decade now and this is actually my third round of labor talks but your first strike yes. It's my first strike. What was your reaction to this. Were you surprised by the the decision to do it. No I wasn't wasn't surprised. There's been a lot building. I mean you have a confluence of events here you have these tech companies are trying to muscle into the car business and like you also have new technologies that are becoming required like electric cars because of emissions requirements and so it's trained to make sure it has the cash to invest in the future. The future is becoming expensive and the thing with GM the other other Detroit carmakers is there really vulnerable to the industry's boom bust cycle. I mean basically for decades that the companies you know they have at this period of extreme profitability when things are good when the economy's good and people are buying cars and then if the economy weekends all of a sudden the whole thing thing turns on its head and they can go from very profitable year is to losing money in a short period of time the current conflict between the UAW W. N. G. M. Actually has its roots in the economy's last August. The two thousand eight great recession and both sides are looking at what happened then as they think about the future. GM had been struggling even before the recession in two thousand seven the company posted a loss thirty nine billion dollars and by two thousand nine it sales fell by almost thirty percent such bad sales and such big losses brought the company company to its knees. Today is the day that capitalism capsized the symbol of American industry. General Motors is bankrupt once the world's largest corporation and now GM hopes to emerge from bankruptcy a smaller company that makes vehicles people want to buy the break it was the culmination of kind of this like long slide jam had for years had numerous challenges one of them being very high cost of labor they had too many factories they were stuck doc in the cycle overbuilding cars and then having to heavily discount them and that year GM turn to the government for help and filed for chapter eleven bankruptcy in the midst of a deep recession and financial crisis the collapse of these companies would have been devastating for countless Americans what's and done enormous damage to our economy beyond the auto industry is also because the auto industry is so crucial to American manufacturing factoring in the economy the government stepped in and invested fifty billion dollars in GM to help the company rebuild working with my auto task force. GM eminent stakeholders have produced a viable achievable plan the we'll give this iconic American company a chance to rise again and and after it was all over and GM was out of bankruptcy the company's leaders needed to figure out how to never let that happen again that bankruptcy was really traumatizing for leaders at GM. I mean the memories of that are still really fresh. GM's currency. Oh Mary Barra came in a few years after the crisis assist in two thousand fourteen to get the company into shape she was brought in to be a change agent to really change the culture and make it more proactive. You've really kind of make it more forward thinking so Mary Barra. She made major headlines because she's a first female executive to run a car. Our company and she's also electrical engineer. She's what we call in Detroit. GM lifer she's been at GM for most of her career and was did her dad adwork. GM to yes her father did work at GM so she's second generation jammer and she's from Michigan as well. Do you remember your first interview with her. The first time sat down with her like what is she like and what is it that she talks about when she talks about. Gm yes I do remember very vividly away when I first met her and at that time she was heading product development and I remember asking her what changes she was making and she she gave me this example of how you swipe your card in between to get into different departments and that she was going about removing those because it just seemed like a barrier that was not needed and that to me was symbolic of how she was trying to break down. GM Silo Culture. I think GM is really looking at like look. We cannot not just lean on our history. We have to make decisions that are looking foward and if that means kind of blowing up the way we did things in the past that's fine in the past two years under Baras leadership. The company has posted record profits. Wall Street investors have been thrilled with her performance and and one reason they like what she's doing. She has remained vigilant about preventing another financial meltdown at GM to do that. Bar has made major decisions decisions about the company's future so is really last year that GM decided that they were. GonNa execute on a big restructuring the really want to do some belt tightening and generates meaningful savings not only heading into the downturn but also to free up cash for some future technology bets such as self driving cars cars and electric cars so that set the stage set the stage for a big announcement from GM in two thousand eighteen. This was the weekend after Thanksgiving and news star to leak on that Sunday night. That was going to start closing plans the next day. Barra got on the phone with investors to explain the news and she stressed that you know this is going to improve their cash flow. It's going to really prepare them on to take the next steps and I mean her. Message acid was like this is really going to help us move through the next downturn and free up the cash to invest in some of these future technologies we taking these actions now while the company and the economy are strong stay in front of a fast-changing market and capitalize on growth opportunities as we push to achieve a vision of a world. Duro crashes Euro Missions Zero Congestion and did she discuss the impact on employees. No she did not on that call. ooh. The announcement hit the following morning. They announced that they were. GonNa close five plants in North America including including four in the US and two of those plants were major assembly plants one in Lordstown Ohio and the other one in Detroit because it leaks the night before many of the workers found out about the plant closures like some of them as they were getting ready for work from the the morning news so General Motors has announced its biggest restructuring efforts since it went bankrupt a decade ago. The Auto Company says that it may close five factories four the US and one in Canada and cut more than fourteen thousand salary jobs. GM certainly it landed with a third for many of these workers. It was a total bombshell. I think at some of the plants they had been taking off chefs but to close the plant. I think took a lot of workers by surprise surprise you know the scene in Lordstown as the result there is workers that were just kind of choked up and disappointed and felt betrayed. A lot of the workers felt like hey we really help. Gm you know survive through the bankruptcy and this is how we're being repaid one of the UAW's vice vice president the official who's in charge of bargaining with GM really came out swinging. He called callous. He said this is a real slap in the face to workers workers saw it as a particular insult because they believe the company was rebuilt after the bankruptcy on their backs even before the bankruptcy the the union agreed to lower wages for new employees it also took over the retiree health benefits for its members which GM had previously provided you know the UAW workers really remember that moment. I mean this also has colored. They're thinking going forward. The feeling we sacrificed a lot during the bankruptcy abrupty to help this company survive and so now when they see the company making big profits they feel like hey. We deserve to get more back because we did help up you in that moment of need. GM said they made this move because they really really need to prepare and it is true true like the big trend in the industry right now is that many consumers are moving away from cars and buying SUV's and trucks and the two plants that are targeted for closure build cars in so GM's argument was that we're not seeing demand for these vehicles for GM workers. The decision to close plants lance was hard to swallow but immediately after the announcement their frustration was being echoed at the highest levels of government ever since trump stepped into the office and even before I mean he's really taking the automakers to tass in particular GM and Ford for not building more cars in the US and when this landed I mean he immediately jumped an criticized. Mary directly both were there are closing and I said you know this country's in general motors you better get back there soon so hieaux that also criticised GM for building cars in China and building cars in Mexico. I don't one general motors to be building plants outside of this country as you know they built many plants in China and Mexico and I don't like that at all and you know the the UAW members they hear that a- and I think even just like members hearing it. I mean that kind of emboldens fam- to really take a stand. The workers also have leverage because unemployment employment is so low right now. GM just can't go out and hire new workers that easily they need to deal with the ones they have also. It is much easier here to negotiate a contract when sales are up prophets or up. Things seem to be going good. You know the company can give a little more one. It is financially very strong in some worried about the future and I think that's why you're seeing this friction now. The United added Auto Workers Union is ready to push back on GM's decision to close plants and cut shops and GM is ready to defend its choices and fightback after the break about a decade ago the US government decided to do something they'd never done before today more than sixty percent of all US tax payers will be able to for free free prepare and file their taxes online. They thought they were creating a free online. Tax Filing System instead what they'd made was trap attracted the huge companies take millions of dollars from low-income Americans here how that happened under polyps at one hundred forty four dark pattern listen wherever you get your podcasts welcome back every four years auto companies sit down with the United Auto Workers Union and negotiate new contracts the latest round of talks between GM and the UAW started in July what is at the top of the UAW's agenda going into these talks well. I mean keeping these plants. Open is certainly one of them. I mean they've they made that statement very early on heading in but there's a range of issues that they're discussing a big one for the union is the use of temporary workers workers. The companies WANNA use temps because you know they'll have periods where you know they need to quickly increase output but don't WanNa hire permanent workers to do that because they don't know how long those sales will sustain and so they bring in do that work the problem is is and this is what really has a w the wrong way as some of these temps are not so temporary that they've been working at the company for many years they feel it's really unfair to have temps working alongside fulltime employees but making much less money. That's a major issue on on the table. Healthcare is a major issue. I mean the companies want the union members to pay more of their healthcare cost. They pay about three percent and that's versus you know twenty thirty percent for most salaried workers okay so in these contract talks on the other side of the table is GM. What are they looking for the big thing that GM wants is to keep its labor costs check now one of the things that's happened. Ben Is as the market has rebounded as GM's profits have rebounded through the last two rounds of contract talks in two thousand eleven two thousand mm fifteen it did give a lot back to the workers you know in terms of pay raises and so as they've given more back to the union in their labor costs have crept back up and so the big goal for them is not only keeping labor costs from continuing to grow but also trying to bring him down and also the companies are facing a lot of uncertainty. There's trade uncertainty. There's uncertainty over fuel economy regulations and right now they could really use some flexibility so that's a big issue for them. At the bargaining table negotiations have gone basically nowhere aware since July and this weekend they hit a deadline. The current contract expired in other circumstances. The Union might have extended the contract attract a bit too. Give time to keep the talks going but this time it didn't so when they didn't extend those contracts we knew is is looking for confrontation. You know the Birkner on the Union side came in and said Hey we're just not getting anywhere you know we don't feel like GM as bargaining good faith and they basically said we are at a standstill and we were told that the vote was unanimous mask to strike shortly after the meeting. They held a press conference and they said we're GONNA strike at midnight restarted last night at twelve the first shift we're from twelve to six six citoyen six round the clock few years back. We gave up a lot to keep this house and now they're making more money than they ever had. We feel like we should get some of that stuff back we buy we gave concessions during the darkest hour. Keep this company running and now this company is making record profits off our labor in. They don't want to even give anything back but they want to continue the tate and that's not right. That's I feel betrayed trade the strike covers more than thirty plants in ten states and GM has essentially forty six thousand full-time factory workers represented represented by the UAW's this major major strike one. We haven't seen in more than a decade. Were several days into the strike right now. What are the workers giving up by striking well a lot of pay so the way it works is not paid while they're on the picket line by the company instead had what they receive is what they call strike pay this is paid by the Union and it has turned fifty dollars a week. That's a fraction of what they'd make at the plant. What is GM losing. This does take a financial toll so the way it works. Is that a car maker books revenue went vehicle rolls off off the line and sold to a dealership so if there's no vehicles rolling off the line and being sent to dealerships. I mean obviously they're not booking that revenue. Some analysts analysts have said that it can cost anywhere from fifty million to one hundred million dollars a day granted. GM does have a stockpile of cars but certainly it does cost the company and the longer it goes on the longer the financial head. Mary Barra seems to be trying to deliver what Wall Street wants and what she wants for the company right to be sustainable in the future to meet the changing aging technology. That's coming into the auto industry and to do that. She wants to kind of lean mean company but the workers you want a share of the prophets and to keep their jobs and to have better wages. How can she strike this balance. I mean it's a really tough one and I mean and there's a lot of dynamics that play into you know. We're essentially do they end up. I mean I I really do feel like that's the question that they are resolving right now. At the bargaining pardoning table the strike is now in its fourth day and the most recent developments. Don't look promising on Tuesday. GM stopped paying health care costs for the workers on strike in response the Union put out a statement about GM saying quote quote one minute. They say they care about their workers and next GM is cutting off people's lifeline that's offered today. Thursday September nineteenth nineteenth. The Journal is a CO production of Gimblett and the Wall Street Journal. Thanks for listening. We'll see you tomorrow.