Latest / Bloomberg Intelligence / Could See A U.S. And Global Recession By End Of 2019: Sri-Kumar

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Could See A U.S. And Global Recession By End Of 2019: Sri-Kumar · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Will
• 0:33
  Speaker 1: emerging market currencies be the primary victim of the ongoing
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  Speaker 1: trade skirmishes? Here to answer that question is Komal Street Kumar.
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  Speaker 1: He is president and founder of Street Kumar Global Strategy
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  Speaker 1: is also a Bloomberg opinion columnist. Coming to us from
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  Speaker 1: the lovely Santa Monica, California. Samal, Thank you so much,
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  Speaker 1: uh Sree, thank you so much for being with us.
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  Speaker 1: So what is your take on emerging markets currencies heading
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  Speaker 1: into your end here? Good to be with you and
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  Speaker 1: PIM Lisa. In terms of what is happening, the emerging
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  Speaker 1: markets are clearly reacting to a stronger and stronger dollar
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  Speaker 1: that we have seen over the last several months, FED
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  Speaker 1: which insists that it has not stopped hiking, it is
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  Speaker 1: going to keep increasing interest rates, and we have a
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  Speaker 1: situation of trade war which is really very negative for
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  Speaker 1: many of the emerging markets. So it may not always
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  Speaker 1: be a conscious move to depreciate their currencies in order
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  Speaker 1: to fight a trade war, Lisa, but that clearly is
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  Speaker 1: the ultimate result. We have seen that recently with the
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  Speaker 1: Turkish lira. We have seen the Argentine pace, so the
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  Speaker 1: Indian rupee. In the case of Argentina and India, they
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  Speaker 1: have been all time record lows, and Argentina is going
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  Speaker 1: to compete with the United States for Chinese markets. The
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  Speaker 1: Indian manufactured exports will become even more competitive globally. So
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  Speaker 1: I the problem here is that it is going to
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  Speaker 1: worsen President Trump's problems. The U S trade deficit is
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  Speaker 1: going to worsen, and we are going to have to
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  Speaker 1: face some way to depreciate the US dollar. And once
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  Speaker 1: that happens, then you have the other countries reacting yet again, Shree.
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  Speaker 1: One of the area One of the things that I
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  Speaker 1: look at on a pretty regular basis is the price
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  Speaker 1: of copper as a proxy for industrial activity, as it
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  Speaker 1: is an industrial medal. The price of copper is down
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  Speaker 1: more than fifteen percent since it's high in mid June.
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  Speaker 1: Do you believe that we're going to find that the
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  Speaker 1: world economy is not as robust as many economists belief.
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  Speaker 1: That is a great question, and I would pare your
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  Speaker 1: answering your question to what we see as a message
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  Speaker 1: that is coming from one is from Dr Copper as
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  Speaker 1: it's popularly known for its record in predicting the global economy,
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  Speaker 1: along with what you see happening with the US equity market,
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  Speaker 1: which has been rushing up in the last few days
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  Speaker 1: because of corporate turnings, even as the bond market continues
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  Speaker 1: to give you dangerous signals and the two to ten
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  Speaker 1: years spread on the U S treasuries continues to be
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  Speaker 1: below thirty basis points. The combination of weakness and copper
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  Speaker 1: and a very narrow spread suggests to me that if
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  Speaker 1: we could invert the Eelk curve even by September, if
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  Speaker 1: the FED were to high cut on September twenty six,
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  Speaker 1: and then you're looking possibly for a US recession and
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  Speaker 1: a global recession towards the end of next year, and
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  Speaker 1: if we have a trade war accelerating, it only pushes
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  Speaker 1: the world further into recession. Well, that's a pretty a
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  Speaker 1: pretty dire prediction, and there are a growing number of
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  Speaker 1: people who do agree with you. Actually, I want to
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  Speaker 1: push back a little bit on this idea of the
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  Speaker 1: ongoing appreciation of emerging market currencies in the appreciation of
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  Speaker 1: the US dollar. First of all, you are being some
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  Speaker 1: of these developing nations deploying their foreign currency reserves to
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  Speaker 1: support the currencies. So that's is evidence that they don't
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  Speaker 1: want to see such depreciation. Uh and and in the
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  Speaker 1: US is one country, but there are other countries that
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  Speaker 1: are increasingly dominant, including China and India, which can drive
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  Speaker 1: a lot of economic activities. So what do you say
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  Speaker 1: to people who argue for emerging market investments now? Based
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  Speaker 1: on those arguments, I would say emerging markets are going
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  Speaker 1: to look great, but not yet. In other words, the
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  Speaker 1: emerging market currencies are going to continue to depreciate. In
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  Speaker 1: my opinion, Lisa, you were right on in saying that
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  Speaker 1: many countries don't want it to depreciate. Both India and
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  Speaker 1: Argentina are facing the prospect of higher domestic inflation as
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  Speaker 1: a result of weaker currencies. So for even for domestic reasons,
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  Speaker 1: they want to support currencies. The problem is the following
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  Speaker 1: they are not in control of it. If the FED
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  Speaker 1: word to increase interest rates and if President Bush President
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  Speaker 1: Trump were to continue with the trade wars, their currencies
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  Speaker 1: are going to depreciate no matter what they do, or
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  Speaker 1: the central banks are going to figure out that they're
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  Speaker 1: going to spend more and more of their dollar reserves
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  Speaker 1: to defend the currencies, which is basically meaningless if the
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  Speaker 1: fundamentals are suggesting a weaker currency. So it is may
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  Speaker 1: not be intentional that these countries are doing it, and
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  Speaker 1: you're right in saying that they are trying to control inflation.
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  Speaker 1: They don't want the currencies to depreciate, but it's beyond
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  Speaker 1: their control. Also taken to account that recently Larry Cudlow,
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  Speaker 1: economic advisor to the President, has suggested that the FED
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  Speaker 1: go very slow on its rate heights. The concern here
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  Speaker 1: is if the Fed were to keep tightening, it's going
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  Speaker 1: to cause the dollar to strengthen even further, worse than
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  Speaker 1: the trade situation. So you're going to have a conflict
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  Speaker 1: between the Fed and the administration coming up between the
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  Speaker 1: next two to three months. All Right, we want to
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  Speaker 1: thank you very much for being with us. Kamal Ah
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  Speaker 1: Kumar as the president and the founder of a Shriek
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  Speaker 1: Kumar Global Strategies, he is also a Bloomberg opinion columnist.
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  Speaker 1: Is based in Santa Monica, California, and you can follow
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  Speaker 1: Shri on Twitter at Shri s r i K Global.
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  Speaker 1: The United States spends the most on healthcare per person.
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  Speaker 1: It spends something on the order of about three point
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  Speaker 1: three trillion dollars. That's nearly of US g D P.
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  Speaker 1: Here to telp us about how this money is spent
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  Speaker 1: and can it be more efficiently used in order to
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  Speaker 1: bring high quality health care to Americans is VJ Governor
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  Speaker 1: de Rogin. He is a the Cox Distinguished Professor from
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  Speaker 1: Dartmouth's Touch School of Business. Also joining us is Robbie
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  Speaker 1: Rama Murti. He is the University Distinguished Professor of International
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  Speaker 1: Business and Strategy and Director of the Center for Emerging
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  Speaker 1: Markets at Northeastern University. They are both the authors of
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  Speaker 1: the new book entitled Reverse Innovation in Healthcare, How to
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  Speaker 1: make Value Based Delivery Work. Gentlemen and professors, thank you
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  Speaker 1: very much for being with us. Professor Governor de Rogin,
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  Speaker 1: I want to begin with you and just set out
• 7:37
  Speaker 1: why did you decide to write this book? See the
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  Speaker 1: baby started on this book is both of us are
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  Speaker 1: from India, and what we found was India is a
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  Speaker 1: country which has got one billion population who are poor.
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  Speaker 1: Therefore they can't afford to pay a lot on healthcare.
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  Speaker 1: And India also has limited number of doctors and limited
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  Speaker 1: number of hospitals. So the question is how do you
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  Speaker 1: serve a large fraction of the population with limited hospital
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  Speaker 1: infrastructure and medical doctors. The only way you can do
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  Speaker 1: it is through health care delivery innovations. So we said
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  Speaker 1: there has to be some hospitals which do breakthrough health
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  Speaker 1: care delivery innovations, and we found seven of them and
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  Speaker 1: we use that to really generate our insights about how
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  Speaker 1: you can lower health care costs dramatically. So Rob, come
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  Speaker 1: on in here. Can you give us a sense of
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  Speaker 1: what some of those innovations were that you found in
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  Speaker 1: those hospitals. Yeah, one of the important innovations that these
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  Speaker 1: hospitals use is how they configure their assets into a
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  Speaker 1: hub and spoke network and they send advanced procedures and
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  Speaker 1: patients requiring advanced care to the hubs where they also
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  Speaker 1: have the most advanced specialists and the most advanced equipment,
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  Speaker 1: and in the spokes they deal with more routine cases. Now,
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  Speaker 1: this may seem like a simple idea, but in fact
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  Speaker 1: in the US it is something we don't see very
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  Speaker 1: much of. We have, in other words, in the US
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  Speaker 1: too many hospitals that are aspire to be hubs and
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  Speaker 1: not enough spokes, and therefore you have hospitals that become
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  Speaker 1: very expensive because every hospital is trying to do every procedure.
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  Speaker 1: This is one example. Now, as a result of this
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  Speaker 1: configuration in the Indian situation, you actually have hospitals that
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  Speaker 1: too high volumes of various surgeries. And it's not because
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  Speaker 1: there are many more Indians requiring those procedures. It's just
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  Speaker 1: that the available volume is funneled into the hubs, and
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  Speaker 1: so you can have a heart hospital that does six
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  Speaker 1: open heart surgeries in a year compared to about four
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  Speaker 1: thousand in even the most advanced, leading h heart hospital
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  Speaker 1: in the US. So this is one example. And we
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  Speaker 1: have five principles that we identified from the research. And
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  Speaker 1: this is one of the principles. If you if you
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  Speaker 1: want me that I can quickly balk you through the
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  Speaker 1: other principles, sure give us one. Give us another one
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  Speaker 1: that you believe could be applicable to the United States.
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  Speaker 1: Another principle we identified, we call it tasks shifting and
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  Speaker 1: this is trying to free up doctors so they do
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  Speaker 1: the work that only doctors can do and allow others
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  Speaker 1: to do less sophisticated work. In the US, again, we
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  Speaker 1: have the opposite situation where doctors spent more than half
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  Speaker 1: their time on administrative work. And if you look at
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  Speaker 1: the Indian example our hospitals, we studied, a doctor in
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  Speaker 1: one of the eye hospitals is surrounded by ten support
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  Speaker 1: staff who free up the doctor from all of the
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  Speaker 1: non medical work. So this doctor is three or four
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  Speaker 1: times as productive as an eye surgeon in the US.
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  Speaker 1: So we called the stash shifting. And the interesting thing
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  Speaker 1: about what the Indians do is not just that they
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  Speaker 1: have nurses and nurse practitioners helping doctors. They have created
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  Speaker 1: entirely new categories of workers, each appropriately matched to the
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  Speaker 1: work required. And this not only saves money, but actually
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  Speaker 1: improves quality because each person is really qualified and motivated
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  Speaker 1: to do the task that they are assigned. Yeah. Well,
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  Speaker 1: one thing that is sort of interesting in light of
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  Speaker 1: healthcare conversations in the US right now is the cost
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  Speaker 1: of pharmaceuticals. And j I want you to come on
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  Speaker 1: in here, because a lot of people say, yeah, healthcare
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  Speaker 1: is cheaper in other countries outside the US because drug
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  Speaker 1: companies can sell pharmaceuticals at lower prices, the generics are
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  Speaker 1: sold at lower prices. Do you think that that is
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  Speaker 1: a significant component of the lower cost of healthcare in
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  Speaker 1: some in India and other countries. Certainly generic drugs can
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  Speaker 1: contribute to lower costs in a kind tree like India. Certainly,
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  Speaker 1: labor cost is also cheaper. For instance, doctors salaries or
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  Speaker 1: nurses salaries are cheaper in India's compared to the US.
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  Speaker 1: We kind of adjusted for all those and what we
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  Speaker 1: find is even after you adjust the Indian cost structure
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  Speaker 1: for US salaries and US drug prices, what we find
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  Speaker 1: is the Indian exemplars if you take open heart surgery,
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  Speaker 1: they are still of the cost of open heart surgery
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  Speaker 1: in this country and their quality is better than what
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  Speaker 1: we find in the US. For instance, in open heart surgery,
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  Speaker 1: one measure of quality is mortality rates thirty days after surgery.
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  Speaker 1: For Nara and Health, which is one of our hospitals
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  Speaker 1: in India, their mortality rates thirty days after surgery is
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  Speaker 1: one point four and the US average is one point nine.
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  Speaker 1: So their quality is on part, maybe even slightly ahead
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  Speaker 1: so therefore, reverse innovation is not just about reducing cost.
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  Speaker 1: It is about delivering value that means very high quality
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  Speaker 1: at very low cost. Professor Ramamorty, what you believe to
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  Speaker 1: be the biggest obstacle in the United States to implementing
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  Speaker 1: some of the described efficiencies and changes which would benefit
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  Speaker 1: the population. I think the fee for service system that
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  Speaker 1: we have is a major impediment because it motivates UH
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  Speaker 1: everyone in the system to provide services without looking keeping
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  Speaker 1: their eye on the ultimate objective, which is the health
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  Speaker 1: of the patient. And now there are plans in place
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  Speaker 1: to move, especially in medicare, to a different system, which
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  Speaker 1: is more risk sharing with the hospital us in the providers.
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  Speaker 1: We think that's a step in the right direction. That's
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  Speaker 1: one reason they wrote the book at this time, because
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  Speaker 1: we think as hospitals move in that direction, they're going
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  Speaker 1: to be looking for ways to bring down their cost
• 14:10
  Speaker 1: without loading their quality. Ravi Rama Morty University Distinguished Professor
• 14:14
  Speaker 1: of International Business and Strategy and Director of the Center
• 14:16
  Speaker 1: for Emerging Markets at Northeastern University, and VJ. Govinda jan
• 14:22
  Speaker 1: He is the Cocks Distinguished Professor at Dartmouth's Tuch School
• 14:25
  Speaker 1: of Business. Authors of verse innovation and healthcare kind of
• 14:45
  Speaker 1: bringing Dan Hansen. He is UK economist for Bloomberg Economics
• 14:50
  Speaker 1: and he joins us from our London bureau. Dan, thank
• 14:52
  Speaker 1: you very much for being with us. Maybe you could
• 14:55
  Speaker 1: just outline what has the analysis said about the future
• 14:59
  Speaker 1: of the UK at economy if it is outside of
• 15:02
  Speaker 1: the European Union. Thanks for having me. So if we're
• 15:06
  Speaker 1: outside the European Union, the UK economies outside the European Union,
• 15:09
  Speaker 1: that it's going to be costly for us. I mean,
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  Speaker 1: so much depends on the deal we get with the
• 15:16
  Speaker 1: European Union, and that's why the events over the past
• 15:18
  Speaker 1: few days have been so important. You've seen the UK
• 15:21
  Speaker 1: government appear at least to move towards a softer Brexit.
• 15:27
  Speaker 1: But even that softer Brexit we think could see the
• 15:30
  Speaker 1: economy around five smaller by about twenty thirties. That's a
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  Speaker 1: significant hit um. And if we go towards this dreaded
• 15:40
  Speaker 1: no deal scenario, that cost could rise substantially up to
• 15:44
  Speaker 1: maybe perhaps seven percent of GDP. So these are these
• 15:47
  Speaker 1: are big numbers that we're talking about, and I think
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  Speaker 1: the really important point here is it's the form of
• 15:53
  Speaker 1: Brexit that matters the most. It's not that we're just
• 15:55
  Speaker 1: leaving and there's just this cost. It really is the
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  Speaker 1: shape of the deal we're going to get the EU
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  Speaker 1: that will determine the ultimate cost of the UK economy.
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  Speaker 1: You know, Dan, whenever you talk about these projections, I'm
• 16:05
  Speaker 1: sure you get a lot of feedback from people saying, Oh,
• 16:08
  Speaker 1: you're just taking the worst case scenario and you're against brexits,
• 16:11
  Speaker 1: you're trying to paint it this way, or you're four Brexits,
• 16:13
  Speaker 1: you're trying to paint it that way. And wondering is
• 16:15
  Speaker 1: there any way to quantify what the economic effect has
• 16:19
  Speaker 1: already been stemming from the uncertainty that Brexit has introduced. Yes, sure,
• 16:26
  Speaker 1: so we we've done some analysis on this and it
• 16:28
  Speaker 1: really comes down to what's your counter factual um and
• 16:31
  Speaker 1: the way we take We take quite a simple approach
• 16:33
  Speaker 1: and just say what we have forecast had the UK
• 16:37
  Speaker 1: not decided to leave the European Union, and our numbers
• 16:40
  Speaker 1: suggests that the UK is about at the moment, it
• 16:43
  Speaker 1: is about one per cent smaller than it otherwise would
• 16:45
  Speaker 1: have been. Now, you're quite right, it's uncertainty that's had
• 16:48
  Speaker 1: an effect, especially on business investment in the United Kingdom.
• 16:51
  Speaker 1: But it's also this drop in the pound that's fed
• 16:54
  Speaker 1: through to inflation and that squeeze incomes in the UK.
• 16:57
  Speaker 1: It's made things a lot more expensive for consumers and
• 17:00
  Speaker 1: that's seeing consumer spending slow. So it's those two effects
• 17:03
  Speaker 1: really that have that have seen the economy slow. But
• 17:06
  Speaker 1: our number is about one of GDP, so or the
• 17:09
  Speaker 1: economy we think about one percent of g d P
• 17:11
  Speaker 1: smaller than it otherwise would have been. What do you
• 17:14
  Speaker 1: believe the reaction or the next moves on the part
• 17:17
  Speaker 1: of the Bank of England are going to be given
• 17:19
  Speaker 1: this scenario. So it's really difficult for the Bank of
• 17:23
  Speaker 1: England because they've been struggling with this uh, this overshoot
• 17:27
  Speaker 1: of inflation. So inflation has gone up at the end
• 17:29
  Speaker 1: of last year it's up at three percent in the UK,
• 17:31
  Speaker 1: but as I say, that was all sterling driven and
• 17:34
  Speaker 1: the Bank of Englan's target's actually two percent. But at
• 17:37
  Speaker 1: the same time they've had a slowing economy, so you've
• 17:39
  Speaker 1: had the monetary policy maker's nightmare. It's the trade off.
• 17:42
  Speaker 1: They've got surging inflation, you've got a slowing economy. What
• 17:44
  Speaker 1: you do um in the immediate aftermath of the Brexit vote,
• 17:48
  Speaker 1: they loosen policy and quite significantly. But back in November
• 17:52
  Speaker 1: they lifted rates very marginally by twenty five basis points
• 17:56
  Speaker 1: and took back some of that stimulus. And now we
• 17:59
  Speaker 1: think they're nex meeting which comes on the second of August,
• 18:02
  Speaker 1: they're going to lift rates again. The unemployment rate in
• 18:05
  Speaker 1: the United Kingdoms at a forty two year low. Growth
• 18:09
  Speaker 1: we saw figures today that showed growth likely to rebound
• 18:12
  Speaker 1: in the second quarter UM and inflation is coming down
• 18:15
  Speaker 1: but it's still above the two percent target, and pay
• 18:18
  Speaker 1: growth is picking up. So all of those factors together
• 18:20
  Speaker 1: we think their next move is actually gonna come in
• 18:22
  Speaker 1: a couple of weeks time, on the second of August.
• 18:24
  Speaker 1: All right, although the manufacturing get out of the UK
• 18:27
  Speaker 1: were somewhat disappointing, right well, I mean the manufacturing sector
• 18:33
  Speaker 1: groom month or month. It was the broader factory sector,
• 18:37
  Speaker 1: you're right, did contract, But part of that was due
• 18:39
  Speaker 1: to erratic factors. One which is the it's been very
• 18:43
  Speaker 1: hot weather here in the UK for once, and the weather.
• 18:46
  Speaker 1: I love the blaming of the weather. It's always a
• 18:48
  Speaker 1: good thing to go to. I would just say I
• 18:54
  Speaker 1: was watching our television coverage earlier today and Tom Keene
• 18:58
  Speaker 1: was at the Parliament Square in front of Westminster and
• 19:03
  Speaker 1: you could see all the grass has decidedly gone brown
• 19:07
  Speaker 1: because of this hot Alright, alright, so whether weather matters, Dan,
• 19:12
  Speaker 1: just just real quick here, I want to get your sense,
• 19:14
  Speaker 1: going back to what you were saying, the form of
• 19:16
  Speaker 1: Brexit matters quite a bit. Do you see a much
• 19:20
  Speaker 1: greater likelihood that we are going to get a so
• 19:23
  Speaker 1: called no deal Brexit which would ultimately remove in your prediction,
• 19:27
  Speaker 1: about seven percent of GDP annually by the end of
• 19:31
  Speaker 1: At the moment, I think there is a risk simply
• 19:34
  Speaker 1: because of what's happened in the last twenty four hours.
• 19:38
  Speaker 1: It's quite clear in the UK cabinet too, of the
• 19:41
  Speaker 1: most prominent Brexiteers have left, the resigned from the UK
• 19:45
  Speaker 1: Cabinet and you've got a lot of hardline Conservative lawmakers.
• 19:51
  Speaker 1: So that's the party who are empower in the UK,
• 19:54
  Speaker 1: who are quite keen to have a very clean break
• 19:58
  Speaker 1: from the European Union. And now if they decide to
• 20:01
  Speaker 1: challenge to reason as leadership, um, then it's quite possible
• 20:06
  Speaker 1: that you end up getting a very uh anti EU
• 20:11
  Speaker 1: or the pro Brexit leader in the Tory Party, and
• 20:14
  Speaker 1: that lifts the chances quite significantly of a of a
• 20:17
  Speaker 1: harder or even a no deal Brexit. Well, thank you
• 20:20
  Speaker 1: so much. Unfortunately we've got to leave it there, but
• 20:21
  Speaker 1: we'll talk with you soon again about this issue. Dan Hanson,
• 20:25
  Speaker 1: UK economist for Bloomberg Economics talking all about the various
• 20:29
  Speaker 1: scenarios and effects of Brexit. Tessa shares up nearly two
• 20:47
  Speaker 1: percent today, following a three percent gaining yesterday after news
• 20:50
  Speaker 1: came out today that the company is planning a Chinese
• 20:55
  Speaker 1: auto manufacturing plant with the capacity to produce five hundred
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  Speaker 1: thousand cars. Joining us now, Jamie Butter's US autos editor
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  Speaker 1: for Bloomberg News, joining us from the Detroit bureau. Jamie,
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  Speaker 1: this is a really big deal. Explain why. I mean,
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  Speaker 1: there's there's sort of two sides to this. Tesla needs
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  Speaker 1: the sort of production haft that they could potentially get
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  Speaker 1: from this, but also tell us what it means about
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  Speaker 1: what's going on between the US and China. Well, yeah,
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  Speaker 1: those are those some pretty big things. So yeah, I mean,
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  Speaker 1: Tesla you know, has been so it's small, it's still
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  Speaker 1: kind of starting up. They really only have the one
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  Speaker 1: car factory this, you know, to get one in China
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  Speaker 1: and then they'll announce by the end of the year,
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  Speaker 1: should announce some plans for a third assembly planned in Europe.
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  Speaker 1: You know, that really can go a long way towards
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  Speaker 1: them really kind of becoming a real automaker or something
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  Speaker 1: stable enough to survive a recession, um big enough to
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  Speaker 1: really gain some economies of scale. So it's this is
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  Speaker 1: an important step. We've kind of seen it coming, he's
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  Speaker 1: been talking, I've been working on it for more than
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  Speaker 1: a year. But to actually get it to come together
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  Speaker 1: as a Holy owned Tesla plant in China, it's a
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  Speaker 1: big step for Tesla. Of course, they've got to pay
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  Speaker 1: for it, and there's some other issues there. But it
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  Speaker 1: is very interesting when you think about it in light
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  Speaker 1: of all the trade chaos. You know that the Trump
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  Speaker 1: administration is created and we're seeing rising tariffs in the
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  Speaker 1: US US against China made products in China against US
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  Speaker 1: made products including automobiles as well as aluminum and steel,
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  Speaker 1: and all these other things going on. And so here's
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  Speaker 1: the you know, the youngest publicly traded US automaker UH
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  Speaker 1: announcing plans to build a factory and basically double their
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  Speaker 1: capacity by building a factory in in Shanghai outside of Shanghai,
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  Speaker 1: uh so, which which will help it avoid the tariffs
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  Speaker 1: on both sides of the deal. But it'll be really
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  Speaker 1: I'll be really curious to see if President Trump has
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  Speaker 1: anything to say about it. He's criticized Harley Davidson for
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  Speaker 1: their plans to move some work outside of the US
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  Speaker 1: and order to avoid Europe's tariffs against US made products.
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  Speaker 1: This is gonna take any work away from the US.
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  Speaker 1: But sometimes the President gets real sensitive about American companies
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  Speaker 1: creating manufacturing jobs anywhere other than the US. Of a
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  Speaker 1: Jamie Butters, Is it at all ironic that on this day,
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  Speaker 1: when we're talking about China and Tesla, that Tesla laid
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  Speaker 1: off nine percent of its workforce. Um? Is it ironic? Well? Oh,
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  Speaker 1: and also I'll give you a moment to ponder that.
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  Speaker 1: As we recall in there was a story about how
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  Speaker 1: Tesla was going to produce electric vehicles in China. Oh
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  Speaker 1: but wait, that story surfaced again in and if they
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  Speaker 1: had actually started building that plant in it would already
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  Speaker 1: be finished by now. Yeah. Uh, but they Tesla has
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  Speaker 1: moved at a very rapid pace to grow at the
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  Speaker 1: rate they have, and I don't know if they could
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  Speaker 1: have had the money or the uh you know, intellectual
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  Speaker 1: energy to need it to do all that. Uh. You know,
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  Speaker 1: Ellen Musk really does everything very his very hands on.
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  Speaker 1: Uh so having another operation on another continent may have
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  Speaker 1: been too much for them at the time. It is interesting,
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  Speaker 1: you're right. I mean, they're gonna add thousands, presumably thousands
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  Speaker 1: of jobs. We don't know how many, but some number
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  Speaker 1: of thousands in China, and they're cutting uh thousands, you
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  Speaker 1: know about was about three thousand, mostly in the US.
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  Speaker 1: You know, it seems that a lot of the US
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  Speaker 1: cutbacks are related to the Solar City operations. We're certainly
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  Speaker 1: seeing a lot you know, the retail folks and installers
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  Speaker 1: from Solar City. So it may just be more of
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  Speaker 1: a business alignment. A lot, you know, a lot of
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  Speaker 1: things are fungible. I mean they're saying, you know, this
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  Speaker 1: plant is only going to produce vehicles for China. The
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  Speaker 1: California plant will produce for the rest of the world,
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  Speaker 1: at least until Europe gets going. But well, you can't
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  Speaker 1: always move as people, you know. It's one thing. You know,
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  Speaker 1: it's hard enough for Nissan or Toyota to move people
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  Speaker 1: from southern California to Texas or Tennessee. You're not going
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  Speaker 1: to move a bunch of factory workers from California to China,
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  Speaker 1: right and and certainly I mean two pims point though
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  Speaker 1: with a skepticism about sort of building a plant tests
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  Speaker 1: ability to do so they're kind of running out of cash.
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  Speaker 1: I just want to touch on one other thing, Jabe.
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  Speaker 1: We've got about a minute left here. BMW also announced
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  Speaker 1: today that it will make many cars in China for
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  Speaker 1: the first time, and I'm just wondering, you know, whether
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  Speaker 1: quickly you could just give us an overview of just
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  Speaker 1: how much automakers globally are trying to expand their presences
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  Speaker 1: and manufacturing in China. Yeah. Well, I mean, China is
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  Speaker 1: the biggest market and it is still the fastest growing
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  Speaker 1: market in the world, and it's phenomenal to think about it.
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  Speaker 1: It's now, you know, approaching twice as big as the
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  Speaker 1: United States market, which until the Great Recession was still
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  Speaker 1: the world's largest. It's still the most lucrative. But to
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  Speaker 1: avoid the to really cater to that market, you know,
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  Speaker 1: it is it is so big you want to have
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  Speaker 1: vehicles that are designed for Chinese people. That can reduce
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  Speaker 1: the costs of that your cost effective or you know,
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  Speaker 1: more profitable. Uh. And of course, dealing with a government
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  Speaker 1: essentially controlled economy, it's always wise to keep those relationships strong,
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  Speaker 1: and creating jobs in a place helps helps with that.
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  Speaker 1: Thanks very much. Jamie Butters is our US autos analyst
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  Speaker 1: for Bloomberg. He joins us from Detroit. Thanks for listening
• 26:24
  Speaker 1: to the Bloomberg P and L podcast. You can subscribe
• 26:27
  Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever
• 26:30
  Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter
• 26:34
  Speaker 1: at pim Fox. I'm on Twitter at Lisa abramowits one
• 26:38
  Speaker 1: before the podcast. You can always catch us worldwide on
• 26:41
  Speaker 1: Bloomberg Radio.