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UAW, IPOs, Mercedes, and Maserati (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside
• 0:04
  Speaker 1: my co host Matt Miller.
• 0:05
  Speaker 2: Every business day we bring you interviews from CEOs, market pros,
• 0:09
  Speaker 2: and Bloomberg experts, along with essential market moven news.
• 0:14
  Speaker 1: Find the Bloomberg Markets podcast called Apple Podcasts or wherever
• 0:17
  Speaker 1: you listen to podcasts, and at Bloomberg dot com Slash podcast.
• 0:21
  Speaker 1: All Right, the auto strike it is on in a
• 0:23
  Speaker 1: big way off the UAW striking all three big Detroit
• 0:27
  Speaker 1: automakers at the same time, and that is the subject
• 0:30
  Speaker 1: of our Big Take story today. You know, Matt and
• 0:33
  Speaker 1: I love the Big Takes stories because these reporters go.
• 0:35
  Speaker 3: Deep on some really big topics.
• 0:37
  Speaker 1: Today we've got a uaw's bid to up end the
• 0:39
  Speaker 1: auto world. Who begins with a snub of Bill Ford.
• 0:43
  Speaker 1: Joining us is Keith Milton. He covers the auto industry
• 0:46
  Speaker 1: along with David Welch, Gabrielle Coppola, and Josh Idelson, all
• 0:51
  Speaker 1: out in Detroit. Doing great job on this big Take story. Hey, Keith,
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  Speaker 1: What's interesting to me at least is the fact that
• 0:57
  Speaker 1: the UAW is striking all three Detroit automakers simultaneously. They
• 1:02
  Speaker 1: haven't done that before have they.
• 1:04
  Speaker 4: That is a first, but they're taking it in small bites.
• 1:08
  Speaker 4: Rather than shutting down all of the factories of the
• 1:11
  Speaker 4: Big Three, they targeted one factory at each company and
• 1:16
  Speaker 4: have threatened to widen that strike if they don't get
• 1:19
  Speaker 4: an agreement.
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  Speaker 5: Tes.
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  Speaker 2: Well, I just I mean, Keith, you cover Ford especially
• 1:24
  Speaker 2: closely obviously the entire industry, But as far as I
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  Speaker 2: understood it, the unions have the best relationship with the
• 1:32
  Speaker 2: Ford Motor Company because they like, you know, the idea
• 1:35
  Speaker 2: of a family owned operation. Ford also didn't take a
• 1:39
  Speaker 2: bailout during during the Great Financial Crisis, and Bill Ford
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  Speaker 2: gets personally involved with union leaders, right, So is it
• 1:49
  Speaker 2: especially fascinating that they have really snubbed him and he
• 1:53
  Speaker 2: seems frustrated.
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  Speaker 4: Yeah, that's a really keen observation, Matt, because Ford, and
• 2:00
  Speaker 4: Bill Ford in particular, going back to when he first
• 2:02
  Speaker 4: joined the company in nineteen seventy nine, has been involved
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  Speaker 4: in every single labor negotiation since then. You know, he's
• 2:10
  Speaker 4: a guy who grew up playing hockey with union workers,
• 2:14
  Speaker 4: so he has kind of I know it sounds odd,
• 2:16
  Speaker 4: but he has a very good rapport with the rank
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  Speaker 4: and file from his hockey playing to be honest. And
• 2:22
  Speaker 4: what happened here is he took what Ford says was
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  Speaker 4: their best offer ever to the union twenty percent raises,
• 2:29
  Speaker 4: a restoration of cost of living adjustments, you know, five
• 2:33
  Speaker 4: weeks vacation, nineteen personal days, all sorts of goodies. He
• 2:38
  Speaker 4: took it personally to the bargaining table last Tuesday, and
• 2:41
  Speaker 4: he was greeted at the door by UW Vice President
• 2:44
  Speaker 4: Chuck Browning, who said, Sean Fain is not here.
• 2:47
  Speaker 6: The UAW president is not here. Bill Ford's like, why not?
• 2:52
  Speaker 1: Yeah, Hey, Ken and Keith?
• 2:55
  Speaker 5: What crazy Bill Ford? I know, the scion, you know,
• 2:59
  Speaker 5: the Henry Ford family.
• 3:00
  Speaker 1: Well that kind of that kind of goes to my
• 3:01
  Speaker 1: next question, what do we know about this u a
• 3:03
  Speaker 1: W president Sean Feiney seems to really kind of be
• 3:07
  Speaker 1: grabbing the.
• 3:07
  Speaker 2: Spotlight here and he's not in jail. Yes, like like
• 3:10
  Speaker 2: the last last two union leaders.
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  Speaker 4: Right, that's correct, and that's you know, that explains the
• 3:17
  Speaker 4: rise of Sean fame, this kind of fiery leader. He
• 3:20
  Speaker 4: was the reform candidate who narrowly defeated, you know, the
• 3:25
  Speaker 4: the incumbent candidate who was from that traditional group which
• 3:29
  Speaker 4: had you know, two previous presidents go to jail for corruption,
• 3:33
  Speaker 4: this using union fund funds on their own lavish lifestyles.
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  Speaker 4: Fain is, you know, really a true believer. And I'm
• 3:40
  Speaker 4: not sure the auto executives fully understood that when he
• 3:43
  Speaker 4: first was elected back in March. And he sees this
• 3:47
  Speaker 4: as much more than just an auto contract. He sees
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  Speaker 4: this as class warfare, balancing the scales of forty years
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  Speaker 4: of kind of the wealthy class, uh, you know, winning
• 3:58
  Speaker 4: over on the middle class.
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  Speaker 6: And so he's on a crusade.
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  Speaker 4: And that attitude is something that the auto companies haven't
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  Speaker 4: dealt with before. They've dealt with pragmatists who, you know,
• 4:13
  Speaker 4: when it came down to it, were able to horse
• 4:15
  Speaker 4: trade and get a deal done.
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  Speaker 2: It makes sense because I mean, I don't want to
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  Speaker 2: sound like a bleeding heart liberal, but the CEOs used
• 4:23
  Speaker 2: to get thirty to forty times with the guy on
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  Speaker 2: the factory floor got and now it's more like two
• 4:28
  Speaker 2: hundred times. Right, And you say wealthy class versus middle class?
• 4:31
  Speaker 2: What middle class? Are auto workers really the middle class anymore?
• 4:35
  Speaker 2: I don't think that's how they feel. And then you know,
• 4:40
  Speaker 2: their demands look outrageous because they throw in four day
• 4:44
  Speaker 2: workweek and define benefit pensions, which you know none of
• 4:47
  Speaker 2: us is going to get that anymore.
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  Speaker 5: But the.
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  Speaker 2: Wage increases look to be okay and aren't going to
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  Speaker 2: bankrupt these companies, are they.
• 4:57
  Speaker 4: Well, I mean these are big way increases. Stilantis up
• 5:01
  Speaker 4: to their offer over the weekend to twenty one percent,
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  Speaker 4: but the union is asking for thirty six percent. So
• 5:09
  Speaker 4: there's a pretty wide golf and just one point on
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  Speaker 4: those defined benefit pensions. You're right, Matt, none of us
• 5:17
  Speaker 4: get those anymore. But the point that Sean Fain makes
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  Speaker 4: is the CEOs.
• 5:21
  Speaker 5: Do well, that's a good point. That's interesting. I did
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  Speaker 5: not know that.
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  Speaker 2: Well, they also get like twenty to thirty million dollars
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  Speaker 2: a year.
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  Speaker 5: Yeah, that's nice argue.
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  Speaker 2: They up those pensions just as a show of you know,
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  Speaker 2: solidarity with the factory floor.
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  Speaker 7: Right.
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  Speaker 4: Yeah, so so no, they probably won't get the defined
• 5:41
  Speaker 4: benefit pension back.
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  Speaker 6: But Fane's trying to make a point.
• 5:45
  Speaker 1: Yep, all right, as we're go into that, I guess
• 5:47
  Speaker 1: the second week here, I don't know. I can't can
• 5:48
  Speaker 1: keep track. Keith, what's the feeling in Detroit about how
• 5:51
  Speaker 1: this thing plays out? Because that's that's a.
• 5:53
  Speaker 5: Today's Big four by the way, Day four, Day four.
• 5:56
  Speaker 1: Okay, a big bid. Ask difference between the union and
• 6:00
  Speaker 1: the companies. What's the feeling in Detroit how this might
• 6:03
  Speaker 1: play out?
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  Speaker 4: Well, first off, there's a lot of support in Detroit
• 6:07
  Speaker 4: for these strikers. One of the striking plans is here
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  Speaker 4: in suburban Detroit, not far from where I'm sitting right now.
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  Speaker 6: So they got a lot of honkers, a lot of support.
• 6:16
  Speaker 4: You know, there's a Gallup poll out that shows that
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  Speaker 4: seventy five percent of America is on the UAW side
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  Speaker 4: in this dispute.
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  Speaker 6: So this is labor's moment. Man. You know, they're an ascendence.
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  Speaker 4: There's this feeling that, you know, in the pandemic, they
• 6:30
  Speaker 4: were getting left behind, and there's nervousness about AI and
• 6:33
  Speaker 4: all sorts of things that could replace jobs. So they
• 6:36
  Speaker 4: have support, and it seems like the companies are going
• 6:41
  Speaker 4: to have to try and meet them farther.
• 6:44
  Speaker 6: Than they have in a halfway battle.
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  Speaker 4: They have actually met them halfway because the union has
• 6:50
  Speaker 4: for forty percent initially and the companies have offered twenty.
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  Speaker 6: But they're going to have to go farther.
• 6:55
  Speaker 2: I was going to ask about Brampton Ontario and the
• 6:57
  Speaker 2: Canadian Union.
• 6:59
  Speaker 5: And because but I just got an email for Dodge.
• 7:01
  Speaker 5: My vehicle has been built.
• 7:03
  Speaker 6: Nice. I mean in Canada, if you care, uniform.
• 7:09
  Speaker 4: Negotiate unifors the union up there, and they're also negotiating
• 7:13
  Speaker 4: a contract. But they're doing it in the traditional way
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  Speaker 4: where you pick one company and set a pattern there
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  Speaker 4: and then take it to the other two. That's the
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  Speaker 4: way it's always been done. They're doing that up in Canada,
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  Speaker 4: and the company they have targeted.
• 7:25
  Speaker 7: Is for It.
• 7:26
  Speaker 6: Okay, again, Matt, to.
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  Speaker 4: Your point that Ford tends to, you know, have a
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  Speaker 4: better relationship with the union and you know, have been
• 7:34
  Speaker 4: able to reach agreements with them through the years. There
• 7:36
  Speaker 4: has not been a national strike at Ford since nineteen
• 7:39
  Speaker 4: seventy six.
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  Speaker 1: Okay, all right, good keep that in mind. But here
• 7:43
  Speaker 1: in the US it looks very contentious here. Keith Noughton,
• 7:45
  Speaker 1: thanks so much for joining us. Keith Monton covers Detroit
• 7:48
  Speaker 1: for Bloomberg News and all the auto guys. He's out
• 7:50
  Speaker 1: there and he is one of the authors of the
• 7:53
  Speaker 1: Big Take story.
• 7:54
  Speaker 8: Today you're listening to the team. Ken's a live program
• 7:58
  Speaker 8: Bloomberg Markets Jays at ten am Eastern on Bloomberg dot Com,
• 8:02
  Speaker 8: the iHeartRadio app, and the Bloomberg Business app, or listen
• 8:06
  Speaker 8: on demand wherever you get your podcast.
• 8:10
  Speaker 9: We're welcome now our Bloomberg TV and radio audiences. Today
• 8:13
  Speaker 9: we are focused on oil, as Brent Near's ninety five
• 8:16
  Speaker 9: dollars a barrel. No better guest to discuss that with
• 8:19
  Speaker 9: than Mike Worth, Chevron chairman and CEO joins us now.
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  Speaker 10: Mike, it's such a pleasure to see you.
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  Speaker 7: Thanks for joining, Alex, It's good to be here.
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  Speaker 10: Okay, Hunter hour oil? Is that going to happen?
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  Speaker 7: Sure looks like it. We're certainly moving in that direction.
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  Speaker 11: The momentum, you know, supply is tightening, inventories are drawing.
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  Speaker 11: These things happen gradually concealed building, and so I think
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  Speaker 11: the you know, the the trends would suggest that we're
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  Speaker 11: we're certainly on our way.
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  Speaker 7: We're getting close.
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  Speaker 12: Mike, good morning, it's guy in London. What impact do
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  Speaker 12: you think a hundred bucks a barrel will have on
• 8:53
  Speaker 12: the US economy? What impact will I have on the
• 8:56
  Speaker 12: global economy?
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  Speaker 11: Well, certainly those are higher price is then you know,
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  Speaker 11: we tend to see out over the long term, and
• 9:04
  Speaker 11: so I think it will have some effect on the economy,
• 9:08
  Speaker 11: But you know, we've had relatively higher roil prices here
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  Speaker 11: now for most of this year and certainly all of
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  Speaker 11: last year. The recession that everyone's been talking about hasn't arrived,
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  Speaker 11: and so I think the underlying drivers of the economy
• 9:22
  Speaker 11: in the US and frankly globally remain pretty healthy. So
• 9:27
  Speaker 11: I think it's a drag on the economy, but one
• 9:30
  Speaker 11: that thus far, I think the economy has been able
• 9:32
  Speaker 11: to tolerate.
• 9:34
  Speaker 10: Have you adjusted your price deck?
• 9:36
  Speaker 9: Meaning that's my question being like, are these higher prices.
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  Speaker 10: Sustainable for the long term?
• 9:39
  Speaker 11: Yeah, we take a very long term view on supply, demand, policy, technology.
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  Speaker 11: We haven't changed our long term price but we really
• 9:48
  Speaker 11: don't change that very often, and not in response to
• 9:51
  Speaker 11: it are short and we've been in a volatile market
• 9:54
  Speaker 11: really going back to the pandemic when things came down
• 9:56
  Speaker 11: to the recovery, when it was high the war, this
• 10:00
  Speaker 11: has been a period of time where prices have been unpredictable,
• 10:03
  Speaker 11: involvedle and not what you would call mid cycle.
• 10:07
  Speaker 12: Mike, if I worked for you, if I worked for
• 10:10
  Speaker 12: Mike Worth and I worked for Chefron, would this be
• 10:12
  Speaker 12: my cue to say Mike, can I have a pay
• 10:15
  Speaker 12: rise please?
• 10:17
  Speaker 11: Well, we're certainly seeing I think you're making a reference
• 10:19
  Speaker 11: to what's going on in different parts of the world.
• 10:22
  Speaker 11: We're seeing organized labor, you know, in many different industries
• 10:26
  Speaker 11: now kind of assertively step forward and say, look, we
• 10:31
  Speaker 11: want to be compensated. We see the inflation in the economy,
• 10:36
  Speaker 11: and we've seen companies recover. We've had a very strong
• 10:40
  Speaker 11: pay program last year of our employees. We tried to
• 10:42
  Speaker 11: stay very competitive and I would expect we'll continue to
• 10:45
  Speaker 11: do so.
• 10:46
  Speaker 9: That is Guy's way of getting into the strike action
• 10:48
  Speaker 9: that's happening in Australia with Gorgon and weed Stone.
• 10:50
  Speaker 10: So so far cargoes have not yet been impacted.
• 10:53
  Speaker 9: You're using some non union workers, right, Is there a
• 10:55
  Speaker 9: point where that would change.
• 10:57
  Speaker 11: Well, we certainly hope that what we'll see is a
• 11:00
  Speaker 11: negotiated agreement. Others in Australia have reached agreement with these unions.
• 11:04
  Speaker 11: We've been at the table bargaining in good faith and
• 11:07
  Speaker 11: that's our desired outcome. That said, when we face potential
• 11:11
  Speaker 11: strikes anywhere in the world, we have to prepare to
• 11:13
  Speaker 11: maintain operations. Our products are vital to the global economy
• 11:18
  Speaker 11: and the flow of those commodities, particularly al in g
• 11:20
  Speaker 11: In a world as we've seen last year, where it's
• 11:22
  Speaker 11: important to keep economies going, not just in the region
• 11:26
  Speaker 11: in Australasia, but also in Europe. That's our responsibility, and
• 11:30
  Speaker 11: so we do prepare to maintain operations even during an
• 11:32
  Speaker 11: industrial action, and thus far we've been able to successfully
• 11:36
  Speaker 11: do so in Australia.
• 11:38
  Speaker 12: Do you think if I'm sitting here in Europe I
• 11:40
  Speaker 12: should worry about what's happening here? Is this going to
• 11:42
  Speaker 12: be a problem when we get to winter? Do you think, Mike?
• 11:45
  Speaker 11: Well, last winter Europe came through better than I think
• 11:48
  Speaker 11: most thought.
• 11:48
  Speaker 7: Guy.
• 11:49
  Speaker 11: Now, inventories were high going into the winter because Russian
• 11:51
  Speaker 11: gas had been flowing in, industrial demand really came off,
• 11:55
  Speaker 11: and then it was a relatively mild winter. We certainly
• 11:57
  Speaker 11: can't count on all of those things happening again, but
• 12:01
  Speaker 11: gas inventories in Europe are pretty strong right now relative
• 12:05
  Speaker 11: to history, and so I would say Europe is set
• 12:07
  Speaker 11: up much.
• 12:08
  Speaker 7: Better than it was last year.
• 12:11
  Speaker 11: The weather is always difficult to predict, but I feel
• 12:15
  Speaker 11: like Europe is about as good a place as it
• 12:18
  Speaker 11: could hope to be at this point in time.
• 12:20
  Speaker 9: That's one of the weird things about looking at China
• 12:22
  Speaker 9: growth because obviously Europe wants China growth, but the energy
• 12:25
  Speaker 9: sector probably doesn't want China growth if you're in Europe
• 12:27
  Speaker 9: because of the demand pole, are you what are you
• 12:30
  Speaker 9: noticing in China? Whether it's ellen gear oil demand pole.
• 12:32
  Speaker 7: Well, it's been gradual.
• 12:34
  Speaker 11: It's been slower than people expected it to be, but
• 12:36
  Speaker 11: it is coming back, and I think that's one of
• 12:39
  Speaker 11: the reasons why you've seen crude oil prices tightening.
• 12:41
  Speaker 9: Is that inventory restocking you think, or is that end
• 12:43
  Speaker 9: user demand.
• 12:44
  Speaker 7: Always a little bit hard to tell.
• 12:45
  Speaker 11: The data out of China isn't exactly as transparent as
• 12:49
  Speaker 11: it is in other parts of the world, but I
• 12:51
  Speaker 11: think it's probably indicative of an economy that is finding
• 12:55
  Speaker 11: some traction and is moving forward. We're going to see
• 12:58
  Speaker 11: record oil demand this year, all time record demand, right
• 13:02
  Speaker 11: up a couple million barrels a day versus the prior year.
• 13:04
  Speaker 11: It'll grow again in the year ahead, and so as
• 13:07
  Speaker 11: long as the global economy stays relatively healthy, demand for
• 13:10
  Speaker 11: these products steadily marches forward.
• 13:15
  Speaker 12: Mike, you've mentioned inflation a couple of times already in
• 13:18
  Speaker 12: the conversation. Are you still seeing inflation? Are you starting
• 13:21
  Speaker 12: to see deflation in certain areas? What does the cost
• 13:23
  Speaker 12: side of the equation look like.
• 13:25
  Speaker 11: Yeah, so we've certainly planned for inflation. What we're experiencing
• 13:29
  Speaker 11: is consistent with how we laid out our budgets for
• 13:32
  Speaker 11: this year. I wouldn't say we're seeing deflation anywhere in
• 13:35
  Speaker 11: a meaningful way. Maybe seeing disinflation, right, So, a reduction
• 13:39
  Speaker 11: in the rate of inflation. And it tends to be
• 13:42
  Speaker 11: isolated to certain parts of our supply chain, certain geographies,
• 13:47
  Speaker 11: a little bit more than something you would describe as widespread.
• 13:50
  Speaker 11: I think wage pressure is pretty broadly distributed other things,
• 13:54
  Speaker 11: and our supply chains tend to be focused in areas
• 13:57
  Speaker 11: where there's a lot of activity, like West Texas and
• 14:00
  Speaker 11: in the Permian basin, which has seen a little more
• 14:01
  Speaker 11: pressure than some other parts of the world.
• 14:04
  Speaker 3: Yeah.
• 14:04
  Speaker 9: So to that point, can you increase if you take
• 14:07
  Speaker 9: USHL for a second, the Permian, can you increase productivity
• 14:10
  Speaker 9: enough to offset those costs when a lot of your
• 14:13
  Speaker 9: spending in the next say ten years will be in
• 14:16
  Speaker 9: US AL.
• 14:16
  Speaker 11: That is the big question right now that we're confronting
• 14:19
  Speaker 11: as we're putting our plans together. Going forward thus far,
• 14:22
  Speaker 11: that has been the case, and in fact, productivity at
• 14:25
  Speaker 11: a time when we saw lower inflation was marching for
• 14:27
  Speaker 11: much faster than cost were, which is why we saw
• 14:30
  Speaker 11: cost of production coming down. I think those are coming
• 14:33
  Speaker 11: into more of a balance today, and I think the
• 14:36
  Speaker 11: forward view the question is can you continue to move
• 14:39
  Speaker 11: up that productivity ramp and offset inflation or not.
• 14:43
  Speaker 7: I think it's early to say.
• 14:44
  Speaker 11: The one thing that is sometimes not talked about in
• 14:47
  Speaker 11: this discussion, we've seen a lot of productivity gains on
• 14:50
  Speaker 11: drilling and completions. We're still only recovering about ten percent
• 14:55
  Speaker 11: of the molecules that are in place. If we can
• 14:57
  Speaker 11: improve recoveries, that changes the entire economic equation in a
• 15:01
  Speaker 11: very profound way. We're working hard on that. We expect
• 15:04
  Speaker 11: to see recoveries improve over time. So it's another leg
• 15:08
  Speaker 11: of that equation, which is not necessarily productivity on the activity,
• 15:12
  Speaker 11: but it is on the recovery and the economic equation.
• 15:14
  Speaker 10: What is that is that three plus mile laterals?
• 15:17
  Speaker 9: Is it going to be just different types of enhanced
• 15:20
  Speaker 9: oil recovery, like what's the super supermagic sauce fare.
• 15:23
  Speaker 11: Yeah, we're working a lot of different things we're certainly
• 15:25
  Speaker 11: drilling longer. We're drilling longer laterals. We're working on different
• 15:28
  Speaker 11: completion technology to create different fractured geometry so you can
• 15:32
  Speaker 11: get more flow.
• 15:32
  Speaker 10: Does that all cost more money?
• 15:33
  Speaker 13: Though?
• 15:33
  Speaker 7: To do it does?
• 15:35
  Speaker 11: And so that's why you've got to evaluate the economics
• 15:37
  Speaker 11: of this. We're working on chemicals that can enhance recovery
• 15:40
  Speaker 11: in terms of the interaction right down at a molecular level,
• 15:44
  Speaker 11: and all these things you have to pile them in
• 15:46
  Speaker 11: a lab, you have to pilot them in the field.
• 15:48
  Speaker 11: You have to understand if you can scale them up
• 15:50
  Speaker 11: and if they make economic sense. That's been the history
• 15:53
  Speaker 11: of our industry. The technology tends to solve these things.
• 15:56
  Speaker 11: We got a lot of smart people in our company
• 15:57
  Speaker 11: and in this industry, and a lot of incentive when
• 16:00
  Speaker 11: you know where those molecules are to figure out how
• 16:02
  Speaker 11: to get them to flow in a way that's economic.
• 16:06
  Speaker 12: I said to Alex this morning, Mike that she wasn't
• 16:08
  Speaker 12: allowed to use any technical jog and I think you
• 16:10
  Speaker 12: guys just about skirted around it in that part of
• 16:12
  Speaker 12: the conversation. You were fine, You were fine. You get
• 16:15
  Speaker 12: a pass on that one, Mike. You talk about the
• 16:18
  Speaker 12: fact that you've got lots of smart people. Do you
• 16:19
  Speaker 12: have lots of smart lawyers? One of the things that
• 16:22
  Speaker 12: Alex and I were kicking around before we spoke to
• 16:24
  Speaker 12: you this morning was what is happening with this California
• 16:26
  Speaker 12: case and the fact that increasingly it looks like climate
• 16:30
  Speaker 12: change is going to be litigated. Is litigation the right
• 16:33
  Speaker 12: way of dealing with this?
• 16:35
  Speaker 7: In a word, no, it's not.
• 16:37
  Speaker 11: Look this is one of many such actions that we've
• 16:41
  Speaker 11: seen over the years. Ironically, a number of them on
• 16:46
  Speaker 11: filed on behalf of people who have actually profited from
• 16:48
  Speaker 11: and encouraged energy development. Climate change is a global issue.
• 16:54
  Speaker 11: It calls for a coordinated global policy response, not piecemeal
• 16:58
  Speaker 11: litigation that benefits attorneys and politicians.
• 17:02
  Speaker 7: So will we do have smart lawyers.
• 17:06
  Speaker 11: We will deal with the lawsuits, But more importantly, we're
• 17:09
  Speaker 11: working on finding ways to meet today's energy demand with
• 17:12
  Speaker 11: energy that has less carbon intensity and still is affordable
• 17:16
  Speaker 11: and reliable for the economy, even as we're investing in
• 17:19
  Speaker 11: new technologies like renewable fuels and hydrogen and carbon capture
• 17:24
  Speaker 11: to build a new energy system over time that is
• 17:26
  Speaker 11: inherently lower carbon. That's a constructive approach, that's where we're engaged.
• 17:30
  Speaker 11: That's where most of my attention is focused.
• 17:32
  Speaker 9: Okay, so to this point, you guys are going to
• 17:34
  Speaker 9: become majority owner in what could be the world's largest
• 17:37
  Speaker 9: hydrogen production and storage facility.
• 17:39
  Speaker 10: There's that You do have a huge.
• 17:41
  Speaker 9: Carbon capture facility next to Gorgon in Australia, etc.
• 17:44
  Speaker 10: These things are huge, and they're.
• 17:46
  Speaker 9: Expensive, and some have been around for a while. Hydrogen, though,
• 17:49
  Speaker 9: is new.
• 17:50
  Speaker 10: How do you know how much.
• 17:51
  Speaker 9: Capex to realistically allocate before you're like, this is too
• 17:54
  Speaker 9: big and it's a money suck.
• 17:56
  Speaker 10: How do you see this playing out?
• 17:57
  Speaker 11: Well, it requires a lot of judgment. You have to
• 17:59
  Speaker 11: spend time, you have to really select. There are many
• 18:01
  Speaker 11: opportunities out there.
• 18:02
  Speaker 10: There's a lot of hydrogen.
• 18:03
  Speaker 11: For example, there are a lot of places you can
• 18:05
  Speaker 11: invest in hydrogen. You can invest in blue hydrogen, you
• 18:07
  Speaker 11: can invest in green hydrogen. There's different carbon intensities, there's
• 18:11
  Speaker 11: different technology pathways. We've got an entire organization that spends
• 18:15
  Speaker 11: all its time working on the technical, the commercial, the
• 18:19
  Speaker 11: practical engineering realities of these things and looks to find
• 18:23
  Speaker 11: the best places to start. Certainly in the US, we've
• 18:26
  Speaker 11: seen some policy through the IRA which creates incentives. Those
• 18:32
  Speaker 11: aren't intended to last forever, but they can help prime
• 18:34
  Speaker 11: the pump as we bring the technology costs down. The
• 18:37
  Speaker 11: project you referenced is a project in Utah which is
• 18:40
  Speaker 11: actually very economic today. We'll take surplus renewable power that
• 18:45
  Speaker 11: comes from primarily from wind in the western US, and
• 18:48
  Speaker 11: when it's more than the grid needs, which happens during
• 18:51
  Speaker 11: certain times of the day, we can use that to
• 18:53
  Speaker 11: convert water into hydrogen. We'll store the hydrogen in the
• 18:57
  Speaker 11: underground caverns, and then at other times in the day
• 19:00
  Speaker 11: when you want to bring that power back, we can
• 19:02
  Speaker 11: bring the hydrogen out of the caverns. It can be
• 19:04
  Speaker 11: put into a gasfird power plant along with natural gas.
• 19:07
  Speaker 7: To produce lower carbon electricity.
• 19:09
  Speaker 11: So it's an example of something that's technically feasible, the
• 19:11
  Speaker 11: economics and contract terms on and give us a return
• 19:14
  Speaker 11: on our investments, and it's a platform from which we
• 19:16
  Speaker 11: can then grow.
• 19:17
  Speaker 8: You're listening to the tape Ket's are live program Bloomberg
• 19:20
  Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 19:24
  Speaker 8: tune it app, Bloomberg dot Com, and the Bloomberg Business app.
• 19:27
  Speaker 8: You can also listen live on Amazon Alexa from our
• 19:30
  Speaker 8: flagship New York station, Just say Alexa play Bloomberg eleven thirty.
• 19:37
  Speaker 12: Welcome now are Bloomberg Radio and television audiences to a
• 19:40
  Speaker 12: fantastic conversation with Ala Hollinis. He is the Mercedes Benz CEO.
• 19:46
  Speaker 12: He joins us in New York, as does, of course,
• 19:48
  Speaker 12: Bloomberg's Matt Miller. All great to see you. Thank you
• 19:51
  Speaker 12: very much indeed for taking some time to drop by
• 19:53
  Speaker 12: and see us here at Bloomberg. The story we've been
• 19:57
  Speaker 12: talking about over the last few days has been all
• 20:00
  Speaker 12: about China. We're trying to work out whether Europe is
• 20:04
  Speaker 12: going to start a fire with China that is going
• 20:06
  Speaker 12: to impact Mercedes Benz. Let's talk of tariffs, let's talk
• 20:10
  Speaker 12: of trade wars around auto's and evs.
• 20:13
  Speaker 3: Are you worried?
• 20:15
  Speaker 14: It's great to be with you this morning, guy. No,
• 20:18
  Speaker 14: we're not fundamentally worried. We have a very strong business
• 20:21
  Speaker 14: in China that has grown significantly over the last ten years,
• 20:26
  Speaker 14: and we'll continue to invest in China to make sure
• 20:30
  Speaker 14: that we bring the product that the Chinese customers are
• 20:32
  Speaker 14: expecting for us from US. I think it's important in
• 20:37
  Speaker 14: these types of discussions to not forget what has made
• 20:41
  Speaker 14: are so successful over the last decades. It's been opening
• 20:45
  Speaker 14: up markets, free trade, free competition, but also a level
• 20:49
  Speaker 14: playing field. So as long as all of those frameworks
• 20:55
  Speaker 14: are in place to make sure that we can do
• 20:57
  Speaker 14: business in a sensible way, we're not work well.
• 21:00
  Speaker 2: We have though all an EU inquiry and the Chinese
• 21:04
  Speaker 2: car imports. Don't you expect Beijing to react with countermeasures.
• 21:11
  Speaker 14: We will see how this plays out and what comes
• 21:14
  Speaker 14: out to that. And we like to remind people that
• 21:19
  Speaker 14: open markets is what drives growth and also drives wealth creation.
• 21:24
  Speaker 15: In fact, if you look.
• 21:24
  Speaker 14: At the history of our company, it didn't take Gottlieb
• 21:27
  Speaker 14: Diamer more than fifteen years to figure out that Germany
• 21:32
  Speaker 14: is not the only attractive market in the world. And
• 21:34
  Speaker 14: we've been here in the United States for more than
• 21:36
  Speaker 14: one hundred and twenty years now. So that companies go
• 21:38
  Speaker 14: global and that competition goes global, I think that's natural.
• 21:41
  Speaker 14: We had the Japanese come to the United States in
• 21:44
  Speaker 14: the eighties and the nineties, then the Koreans, then Tesla came.
• 21:47
  Speaker 14: Now when we're going into electrification, so let's keep markets
• 21:51
  Speaker 14: open and let the market participants fight it out.
• 21:56
  Speaker 12: And Alina Beboch the German format is still speaking to
• 21:59
  Speaker 12: our good friend colleague Amriy Hordern. A little bit earlier
• 22:02
  Speaker 12: on or she was saying that there's a risk that
• 22:06
  Speaker 12: Europe is too exposed to China, that we need to
• 22:10
  Speaker 12: be cautious in our approach to China. Do you think
• 22:13
  Speaker 12: that European German luxury carmakers are though, at risk of
• 22:18
  Speaker 12: being overexposed to China, that that market has become too
• 22:22
  Speaker 12: big for you and the politics could get in the way.
• 22:25
  Speaker 12: How do you think about it when you get warnings
• 22:28
  Speaker 12: like that from German ministers.
• 22:31
  Speaker 14: On the one hand, I think we learned a thing
• 22:33
  Speaker 14: in the pandemic that supply chains can be fragile, and
• 22:39
  Speaker 14: to create some optionality and more resilience into your supply
• 22:44
  Speaker 14: chains is generally a good thing for businesses. This is
• 22:47
  Speaker 14: something that we have already started, especially on battery materials,
• 22:52
  Speaker 14: where we have devised a strategy where we're going to
• 22:54
  Speaker 14: try to as best as we can over the next years,
• 22:57
  Speaker 14: go into a kind of region for real sourcing. So yes,
• 23:01
  Speaker 14: we do look at different commodities to make sure that
• 23:03
  Speaker 14: their supply chain is resilient, but it would be a
• 23:07
  Speaker 14: complete illusion to think that we can divide the world,
• 23:10
  Speaker 14: the automotive world, into individual regions that have nothing to
• 23:15
  Speaker 14: do with each other. These supply chains are supply networks
• 23:19
  Speaker 14: rather are much too sophisticated. There are five continents in
• 23:22
  Speaker 14: every Mercedes that's being sold, and that is the strength
• 23:26
  Speaker 14: and market economy that the invisible hand of the market
• 23:28
  Speaker 14: figures out what the economic optimum is. So supply chain resilience, yes,
• 23:34
  Speaker 14: but keeping the markets open and the market working, I
• 23:38
  Speaker 14: think is even more important.
• 23:40
  Speaker 2: You have a strike going on here in the US, well,
• 23:43
  Speaker 2: not you, the UAW striking on for GM and STILLANTIS.
• 23:47
  Speaker 2: You have production here in the US doesn't have UAW workers,
• 23:51
  Speaker 2: but you still got to be prepared for supply chain
• 23:54
  Speaker 2: issues due to the strike. What are you expecting now
• 23:57
  Speaker 2: and how do you expect it to affect your business?
• 24:02
  Speaker 14: We don't expect any major impact on our business, and
• 24:06
  Speaker 14: of course, Mercedes Benz doing businesses more than one hundred
• 24:09
  Speaker 14: and fifty countries and have operations in all major economic regions.
• 24:13
  Speaker 14: We tried to make sure that we're competitive, that we're
• 24:15
  Speaker 14: an attractive employer, but at the same time we're in transformation.
• 24:19
  Speaker 14: The auto industry is getting more competitive, not less competitive.
• 24:22
  Speaker 14: So whatever pressures we have on cost is going to
• 24:24
  Speaker 14: have to be made up in productivity. So I think
• 24:27
  Speaker 14: we have to be very mindful to keep the gain
• 24:30
  Speaker 14: on productivity up and make sure that we don't have
• 24:36
  Speaker 14: cost that run out of control.
• 24:37
  Speaker 2: But don't you expect OLAF if they get a twenty
• 24:40
  Speaker 2: twenty five percent increase at UAW plants, You're going to
• 24:44
  Speaker 2: have to raise your price your pay at some point
• 24:47
  Speaker 2: in Tuscaloosa as well, otherwise you're going to lose workers
• 24:50
  Speaker 2: to plants up north.
• 24:52
  Speaker 14: We have been in the United States, in the southeast
• 24:57
  Speaker 14: of the United States with our plant in Alabama and
• 24:58
  Speaker 14: also our commerce van operation in South Carolina now for
• 25:04
  Speaker 14: in Alabama more than twenty five years, almost thirty years,
• 25:07
  Speaker 14: and we have always kept lockstep with what's going on
• 25:10
  Speaker 14: in the economy to make sure that we have attractive jobs.
• 25:13
  Speaker 14: So we watch that and we make adjustments as we
• 25:18
  Speaker 14: go along. But at the same time we look at,
• 25:20
  Speaker 14: you know, how can we do things better, how can
• 25:21
  Speaker 14: we do work in a smarter way, get leaner, because
• 25:25
  Speaker 14: the cost competition is not going to go anywhere.
• 25:28
  Speaker 12: Alo do you think that companies such as yourself these
• 25:32
  Speaker 12: companies like Stillantis and Ford should be guaranteeing the workers
• 25:37
  Speaker 12: that are working on combustion engines will have a place
• 25:40
  Speaker 12: in the new EV world. Should they be guaranteed jobs,
• 25:43
  Speaker 12: should they be carried through this transition process.
• 25:47
  Speaker 14: I cannot speak for other wader makers, but if I
• 25:49
  Speaker 14: look at what's happening at Mercedes Benz around the world
• 25:51
  Speaker 14: and primarily in Germany where we have most of our operations, Yes,
• 25:56
  Speaker 14: we're investing heavily into the new technologies lie and share
• 26:00
  Speaker 14: of our capital allocation goes into electrication and digitalization, and
• 26:04
  Speaker 14: we're creating.
• 26:05
  Speaker 3: New jobs there.
• 26:06
  Speaker 14: But the fact of the matter on the powertrain side
• 26:09
  Speaker 14: of things, the net at the end of this transition,
• 26:12
  Speaker 14: which is a ten year plus affair, is going to
• 26:16
  Speaker 14: be less jobs on powertrain. On vehicle assembly, it's about
• 26:20
  Speaker 14: the same. But we will use demography over this ten
• 26:26
  Speaker 14: year plus period, our demographics to make sure that we
• 26:29
  Speaker 14: can get into a position where we do this in
• 26:32
  Speaker 14: a sensible way.
• 26:33
  Speaker 2: Although I drove recently the EQS, it's an electric euroelectric suv,
• 26:40
  Speaker 2: obviously a very luxurious product as you move even more upscale.
• 26:45
  Speaker 2: At the same time, the Tesla Model X and Model
• 26:48
  Speaker 2: S are getting kind of long in the tooth. If
• 26:50
  Speaker 2: you have lost customers to Elon Musk, are you gaining
• 26:54
  Speaker 2: them back with this new push into you know, luxury electrics.
• 27:00
  Speaker 14: We have seen with the EQS and the EQUI, both
• 27:03
  Speaker 14: on the Sedans and the SUVs, and here you have
• 27:05
  Speaker 14: some extremely high tech, luxurious products. We didn't make carbon
• 27:11
  Speaker 14: copies of our combustion equivalents, but really tried to create
• 27:14
  Speaker 14: a complementary offering. And yes, we have a lot of
• 27:17
  Speaker 14: conquest customers coming into those vehicles. People that maybe didn't
• 27:22
  Speaker 14: look at Mercedes before that goes like, Wow, Mercedes is
• 27:25
  Speaker 14: going electric. This is interesting for me. So so far
• 27:28
  Speaker 14: that plan is working out quite well.
• 27:31
  Speaker 12: Matt, I have to say, you've got a big smile
• 27:33
  Speaker 12: on your face. You look like you're enjoying driving that car.
• 27:37
  Speaker 12: Is it as good as a nice engine?
• 27:39
  Speaker 3: Are you?
• 27:39
  Speaker 12: Are you a convert? Yeah? I've been tracking Matt's history
• 27:42
  Speaker 12: as he's worked his way through this process.
• 27:44
  Speaker 2: You know what I want to be with they Yet
• 27:46
  Speaker 2: this is the one electric vehicle that may be able
• 27:49
  Speaker 2: to win me over because of the pedal feel, because
• 27:52
  Speaker 2: of I hate to say it, I don't want to
• 27:54
  Speaker 2: get flame, but the fake sound, which.
• 27:56
  Speaker 5: I absolutely loved.
• 27:57
  Speaker 2: It really felt like a big block more than and
• 28:00
  Speaker 2: ev And oh are you going for that? I mean,
• 28:03
  Speaker 2: are you trying to make these electric vehicles feel like
• 28:07
  Speaker 2: you know, the luxury V eights that were so that
• 28:11
  Speaker 2: we long for.
• 28:12
  Speaker 14: Of course there's a different sound profile, but the way
• 28:15
  Speaker 14: a car drives and rides, you know what you expect
• 28:18
  Speaker 14: from a Mercedes to safety, the quality, how everything just
• 28:22
  Speaker 14: feels right. That is true for an electric vehicle as
• 28:25
  Speaker 14: it is for a combustion vehicle. But for you, Matt,
• 28:27
  Speaker 14: I got a special coming up next year. I know
• 28:30
  Speaker 14: you're a big fan of the G Wagon, the G class,
• 28:33
  Speaker 14: and next year we're going to have an electric g
• 28:35
  Speaker 14: It's going to blow you away.
• 28:37
  Speaker 7: Promise.
• 28:38
  Speaker 5: I am absolutely looking forward to that.
• 28:40
  Speaker 2: As you know, I have had the V eight version,
• 28:43
  Speaker 2: so I'll see what the version.
• 28:45
  Speaker 12: That's that's This is a high bar we're talking about here, Ala,
• 28:49
  Speaker 12: So I hope you know what you're doing here. That's
• 28:51
  Speaker 12: a big promise for Matt Finnal quick question. Champagne sales
• 28:55
  Speaker 12: are beginning to fault luxury goods companies like Richma talking
• 29:00
  Speaker 12: about the idea that even upper end consumers that begin
• 29:03
  Speaker 12: beginning to feel the inflation re effects. Is that going
• 29:06
  Speaker 12: to be a challenge for you as well? Are you
• 29:08
  Speaker 12: in that kind of bracket? Are you going to be
• 29:10
  Speaker 12: affected by those same forces.
• 29:13
  Speaker 14: Our top end vehicle sales for the first six months
• 29:15
  Speaker 14: of this year were very strong, but at the same time,
• 29:18
  Speaker 14: you have to watch the macro picture. In North America
• 29:22
  Speaker 14: and in Europe we have higher interest rates. Those higher
• 29:25
  Speaker 14: interest rates are probably going to stick around for a while.
• 29:29
  Speaker 14: That affects the pricing of capital goods in terms of
• 29:32
  Speaker 14: financing and leasing, and that's about fifty percent of our transactions.
• 29:36
  Speaker 14: So we have taken a cautious view on the macroeconomic side.
• 29:40
  Speaker 14: That is why we have guided for vehicle sales at
• 29:43
  Speaker 14: around the same level this year as last year.
• 29:46
  Speaker 12: Allah, greatity, see you thanks stopping by thee ask.
• 29:50
  Speaker 8: You're listening to the team. Ken's a live program Bloomberg
• 29:53
  Speaker 8: Markets weekdays at ten am Eastern on Bloomberg dot com,
• 29:57
  Speaker 8: the iHeartRadio app and the Bloomberg Business App as non
• 30:00
  Speaker 8: demand wherever you get your podcasts.
• 30:04
  Speaker 1: Is our government going to shut down at the end
• 30:06
  Speaker 1: of the month. We got to keep that on the
• 30:07
  Speaker 1: front burner.
• 30:08
  Speaker 5: Kids.
• 30:09
  Speaker 1: Nathan Dean senior policy analyst at the US for covering
• 30:12
  Speaker 1: the US government for Bloomberg Intelligence. He's based on in Washington, DC.
• 30:15
  Speaker 1: He is my go to person for all things DC
• 30:18
  Speaker 1: for better or worse, Nathan, where are we now on
• 30:21
  Speaker 1: the discussions among the lawmakers about keeping this government open
• 30:25
  Speaker 1: or maybe not?
• 30:27
  Speaker 16: Yeah, so, just over the weekend, you know, the House
• 30:29
  Speaker 16: Republicans came together in tentatively agreed on a package that
• 30:32
  Speaker 16: at least would allow them to fund the government.
• 30:35
  Speaker 3: We're talking about it.
• 30:36
  Speaker 16: I think it was an eight percent reduction in costs
• 30:40
  Speaker 16: minus defense and veterans. But you know, this doesn't really
• 30:44
  Speaker 16: change the political perception of we are headed for a shutdown.
• 30:47
  Speaker 16: We're ascertaining a high percentage around seventy seventy five percent
• 30:51
  Speaker 16: that the government shuts down, and you know, this is
• 30:53
  Speaker 16: just something that this is one of the steps of
• 30:55
  Speaker 16: the process that they're going to have to work out
• 30:57
  Speaker 16: over the next few weeks.
• 30:58
  Speaker 3: There's going to be a lot more.
• 30:58
  Speaker 16: Scary headlines to if there is a shutdown, though we
• 31:01
  Speaker 16: don't think it's gonna last long. I mean, look, anything
• 31:04
  Speaker 16: can happen to this point, but you're probably looking at
• 31:06
  Speaker 16: like a five to seven day even maybe a ten
• 31:08
  Speaker 16: day shutdown as opposed to you know, what we saw
• 31:11
  Speaker 16: under the Trump administration. I don't think you're getting anywhere
• 31:13
  Speaker 16: close to the thirty one day shutdown that occurred in
• 31:15
  Speaker 16: twenty nineteen.
• 31:16
  Speaker 1: All Right, if there is a shutdown, I guess the
• 31:18
  Speaker 1: first thing people will try to do is assign Blaine.
• 31:21
  Speaker 1: Would there be any Blane if there were a shutdown?
• 31:25
  Speaker 16: Yeah, you know, I think obviously it's the party that
• 31:27
  Speaker 16: is pushing for the shutdown that ultimately pays the political
• 31:31
  Speaker 16: price here. And you know, when the Senate agreed or
• 31:34
  Speaker 16: at least agreed to open up debate on their spending package,
• 31:37
  Speaker 16: it was by a vote of ninety one to seven.
• 31:39
  Speaker 16: So that's a bipartisan issue over in the Senate. It's
• 31:42
  Speaker 16: really the Republicans in the House that are driving this
• 31:44
  Speaker 16: at the moment. But what we would say though, is
• 31:46
  Speaker 16: that when it comes to a shutdown, the impact can
• 31:49
  Speaker 16: really differentiate on who you are.
• 31:51
  Speaker 3: If you live in the Washington.
• 31:52
  Speaker 16: Area, or if you are exposed to federal contracting, you know,
• 31:55
  Speaker 16: or if you're a government deemed non essential employee, you
• 31:59
  Speaker 16: may not get paid during that time. Now, government employees
• 32:01
  Speaker 16: have always been retroactively played it's those government contractors that
• 32:05
  Speaker 16: are furloughed that are not. But when it comes to
• 32:08
  Speaker 16: markets and large contractors in terms of their equity share
• 32:11
  Speaker 16: prices and so forth, you usually see like a one
• 32:14
  Speaker 16: or two day worth a confusion in the markets, but
• 32:17
  Speaker 16: then ultimately there's not much of an impact at all.
• 32:20
  Speaker 1: All right, So how about it it just as it
• 32:22
  Speaker 1: relates to Washington per se getting this stuff done, Speaker McCarthy,
• 32:26
  Speaker 1: where are we in his leadership of his party dealing
• 32:30
  Speaker 1: with the various factions there, because it feels like there's
• 32:33
  Speaker 1: just a relatively small part of the Republican Party that
• 32:36
  Speaker 1: may be looking for a shutdown.
• 32:38
  Speaker 3: Yeah, I mean that's exactly it.
• 32:39
  Speaker 16: I mean, Speaker McCarthy has an extremely difficult position where
• 32:42
  Speaker 16: he can only afford to lose five votes. You know,
• 32:44
  Speaker 16: we went through this during the debt ceiling and he
• 32:46
  Speaker 16: was able to get the you know, the party through
• 32:49
  Speaker 16: that issue as well. I mean, he's done on this
• 32:52
  Speaker 16: quite a bit, and I think to a lot of
• 32:54
  Speaker 16: people in Washington, and he's exceeded expectations in being able
• 32:57
  Speaker 16: to corral the Republican Party. But now you've we've got
• 33:00
  Speaker 16: different apt factions here. You've got the House Freedom Caucus
• 33:02
  Speaker 16: and send, you know, demanding certain cuts. You've got Main
• 33:06
  Speaker 16: Street Caucus may say, look, I'm not going to go
• 33:08
  Speaker 16: along with those cuts, or I'm not going to go
• 33:10
  Speaker 16: along with those changes, especially if you're a Republican in
• 33:12
  Speaker 16: a Biden district.
• 33:14
  Speaker 3: But he can only afford to lose five votes.
• 33:16
  Speaker 16: The Democrats aren't really in a position where they're going
• 33:18
  Speaker 16: to want to help him at this. I think eventually
• 33:20
  Speaker 16: they will, but you know, there is also an impeachment
• 33:22
  Speaker 16: inquiry going on a lot of Democrats, you know, I
• 33:24
  Speaker 16: think all the Democrats aren't happy about that.
• 33:27
  Speaker 3: So this is something that Speaker McCarthy's going to have
• 33:29
  Speaker 3: to work through.
• 33:30
  Speaker 16: And he's not going to actually make a decision on
• 33:32
  Speaker 16: how to move forward until that exact moment when he
• 33:35
  Speaker 16: needs to, and that could be a couple of days
• 33:37
  Speaker 16: after the government has shut down.
• 33:39
  Speaker 1: So how is the White House going to play this?
• 33:41
  Speaker 1: Because there is an election coming up, and I'm sure
• 33:45
  Speaker 1: the administration doesn't want to be saddled with any kind
• 33:48
  Speaker 1: of blame here, too much blame here. So what are
• 33:50
  Speaker 1: we hearing from the President and from the administration.
• 33:53
  Speaker 16: So I think the White House is in a position
• 33:55
  Speaker 16: of strength going into this because you know, a lot
• 33:57
  Speaker 16: of this was already agreed upon during the debt ceiling issue,
• 34:00
  Speaker 16: and you know, these funding levels that especially the vote
• 34:03
  Speaker 16: in the Senate signifies that there is somewhat bipartisan agreement
• 34:06
  Speaker 16: at least over in the Senate, that you know, the funding.
• 34:09
  Speaker 3: Issue is somewhat resolved.
• 34:10
  Speaker 16: You know, obviously, you know there's always nuances that have
• 34:13
  Speaker 16: to be hashed out and so forth like that. But
• 34:14
  Speaker 16: I think what you're going to see from the White
• 34:16
  Speaker 16: House is essentially just a you know, look, this is
• 34:18
  Speaker 16: a congressional issue. This is what Capitol Hill is going
• 34:20
  Speaker 16: to have to deal with. It's the other side of
• 34:21
  Speaker 16: Pennsylvania Avenue. Once the House comes together and actually can
• 34:25
  Speaker 16: figure something out with the Senate, then send it to
• 34:28
  Speaker 16: the President's desk. But I think ultimately the President's going
• 34:30
  Speaker 16: to try and at least initially, you know, stay.
• 34:33
  Speaker 3: Out of this and let Capitol Hill fight it out.
• 34:35
  Speaker 1: What seems like there's a ton of risk here for
• 34:37
  Speaker 1: the Republican Party because it feels just at this stage,
• 34:42
  Speaker 1: as you suggested, that they're the ones kind of pressing
• 34:45
  Speaker 1: for it here, and I'm not. I guess they hope
• 34:47
  Speaker 1: the calculus is, yeah, but what we're arguing for, less
• 34:50
  Speaker 1: spending and the other things are arguing for, that's really
• 34:53
  Speaker 1: what the people want, and they'd be willing to deal
• 34:55
  Speaker 1: with a government shutdown to get that. Is that their calculus?
• 34:58
  Speaker 3: Yeah?
• 34:59
  Speaker 16: Absolutely, I mean, like I said before, you know, the
• 35:01
  Speaker 16: Speaker McCarthy can only afford to lose five votes. But
• 35:03
  Speaker 16: really what it comes down to is that some of
• 35:05
  Speaker 16: these Republicans that are insisting, Look, you've heard language saying
• 35:08
  Speaker 16: that a government shutdown saves money. That's not entirely true,
• 35:11
  Speaker 16: but it plays well in you know, Peoria, Illinois, or
• 35:14
  Speaker 16: in Alabama, or in Georgia or in Nevada, and so
• 35:18
  Speaker 16: you know a lot of these Republicans you know, are
• 35:20
  Speaker 16: thinking of their specific constituents here, and so you know
• 35:24
  Speaker 16: it's one of those things where eventually they're going to
• 35:26
  Speaker 16: have to work this out, meaning they the Speaker McCarthy
• 35:29
  Speaker 16: is going to have to take to make a decision
• 35:31
  Speaker 16: at a certain point, you know, do I keep the
• 35:33
  Speaker 16: government shut down or do I push for a shutdown,
• 35:35
  Speaker 16: or do I try and come up with a bipartisan package.
• 35:38
  Speaker 16: If he moves forward with a bipartisan package, you know,
• 35:41
  Speaker 16: he could.
• 35:41
  Speaker 3: See a motion to vacate.
• 35:42
  Speaker 16: You know, he's made he said language last week He's like, look,
• 35:45
  Speaker 16: I would welcome a voting motion to vacate me as
• 35:48
  Speaker 16: speaker because I think if that would be successful, who
• 35:51
  Speaker 16: would take his place. I'm not exactly sure if there's
• 35:53
  Speaker 16: anybody they would want the job at this point. So,
• 35:56
  Speaker 16: you know, it's just unfortunately, we're gonna have to go
• 35:58
  Speaker 16: through this every few months for every few years, where
• 36:01
  Speaker 16: you know, there's discussion on whether the government should be
• 36:04
  Speaker 16: shut down. It doesn't save any money. It actually doesn't
• 36:07
  Speaker 16: really help. The last one cost about three billion dollars
• 36:10
  Speaker 16: in GDP output, according to the Congressional Budget Office. But again,
• 36:14
  Speaker 16: these policymakers won't make their decision to come to an
• 36:17
  Speaker 16: a pipe partisan agreement until their backs are against the wall,
• 36:19
  Speaker 16: and those backs won't be against the wall until they
• 36:22
  Speaker 16: absolutely are, which probably will be you know, three to
• 36:25
  Speaker 16: five days after a shutdown.
• 36:26
  Speaker 1: Yeah, yeah, I don't know how you do this, Nathan.
• 36:28
  Speaker 1: You got to deal with these people all the time
• 36:30
  Speaker 1: in this whole policy all the time. You're our buffer,
• 36:32
  Speaker 1: You're the guy we go to we need to really
• 36:34
  Speaker 1: figure out what's going on down at DC.
• 36:36
  Speaker 8: You're listening to the tape. Cat's are live program Bloomberg
• 36:39
  Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 36:43
  Speaker 8: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 36:46
  Speaker 8: You can also listen live on Amazon Alexa from our
• 36:49
  Speaker 8: flagship New York station, Just Say Alexa playing Bloomberg eleven thirty.
• 36:54
  Speaker 1: We're talking more.
• 36:55
  Speaker 5: Cars, dude, Yeah, it's a great day for cars.
• 36:57
  Speaker 1: Is a great day for cars?
• 36:58
  Speaker 2: Well, I mean, let's just say there's a lot of news,
• 37:01
  Speaker 2: because there is. There are some negative stories right that
• 37:04
  Speaker 2: the strike continues to linger on.
• 37:06
  Speaker 5: It's only day four. But you've had some big offers
• 37:10
  Speaker 5: out there.
• 37:10
  Speaker 2: Stilantis, for example, offered a twenty one percent increase in
• 37:14
  Speaker 2: wages and the union just batted that away. You've had
• 37:19
  Speaker 2: I think twenty percent offers from Ford NGM, but they're
• 37:21
  Speaker 2: demanding thirty six percent plus. They want to bring back
• 37:25
  Speaker 2: define pension benefits, and they're also pushing for a four
• 37:28
  Speaker 2: day work week.
• 37:30
  Speaker 3: I'm pushing for a four day workek. Nobody's listening to me.
• 37:32
  Speaker 2: We have talked to Ola Colnius today, the CEO of Mercedes,
• 37:36
  Speaker 2: and now we've got David Grosso in here the CEO
• 37:39
  Speaker 2: of Maserati And Okay, to be fair, obviously you're part
• 37:43
  Speaker 2: of a much bigger group Stilantis. And I'm sure you're
• 37:45
  Speaker 2: not dealing with the strike yourself, as you're not producing
• 37:48
  Speaker 2: cars you'r Maserati's on this side of the Atlantic.
• 37:51
  Speaker 5: But does it have an effect on you indirectly?
• 37:54
  Speaker 2: I mean, do you have supply chain problems if this
• 37:57
  Speaker 2: drags on?
• 37:59
  Speaker 5: How do you see it?
• 38:00
  Speaker 17: Well, great question that you know directly, as you said,
• 38:03
  Speaker 17: we don't have issues because we don't produce it as
• 38:05
  Speaker 17: hundred percent made in Italy Maserati. Uh, clearly we're global, global,
• 38:10
  Speaker 17: global brand, and you know for us in North America
• 38:13
  Speaker 17: is is important market. So uh, you know, we we
• 38:16
  Speaker 17: look forward to the resolution of this because longer term
• 38:20
  Speaker 17: impacts would be on everybody, I mean, on everybody in
• 38:23
  Speaker 17: every sector. So so far we're not we have not
• 38:26
  Speaker 17: been impacted, but the long term ripple effects, you know,
• 38:30
  Speaker 17: it could be far reaching for everybody.
• 38:33
  Speaker 1: All Right, you know I got the new estate down
• 38:34
  Speaker 1: on the Jersey Shore, right across the street in the driveway,
• 38:38
  Speaker 1: not one, not two, but three Maseratis.
• 38:41
  Speaker 5: Wow, Joe Walls exactly.
• 38:45
  Speaker 1: They talk to us about your business these days? Where
• 38:49
  Speaker 1: are you in terms of your global business and uh
• 38:52
  Speaker 1: and in the US.
• 38:53
  Speaker 17: Well global business we uh, we are, you know, experiencing
• 38:57
  Speaker 17: a nice growth, fueled by the intron action of the
• 39:00
  Speaker 17: new product that we launched over the last eighteen months,
• 39:03
  Speaker 17: I would say, the Grecala, the suv and now we
• 39:07
  Speaker 17: just released the Grand Tourismo which is hitting this market
• 39:10
  Speaker 17: in these very weeks. And before that we have the
• 39:13
  Speaker 17: MC twenty which was represent a little bit the rebirth
• 39:17
  Speaker 17: of the Mazarati brand. As you know, Bazzarati was born
• 39:19
  Speaker 17: on the track, so for us having the MC twenty
• 39:23
  Speaker 17: going back from the street to the track, and we
• 39:26
  Speaker 17: had the GT two program and then recently we we
• 39:30
  Speaker 17: just unveiled the extreme version evncent twenty which is called
• 39:34
  Speaker 17: the MC Xtrema that we unveiled at Pebble.
• 39:37
  Speaker 15: Beach, which as the Beast.
• 39:40
  Speaker 17: So you know, all these has generated the rebirth and
• 39:45
  Speaker 17: they going back of the brand where it belongs, which
• 39:48
  Speaker 17: is epitomizing Italian luxury. The beautiful thing about the Mazarati
• 39:52
  Speaker 17: brand is that you know you mentioned three in the byway,
• 39:55
  Speaker 17: because you know, you can find the Maserati for you
• 39:58
  Speaker 17: like there's a two seater, there's a four seaters grund Aisma.
• 40:01
  Speaker 17: By the way, Mazarati invented the SEC the segment of
• 40:04
  Speaker 17: Grand Tourismo. It's a trademark world that we we we
• 40:08
  Speaker 17: we've had.
• 40:08
  Speaker 15: Many seventy five years ago actually.
• 40:10
  Speaker 2: And now everybody who's anybody has a GT car, right yeah,
• 40:14
  Speaker 2: and that all comes back to you. How do you
• 40:16
  Speaker 2: differentiate the g T from the MC twenty because they're
• 40:18
  Speaker 2: both you know, two seaters not sports cars, right.
• 40:23
  Speaker 15: No, the GT is a four seater. Oh, the GT
• 40:25
  Speaker 15: is a for the Grand Chrisma is a four seater.
• 40:27
  Speaker 17: I did not and it's very.
• 40:30
  Speaker 5: Versus nine to eleven essentially.
• 40:33
  Speaker 17: Yeah, there's different type of competitors for the for the
• 40:36
  Speaker 17: for the for the Grand Tourismo. I tend not to
• 40:39
  Speaker 17: name competition, but by just by you know, having worked, uh,
• 40:43
  Speaker 17: you know in previously in different environment including sports.
• 40:47
  Speaker 15: You focus on on on our game.
• 40:49
  Speaker 17: But it's true you have four seaters as as as
• 40:53
  Speaker 17: a competitor for the Grand Arismo. Grand Tourismo actually was
• 40:56
  Speaker 17: originated seventy five years ago by the Mazarati activity, if
• 41:00
  Speaker 17: you will, uh, and an ingenuity because they basically put
• 41:05
  Speaker 17: a coupe a coup but in that you know, with
• 41:08
  Speaker 17: the with the spaciousness of of a sedan and the
• 41:11
  Speaker 17: driver ability of a sport coup, but with the plush
• 41:15
  Speaker 17: comfort of a sedan, and that created the Grand Turisma.
• 41:18
  Speaker 2: That's why I mean, I don't mean to compare it
• 41:21
  Speaker 2: to a nine to eleven. I'm just saying it's it's
• 41:22
  Speaker 2: among those class of cars where you say it's a
• 41:25
  Speaker 2: four seater, but we're not putting a couple of adults
• 41:28
  Speaker 2: in the back, right, I.
• 41:29
  Speaker 17: Mean, no, no, you I'll be happy to drive you
• 41:31
  Speaker 17: around and you sit in the back and you'll tell
• 41:33
  Speaker 17: me how you feel after two hours drive to the Hampton's.
• 41:36
  Speaker 5: Wow, that's a great offer. Well you drive you drop.
• 41:41
  Speaker 2: I have driven the the Grecli and the Troo. I
• 41:46
  Speaker 2: had the Trofeo version, which I think starts at one
• 41:49
  Speaker 2: O three one hundred three grand. Amazing car and for
• 41:53
  Speaker 2: me it was kind of a life changing experience because
• 41:56
  Speaker 2: I had previously shunned V sixes. This power plant was
• 42:02
  Speaker 2: everything in that car to me, and it's I think
• 42:05
  Speaker 2: derived from the MC twenty.
• 42:06
  Speaker 17: Right it is it is, yeah, And the MCD entry
• 42:09
  Speaker 17: is powered by the Netuno engine, which is again made
• 42:12
  Speaker 17: in Maserati.
• 42:14
  Speaker 2: Again Neatuno is from King Neptune, by the way, you know,
• 42:17
  Speaker 2: he carried the Trydent tried it.
• 42:19
  Speaker 1: Hence there you know, Okay, it comes together.
• 42:24
  Speaker 6: It comes to.
• 42:26
  Speaker 3: David Day.
• 42:27
  Speaker 1: Who is your customer in in Is there typical customer
• 42:30
  Speaker 1: or is it different in Europe versus North America versus
• 42:33
  Speaker 1: maybe Asia.
• 42:34
  Speaker 15: Oh that's a great question.
• 42:35
  Speaker 17: You know, we again as we repositioned the brand and
• 42:38
  Speaker 17: we started so the results we're getting and North America
• 42:42
  Speaker 17: is on the forefront of this growth because there's a
• 42:45
  Speaker 17: critical market for us. But historically we had a great
• 42:47
  Speaker 17: position and now we're actually enjoying that history.
• 42:50
  Speaker 15: But with new product and new growth perth.
• 42:54
  Speaker 17: So you know, we refocus the brand on its values,
• 42:57
  Speaker 17: which are you know, Italian luxury and formans.
• 43:00
  Speaker 15: So we're focusing on a new.
• 43:02
  Speaker 17: Luxury consumer, which is by nature global. So the mindset
• 43:07
  Speaker 17: of the consumer is similar, the lifestyle of the aspirations,
• 43:10
  Speaker 17: the type of activities are similar. So there's many more
• 43:16
  Speaker 17: similarities between New York and Shanghai and London modern luxury customer. Uh,
• 43:25
  Speaker 17: the differences right, and then there of course there's different regulations,
• 43:28
  Speaker 17: different urban or suburban type of situations. But that's what
• 43:32
  Speaker 17: is actually giving us the confidence that this growth path
• 43:38
  Speaker 17: we're on it's going to be a long term growth
• 43:41
  Speaker 17: that's definitely. It's it's our intention and our plans our
• 43:45
  Speaker 17: growth company. The other thing is that global luxury consumer
• 43:48
  Speaker 17: is not looking anymore just for super sports cars or
• 43:52
  Speaker 17: just for granturismo. But they have a lifestyle for which
• 43:55
  Speaker 17: they may need a medium sized suv. But you know,
• 43:59
  Speaker 17: just a agree were saying is you know, you have
• 44:02
  Speaker 17: certain needs or design in terms of the responsiveness of
• 44:05
  Speaker 17: the engine or the type of luxury experience you have
• 44:09
  Speaker 17: as a driver or as passenger, not only in terms
• 44:11
  Speaker 17: of materials, but also in terms of the digital interaction
• 44:14
  Speaker 17: that you have with a car. So we put a
• 44:16
  Speaker 17: lot of efforts also and focus on the digital driving experiences.
• 44:20
  Speaker 2: So this is a whole new generation essentially completely completely.
• 44:25
  Speaker 2: How do you you're you're trading within Stilantis, they own Maserati,
• 44:31
  Speaker 2: but you should be trading at a much higher valuation.
• 44:35
  Speaker 2: That is, they should be getting a lot more value
• 44:37
  Speaker 2: from Masarati than they do inside the company. And they
• 44:40
  Speaker 2: break out investment banker now trying to your financials. They
• 44:44
  Speaker 2: break out your financials and they don't break out Stilantis
• 44:47
  Speaker 2: doesn't break out all their brand's financials, but they do
• 44:49
  Speaker 2: for Maserati. If you do well, do you see an.
• 44:52
  Speaker 5: I p O in your future?
• 44:54
  Speaker 17: It's a question that it's a great questions. The question
• 44:56
  Speaker 17: has been asked several times.
• 44:58
  Speaker 5: I'm hoping you'll give me a good answer, I know.
• 45:00
  Speaker 17: You know, to me, to a CFO and to Carlos
• 45:04
  Speaker 17: and Carlos CEO group CEO.
• 45:07
  Speaker 15: And the kind of answer is like, right now, it's
• 45:09
  Speaker 15: not in the cards. Right now the cards.
• 45:11
  Speaker 17: We are focusing totally in in really capturing the growth
• 45:15
  Speaker 17: potential long term that Mazarati has in order to deliver
• 45:20
  Speaker 17: the high demands that global customer, global customer, luxury customer
• 45:25
  Speaker 17: has and we're focused on that. We're very pleased about
• 45:28
  Speaker 17: their journey we've had four years ago in a very
• 45:31
  Speaker 17: different you know situation as a brand, as a business.
• 45:34
  Speaker 15: But we still have a long ways to go.
• 45:36
  Speaker 5: So how how much can you grow?
• 45:39
  Speaker 2: I mean, aren't you limited to some extent by unit sales?
• 45:43
  Speaker 2: Isn't there a ceiling as far as how many you
• 45:46
  Speaker 2: can actually sell.
• 45:48
  Speaker 17: It's a great question because it allows me to shift
• 45:50
  Speaker 17: to build on what you were saying and when you
• 45:53
  Speaker 17: when you work in luxury, the focus is not on volume.
• 45:57
  Speaker 17: If you want to be healthy and delivering to the
• 45:59
  Speaker 17: crustomer needs or the long term, you have to focus
• 46:02
  Speaker 17: on profit without and on quality of course, So without quality,
• 46:08
  Speaker 17: these are the two fundamental elements of our plan. Without quality,
• 46:12
  Speaker 17: you don't have luxury. You know, quality brands and luxury
• 46:15
  Speaker 17: brands even in other fields you know, normally are like
• 46:18
  Speaker 17: one hundred years old and they were born as a
• 46:20
  Speaker 17: high quality brand, right, and over time you become luxury
• 46:24
  Speaker 17: because you are very steady in delivering luxury. The other
• 46:26
  Speaker 17: thing you need to do is you need to have
• 46:29
  Speaker 17: your your added.
• 46:31
  Speaker 15: Value recognized by the customer in pricing. Right. So we
• 46:34
  Speaker 15: put a lot effort in that and.
• 46:36
  Speaker 17: Rebalancing and redefining our business model and we have now
• 46:40
  Speaker 17: and nine point two percent AOI just operating and margin.
• 46:46
  Speaker 15: And you know, our.
• 46:47
  Speaker 17: Goal is there's no need, no, there's no reason why
• 46:50
  Speaker 17: we shouldn't be at fifteen percent first, which is like
• 46:53
  Speaker 17: benchmark and above fifteen percent, so that's what we're looking at.
• 46:57
  Speaker 15: And the volume then is you know, could be a really.
• 47:02
  Speaker 17: Dangerous trap to fall in the mindset all I need
• 47:07
  Speaker 17: to sell more, I need to sell better. We don't
• 47:10
  Speaker 17: want to be much bigger, but we want to be
• 47:12
  Speaker 17: recognized as the best in terms of you know, Italian luctory.
• 47:17
  Speaker 1: Real quickly, quickly, thirty seconds on your evolution to going electric?
• 47:23
  Speaker 3: Where are you guys?
• 47:24
  Speaker 17: We're almost ready to actually have Maserati cars electric cars
• 47:31
  Speaker 17: driven in the roads, you know. By the now and
• 47:33
  Speaker 17: the end of the year, we're gonna introduce in you know,
• 47:36
  Speaker 17: launch the Grecala electric and electric version is fol Gore.
• 47:40
  Speaker 17: Foll Gore, going back to mythology means lightning and foll
• 47:44
  Speaker 17: gray is you know, is the Mazarati The name identifies
• 47:49
  Speaker 17: Mazarati Electric and then we also have the Granturism Electric.
• 47:54
  Speaker 1: The next time we get you in, I want to
• 47:56
  Speaker 1: figure out how you went from the sneaker business m
• 47:59
  Speaker 1: hm to the luxury automobile.
• 48:01
  Speaker 5: You went and before then let's get you in a
• 48:03
  Speaker 5: Maserati yeh.
• 48:03
  Speaker 2: Then we'll get me and ride the product before you
• 48:05
  Speaker 2: interview the CEO.
• 48:06
  Speaker 1: Next Yeah, next time, we'll do that next time, David Grosso,
• 48:09
  Speaker 1: thank you so much for joining us, CEO of Maserati,
• 48:12
  Speaker 1: joining us live here in our Bloomberg Interactive Broker Studio.
• 48:15
  Speaker 3: It's been a great card day for you, man.
• 48:16
  Speaker 5: Yeah, I've been enjoying it.
• 48:18
  Speaker 3: Yeah, we got it.
• 48:19
  Speaker 1: Just I mean you drive everything that's out there on
• 48:21
  Speaker 1: the road, you might as well well.
• 48:22
  Speaker 5: I had and driven the GT. Yet I gotta drive
• 48:24
  Speaker 5: the GT.
• 48:24
  Speaker 1: Okay, we'll get you to get you behind.
• 48:26
  Speaker 2: I think we know we didn't do the Joe Walsh joke.
• 48:28
  Speaker 2: You have you heard the Joe Walsh song Life's been
• 48:30
  Speaker 2: good to Me so far? No, he says, my Maserati
• 48:34
  Speaker 2: does one eighty five.
• 48:36
  Speaker 5: You must know that it's a rockslough.
• 48:38
  Speaker 3: Yes, yes, you do know that.
• 48:39
  Speaker 5: Okay, okay, good.
• 48:40
  Speaker 8: You're listening to the tape. Catch are live program Bloomberg
• 48:43
  Speaker 8: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 48:47
  Speaker 8: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 48:50
  Speaker 8: You can also listen live on Amazon Alexa from our
• 48:53
  Speaker 8: flagship New York station, Just say Alexa Play Bloomberg eleven thirty.
• 48:59
  Speaker 1: Kevin Tiny Joints, Senior Automotive analyst for Bloomberg Intelligence. Hey, Kevin,
• 49:04
  Speaker 1: you know I'm thinking about this strike here, and you know,
• 49:06
  Speaker 1: as a Wall Street guy, I'm usually kind of pro business.
• 49:09
  Speaker 1: But boy, the auto workers got some good points here.
• 49:13
  Speaker 1: I mean, they gave up it seems like a lot
• 49:17
  Speaker 1: during the Great Financial Crisis and then the pandemic they
• 49:19
  Speaker 1: came in from the automaker's perspective, what can they really afford?
• 49:27
  Speaker 13: Well, look, I think the issue for the union is that, look,
• 49:31
  Speaker 13: we've seen you make a lot of money over the past,
• 49:36
  Speaker 13: really since that period, since the bankruptcy period two thousand
• 49:38
  Speaker 13: and eight, two thousand and nine, even into twenty ten,
• 49:42
  Speaker 13: and they can't hide that. The manufacturers can't hide that.
• 49:45
  Speaker 13: I think what they're going to try and get out
• 49:48
  Speaker 13: of these negotiations the manufacturers, that is, is that flexibility
• 49:54
  Speaker 13: to adjust capacity and headcount going forward, because even though
• 49:59
  Speaker 13: they've made more money, the production, especially in North America
• 50:03
  Speaker 13: and US specifically is down significantly. So the idea that
• 50:09
  Speaker 13: the manufacturers kind of pay up for their earnings through
• 50:13
  Speaker 13: these contract negotiations also has to include the idea that, hey,
• 50:18
  Speaker 13: if we move to a smaller market, which is what
• 50:20
  Speaker 13: has happened, and especially if electrification means fewer unit unit sales,
• 50:26
  Speaker 13: as that volume declines, you have to have that flexibility
• 50:29
  Speaker 13: to take out headcount or production capacity going forward.
• 50:33
  Speaker 1: So there is a pretty big bit ass spread here.
• 50:35
  Speaker 1: I mean, you know, the I guess the auto companies
• 50:39
  Speaker 1: are talking about a twenty one percent increase, and I
• 50:41
  Speaker 1: think the less proposal from the unions for something like
• 50:46
  Speaker 1: thirty six percent. If you had to guess, I mean,
• 50:48
  Speaker 1: do we just so simple split the difference or is
• 50:51
  Speaker 1: there a level upon which when you have these big
• 50:54
  Speaker 1: folks in Detroit look at Elon Musk and say I
• 50:57
  Speaker 1: can't compete at thirty six percent increase.
• 51:01
  Speaker 15: Yeah, that it is going to be difficult.
• 51:03
  Speaker 13: But again, if they're that flexibility there is to adjust
• 51:08
  Speaker 13: to a market that is, you know, fifteen million unit
• 51:12
  Speaker 13: million units a year going forward, but at fifty two
• 51:15
  Speaker 13: thousand dollars in an average transaction price, the revenue pool
• 51:19
  Speaker 13: is actually larger even though the unit volume is down.
• 51:23
  Speaker 13: So I think what you're going to see is the
• 51:25
  Speaker 13: ability to pay up. You know. So if I had
• 51:28
  Speaker 13: a bed, I would say that the likelihood is that
• 51:30
  Speaker 13: the union gets closer to their number than what the
• 51:33
  Speaker 13: manufactured is willing to give. But again that flexibility on
• 51:39
  Speaker 13: the other side to say, yeah, if this is a
• 51:41
  Speaker 13: fifteen and fifteen to sixteen million unit market going forward,
• 51:45
  Speaker 13: where we're used to seventeen plus. You know, then we
• 51:48
  Speaker 13: have to have the ability to close plants, take out
• 51:51
  Speaker 13: some head count, and adjust to the market going forward.
• 51:54
  Speaker 2: I mean, maybe they'll be able to give a huge
• 51:57
  Speaker 2: raise in wages as cus forgetting that kind of flexibility
• 52:02
  Speaker 2: from the UAW because you know, you hear numbers like
• 52:06
  Speaker 2: twenty percent and you think that's probably going to break
• 52:08
  Speaker 2: these automakers, but it's not because people don't realize how
• 52:12
  Speaker 2: small percentage of the cost labor actually is, right.
• 52:16
  Speaker 13: Right, And again, that twenty percent or forty percent or
• 52:20
  Speaker 13: whatever it ends up being is over the four years
• 52:22
  Speaker 13: of the contract, so it's not immediately all at once.
• 52:26
  Speaker 7: You know.
• 52:26
  Speaker 3: The other one is going to.
• 52:27
  Speaker 13: Be the signing bonus for ratifying the deal, which would
• 52:30
  Speaker 13: which would be a nice number. But really that's what
• 52:34
  Speaker 13: the manufacturers have to give, is to give back some
• 52:37
  Speaker 13: of that profitability they've earned over really the past decade
• 52:40
  Speaker 13: or since the the you know, the bankruptcy period. That's
• 52:44
  Speaker 13: what they're going to be able to do. But ultimately
• 52:47
  Speaker 13: the idea of having too many workers or pensions and
• 52:51
  Speaker 13: legacy costs going forward, that's where the manufacturers, that's where
• 52:55
  Speaker 13: it would hurt them, not so much in the hourly
• 52:59
  Speaker 13: increase in the way age going forward, because you can
• 53:02
  Speaker 13: you can cut costs right, you can, you can increase revenue,
• 53:05
  Speaker 13: you know, which is which is what's happening as mix
• 53:08
  Speaker 13: shifts to truck from car or to electric from internal combustion.
• 53:13
  Speaker 13: But you have to have the ability to right size
• 53:15
  Speaker 13: your business going forward.
• 53:17
  Speaker 1: So do you think I guess just the question I
• 53:20
  Speaker 1: think I would guess if I were an investor considering,
• 53:23
  Speaker 1: you know, any one of these auto companies is just
• 53:26
  Speaker 1: do I think these companies can generate better, worse or
• 53:30
  Speaker 1: the same returns in an electrified world versus internal combustion world.
• 53:35
  Speaker 1: Did you have a view on that?
• 53:37
  Speaker 13: Yeah, I mean, so far it looks like worse.
• 53:40
  Speaker 5: Yep.
• 53:41
  Speaker 13: And I think what we're starting to see is a
• 53:43
  Speaker 13: little bit of pushback on that. You know, and I've
• 53:45
  Speaker 13: been saying this for years, is that the US is
• 53:49
  Speaker 13: behind an EV adoption out because the consumer does or
• 53:51
  Speaker 13: doesn't want it, or it's expensive, or it's just not
• 53:55
  Speaker 13: as profitable as the business that the manufacturers have been
• 53:58
  Speaker 13: doing forever, which is an internal combustion.
• 54:02
  Speaker 2: So then even if they get you know, if they
• 54:05
  Speaker 2: get the development costs behind them, and I mean Tesla's
• 54:10
  Speaker 2: running eighteen percent margins, right, so they're super profitable.
• 54:15
  Speaker 13: Yeah, but you're talking about regulatory credit sales, you're talking
• 54:18
  Speaker 13: about deferred revenue from full self driving, right, And when
• 54:21
  Speaker 13: you look at their gross margins or you know, operating
• 54:25
  Speaker 13: margins even you know they're not as profitable as they're
• 54:29
  Speaker 13: not the most profitable in terms of margin of all
• 54:33
  Speaker 13: the automakers either, Right, they're kind of middle of the
• 54:35
  Speaker 13: pack when you adjust everybody onto the level playing field.
• 54:39
  Speaker 7: You know.
• 54:40
  Speaker 13: So the idea is that you know, you've had things
• 54:43
  Speaker 13: over the years, right, the mixshift to truck from car,
• 54:46
  Speaker 13: which I've been talking about for ten years, that's profitable
• 54:49
  Speaker 13: on day one, right, and that's why that shift has happened.
• 54:53
  Speaker 13: Now what you're looking for is when does this get profitable?
• 54:56
  Speaker 13: Now I've been saying if you look at software and
• 55:00
  Speaker 13: subscription and services, that's profitable on day one, and I
• 55:04
  Speaker 13: think that's going to be your profit bridge going forward
• 55:07
  Speaker 13: until the when if EV is as profitable as internal combustion.
• 55:12
  Speaker 13: And I think that's why you're starting to see a
• 55:13
  Speaker 13: little bit of a hedge in terms of why don't
• 55:16
  Speaker 13: plug in hybrids make more sense? These days, and now
• 55:19
  Speaker 13: we're starting to see some of that come into the market.
• 55:21
  Speaker 13: Toyota Alexis been talking about it for a long time,
• 55:25
  Speaker 13: you know, and even consumers I talk to are asking me, like,
• 55:28
  Speaker 13: why isn't that more of a thing. We don't have
• 55:30
  Speaker 13: to worry about charging infrastructure, We don't have as high
• 55:33
  Speaker 13: a cost as a consumer. So I think the market's
• 55:37
  Speaker 13: kind of taking a step back from from the singularity
• 55:41
  Speaker 13: of either internal combustion or full battery electric to the
• 55:44
  Speaker 13: steps in between.
• 55:46
  Speaker 1: So, but Kevin, I know you're you know, as big
• 55:48
  Speaker 1: or bigger card geek than Matt Miller here, can you
• 55:51
  Speaker 1: tell me what is the demand out there? The real
• 55:54
  Speaker 1: demand out there for EV's. Do people want them? Or
• 55:57
  Speaker 1: do people feel like they're kind of being pushed upon them?
• 56:00
  Speaker 5: I think shoved down their throat is a good way
• 56:02
  Speaker 5: to put it.
• 56:04
  Speaker 13: Well, Look, I mean I go a lot of places,
• 56:07
  Speaker 13: and I talk to a lot of people, you know,
• 56:09
  Speaker 13: and especially at the dealership level, and I have dealerships
• 56:12
  Speaker 13: come to me all the time at these you know,
• 56:14
  Speaker 13: I'll speak at a convention and I have people and
• 56:16
  Speaker 13: I talk about the you know, the average transaction price
• 56:19
  Speaker 13: relative to internal combustion. I have people, you know, from
• 56:22
  Speaker 13: the middle of the country come to me and say, look,
• 56:25
  Speaker 13: my dealership and isn't is in an area where you know,
• 56:27
  Speaker 13: household income just can't afford fifty thousand dollars, never mind
• 56:32
  Speaker 13: sixty sixty five thousand dollars for an EV So what
• 56:36
  Speaker 13: are people supposed to do? So I think there is
• 56:39
  Speaker 13: a little bit of that, but you know, look, I'm
• 56:41
  Speaker 13: one that says the consumer will go where the manufacturers
• 56:46
  Speaker 13: need them to go, because they're the ones producing the vehicles.
• 56:49
  Speaker 13: Right if if we had manufacturers who didn't care about
• 56:53
  Speaker 13: profitability or you know, thought that the idea was to
• 56:57
  Speaker 13: move to electric even if it were on profitable, you know,
• 57:01
  Speaker 13: that's what consumers would get.
• 57:03
  Speaker 15: So right now in.
• 57:04
  Speaker 13: This country, if the government isn't penalizing the manufacturers or
• 57:08
  Speaker 13: subsidizing them, and it falls to where profitability is best,
• 57:12
  Speaker 13: that's what automakers are chasing right now. So from the
• 57:15
  Speaker 13: consumer's perspective, it almost doesn't matter what they want or
• 57:19
  Speaker 13: what they prefer. They can't buy what a manufacturer doesn't build,
• 57:22
  Speaker 13: and a manufacturer is not building what's not profitable.
• 57:26
  Speaker 2: I got to I'm going to go somewhere else real quick.
• 57:29
  Speaker 2: So I had a truck that had some problems and
• 57:33
  Speaker 2: there was a catastrophic event not of my doing, right,
• 57:36
  Speaker 2: And a dealer friend of mine said, ah, you got
• 57:38
  Speaker 2: a Monday truck.
• 57:40
  Speaker 5: So what's that?
• 57:40
  Speaker 2: He said, Well, this is probably built on a Monday
• 57:43
  Speaker 2: when everybody came in hungover and wasn't paying as much attention.
• 57:47
  Speaker 2: Now I pushed back a little and I say, I've
• 57:49
  Speaker 2: met a lot of people on production lines at many
• 57:51
  Speaker 2: different brands, and they tend to be responsible adults, professionals
• 57:56
  Speaker 2: who take pride in their work. So I don't really
• 57:58
  Speaker 2: buy that as much. But I just got my Challenger built.
• 58:01
  Speaker 2: I just got an email. Nice my Dodge Challenger Artie
• 58:05
  Speaker 2: scatpack wide body in fate Green has been built up
• 58:08
  Speaker 2: in Canada and I put it on. I'm so excited
• 58:11
  Speaker 2: to put it on the Challenger for them. And they said, Man,
• 58:13
  Speaker 2: you don't want to buy a car around these strikes.
• 58:15
  Speaker 2: Everybody's in a bad mood. You maybe they're knocking back
• 58:18
  Speaker 2: some beers before work. What do you buy any of
• 58:20
  Speaker 2: that kind of mythology around the wrong time to buy
• 58:23
  Speaker 2: a car or get a car built.
• 58:25
  Speaker 7: You know.
• 58:26
  Speaker 13: Look, I would say there was a period through the pandemic.
• 58:30
  Speaker 13: My son and I he's also a big car guy.
• 58:33
  Speaker 13: We talk about that, like we wouldn't buy a twenty
• 58:35
  Speaker 13: twenty model a year or you know, and I'm not.
• 58:38
  Speaker 13: And look, the whole chip shortage thing, not that it
• 58:42
  Speaker 13: wasn't real, but you know, look, there was issues where
• 58:46
  Speaker 13: vehicles had to be de contented because you just didn't
• 58:49
  Speaker 13: have the chips right, or you know, features or options
• 58:55
  Speaker 13: were just lower just because you're putting if there is
• 58:58
  Speaker 13: a finite amount of chips, you're putting them in your
• 59:00
  Speaker 13: high end vehicles, you know, and then some content gets
• 59:04
  Speaker 13: left off of everything else in the portfolio. So I
• 59:07
  Speaker 13: think there's more that than the actual worker saying, you know,
• 59:11
  Speaker 13: it's Monday, I don't feel like doing this. Well, but yeah,
• 59:15
  Speaker 13: I mean there's there's periods. Look, and I think the
• 59:18
  Speaker 13: other one to note is, you know, I started talking
• 59:22
  Speaker 13: about bankruptcy being inevitable in two thousand and five. You know,
• 59:26
  Speaker 13: so automakers see that now investment kind of stops, right,
• 59:29
  Speaker 13: you get in defensive, like let's save some cash. So
• 59:32
  Speaker 13: you know, for me, that period from five into through
• 59:37
  Speaker 13: the bankruptcy is you know, there wasn't a good investment.
• 59:40
  Speaker 1: Happening all right, Kevin. Thanks as always, Kevin Tyne and
• 59:42
  Speaker 1: senior automotive analysts for Bloomberg Intelligence.
• 59:45
  Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
• 59:48
  Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever.
• 59:52
  Speaker 5: Podcast platform you prefer. I'm Matt Miller.
• 59:55
  Speaker 2: I'm on Twitter at Matt Miller nineteen seventy three.
• 59:58
  Speaker 1: And I'm fall Sweeney. I'm on Twitter at pt Sweeney.
• 1:00:01
  Speaker 1: Before the podcast, you can always catch us worldwide at
• 1:00:03
  Speaker 1: Bloomberg Radio