Latest / Bloomberg Intelligence / BI Weekend: US Earnings, Disney’s Succession

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BI Weekend: US Earnings, Disney’s Succession · Bloomberg Intelligence

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Speaker 2: Today, we'll look at why the coffee giants Bucks has
1:00
Speaker 2: withdrawn its guidance for twenty twenty five plus.
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Speaker 5: We'll dive into the telecommunication space and look at earnings
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Speaker 5: from AT and T.
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Speaker 2: But first we look at earnings from the shipping giant UPS.
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Speaker 5: This week, the company reported that it returned to sales
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Speaker 5: and profit growth for the first time in nearly two years.
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Speaker 5: UPS benefited from higher volumes, more profitable packages, and studying
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Speaker 5: labor costs for more.
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Speaker 2: Nora and I were joined by Lee Klascow, Bloomberg Intelligence
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Speaker 2: Senior Transport, Logistics and shipping analysts.
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Speaker 5: We first asked Lee for his take on UPS's most
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Speaker 5: recent quarter.
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Speaker 6: Yeah, so UPS had a pretty good print. May also,
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Speaker 6: you know, indicated that earnings might be a little better
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Speaker 6: than expectations are in the fourth quarter. UPS has been
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Speaker 6: kind of a show me story. They've been doing a
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Speaker 6: lot of self help things, but a lot of those
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Speaker 6: initiatives really haven't bubbled up to the bottom line or
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Speaker 6: the revenue numbers, just given the difficult backdrop. And what
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Speaker 6: we saw was earnings per share for growth finally inflected
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Speaker 6: positively after seven quarterly declines. So things seem to be
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Speaker 6: working for UPS, and you know, we expect earnings expectations
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Speaker 6: for the fourth quarter and probably next year to move
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Speaker 6: higher on kind of the progress that they've made thus far.
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Speaker 5: Hayley, I mean, you mentioned that difficult backdrop as we're
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Speaker 5: thinking about the future. I mean, how much of a
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Speaker 5: move higher do you really anticipate as we're thinking about
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Speaker 5: the year end, should investors start to see some gains here?
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Speaker 6: Well, we don't do buy hoole sell recommendations of Bloomberg Intelligence,
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Speaker 6: but you know, what we can tell you is that
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Speaker 6: the company are doing the right things to see their
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Speaker 6: margins expand. And you know, our view is that margin
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Speaker 6: expansion could be more than where where the market currently
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Speaker 6: is at. And a lot of that has to do
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Speaker 6: with a lot of the cost savings that they've been
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Speaker 6: able to generate. They've been able to you know, shut
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Speaker 6: down various shifts, sorting shifts, They've been able to close
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Speaker 6: some facilities and just do more with the network that
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Speaker 6: they have. That and if you fast forward that, you know,
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Speaker 6: maybe you know, volumes could start to improve a little
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Speaker 6: more meaningfully from here. You know, they expect a better
3:01
Speaker 6: peak season this year, albeit probably not as robust as
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Speaker 6: they were probably planning for three months ago, but the
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Speaker 6: peak season is expected to grow. And the reason for
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Speaker 6: you know, them tempering the outlook for the peak season
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Speaker 6: is given the fact that the peak season is condensed
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Speaker 6: the peak season for those that don't know is from
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Speaker 6: Black Friday to Christmas Eve and because of that condensed
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Speaker 6: peaks time. You know, a lot of retailers think that
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Speaker 6: some consumers might be going to the stores versus ordering
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Speaker 6: online and making that gamble whether or not you get
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Speaker 6: it under the tree in time.
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Speaker 7: Hay Lee.
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Speaker 2: We love talking to you for a variety of reasons,
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Speaker 2: not the least of which is the companies you covered
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Speaker 2: lead give us a real sense of how the underlying
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Speaker 2: economy is doing, whether it's stuff's being shipped by rail
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Speaker 2: or truck or air cargo. What's GPS telling you about
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Speaker 2: kind of underlying activity that they're seeing.
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Speaker 6: Well, first and foremost, I love talking to you as well, Paul,
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Speaker 6: But you know what I think they're telling us is
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Speaker 6: the consumer is doing okay. You know, it's not doom
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Speaker 6: and gloom going into the holiday season. I think that
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Speaker 6: you know, you are going to see growth. Like I
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Speaker 6: said earlier, that growth might be a little more tempered,
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Speaker 6: but you know, we are seeing a return to kind
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Speaker 6: of seasonality, which is really good because it's not just
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Speaker 6: going to impact the parcel providers. It's going to impact
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Speaker 6: the truckload providers, you know, like the night swifts and
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Speaker 6: the warners of the world. It's going to impact the
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Speaker 6: intermodal providers like the JB Hunts and the hub groups
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Speaker 6: of the world, and the railroads as well. So, you
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Speaker 6: know what we're hearing about the consumer and the fact
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Speaker 6: that B to B volume grew for the first time
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Speaker 6: in a long time within their domestic business is also
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Speaker 6: telling me, you know, that that things might be might
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Speaker 6: be a little better in twenty twenty five. So you know,
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Speaker 6: we're pretty optimistic that demand should be increasing across most
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Speaker 6: of the modes that we cover, and you know, twenty
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Speaker 6: twenty five and our view was going to be a
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Speaker 6: much better year than twenty twenty four was.
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Speaker 5: And I do know back in about April, I remember
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Speaker 5: that UPS became USPS's primary air cargo provider. Is that
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Speaker 5: still a topic of conversation. How much has that really
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Speaker 5: added to the business if at all?
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Speaker 6: Yeah, So it is a great business win for them.
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Speaker 6: You know, FedEx walked away from it for various reasons
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Speaker 6: and UPS decided to pick it up. It's going to
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Speaker 6: be consistent volumes at a consistently good margin. And you
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Speaker 6: know what they're doing is they're really restructuring their overall
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Speaker 6: business they've been getting out of businesses that are a
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Speaker 6: lot more volatile. They just sold their freight brokerach business,
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Speaker 6: which was called Coyote to RXO, and then that was
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Speaker 6: earlier last month, and then in twenty twenty one they
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Speaker 6: sold their less than truckload business UPS Freight to TFI
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Speaker 6: and those were not great businesses for UPS. And now
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Speaker 6: UPS can really focus on being a parcel provider. And
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Speaker 6: to answer your question, what the US postal service business
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Speaker 6: can also do, It's going to build density and density
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Speaker 6: is the name of the game in any transportation company,
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Speaker 6: and so they can build off that density with other volumes.
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Speaker 2: Our thanks to Lee Klasgow, Bloomberg Intelligence Senior Transport, Logistics
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Speaker 2: and Shipping analyst.
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Speaker 5: We move next to earnings from ev giant Tesla.
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Speaker 2: Tesla's expectations for earnings in the third quarter. The company
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Speaker 2: also forecasted as much as thirty percent growth in vehicle
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Speaker 2: sales next year. This reflects the rebound and demand for
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Speaker 2: Tesla's electric vehicles.
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Speaker 5: For more, Paul and I were joined by Craig Trudell,
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Speaker 5: Bloomberg Global Autos Editor. We first asked Craig for his
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Speaker 5: take on Tesla's most recent.
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Speaker 4: Results Oftentimes it's not necessarily the case that you can
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Speaker 4: count on both earnings and the vision to be positive.
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Speaker 4: In this case, both were working in Musk's favor. I
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Speaker 4: think the earnings were much better than expected. I do
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Speaker 4: think that those expectations came down quite a bit over
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Speaker 4: the last year year and a half, but they sort
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Speaker 4: of they did exceed expectations by pretty significant measures. And
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Speaker 4: the profit margins in particular, or something that everybody keeps
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Speaker 4: a very close eye on their automotive profit margins when
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Speaker 4: you back out the credits that they sell to other
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Speaker 4: automakers for regulatory purposes, those in particular, I feel like,
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Speaker 4: are you know, just quarter in and quarter out what
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Speaker 4: everybody looks at? That was a big beat. And then
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Speaker 4: I think Musk was as self assured as I've ever heard.
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Speaker 4: He's never won lacking in confidence. And for him to
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Speaker 4: throw out, you know, twenty to thirty percent sales increase
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Speaker 4: for next year, I think was very surprising. For nine
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Speaker 4: ten months into the year, and they've delivered fewer vehicles
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Speaker 4: in twenty twenty four than they did in twenty twenty three.
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Speaker 5: Hey, Craig, So when I'm walking around New York City
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Speaker 5: every so often I will see, to my surprise, a
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Speaker 5: cyber truck. What is the leadst on that? What do
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Speaker 5: they say in earnings? What can we expect there?
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Speaker 4: They said that it was gross margin positive for the
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Speaker 4: first time in the recent quarter, and so we're almost
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Speaker 4: we're roughly a year into the launch of that vehicle.
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Speaker 4: I would say that's a little on the early side,
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Speaker 4: just relative to how Tesla has you know, done with
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Speaker 4: with new vehicle launches in the past. So that is
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Speaker 4: another another positive I think, you know, in terms of volume,
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Speaker 4: it's it's still quite low relative to the Model Y
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Speaker 4: and the Model three. That is still where you see
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Speaker 4: the vast majority of Tesla's deliveries, so much so that
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Speaker 4: Tesla has even yet to break out that that vehicle.
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Speaker 4: And in terms of you know, quarterly results, and so
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Speaker 4: I think we have a rough idea of how many
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Speaker 4: they've sold. Ironically, based on the recalls that the company
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Speaker 4: has had to do with the vehicle. It's it's as
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Speaker 4: of the latest recall was, which was just a few
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Speaker 4: weeks ago, it was around twenty seven thousand units, I believe,
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Speaker 4: So you know, that's that's pretty small for a company
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Speaker 4: that you know, may sell somewhere in a one point
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Speaker 4: eight million vehicles this year.
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Speaker 2: Where is the focus from the company here in terms
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Speaker 2: of they seems like they have a lot of balls
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Speaker 2: in the air, obviously, the car business itself, robotaxis, artificial intelligence,
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Speaker 2: what are they? What does Elon want investors to focus on?
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Speaker 4: Do you think? I think that's actually really one of
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Speaker 4: the most interesting things here. And I think Liam Denning's
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Speaker 4: column for Bloomberg Opinion, you know, does a great job
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Speaker 4: of laying out this idea that you know, Musk's emphasis
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Speaker 4: has really been on, you know, don't bother with the
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Speaker 4: here and now, forget the near term earnings. The sort
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Speaker 4: of big potential for this company has to do with,
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Speaker 4: you know, selling self driving cars and humanoid robots and
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Speaker 4: things that you know, we've heard Elon talk about time
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Speaker 4: and time again, but not actually deliver. And I think,
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Speaker 4: you know, if if you're sort of looking at this
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Speaker 4: company sort of class half full, it's I'm less concerned
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Speaker 4: than I am today about the here and now of
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Speaker 4: this company and the earnings power of Tesla and it's
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Speaker 4: it's current business and therefore, you know, more encouraged that
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Speaker 4: that they have, you know, the ability and the time
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Speaker 4: and the financial wherewithal to go out and pursue those
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Speaker 4: you know, big stretch goals that Musk has stepped for
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Speaker 4: the company, and you know, depending on who you ask,
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Speaker 4: you know may or may not be able to actually
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Speaker 4: follow through on his various predictions.
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Speaker 5: Well, from an equity perspective, this stock has been all
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Speaker 5: over the place this year. What's the goal case here?
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Speaker 5: What are people saying? How much legs do they have
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Speaker 5: to run? Can the stock go much further? What's the
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Speaker 5: consensus there?
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Speaker 4: You're absolutely right. I mean back in April, this was
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Speaker 4: a stock that was down forty three percent for the year,
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Speaker 4: and so for for them to have you know, come
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Speaker 4: all the way back, they it's sold off quite a bit,
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Speaker 4: you know, after the Robotaxi unveiling just a few weeks ago,
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Speaker 4: and you know, we we've now seen the shares to
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Speaker 4: go positive again for the year. I think whether or
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Speaker 4: not the the company can can actually grow next year
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Speaker 4: with deliveries, I think is really important. Because even Musk,
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Speaker 4: who's you know, sort of perpetually said, you know, next
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Speaker 4: year will be our year for autonomy, even he is saying,
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Speaker 4: you know that this cyber cab that they showed a
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Speaker 4: couple of weeks ago isn't going to be ready in
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Speaker 4: twenty twenty six, and so we need this company to bring,
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Speaker 4: you know, more affordable vehicles to market, to make teslas
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Speaker 4: more accessible to more consumers and get back to when
11:31
Speaker 4: it's you know, growing again. To put it simply, and
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Speaker 4: you know, I think it's still unclear what exactly they
11:37
Speaker 4: have to offer that's going to help them get there.
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Speaker 2: Thanks to Craig Trudell, Bloomberg Global Autos Editor.
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Speaker 5: Coming up, we'll discuss what we can expect and Walt
11:46
Speaker 5: Disney's succession planning.
11:47
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12:21
Speaker 2: We move next to earnings from the coffee chains Starbucks.
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Speaker 2: This week, the company reported sales that plunged for the
12:27
Speaker 2: third consecutive quarter.
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Speaker 5: Starbucks also pulled its guidance for twenty twenty five. This
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Speaker 5: comes as a new CEO, Brian Nichol, tries to assess
12:34
Speaker 5: his business and develop a turnaround plan for more.
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Speaker 2: Guest host Emily Grafao and I were joined by Michael Halen,
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Speaker 2: Bloomberg Intelligence Senior Restaurant and food service analyst. We first
12:43
Speaker 2: asked Michael what exactly is going on at Starbucks.
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Speaker 8: They played catch up a bit once the hiring of
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Speaker 8: Brian Nichol was announced. You know, Brian Nichols started last month,
12:53
Speaker 8: and you know he's moving quickly.
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Speaker 2: Man.
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Speaker 7: He's making a lot of management changes, and he's.
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Speaker 8: Aggressively making moves to simplify operations. You know, they're going
13:03
Speaker 8: to rationalize menu items, make it easier to execute, and
13:06
Speaker 8: try to bring.
13:07
Speaker 7: Hospitality back to the coffee shops right.
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Speaker 8: They want to free up their employees, their partners as
13:12
Speaker 8: they like to call them, to get back to knowing
13:16
Speaker 8: the names of their customers right and being able to
13:18
Speaker 8: greet them with a smile and friendly service, right, and
13:21
Speaker 8: so's that's going to be job one, and then from
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Speaker 8: there they're going to expand on the marketing side.
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Speaker 7: You know, Starbucks has historically.
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Speaker 8: Only marketed to its rewards members, right, and Brian nicol
13:32
Speaker 8: wants to expand that to everyone, right.
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Speaker 7: And we think that's a smart plan.
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Speaker 8: We think they've been under investing in marketing for a
13:38
Speaker 8: long time and we expect it to pay dividends as
13:41
Speaker 8: early as fiscal twenty twenty five.
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Speaker 9: What is the company said to explain the seven percent
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Speaker 9: decline in same store sales? Because before you came on,
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Speaker 9: we were talking about how you have to wait in
13:53
Speaker 9: a really long line to get your Starbucks.
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Speaker 10: There's less foot traffic.
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Speaker 2: Right every doing it.
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Speaker 9: There's I guess, well maybe some teams in the store,
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Speaker 9: but there's less people in the store. What have they
14:03
Speaker 9: said about really what's driving that decline?
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Speaker 1: You know?
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Speaker 8: Part of what new CEO Brian Niccholas said is is
14:08
Speaker 8: like it's largely about the experience. You know, it's become
14:11
Speaker 8: largely transactional. Right, They've lost that customer service feel. They've
14:16
Speaker 8: had the trouble executing the orders. You know, a big
14:19
Speaker 8: part of it is, you know. And then he also
14:22
Speaker 8: mentioned that, you know, all of these new menu items
14:25
Speaker 8: that they added to try to bring people in didn't work, right.
14:28
Speaker 8: And then pricing has gotten ahead of itself at Starbucks
14:31
Speaker 8: as well.
14:32
Speaker 7: And then China, China.
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Speaker 8: There's a huge price gap between the prices that they're charging.
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Speaker 8: Sometimes they're charging three times as much as as some
14:40
Speaker 8: of their smaller.
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Speaker 7: Competitors like Luck and Coffee and k Coffee.
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Speaker 8: So, you know, prices has also been a big part
14:47
Speaker 8: of their issue, and it's something that they're they're going
14:49
Speaker 8: to address right away.
14:51
Speaker 2: You know, I've seen some crazy graphics in various articles
14:55
Speaker 2: showing the permutations of the different orders that one could have,
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Speaker 2: and if you're bar barber, it's virtually impossible to learn
15:02
Speaker 2: all these Is there a sense that they got to
15:04
Speaker 2: simplify just the menu a little bit.
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Speaker 8: Yeah, they issued a video and that was a big
15:11
Speaker 8: point of emphasis. It was like making the jobs of
15:13
Speaker 8: their bearistas a lot easier and their employees a lot easier, right,
15:18
Speaker 8: and so you know, when an employee stressed, it's very
15:21
Speaker 8: hard for them to provide the customer with a good experience, right,
15:24
Speaker 8: So this all flows downhill.
15:25
Speaker 7: So making the Barista's jobs easier.
15:29
Speaker 8: Making it more enjoyable environment for them is going to
15:32
Speaker 8: flow down to the consumer and then it's going to
15:35
Speaker 8: result in better traffic and same source sales.
15:38
Speaker 9: I was curious to get your thoughts, you know, Brian
15:41
Speaker 9: Nichols said. The company said that they're pulling back this
15:44
Speaker 9: guidance because the CEO needs more time to kind of
15:48
Speaker 9: think through all this. How unprecedented is that just thirty seconds?
15:52
Speaker 11: Uh?
15:52
Speaker 7: No, it would be This is very common.
15:53
Speaker 8: Any any good CEO worth his soult is going to
15:56
Speaker 8: suspend guidance so they have more time to get their
15:58
Speaker 8: initiatives in place.
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Speaker 7: This is huge.
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Speaker 8: Companies can take a long time for momentum to start
16:03
Speaker 8: building in the right direction, and this is a wise.
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Speaker 5: Move our thanks to Michael Halen Bloomberg Intelligence senior restaurant
16:09
Speaker 5: and food service analysts.
16:10
Speaker 2: We move next to the Median entertainment space and Walt Disney.
16:14
Speaker 5: This week, Disney named a former Morgan Stanley CEO, James Gorman,
16:18
Speaker 5: chairman of the board. The company also said it will
16:20
Speaker 5: appoint a new CEO in early twenty twenty six.
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Speaker 2: Nor and I were joined by Githa Rong Andathan Bloomberg
16:25
Speaker 2: Intelligence analyst on US Media. We first asked Githa for
16:28
Speaker 2: her thoughts on the latest with Disney's succession plan.
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Speaker 12: So I think this is the number one issue for
16:35
Speaker 12: this company right now. I mean, succession planning has obviously
16:37
Speaker 12: not been Disney's strong suit. You know, they had botched
16:40
Speaker 12: succession attempts now multiple times, this is important. I mean,
16:44
Speaker 12: you have arguably one of the best executives in the
16:47
Speaker 12: business in James Gorman, who led such a smooth, orderly transition,
16:52
Speaker 12: you know, in his own CEO transition, just did it
16:56
Speaker 12: in five months with all internal candidates. So if it's
17:00
Speaker 12: going to be orchestrated by him, I think obviously he's
17:02
Speaker 12: been on the succession planning committee. It's his number one priority,
17:06
Speaker 12: and I think it definitely gives investors a lot of confidence.
17:09
Speaker 12: The one thing, though, that you know, you have to
17:11
Speaker 12: mention here is that the early twenty twenty six time
17:14
Speaker 12: frame that they have announced in terms of the new
17:17
Speaker 12: CEO appointment, I think that's a little bit later than
17:20
Speaker 12: what investors were expecting. I think most investors were expecting
17:23
Speaker 12: it to happen in twenty twenty five.
17:25
Speaker 5: I mean, things have really been tumultuous as we think
17:27
Speaker 5: about succession plans. What are investors looking for from a
17:31
Speaker 5: successor here?
17:32
Speaker 12: So right now, all that we know is that you
17:34
Speaker 12: have the four internal chiefs, you know, So you have
17:38
Speaker 12: the parks chief Josh Tomorrow, you have ESPN's Jimmy Pittaro,
17:42
Speaker 12: and you have the two big creative heads on the
17:44
Speaker 12: TV and the film side, Dana Walden and Alan Bergman,
17:47
Speaker 12: who are all front runners. So, you know, leading a
17:49
Speaker 12: company like Disney is really really challenging because you know,
17:53
Speaker 12: you had a parks guy in Bob Chapek who was
17:56
Speaker 12: leading the company, and obviously that turned out not so
17:59
Speaker 12: well because you know, the creative side was completely neglected.
18:04
Speaker 12: And now you have Barbiger kind of coming back in
18:06
Speaker 12: and cleaning up all those relationships that were broken with
18:10
Speaker 12: the Hollywood community. So it's going to be interesting to
18:13
Speaker 12: see whom he really picks. Obviously, the two front runners
18:16
Speaker 12: here are Dana Walden, who is a very well known,
18:19
Speaker 12: very well respected TV executive. She has deep, deep ties
18:24
Speaker 12: in Hollywood. She actually came over from Fox. She has
18:27
Speaker 12: built a lot of credibility within the industry, but she
18:30
Speaker 12: has absolutely no experience with the parks business. And remember,
18:34
Speaker 12: parks brings in almost fifty five to sixty percent of
18:37
Speaker 12: Disney's profits, so this is critical to the future of
18:40
Speaker 12: the company. Josh Tomorrow on the other side, of course,
18:43
Speaker 12: he's an out and out parks guy, has absolutely no
18:47
Speaker 12: experience with creative so this is where it gets really
18:50
Speaker 12: really challenging. So it's going to be interesting to see
18:53
Speaker 12: whether Barbiger things having that creative element is more important
18:57
Speaker 12: or whether it's again going to be a parks pick
18:59
Speaker 12: like Bob Schapeck.
19:01
Speaker 2: So Githa, you know, probably the end of the day,
19:03
Speaker 2: only one person counts, and it's not James Gorman, It's
19:07
Speaker 2: not the board, it's Bob Eiger. What do you think
19:11
Speaker 2: he wants to do? Will he be ready to go
19:14
Speaker 2: when this happens.
19:15
Speaker 12: I think he will be ready to go. The question
19:18
Speaker 12: is does he want to stick with an internal candidate?
19:20
Speaker 12: I mean we you know you know this very well, Paul.
19:22
Speaker 12: He's been doing this now for a very very long time.
19:25
Speaker 12: You know, there was first, of course the Jay Rozzulo thing.
19:28
Speaker 12: Then of course there was Bob Japek. There's always kind
19:31
Speaker 12: of been this proclivity towards an internal candidate. But having
19:33
Speaker 12: said that, for the CFO, they did look outside with
19:35
Speaker 12: Hugh Johnston. So again it's it's going to be interesting
19:38
Speaker 12: to see what happens and what he really wants to prioritize.
19:42
Speaker 12: If he thinks this time around the creative element is
19:45
Speaker 12: going to be more important, or whether he wants more
19:47
Speaker 12: of an operations kind of person. But I think yes,
19:49
Speaker 12: he will, he will go. His contract ends in December
19:52
Speaker 12: twenty twenty sixth.
19:53
Speaker 5: Our thanks to GEETHA. Rogenathan Bloomberg Intelligence analysts on US media.
19:57
Speaker 2: This week we focused on a Bloomberg Big Takes we're
20:00
Speaker 2: entitled Cracked Skull, Broken Bones show Rivian's Plant Danger.
20:04
Speaker 5: You can find it on Bloomberg dot Com and The Terminal.
20:07
Speaker 5: The story looks at how interviews with factory workers show
20:10
Speaker 5: serious safety issues at Rivian's only US plant.
20:14
Speaker 2: For more, guest host Emily Grafao and I were joined
20:16
Speaker 2: by Kyle Porter, Bloomberg Industrials reporter. We first asked Kyle
20:19
Speaker 2: to discuss his findings at Rivian.
20:22
Speaker 11: They're really struggling to build a safety culture that they
20:25
Speaker 11: can be proud of. In short, there's been numerous incidents,
20:29
Speaker 11: some of which you start that in the headline, or
20:32
Speaker 11: those which we didn't put into the story. Or this,
20:34
Speaker 11: which I haven't been investigated by OSHA. If you talk
20:36
Speaker 11: to people out there in normal Illinois, a lot of
20:39
Speaker 11: them go to work every day because it's the best
20:41
Speaker 11: paid employer in the region, but they don't feel safe.
20:44
Speaker 2: So I mean again, they only have one plant here.
20:47
Speaker 2: I'm wondering, how did Rivian like if I were starting
20:50
Speaker 2: up a new hotalk cup and I'd just go over
20:52
Speaker 2: to Ford or GM or Stalantis steal a bunch of
20:54
Speaker 2: their factory people and say, hey, guys, start building my
20:57
Speaker 2: car here. How did Rivian do it? How is Rivian
21:00
Speaker 2: kind of I guess learning on the job if you will.
21:02
Speaker 11: Well, Rivian got a deal. The original the plan that
21:06
Speaker 11: they have they purchased the sixteen million dollars been abandoned
21:11
Speaker 11: by Mitsubishi when they were trying to make an electric
21:13
Speaker 11: car in the US, so it's sort of all fell
21:16
Speaker 11: into place. There were still workers from the time that
21:18
Speaker 11: it was owned by Mitsubishi that could come in and work,
21:20
Speaker 11: so they felt that they could get some muscle memory.
21:23
Speaker 11: And then at the start they you know, it was
21:24
Speaker 11: designed to be a very niche comaker, and then they
21:28
Speaker 11: got the Amazon deal. Things exploded and they had to
21:30
Speaker 11: ramp up.
21:31
Speaker 2: So what's the company responding, like, how they've kind of
21:34
Speaker 2: respond to this and do they have any policies in
21:37
Speaker 2: place to try to address this, because I'm just looking
21:39
Speaker 2: at another great graphic. Get you having a story that
21:41
Speaker 2: just shows a number of serious violation sited and Ruvin's
21:45
Speaker 2: at the top of that list.
21:46
Speaker 11: Yes it is, and as you pointed out, it's only
21:49
Speaker 11: one factory with eight thousand staff. Most of the companies
21:52
Speaker 11: on that list have multiple sites and tens of thousands
21:54
Speaker 11: of workers.
21:55
Speaker 2: I just want to know kind of have the companies
21:56
Speaker 2: responding here.
21:57
Speaker 11: They're responded in great detail to us. It's fair to say.
22:01
Speaker 11: They pointed out that most of the serious citations that
22:03
Speaker 11: they were issued were ultimately downgraded or in a couple
22:06
Speaker 11: of cases, dismiss which is true of most people that
22:10
Speaker 11: go through the citation process. And they pointed as to
22:13
Speaker 11: things that they've done to improve their safety processes. And indeed,
22:15
Speaker 11: Osher itself has commended the company for being open and
22:19
Speaker 11: looking to improve itself in safety.
22:21
Speaker 2: So is any materially different than say a Tesla factory
22:26
Speaker 2: or you know the other EV makers.
22:29
Speaker 11: Well, it currently only builds two types of vehicle. You
22:33
Speaker 11: have the Amazon truck, and then you have the R one,
22:37
Speaker 11: which comes into several bottles. It's a ne SUV in
22:40
Speaker 11: a truck, and they're looking to ramp that up with
22:42
Speaker 11: an expansion with the R two next year. So it's smaller.
22:46
Speaker 11: It's I think it's aiming to produce now. They actually
22:49
Speaker 11: cut their forecast this year about fifty thousand vehicles, so
22:52
Speaker 11: the scale of it is much smaller.
22:54
Speaker 2: Does Rivin have the money to invest in their plants
22:58
Speaker 2: into the safety because well, you look at the the
23:00
Speaker 2: stocks of some of these companies that are just so volatile,
23:03
Speaker 2: and I wonder if they even really have the money
23:05
Speaker 2: to invest in safety protocols.
23:07
Speaker 11: It's a question to ask the company that they say
23:09
Speaker 11: that they have a real commitment to safety and they
23:11
Speaker 11: are investing in it.
23:13
Speaker 2: Is it is making an evy?
23:15
Speaker 4: I don't know.
23:16
Speaker 2: It seems like they're not building an internal combustion engine,
23:18
Speaker 2: so they're not actually building an engine.
23:20
Speaker 7: There is it?
23:21
Speaker 2: I would think the process is a lot different. Is
23:23
Speaker 2: it any more or less dangerous as the industry said
23:26
Speaker 2: versus say, a you know, traditional guess assembly plant.
23:31
Speaker 11: Given that you're building this thing from scratch, you know,
23:34
Speaker 11: from the engine upwards there's a lot of process that
23:38
Speaker 11: has to be learned. There's a lot of things that
23:40
Speaker 11: need to be learned. Indeed, one of the things that
23:42
Speaker 11: the company was cited for was a movement vehicle that
23:46
Speaker 11: the engineers are designed and you know, wasn't safe for
23:50
Speaker 11: employees to use. They were telling employees to be careful
23:52
Speaker 11: until I she cited them and they figured out a
23:54
Speaker 11: way to do it differently. And you could replicate that
23:57
Speaker 11: across a thousand examples, from how you attach the doors
24:00
Speaker 11: to how you put the glass in. You could go
24:02
Speaker 11: on and on and on, and Rivian's had to work
24:03
Speaker 11: out new and different ways of doing all these things
24:05
Speaker 11: for these new bespoke vehicles.
24:07
Speaker 2: But the employees, I guess they are. Are they aware
24:10
Speaker 2: of the hazards when they take these jobs.
24:13
Speaker 11: That's a very good question. It's rapidly becoming a company town.
24:18
Speaker 11: Most of the people that we spoke to for the
24:20
Speaker 11: story are one of several family members who work at
24:23
Speaker 11: the plant. They all talk about how when the plant
24:26
Speaker 11: first opened, it was very small, very welcoming. You saw
24:29
Speaker 11: members of senior management. It felt like a family. And
24:32
Speaker 11: as production as ramp up, that's gone away and there's
24:35
Speaker 11: been a pressure just to produce.
24:37
Speaker 2: Our thanks to Kyle Porter, Bloomberg Industrials Reporter and.
24:40
Speaker 5: Coming up on the program, well look at where we
24:42
Speaker 5: stand with nuclear reactor technology.
24:44
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
24:47
Speaker 2: depth research and data on two thousand companies and one
24:49
Speaker 2: hundred and thirty industries. You can access Bloomberg Intelligence via
24:52
Speaker 2: b I go on the terminal, Paul Sweeney.
24:54
Speaker 5: And I'm normal. Dup, this is Bloomberg.
25:02
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25:06
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25:16
Speaker 1: Just say Alexa, play Bloomberg eleven thirty M.
25:20
Speaker 5: Paul Sweeney and I'm Normalinda filling in for Alex Steele.
25:23
Speaker 5: We moved next to the telecommunications space. Both AT and
25:26
Speaker 5: T and Verizon both reported third quarter earnings this week.
25:30
Speaker 2: AT and T said it gained more mobile subscribers and
25:32
Speaker 2: analysts expected well steady focus on its fiber optic network
25:35
Speaker 2: and fixed wireless service.
25:37
Speaker 5: But Verizon reported quarterly revenue that missed analyst expectations. The
25:41
Speaker 5: company said it was weighed down by lackluster sales of
25:44
Speaker 5: hardware such as mobile phones.
25:46
Speaker 2: For more, guest host Emily Grafeo and I were joined
25:48
Speaker 2: by John Butler, Bloomberg Intelligence senior telecom analyst. We first
25:52
Speaker 2: asked John for his take on what he saw from
25:53
Speaker 2: AT and T this quarter.
25:55
Speaker 13: Mob Bell delivered It is what I would say. They
25:58
Speaker 13: actually had a very steady quarter. The one thing I've
26:03
Speaker 13: always liked about AT and T is they are the
26:06
Speaker 13: steady hand in the telecom space, unlike technology. For example,
26:11
Speaker 13: in telecom, I always say a millimeter is a mile.
26:15
Speaker 13: You know, if they edged out expectations on key metrics
26:19
Speaker 13: particularly and wireless and so, you know, steady as she
26:24
Speaker 13: goes really a good story. And it continues to be
26:28
Speaker 13: based on what I saw this quarter.
26:31
Speaker 9: So they gain more mobile subscribers in the third quarter
26:34
Speaker 9: than analysts expected. Where is that coming from? Is that
26:37
Speaker 9: people switching from a competitor to AT and T?
26:41
Speaker 13: Yeah, Emily, So what we're seeing in telecom is the
26:44
Speaker 13: market is largely saturated, So when you see gains at
26:48
Speaker 13: AT and T, it's typically coming from other carriers. We're
26:53
Speaker 13: also seeing a big migration coming out of the prepaid
26:57
Speaker 13: business as carriers like AT and T take their best
27:01
Speaker 13: credits out of that category and sort of elevate them
27:05
Speaker 13: into the low end of the post paid space. The
27:09
Speaker 13: other thing we're seeing our second line, So a lot
27:11
Speaker 13: of people are actually getting second cell phones or adding
27:15
Speaker 13: an additional line to their phone, and so we're getting
27:18
Speaker 13: what I termed second line growth as well. So it's
27:21
Speaker 13: really a combination of those factors that's at work there.
27:25
Speaker 2: So John kind of zoom out a little bit. Look
27:28
Speaker 2: at the wireless space in general. We've got you know, Verizon,
27:31
Speaker 2: AT and T, T Mobile. I mean, it's got three big,
27:34
Speaker 2: big players, and the pie is not growing a whole lot,
27:37
Speaker 2: I don't think. So how do investors think about where
27:40
Speaker 2: to lay their wireless that's here between those three names, So.
27:44
Speaker 13: Let me take it from the top. T Mobile continues
27:48
Speaker 13: to be the growth name in the space. They have
27:51
Speaker 13: I think, the strongest brand they've been out there with
27:54
Speaker 13: a consumer friendly brand. It's very splashy, it resonates well
27:59
Speaker 13: with the young people. When you look at those net
28:04
Speaker 13: news subscribers coming in every quarter. Team mobile just continues
28:08
Speaker 13: to be quartered and quarter out. As I said a
28:11
Speaker 13: moment Ago, AT and T is this steady hand. They're
28:15
Speaker 13: growing steadily, they're executing very well. And then at the
28:19
Speaker 13: low end of that spectrum is Verizon. They've had some trouble,
28:24
Speaker 13: they've been losing share in recent quarters. They're starting to
28:28
Speaker 13: make the turn. So it's going to be interesting to
28:30
Speaker 13: see the industry dynamics here as Verizon on the margin
28:35
Speaker 13: gets better I think in coming quarters. So we're watching that.
28:40
Speaker 13: But in terms of how the stack lays out, now,
28:42
Speaker 13: that's that's where it is.
28:45
Speaker 10: How are you thinking about AT and T and these
28:48
Speaker 10: other wireless providers versus the traditional telecom companies because we've
28:54
Speaker 10: learned in at least the AT and T earnings reports
28:56
Speaker 10: they're trying to get more into that traditional telecom business
29:03
Speaker 10: laying out broadband fiber. Is it working.
29:07
Speaker 13: Yeah, So if you look at the history of telecom,
29:10
Speaker 13: AT and T and for Verizon are the old regional
29:13
Speaker 13: bell operating companies. There are a number of them put together, actually,
29:17
Speaker 13: and so they both still have a wireline business, a
29:22
Speaker 13: fixed line network that they're using now to deliver and
29:26
Speaker 13: really grow in the broadband space, and that is causing
29:32
Speaker 13: convergence with the cable industry. Right the cable operators are
29:35
Speaker 13: now getting into wireless, and telcos are all leaning into
29:40
Speaker 13: broadband and having very good success building share and taking
29:45
Speaker 13: share from the cable guys. So that's going to continue
29:49
Speaker 13: to play out in coming quarters. And I think the
29:51
Speaker 13: competitive edge that the telcos have is a lot of
29:55
Speaker 13: their networks are built on fiber, and so fiber is
30:01
Speaker 13: the best long term solution for broadband. It's the highest
30:06
Speaker 13: capacity and it stands up very well to environmental pressures.
30:12
Speaker 2: How did the cable companies, then, John, compete? What's their
30:14
Speaker 2: competitive I guess strengths versus AT and T and Verizon.
30:19
Speaker 13: I think so great question, Paul. You know, on the
30:22
Speaker 13: broadband front, they're trying to upgrade their networks to what's
30:25
Speaker 13: called doss for it's going to give them the ability
30:28
Speaker 13: to offer the same upload and download speeds, which they
30:33
Speaker 13: can't do now. The download speeds are very fast, but
30:36
Speaker 13: the upload speeds are rather slow, so you don't get
30:39
Speaker 13: that the metrical service, but hopefully coming soon. And I
30:44
Speaker 13: think on the wireless side, they're capturing a lot of
30:49
Speaker 13: share at the low end of the market. They're coming
30:51
Speaker 13: in with some very compelling offers and it's working and
30:56
Speaker 13: they're taking share from the telecoms.
30:58
Speaker 5: And wireless to John Butler, Bloomberg Intelligence senior telecom analysts.
31:03
Speaker 2: Each week we look at research from Bloomberg and EF
31:06
Speaker 2: previously known as New Energy Finance.
31:08
Speaker 5: They're the team at Bloomberg that tracks and analyzes the
31:11
Speaker 5: energy transition from commodities to power, transport, industries, buildings, and
31:15
Speaker 5: agriculture sectors.
31:17
Speaker 14: This week we.
31:17
Speaker 2: Took a look at nuclear power and for the first
31:20
Speaker 2: time in seventeen years, there are no nuclear reactors under
31:23
Speaker 2: construction in the US.
31:24
Speaker 5: For more, Paul and I were joined by Chris Gadomski,
31:27
Speaker 5: be an EF lead nuclear analyst. We first asked Chris
31:31
Speaker 5: where we stand with nuclear reactor technology.
31:34
Speaker 14: Think about a football team or a basketball team and
31:37
Speaker 14: you're sitting your best player on the bench, and there's
31:42
Speaker 14: a lot of issues with regards to nuclear energy, but
31:46
Speaker 14: it is a very, very robust technology that can provide
31:50
Speaker 14: the twenty four to seven type of baseload power that
31:55
Speaker 14: many customers are looking for and interested in having. We
31:59
Speaker 14: are are for the first time since two thousand and
32:02
Speaker 14: seven without a reactor under construction, which is very, very discouraging,
32:06
Speaker 14: especially in the context of the fact that China has
32:09
Speaker 14: got something like twenty seven to twenty eight reactors under construction,
32:13
Speaker 14: and Russia is building twenty two or twenty three reactors
32:16
Speaker 14: around the world in six different countries. So what has
32:20
Speaker 14: happened to the US nuclear industry. We've kind of dropped
32:23
Speaker 14: the ball on large reactor construction. And there's a lot
32:27
Speaker 14: of hope and a lot of cheerleading that some of
32:29
Speaker 14: these advanced reactors are being developed by a whole slew
32:32
Speaker 14: of companies will carry the day and provide an alternative
32:35
Speaker 14: nuclear solution.
32:37
Speaker 5: Talk us through just how long it takes to license
32:40
Speaker 5: and build a lot of these larger reactors.
32:43
Speaker 14: So though the AP one thousand that was built in
32:46
Speaker 14: Vogel at a budget a cost of thirty four billion dollars,
32:52
Speaker 14: it took about fifteen years to license and build. And
32:56
Speaker 14: that's quite a long period of time. What utility executive
33:00
Speaker 14: is going to look around and say, listen, let me
33:02
Speaker 14: grab another one of these and spend that type of
33:04
Speaker 14: cash and wait that long, Especially since the new technologies
33:09
Speaker 14: intermittent renewables are coming on and they provide an alternatives,
33:13
Speaker 14: and there's a lot of change in the utility industry
33:17
Speaker 14: and the electric power industry, and hence it becomes a
33:19
Speaker 14: pretty risky proposition to place a bet billions of dollars
33:24
Speaker 14: for a technology that's not going to come and return
33:28
Speaker 14: an investment for several different years. And there's several examples
33:31
Speaker 14: not only in the US, but also in Europe where
33:33
Speaker 14: this is going on.
33:35
Speaker 2: Some of these smaller modular reactors that we hear about
33:38
Speaker 2: that kind of seems like a reasonable solution to me.
33:40
Speaker 2: I don't have to build this monster generator. I do
33:42
Speaker 2: something smaller for maybe lower cost, presumably cheaper all the
33:47
Speaker 2: kind of stuff.
33:48
Speaker 14: Well, the question is is that we anticipate that those
33:51
Speaker 14: reactors may be more expensive on a per kill a
33:54
Speaker 14: wide basis, but the risk that they present to a
33:58
Speaker 14: utility executive signing to invest this technology is less. You
34:02
Speaker 14: can build them sequentially so that you get a cash
34:06
Speaker 14: flow after the first one is up and running and
34:08
Speaker 14: now you're building the second one, as opposed to waiting
34:11
Speaker 14: the many years to get that. We anticipate that licensing
34:15
Speaker 14: and building an SMR and will take about five to
34:19
Speaker 14: six years, two years in the licensing process and three
34:22
Speaker 14: or four years optimistically for construction. We don't anticipate any
34:28
Speaker 14: of these advanced reactors coming online in North America until
34:32
Speaker 14: twenty thirty.
34:33
Speaker 10: How does this compare internationally.
34:36
Speaker 14: Well, the US is a leader in the development of
34:41
Speaker 14: advanced reactors and SMRs. There's only two SMRs that operate
34:46
Speaker 14: around the world, one in China, one in Russia, and
34:48
Speaker 14: only two under construction, one in China and one allegedly
34:53
Speaker 14: in Russia. They're supposed to break around soon. We have
34:57
Speaker 14: a very interesting development in Wyoming with terror Power developing
35:02
Speaker 14: or replacing a coal plant with an advanced reactor, which
35:06
Speaker 14: is very, very exciting. But they have not received a
35:10
Speaker 14: construction permit for that reactor yet and they're still doing
35:14
Speaker 14: preliminary work, and we anticipate that coming online around the
35:19
Speaker 14: twenty thirties.
35:20
Speaker 2: What's the feeling within the halls of Congress about this
35:24
Speaker 2: power source? Is there any support for nuclear power or
35:28
Speaker 2: is ideologically divided or where are we on this?
35:32
Speaker 14: It's certainly changing from being very very questioning and very
35:35
Speaker 14: very nervous about it to be more accepting of the
35:38
Speaker 14: technology because they realize the certain advantages of nuclear power.
35:44
Speaker 14: I live in a solar powered house in California. I
35:47
Speaker 14: get all of my electricity from solar energy. But when
35:50
Speaker 14: you think about powering a large city or so, you
35:53
Speaker 14: need something more than just intermittent renewables. Renewables are very
35:58
Speaker 14: good solution for part of the problem, but they're not
36:00
Speaker 14: a solution for the entire problem. So to displace some
36:04
Speaker 14: of the fossil fuel that we see being used now,
36:07
Speaker 14: we need to have a clean, carbon free source of
36:10
Speaker 14: nuclear power. SMRs have greater flexibility, easier to bring online,
36:15
Speaker 14: and hopefully they'll have a role to play in the future.
36:18
Speaker 10: Well, let's talk about AI.
36:19
Speaker 5: We think about data centers and the demand there, and
36:23
Speaker 5: when we think about nuclear supplying these data centers. I
36:26
Speaker 5: know you mentioned that this should be a pretty much
36:28
Speaker 5: a post twenty thirty phenomenon, apart from the revival of
36:32
Speaker 5: Three Mile Island by twenty twenty eight. Can you talk
36:35
Speaker 5: a bit more about that.
36:36
Speaker 14: Yes, several studies that suggest that there's a tremendous demand
36:40
Speaker 14: growth for nuclear power between now and twenty thirty. There
36:43
Speaker 14: are some questions will that growth continue after twenty thirty
36:47
Speaker 14: or will plateau for a while. I wish I could
36:51
Speaker 14: say that there'll be a solution from the advanced nuclear
36:54
Speaker 14: community before twenty thirty, but if it is, it's just
36:58
Speaker 14: going to be first of a kind one or two
37:00
Speaker 14: WHO reactors, and the challenge is developing a supply chain
37:05
Speaker 14: that can deliver a fleet of these advanced reactors to
37:08
Speaker 14: really respond to the growing demand for electricity from the
37:12
Speaker 14: data centers.
37:13
Speaker 5: Our thanks to Chris Kadomski, be any app lead Nuclear Analysts.
37:17
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