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P&L: Trump's Tariff Threat Would Violate NAFTA · Bloomberg Intelligence

• 0:04
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether at the grocery store or
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  Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes,
• 0:20
  Speaker 1: SoundCloud and at Bloomberg dot com. President elect Donald Trump
• 0:30
  Speaker 1: had threatened to impose tariffs on automobiles made in Mexico
• 0:36
  Speaker 1: by g M, and as part of the automotive industry's
• 0:40
  Speaker 1: response to President elect Donald Trump, Ford Motor Company has
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  Speaker 1: decided that it will not spend one point six billion
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  Speaker 1: dollars to create a new manufacturing plant in San Luis
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  Speaker 1: Potoso in Mexico. Well, Shannon Petty Pieces are White House correspondent,
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  Speaker 1: and she joins us, Now, I know you're at the
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  Speaker 1: Trump Tower in Midtown Manhattan todaytion and but you're focusing
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  Speaker 1: on the NAFTA regulations that would prevent the imposition of tariffs.
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  Speaker 1: Can you explain a little bit more about this contradiction? Right? So,
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  Speaker 1: under NAFTA, um, you know, uh, goods are able to
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  Speaker 1: flow tariff free between Mexico and the US and Canada.
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  Speaker 1: In the US and vice versa and so forth. Um.
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  Speaker 1: Yesterday Trump tweeted, uh, you know, called out GM for
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  Speaker 1: importing a car made in Mexico into the US. UM,
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  Speaker 1: and you know edited with you know, something along the
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  Speaker 1: lines of, you know, uh, if you import products here,
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  Speaker 1: you're gonna have to pay a big border tax. Well,
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  Speaker 1: under NAFTA border tax, the tariff on goods coming into
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  Speaker 1: the US from Mexico is in violation of that agreement.
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  Speaker 1: So if Trump is going to carry through on his
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  Speaker 1: commitment that he made on the campaign trail knights continuing
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  Speaker 1: to read right now about putting attacks on goods coming
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  Speaker 1: in through Mexico, then that it's going to be in
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  Speaker 1: violation of NAFTA. And if you violate NAFTA, which uh
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  Speaker 1: no presidents violated a trade agreement since the eighteen hundreds. So, UM,
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  Speaker 1: we don't know exactly what would happen, but one possibility is,
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  Speaker 1: you know, Mexico rule would retaliate then with its own
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  Speaker 1: set of tariffs. UM, and then you get into the
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  Speaker 1: trade war, and uh, you know, a whole variable of
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  Speaker 1: things can play out from there. But uh, that's sort
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  Speaker 1: of what we talk about when we see uh President
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  Speaker 1: electrov going on, and you know, discussing things like a
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  Speaker 1: border tax, uh, you know, from imports to Mexico. Well, indeed,
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  Speaker 1: in your most recent story, Shannon, you have a quote
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  Speaker 1: from Republican Senator Rob Portman of Ohio. Tell us what
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  Speaker 1: he was talking about. Well, the concern here with you know,
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  Speaker 1: putting a border tax on with exiting NAFTA or you know,
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  Speaker 1: getting into a trade war is that, Um, the okay?
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  Speaker 1: So sure, you know, it would make cars made in
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  Speaker 1: the US more competitive, It might encourage companies to make
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  Speaker 1: more products in the US, but also means goods coming
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  Speaker 1: in from Mexico go up in price. So all the
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  Speaker 1: Mexican made goods that we buy that are sold in
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  Speaker 1: stores like Walmart are going to go up in price.
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  Speaker 1: And also if you're a US manufacturer and you're importing
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  Speaker 1: you know, let's say the fabric or the styrofoam when
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  Speaker 1: your seek cushions for the chairs that you're going to
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  Speaker 1: be manufacturing in the US, the price of those important
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  Speaker 1: manufactured goods go up. So uh, that's the concern of
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  Speaker 1: what could happen here. Of course, there's there's ways to
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  Speaker 1: do this. NAFTA could be renegotiated. Um, we you know,
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  Speaker 1: could have a trade war and the air and prices
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  Speaker 1: of stuff from Mexico go up, but there's taxes or
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  Speaker 1: other incentives to offset it. I mean, there's there is
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  Speaker 1: a lot of variables that could play out. But the
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  Speaker 1: concern is that you know, you put tariffs on cars
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  Speaker 1: coming in from Mexico, Mexico retaliates and the cost of
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  Speaker 1: all sorts of good starts going up. And also the
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  Speaker 1: I should mentioned yeah, then the US manufacturers exporting UH
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  Speaker 1: good to Mexico also get hurt. Now, the authority of
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  Speaker 1: the president when Donald Trump, after he's inaugurated on January twenty,
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  Speaker 1: his power will be what I mean, will he be
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  Speaker 1: able to He doesn't. He has to forward any changes
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  Speaker 1: to treaties UH to the Senate. Right though, under there's
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  Speaker 1: a clause, a very short clause in the NaSTA agreement
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  Speaker 1: that would give the power of the president to just
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  Speaker 1: completely exit the agreement altogether. And he has said on
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  Speaker 1: the campaign trail that he could use that article of
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  Speaker 1: the agreement to exit NAPTA. UM. He has said, rather,
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  Speaker 1: what he'd like to do is renegotiate it and get
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  Speaker 1: us a really a really great deal and much better
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  Speaker 1: terms for the US as part of the agreement. But
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  Speaker 1: if Mexico and Canada did not play along, he could
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  Speaker 1: exercise that powers and just withdraw from the treaty. And
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  Speaker 1: also the president would have what the ability to impose
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  Speaker 1: a duty for one days, claiming what is described as
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  Speaker 1: a balance payments emergency. What is that? Yeah, So, so
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  Speaker 1: then let's say we did exit from NASA. UM Trump
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  Speaker 1: said he'd want to put a thirty percent tariff on
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  Speaker 1: goods coming from Mexico. Um, he would not be able
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  Speaker 1: to do that because even if we did, I guess
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  Speaker 1: at least legally, uh, even if we did exit NASA,
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  Speaker 1: then in ports of Mexico would have a four percent
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  Speaker 1: tariff on them under the most Favored Nation status, they
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  Speaker 1: would get this four percent tariff. Um he could put
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  Speaker 1: a higher trap, that fiercent tariff on but only for
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  Speaker 1: a limited period of a hundred days. Longer term, the
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  Speaker 1: most terror and the biggest therapy will be able to
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  Speaker 1: put on would be four percent, unless, of course, you know,
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  Speaker 1: at least with his with the unilateral powers of the presidency. Indeed,
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  Speaker 1: all right, well, we'll be watching this story, and thank
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  Speaker 1: you for covering at Shannon Petty piece are White House
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  Speaker 1: correspondent for Bloomberg News. Today, she is at Trump Tower
• 6:07
  Speaker 1: in Midtown Manhattan. He decided to build a better bank,
• 6:22
  Speaker 1: and he did so. Frank Sarantino is the chief executive
• 6:25
  Speaker 1: officer of Connect One Bank. They're based in Englewood Cliffs,
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  Speaker 1: New Jersey, and he joins me. Now, Frank, thanks for
• 6:30
  Speaker 1: coming in great to see this idea that do you
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  Speaker 1: built the bank. You went through kind of a start
• 6:35
  Speaker 1: where you know, you had traditional bankers in charge, and
• 6:38
  Speaker 1: now you know you've been running the bank for a while.
• 6:41
  Speaker 1: What is different about having a person who was formerly
• 6:44
  Speaker 1: a customer run a bank than just someone who is
• 6:47
  Speaker 1: only in the banking industry. So you know, from my perspective,
• 6:50
  Speaker 1: it's just bringing more of an entrepreneurial spirit to to
• 6:53
  Speaker 1: to the business itself. And this is a highly regulated
• 6:57
  Speaker 1: industry and for many many years, the things the way
• 7:00
  Speaker 1: they've always been done, and so we just think a
• 7:03
  Speaker 1: little bit differently about everything we do connect One Bank.
• 7:06
  Speaker 1: We think about the customer and everything we do. We
• 7:09
  Speaker 1: we assume the customer is in every one of our meetings.
• 7:11
  Speaker 1: Whenever we have a conversation about what to do, what
• 7:13
  Speaker 1: to do next, how we're going to run our organization. Uh,
• 7:16
  Speaker 1: and I think that that pervades the entire thought process
• 7:19
  Speaker 1: of how we do things. We we really work hard
• 7:22
  Speaker 1: to work with a sense of urgency to get things
• 7:24
  Speaker 1: done quickly at the speed that business demands. All right,
• 7:27
  Speaker 1: well let's let well and it's a little bit different,
• 7:29
  Speaker 1: then let me then let's go to some specifics if
• 7:32
  Speaker 1: we can. For example, regulatory reform and Dodd Frank legislation
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  Speaker 1: is certainly a topic in Washington, d C. I'm sure
• 7:39
  Speaker 1: it's a topic in your office is as well. What
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  Speaker 1: do you expect to happen and what effect will it have.
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  Speaker 1: So there's lots of talk in the industry today about
• 7:47
  Speaker 1: a complete repeal of Dodd Frank. That's probably unlikely. What's
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  Speaker 1: more likely is a real cost benefit analysis. This is
• 7:56
  Speaker 1: an industry that has always operated with regulations and will
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  Speaker 1: continue to op rate with regulations. We're not going to
• 8:01
  Speaker 1: be the Wild West with no regulation. But there are
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  Speaker 1: lots of regulations that were put in place specifically since
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  Speaker 1: Dodd Frank that really have no cost benefit analysis and
• 8:10
  Speaker 1: really may not benefit anyone. And and the amount of
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  Speaker 1: data that needs to be collected and reported upon really
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  Speaker 1: doesn't reflect the risk that's in the marketplace, and so
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  Speaker 1: I think we're gonna look at more sensible regulation. Would
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  Speaker 1: be an example of one regulation that you feel is
• 8:25
  Speaker 1: not necessarily beneficial to either you or to the customer.
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  Speaker 1: So let's take it right to main street and the
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  Speaker 1: ability for a banker to make what used to be
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  Speaker 1: known as a character loan. I know you, I knew
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  Speaker 1: your family. You know we know you had the store
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  Speaker 1: in town for the last forty years. You've never uh
• 8:43
  Speaker 1: never not paid your debts. Yet if we don't have
• 8:46
  Speaker 1: every single piece of financial documentation that can demonstrate that
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  Speaker 1: not only can you make the payments, but you can
• 8:52
  Speaker 1: pay off the loan at maturity, we can't make that
• 8:55
  Speaker 1: loan to you. And so today that's a that's a challenge,
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  Speaker 1: and that's hurting small business. On the flip side of that,
• 9:01
  Speaker 1: you know, someone who wants to buy a home with
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  Speaker 1: the qualified Mortgage standards UM is making it much more
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  Speaker 1: difficult today for first time home buyers to purchase that
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  Speaker 1: at home. The bank doesn't have as much discretion as
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  Speaker 1: it used to have in the past about deciding who
• 9:15
  Speaker 1: is a qualified borrower and who isn't based on the
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  Speaker 1: bank uh Now it has to be a standard that
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  Speaker 1: we can apply across the entire fifty states in the
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  Speaker 1: United States, and I don't think that's I don't think
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  Speaker 1: that's appropriate. And I think we're seeing the impact of that.
• 9:27
  Speaker 1: We're seeing home ownership leg uh for for the reasons
• 9:31
  Speaker 1: that people can't come up with the down payment. Now
• 9:33
  Speaker 1: there are other reasons as well, but this is certainly
• 9:35
  Speaker 1: one of the reasons. Has bureaucracy replaced common sense? Absolutely,
• 9:40
  Speaker 1: we've definitely, I think the pendulum swings, and in this
• 9:44
  Speaker 1: particular case, I think we have swung the pendulum to
• 9:46
  Speaker 1: the place where, uh, it's more important to think about
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  Speaker 1: what the rules say as opposed to what makes sense. Uh.
• 9:53
  Speaker 1: And you know there's also this happens in business, but
• 9:56
  Speaker 1: clearly in banking, there's a fear of failure. We can
• 9:59
  Speaker 1: never have a bank ever fail, and I don't think
• 10:02
  Speaker 1: that's the standard. I think I think we this is
• 10:05
  Speaker 1: you know, this is a a capitalist society, and I
• 10:08
  Speaker 1: think people make decisions, and we have the appropriate amounts
• 10:11
  Speaker 1: of capital required to charter a bank, but I think
• 10:14
  Speaker 1: it's up to management in those boards to make those decisions.
• 10:17
  Speaker 1: I also believe we should never have an institution that's
• 10:19
  Speaker 1: too big to fail, right, that we could never have
• 10:21
  Speaker 1: that that failure take place. But the notion that no
• 10:24
  Speaker 1: bank should ever fail under any circumstances, I think it
• 10:27
  Speaker 1: is really harming the industry. It sounds like a good
• 10:30
  Speaker 1: sounds like a good thing to do, right, it sounds
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  Speaker 1: like it makes sense. But at the end of the day, UH,
• 10:34
  Speaker 1: think about any other industry where you would say, under
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  Speaker 1: no circumstances can there be a failure? UM, that'd still
• 10:41
  Speaker 1: be a lot of buggy with businesses and other industries
• 10:45
  Speaker 1: today that I'm not so sure you'd want around interesting
• 10:47
  Speaker 1: point talk about tax reform and what you perceive is likely.
• 10:51
  Speaker 1: So I think UM tax reform is probably one of
• 10:55
  Speaker 1: the most likely outcomes of the recent election. I think
• 10:59
  Speaker 1: it will benefit certainly in the short term UM. Many
• 11:03
  Speaker 1: companies banks included banks paying enormous People don't realize, but
• 11:07
  Speaker 1: banks pay a tremendous amount of tax for both federal
• 11:10
  Speaker 1: and state taxes UH, and so any reduction in those
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  Speaker 1: tax rates will not only benefit other companies. But as
• 11:17
  Speaker 1: you know, if if a bank benefits and has more
• 11:21
  Speaker 1: UH net income, that goes to capital and allows banks
• 11:24
  Speaker 1: to make more loans. So I think that will benefit
• 11:27
  Speaker 1: the economy greatly. On top of which, if everyone has
• 11:31
  Speaker 1: is stated, gets some sort of a tax break, that's
• 11:34
  Speaker 1: money coming into the economy. And I think we're seeing
• 11:36
  Speaker 1: signs that the markets already reacted to that. The market
• 11:40
  Speaker 1: has already reacted that. Do you think the market is
• 11:42
  Speaker 1: overreacted to that? Well, that's that's to be seen. Right
• 11:45
  Speaker 1: There are those who say we're just getting going, and
• 11:48
  Speaker 1: there are those who say it's overreacted, and there's still
• 11:51
  Speaker 1: lots of forces that will bring the market back to
• 11:54
  Speaker 1: back to earth. I'm of the I'm in the camp
• 11:57
  Speaker 1: that I think this is the a a great amount
• 12:00
  Speaker 1: of liquidity that we're going to need today, and I
• 12:02
  Speaker 1: think the market is reacting appropriately to what it sees
• 12:05
  Speaker 1: is the most probable outcome to whether or not we
• 12:08
  Speaker 1: get tax reform. I just want to bring this headline
• 12:10
  Speaker 1: to you that President elect Donald Trump has named Jay
• 12:13
  Speaker 1: Clayton to head the Securities in Exchange Commission. Jake Clayton
• 12:19
  Speaker 1: is a lawyer, and he would succeed Securities and Exchanged
• 12:24
  Speaker 1: chairman Mary Joe White, another lawyer. Clayton met with Trump
• 12:29
  Speaker 1: in early December and is a partner at Sullivan and Cromwell,
• 12:33
  Speaker 1: where he worked on the initial public offering of Ali
• 12:36
  Speaker 1: Baba Group. UM. Frank last point to business sentiment more loans,
• 12:42
  Speaker 1: less loans, kinds of loans. Give us some details. So
• 12:44
  Speaker 1: in keeping with the tax discussion, Certainly, people feeling that
• 12:48
  Speaker 1: they're going to have more money, whether it's a person
• 12:51
  Speaker 1: or even businesses that think that they're going to either
• 12:55
  Speaker 1: have more wages or more in the way of net income.
• 12:58
  Speaker 1: UM certainly feel better about out the future. And we're
• 13:01
  Speaker 1: seeing that our client base to connect one definitely has
• 13:04
  Speaker 1: been coming back to us. UH. Certainly those that are
• 13:08
  Speaker 1: any way affiliated with any type of infrastructure building right engineers,
• 13:12
  Speaker 1: environmental firms, architectural firms, UH, investors, real estate people are
• 13:16
  Speaker 1: very very optimistic about what the future looks like to them,
• 13:20
  Speaker 1: and we're starting to see that sentiments spill over into
• 13:23
  Speaker 1: the request that we're seeing today, and I think people
• 13:26
  Speaker 1: are willing to stretch a little bit based on what
• 13:27
  Speaker 1: they believe the future looks like. Thanks very much for
• 13:30
  Speaker 1: coming in. Always great give us some details about the
• 13:33
  Speaker 1: banking industry and about what might change in in this year.
• 13:38
  Speaker 1: Frank Sorrentino is the chief executive officer of Connect One Bank.
• 13:42
  Speaker 1: They're based in Englewood Cliffs, New Jersey. Is also the
• 13:45
  Speaker 1: founder of the bank. All right, let's get smart when
• 14:00
  Speaker 1: it comes to healthcare in the United States with Brian Ry.
• 14:03
  Speaker 1: He is our senior healthcare policy analyst for Bloomberg Intelligence
• 14:06
  Speaker 1: for their government team. Joining us from Washington, d C.
• 14:09
  Speaker 1: Home to Bloomberg and one oh five point seven h
• 14:12
  Speaker 1: D two. Brian, there is a battle going on right
• 14:17
  Speaker 1: now in Washington, even before President elect Donald Trump is inaugurated,
• 14:23
  Speaker 1: having to do with the Affordable Care Act perhaps a
• 14:26
  Speaker 1: better known as Obamacare. What is happening and what are
• 14:31
  Speaker 1: we witnessing? Oh? I guess you know, happy New Year
• 14:33
  Speaker 1: and here we go, thanks for how quick? Uh? You know?
• 14:37
  Speaker 1: The Republicans, you know, campaigned on a promise for the
• 14:41
  Speaker 1: last six years of repealing and replacing Obamacare, and for
• 14:44
  Speaker 1: the last six years it's sort of been a toothless
• 14:46
  Speaker 1: promise because President Obama had a veto thread in the
• 14:49
  Speaker 1: office in the in the White House that's going away now.
• 14:51
  Speaker 1: And so now they're sort of the dog that's caught
• 14:53
  Speaker 1: the car. What are you going to do with it
• 14:55
  Speaker 1: now that you've actually caught it? Uh? And you have
• 14:57
  Speaker 1: to actually back up those promises. So the Hotter fifteenth
• 15:00
  Speaker 1: Congress UH was sworn in yesterday, So they are ready
• 15:03
  Speaker 1: to go there looking to using looking at using a
• 15:06
  Speaker 1: process and we'll get into details, but a budget reconciliation
• 15:09
  Speaker 1: process that won't repeal Obamacare, award for word, but it
• 15:13
  Speaker 1: can repeal or at least terminate several key provisions, the
• 15:16
  Speaker 1: insurance mandates, the Medicaid expansion, a lot of the taxes
• 15:20
  Speaker 1: imposed by the law. Um. But then the question becomes, well, Okay,
• 15:23
  Speaker 1: you've done that, what are you going to replace it with?
• 15:26
  Speaker 1: And how long is it going to take for that
• 15:28
  Speaker 1: transition to take place. Well, clearly there's going to be
• 15:31
  Speaker 1: a debate about it, because the President Obama has just
• 15:34
  Speaker 1: left the or is leaving the capital after a strategy
• 15:37
  Speaker 1: meeting with Democrats. I don't know what went on in
• 15:40
  Speaker 1: the meeting, but I would imagine it has to do
• 15:42
  Speaker 1: with providing a defense for many of the provisions of
• 15:46
  Speaker 1: the Affordable Care Act. Well, that's it, and I think
• 15:49
  Speaker 1: at the end of the day, you're going to see
• 15:51
  Speaker 1: you actually several of those provisions remain in whatever replacement
• 15:54
  Speaker 1: vehicle Republicans come up with, such as protections for those
• 15:58
  Speaker 1: with pre existing conditions being able for you know, kids
• 16:01
  Speaker 1: to stay on their parents plan until age six, um.
• 16:04
  Speaker 1: But you know how long that actually takes in Well,
• 16:07
  Speaker 1: how can you get there without having the the unpopular
• 16:10
  Speaker 1: parts of the law, you know, the mandates and the
• 16:12
  Speaker 1: penalties and and the rising premiums that that you know, frankly,
• 16:15
  Speaker 1: you know have been an effect. And I think that's
• 16:17
  Speaker 1: one of the reasons why we have a president elect
• 16:19
  Speaker 1: Trump and a Republican controlled Congress, unlike what happened in
• 16:23
  Speaker 1: two thousand ten when Democrats controlled everything. Is the law
• 16:25
  Speaker 1: hasn't quite worked as well as the Democrats would have hoped,
• 16:29
  Speaker 1: but they do have some things they can point to
• 16:30
  Speaker 1: that people do like. And if there's any disruption along
• 16:33
  Speaker 1: the way, that's certainly going to create some political headwinds,
• 16:36
  Speaker 1: because you're right, Democrats are going to shine as bright
• 16:38
  Speaker 1: as spotlet as they possibly can on any stories about
• 16:42
  Speaker 1: people losing their coverage along the way, um, whatever the
• 16:45
  Speaker 1: Republicans claim they're trying to do. I just also want
• 16:48
  Speaker 1: to mention that president of Vice President elect that Mike
• 16:51
  Speaker 1: Pence visited the capital earlier four meetings on the healthcare bill.
• 16:56
  Speaker 1: Presumably that is about Republicans put putting forth the contrary plan.
• 17:02
  Speaker 1: Can you tell us are there any Republicans that would
• 17:04
  Speaker 1: need to be won over in the Senate in order
• 17:07
  Speaker 1: to change provisions of the Affordable Care Act? Or they
• 17:09
  Speaker 1: all on board? I think they're all conceptually on board.
• 17:12
  Speaker 1: But you know, when push comes to shove, they have
• 17:14
  Speaker 1: you know, a majority of fifty two uh in in
• 17:17
  Speaker 1: the Senate, so not much room to spare. I think, Steve,
• 17:20
  Speaker 1: the topics of discussion are going to be, Okay, you know,
• 17:22
  Speaker 1: how long are we going to let people linger if
• 17:24
  Speaker 1: we're going to say, okay, we're gonna repeal everything now,
• 17:27
  Speaker 1: but not come up with a replacement plan until I
• 17:30
  Speaker 1: think you might see some a few senators be on
• 17:34
  Speaker 1: the edge about that, um. But conversely, I think others
• 17:36
  Speaker 1: are wary of jumping into soon and causing a lot
• 17:39
  Speaker 1: of disruption and sort of um calling, shooting themselves in
• 17:42
  Speaker 1: the foot before they can get out of the starting gate.
• 17:44
  Speaker 1: So I think there's certainly going to be discussions, um.
• 17:47
  Speaker 1: And that's why you know, when when push comes to shove,
• 17:49
  Speaker 1: Congresses is extremely efficient kicking the can down the road,
• 17:52
  Speaker 1: and I would look for them to for all the
• 17:55
  Speaker 1: talk and bluster that we're hearing today for this to
• 17:57
  Speaker 1: not be a smooth process and this to take months
• 18:00
  Speaker 1: and maybe even years rather than the weeks not that
• 18:02
  Speaker 1: they're talking about now. So if you're an investor in
• 18:06
  Speaker 1: either hospital corporations like h c A or indeed health
• 18:10
  Speaker 1: insurer such as UH Community, UH Molina for example, or Sentien,
• 18:18
  Speaker 1: what investors should be what should they be worried about
• 18:20
  Speaker 1: and how fast should they worry? Yeah, I think the
• 18:23
  Speaker 1: the insurance that you mentioned, the Senteens, the Molina's, I
• 18:25
  Speaker 1: think they're worried about an aspect of the law of
• 18:28
  Speaker 1: the Medicaid expansion. Um. You know, that was part of
• 18:30
  Speaker 1: the a c A. That is one thing that through
• 18:33
  Speaker 1: this budget reconciliation process that Republicans can end pretty quickly,
• 18:36
  Speaker 1: and that's been a good source of revenue for those insurers.
• 18:39
  Speaker 1: So that's something that could go away. And then anything
• 18:41
  Speaker 1: that increases the number of uninsured Americans, well that's the
• 18:45
  Speaker 1: problem for the hospitals you outlined, because if you don't
• 18:49
  Speaker 1: have insurance, you're not able to pay those bills. That
• 18:51
  Speaker 1: increases their bad debt expense can hurt their bottom lines
• 18:54
  Speaker 1: as well. So those of the I think you touched
• 18:56
  Speaker 1: on the two groups that are most most eager and
• 18:59
  Speaker 1: most anxious about what's going to happen now. At the
• 19:01
  Speaker 1: same time, a lot of insurers have been leaving the
• 19:04
  Speaker 1: existing Obamacare exchanges, so it's not like that's been a
• 19:06
  Speaker 1: great business deal for them on those state exchanges. So
• 19:10
  Speaker 1: I think they're eager to see some changes to maybe
• 19:12
  Speaker 1: draw them back in. And Republicans certainly have an incentive
• 19:15
  Speaker 1: to try and UNFOS as stable as possible. Always a pleasure.
• 19:18
  Speaker 1: Brian Rye expert when it comes to healthcare policy. He
• 19:21
  Speaker 1: is our senior healthcare policy analysts for Bloomberg Intelligence for
• 19:25
  Speaker 1: the Government team, which is one of two hundred thousand
• 19:39
  Speaker 1: attendees at the Consumer Electronics Show. Sandy Rowland is the
• 19:43
  Speaker 1: chief financial officer of Harmon. Harmon International, it's being acquired
• 19:47
  Speaker 1: by Samsung. Sandy, thank you for being with us having
• 19:51
  Speaker 1: how's the time in Las Vegas? Is everybody already geared
• 19:54
  Speaker 1: up for computing and taking selfies inside their own automobiles? Wow?
• 20:00
  Speaker 1: I mean the energy out here is just amazing. Um
• 20:04
  Speaker 1: Our booth opened about thirty minutes ago, and uh, the
• 20:08
  Speaker 1: lines are already forming. We're so excited to be hosting
• 20:10
  Speaker 1: customers from all around the globe this week. Tell us
• 20:14
  Speaker 1: some of the items that are on view at your
• 20:17
  Speaker 1: booth and what that means for the future of the
• 20:20
  Speaker 1: connected automobile. Yeah, well, this we're really excited that this
• 20:24
  Speaker 1: year we've moved the conversation from connected to intelligent and
• 20:29
  Speaker 1: intuitive UM. And this year it's all about innovation that
• 20:33
  Speaker 1: delivers an immersive, personalized experience, whether it's for the automobile,
• 20:38
  Speaker 1: for the enterprise, or for the home. So what would
• 20:41
  Speaker 1: be some of those things, for example, navigation, h embedded infotainment, telematics,
• 20:48
  Speaker 1: What would be some of the details, Yeah, absolutely, all
• 20:52
  Speaker 1: of the above. UM. What we're excited about in the
• 20:54
  Speaker 1: automobile this year, it's all about customization and personalization. So
• 21:00
  Speaker 1: once the car is connected, there's so much more that
• 21:03
  Speaker 1: you can do with it. So, for example, one of
• 21:06
  Speaker 1: the things that we're showcasing this year is how we've
• 21:09
  Speaker 1: brought in Microsoft solutions into the car. UM. The driver
• 21:13
  Speaker 1: can have access to their calendar, the driver can make
• 21:17
  Speaker 1: access conference calls seamlessly, UM. But if they don't want
• 21:21
  Speaker 1: to do work, UM, we've brought in entertainment solutions that
• 21:25
  Speaker 1: you can convert the car. UM really into an IMAX theater.
• 21:29
  Speaker 1: UM you can have individual sound zones where each and
• 21:32
  Speaker 1: every driver can have a totally different listening experience. UM.
• 21:36
  Speaker 1: All of these are examples of how we're customizing the
• 21:39
  Speaker 1: solutions for the car. You've also put together a package
• 21:43
  Speaker 1: of lane departure indicators, pedestrian detection, also camera based navigation,
• 21:50
  Speaker 1: rear view three sixties surround view solutions. This is UH
• 21:54
  Speaker 1: going to take a lot of power, battery power in
• 21:57
  Speaker 1: order to keep running. What is the the sort of
• 22:00
  Speaker 1: demand from an automobile now in terms of battery used
• 22:04
  Speaker 1: to start the car and and maybe like the interior,
• 22:07
  Speaker 1: but that's it's a far that's a far cry from
• 22:08
  Speaker 1: where we are today. Yeah, for us, it's it's not
• 22:11
  Speaker 1: only about the battery, but it's about how many lines
• 22:14
  Speaker 1: of code our solutions bring into the car UM, and
• 22:18
  Speaker 1: the lines of codes are in the millions, over twenty
• 22:20
  Speaker 1: five million lines of code to bring in some of
• 22:23
  Speaker 1: these solutions into the into the car. And of course
• 22:26
  Speaker 1: one of the things that we're really proud of is
• 22:29
  Speaker 1: that we've been focused a lot on cyber security and
• 22:33
  Speaker 1: you cannot have a connected car without a robust cyber
• 22:37
  Speaker 1: security solution. UM We have a solution that we call
• 22:40
  Speaker 1: five plus one UM and it's been tested by the
• 22:44
  Speaker 1: University of Michigan and NIZA and it's come out as
• 22:48
  Speaker 1: the number one solution for UH cyber security solutions for
• 22:52
  Speaker 1: the automobile. Now, I don't know whether you heard, but
• 22:54
  Speaker 1: I'm sure you are aware of the efforts on the
• 22:56
  Speaker 1: part of Ford, Motor and Toyota to come together in
• 23:00
  Speaker 1: a nonprofit consortium in order to make available the open
• 23:04
  Speaker 1: source software that would allow third party developers to write
• 23:09
  Speaker 1: apps for the automobile. Is that I know that you
• 23:13
  Speaker 1: are part of that consortium as well. What what is
• 23:17
  Speaker 1: that going to bring to your offering? Yeah, you know.
• 23:19
  Speaker 1: I think one thing that's very important is that collaboration
• 23:23
  Speaker 1: is essential. As technologies continue to advance, no one company
• 23:28
  Speaker 1: has all the goods UH. The smartest partnerships will decide
• 23:31
  Speaker 1: who the winners and losers are. So UM, for example,
• 23:35
  Speaker 1: we have partnerships with Microsoft to bring in Quartana into
• 23:39
  Speaker 1: the car. We have UM partnerships with Apple and Google
• 23:42
  Speaker 1: to bring their solutions into the car. UM. No one
• 23:45
  Speaker 1: company can can do it along and do it alone.
• 23:48
  Speaker 1: And we recognize that, and we see that lots of
• 23:51
  Speaker 1: the leading O E M s are also recognizing that
• 23:55
  Speaker 1: there's also an effort on the part of harmon I
• 23:57
  Speaker 1: understand to enhance vehicle to via goal communications as well
• 24:01
  Speaker 1: as vehicle to infrastructure communications. Tell us more about that, Yeah, absolutely, UM.
• 24:08
  Speaker 1: One of the key requirements is that you need to
• 24:10
  Speaker 1: take advantage of the cloud, and that's one of the
• 24:12
  Speaker 1: things that we are doing. It's one of the reasons
• 24:15
  Speaker 1: we acquired Symphony Teleca two years ago. You have to
• 24:20
  Speaker 1: bring in UM the bridge to the digital ecosystems and
• 24:23
  Speaker 1: take advantage of the power of software in the cloud. Yeah.
• 24:28
  Speaker 1: You've also built a reputation on audio, specifically UH speakers,
• 24:34
  Speaker 1: j b L as well as other high end audio components.
• 24:40
  Speaker 1: Is there going to be a change in the way
• 24:43
  Speaker 1: that they are integrated into the automobile, because, as you say,
• 24:46
  Speaker 1: if you're looking at customizing the experience, having just you know,
• 24:52
  Speaker 1: speakers and radio are not necessarily going to be enough anymore.
• 24:57
  Speaker 1: You're absolutely right. So, UM, it's not only about having
• 25:00
  Speaker 1: a solution that sounds good, UM and looks good. We're
• 25:04
  Speaker 1: very proud of our industrial design and the sound solutions
• 25:07
  Speaker 1: that we have UM, but they also have to be
• 25:09
  Speaker 1: smarter now and that's why we're partner partnering with a
• 25:12
  Speaker 1: lot of different companies to bring in the artificial intelligence
• 25:16
  Speaker 1: into these solutions. Well, you're also more than partnering being
• 25:20
  Speaker 1: acquired by Samsung. What what do you believe will be
• 25:24
  Speaker 1: some of the changes that we can see at Harmon
• 25:27
  Speaker 1: after the acquisition is completed. Yeah, this transaction we are
• 25:32
  Speaker 1: obviously very excited about UM. I think that the companies
• 25:35
  Speaker 1: are very complementary. We both have a mindset about around
• 25:39
  Speaker 1: speed and innovation UM. So we think it's going to
• 25:42
  Speaker 1: be a terrific match and we think that the combination
• 25:46
  Speaker 1: of Harmon and Samsung will allow us to take our
• 25:50
  Speaker 1: vision around the connected car UM all the way through
• 25:52
  Speaker 1: autonomous driving UM at a much more accelerated pace. Sandy,
• 25:57
  Speaker 1: do you like heads up displays? Absolutely? Absolutely? Well, because
• 26:01
  Speaker 1: I know that I want you to tell us about
• 26:04
  Speaker 1: a partnership that you have with a company called navty,
• 26:09
  Speaker 1: UH for aftermarket heads up driving. Yeah, that's uh. You know,
• 26:13
  Speaker 1: one of our strategies has been to take some small
• 26:17
  Speaker 1: investments in small start up companies that have interesting technologies,
• 26:22
  Speaker 1: and so our partnership with navty will allow us to
• 26:25
  Speaker 1: bring an after market solution to drivers who don't have
• 26:29
  Speaker 1: those solutions embedded into their car. UM. Also this year
• 26:32
  Speaker 1: at c e S, we're showcasing a car of the
• 26:37
  Speaker 1: future which has a total um windscreen head up display
• 26:43
  Speaker 1: that covers the end to end wind shield. Wow. And
• 26:46
  Speaker 1: what what car is it? Um? This is called the
• 26:49
  Speaker 1: Ring Speed car and it's it's every year at c
• 26:52
  Speaker 1: e S we've been partnering with rin Speed to showcase
• 26:55
  Speaker 1: what we think a car may look like in and
• 27:00
  Speaker 1: this particular car with WRIN Speed is one that is
• 27:04
  Speaker 1: all about shared mobility and autonomous driving. Well, I think
• 27:09
  Speaker 1: you probably have already put your order in for one.
• 27:11
  Speaker 1: Thank you very much. Sandy Rowland is the chief financial
• 27:14
  Speaker 1: officer of Harmon International, coming to us from the Consumer
• 27:18
  Speaker 1: Electronics Show in Las Vegas. The Future of the Digital Automobile.
• 27:30
  Speaker 1: Thanks for listening to the Bloomberg pian L podcast. You
• 27:32
  Speaker 1: can subscribe and listen to interviews at iTunes, SoundCloud, or
• 27:37
  Speaker 1: whatever podcast platform you prefer. I'm pim Fox. I'm out
• 27:41
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• 27:44
  Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You
• 27:47
  Speaker 1: can always catch us worldwide on Bloomberg Radio.