Latest / Bloomberg Intelligence / Silver Supply Expected to Decline While Usage Grows, Krebs Says

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Silver Supply Expected to Decline While Usage Grows, Krebs Says · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
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  Speaker 1: or the trading floor. Find the Bloomberg p m L
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. In
• 0:32
  Speaker 1: the past three weeks, silver has plunged almost thirteen percent.
• 0:37
  Speaker 1: We have somebody who can give us a sense of
• 0:39
  Speaker 1: what the technicals are underpitting, some of the moves, and
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  Speaker 1: what we can expect looking forward. Mitchell Crebs joins US now.
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  Speaker 1: He is president and chief executive officer of Core Mining UH.
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  Speaker 1: He also is the president of the Silver Institute, which
• 0:51
  Speaker 1: is based in Chicago, Illinois. He's pumping his fist. I
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  Speaker 1: expected you to come here like drenched in silver, you know,
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  Speaker 1: just dripping from everywhere, but but you're not. You're actually
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  Speaker 1: wearing very little jewelry. Um. So there was a report
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  Speaker 1: that you put out today that was looking at the
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  Speaker 1: silver industry, and there was good news and there was
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  Speaker 1: bad news. So why don't you start with the good news. Yeah? Sure,
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  Speaker 1: thanks for having me. The good news for sure is
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  Speaker 1: that silver supply for the first time in fourteen years,
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  Speaker 1: actually declined last year, So that's a big deal. Not
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  Speaker 1: by a lot, but it's now declining and it's expected
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  Speaker 1: to continue to decline, which you know, basic supply and
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  Speaker 1: demand fundamental suggests that that's a positive tail wind for
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  Speaker 1: silver going forward. It's the fourth year in a row
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  Speaker 1: now where we've been in a structural deficit where demand
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  Speaker 1: has outstripped supply, So that's another positive i'd say. On
• 1:36
  Speaker 1: the on the demand side, UH, solar panel demand hit
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  Speaker 1: an all time high. It was up thirty four percent
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  Speaker 1: last year. UH, and that's a market that we think
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  Speaker 1: will continue to grow. You know, silver is very much
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  Speaker 1: of a technology, green, clean, renewable energy type of metal.
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  Speaker 1: I think a lot of people think of silver as
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  Speaker 1: your silverware or your jewelry, which definitely that plays a part,
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  Speaker 1: but silver is used in every everything with a light switch,
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  Speaker 1: anything with an on and off switch has silver in it.
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  Speaker 1: So it's a very diverse UH demand base. And you
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  Speaker 1: know this is this is an interesting point because silver
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  Speaker 1: is often thought of as a sister metal to gold,
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  Speaker 1: precious metal to kind of buy in times when you're
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  Speaker 1: looking for a haven um, and yet it's got a
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  Speaker 1: much more prevalent industrial use. Can you give us a
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  Speaker 1: sense of how much demand has come from stuff that
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  Speaker 1: you actually use versus jewelry and how much that has
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  Speaker 1: increased over time. Yeah, that's changed a lot. It used
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  Speaker 1: to be mostly a precious metals, but as electronics have
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  Speaker 1: have grown globally, emerging middle classes in places like China
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  Speaker 1: and India have have grown in consumption GDP per capita
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  Speaker 1: has grown industrial demand electronics demand for silver has grown
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  Speaker 1: a lot. It now makes up the majority of demand
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  Speaker 1: for silver. Can you give us a sense of where
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  Speaker 1: that was, say two decades ago or a decade ago,
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  Speaker 1: It would have been more like a decade ago. Fifteen
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  Speaker 1: years ago, thirty five millimeter film was actually the biggest
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  Speaker 1: source of demand for silver um. Now so that's gone
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  Speaker 1: from like thirty five percent a year down to four
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  Speaker 1: percent as we've all gone to you know, digital and
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  Speaker 1: that's been all replaced with new uses in the electronics sector,
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  Speaker 1: predominantly and solar. So, so give us a sense with
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  Speaker 1: the shifting landscape. There was some not so great news
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  Speaker 1: in the report that you put out today. Can you
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  Speaker 1: lay that out for us? Yeah, overall demand was down.
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  Speaker 1: A lot of that has to do with just slower
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  Speaker 1: global economic growth UM which has had an impact and
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  Speaker 1: had a negative impact on some of that electronics driven demand.
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  Speaker 1: Jewelry demand was down a bit. India was probably one
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  Speaker 1: of the biggest stories with some of the currency crackdown
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  Speaker 1: that took place there last year. That had a negative
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  Speaker 1: effect on silver demand, uh, coming out of out of India.
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  Speaker 1: But the beauty of beauty of having such a diverse
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  Speaker 1: demand bass you know, every year you're gonna have some
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  Speaker 1: things that are down and and some markets that are
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  Speaker 1: that are up. But overall last year it was down
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  Speaker 1: a little bit. Yeah. Yeah, Well, I mean as I
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  Speaker 1: was thinking as you said this, so global demand is
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  Speaker 1: down partly because the economy is slowing, and yet typically
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  Speaker 1: when things are slowing, they would people would go into
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  Speaker 1: precious metals to sort of offset the risk of a
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  Speaker 1: potential downturn. So it's sort of trying to square those
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  Speaker 1: two sides is a little bit hard. And that's the
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  Speaker 1: duality of silver. You know, it is highly correlated to gold,
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  Speaker 1: So everything that moves gold in terms of safe haven
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  Speaker 1: investment risk off. You know a lot of people are
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  Speaker 1: looking at precious metals these days, more with these higher
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  Speaker 1: valuations in the broader equity markets, UM, expectation of higher
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  Speaker 1: of inflation. Those types of things that drive gold definitely
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  Speaker 1: UM have a big impact on on silver. But I
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  Speaker 1: always think of silver as having a good it's it's
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  Speaker 1: underpinned by all of this good, solid, diverse industrial demand.
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  Speaker 1: But what moves silver higher is the investment demand in
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  Speaker 1: in times when typically that's more favorable to things like gold.
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  Speaker 1: So for something that is so stable and has these
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  Speaker 1: sort of competing uh dynamics of affecting its price, why
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  Speaker 1: is it down more than twelve percent in the past
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  Speaker 1: three weeks. Well, silver is a very volatile metal. It
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  Speaker 1: makes gold look like, uh, you know, looks boring. It
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  Speaker 1: makes gold look very boring. Silver goes up and down
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  Speaker 1: a lot. It's a small market, it's flashy. So the
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  Speaker 1: total demand every year for silver's like a billion ounces.
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  Speaker 1: So that's you put today's price on that, that's a
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  Speaker 1: fifteen billion dollar global annual market. That's chump change, uh,
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  Speaker 1: compared to gold is you know, ten times that size
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  Speaker 1: copper for example, oil you know, much much bigger. So
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  Speaker 1: silver gets moved around a lot without you know, a
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  Speaker 1: lot of capital and so silver can go up and down.
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  Speaker 1: Last year, the price of silver varied between thirteen dollars
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  Speaker 1: an ounce and I think twenty one dollars announced, which
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  Speaker 1: is huge volatility. So in the last uh last four
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  Speaker 1: weeks three weeks, a lot of what we've seen in
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  Speaker 1: silver's not that unusual. Um Us in the in the
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  Speaker 1: industry have pretty strong stomachs, and that's why it's so
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  Speaker 1: important to be you know, as a mining company like us.
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  Speaker 1: It's all about costs. It's all about trying to you know,
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  Speaker 1: have a diverse, uh diverse portfolio of operations that have
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  Speaker 1: low costs, conservative balance sheet to try and withstand that
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  Speaker 1: inherent volatility, especially in silver. So with silver, you were
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  Speaker 1: talking about how supply is expected to be down. Is
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  Speaker 1: this because companies and mining companies like your yours, Is
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  Speaker 1: they're running out of places to go? Or is it
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  Speaker 1: something else? Over the last five years, exploration in our
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  Speaker 1: industry has absolutely plummeted. So peak prices were back in
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  Speaker 1: two thousand and eleven when silver hit nearly fifty dollars announced,
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  Speaker 1: so to go from fifth almost fifty dollars announced down
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  Speaker 1: to think get hit thirteen dollars announced people slash their
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  Speaker 1: exploration budgets, so there's no new discoveries, so there's no
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  Speaker 1: new projects being built. And at the same time, a
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  Speaker 1: lot of the bigger projects are a lot of the
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  Speaker 1: bigger minds the world. They're starting to get to the
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  Speaker 1: end of their lives, so those are expected to be
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  Speaker 1: mined out and and go away. So you were kind
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  Speaker 1: of caught in this perfect storm of a lot of
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  Speaker 1: the older minds going away and and not a lot
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  Speaker 1: of new minds there to offset that. Where do you
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  Speaker 1: think is going to be the biggest new vein discovered? Oh, well,
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  Speaker 1: the new the next new deposit. I would probably put
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  Speaker 1: my money on Mexico, just because Mexico is the world's
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  Speaker 1: largest silver producing country. There's a lot of metal there,
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  Speaker 1: so the odds of finding more usually find more metal
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  Speaker 1: where there already is metal found, So I'd bet on Mexico.
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  Speaker 1: Peru's the second largest silver producing country. Those would be
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  Speaker 1: my bets. But you know the places that haven't had
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  Speaker 1: as much exploration historically, Africa UM, even in Asia UM,
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  Speaker 1: there's probably more uh large deposits out there that just
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  Speaker 1: have not yet u UM gotten on anybody's radar screen.
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  Speaker 1: Mitchell Crebs, thank you so much for joining us. Mitchell
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  Speaker 1: Crabs as president and chief executive officer of Core Mining.
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  Speaker 1: He's all so the president of the Silver Institute, uh
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  Speaker 1: and he is based in Chicago. We're gonna we want
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  Speaker 1: to dig into some shares it also are thinking into
• 8:19
  Speaker 1: the red Surprisingly, because the war is over, Verizon did
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  Speaker 1: beat out A T and T to buy a straight
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  Speaker 1: Path in other words, by five G capabilities for three
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  Speaker 1: point one billion dollars. To understand why everyone's just down
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  Speaker 1: on this news, John Butler is here to make sense
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  Speaker 1: of it all. John Butler is senior Telecom Services and
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  Speaker 1: Equipment Analyst for Bloomberg Intelligence. So John, what do you what? Why?
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  Speaker 1: Why is everyone down? Including Straight Path, which is down
• 8:47
  Speaker 1: more Well, that all comes down to price. But this
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  Speaker 1: was interesting in terms of how it all unfolded. I
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  Speaker 1: think we'll start at the ten thousand foot level, which
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  Speaker 1: is this is a big win for Verizon because their
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  Speaker 1: bet on the near future in terms of returning to
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  Speaker 1: growth is all on five G. We're mostly on five G,
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  Speaker 1: I should say, and A T and T S big bet,
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  Speaker 1: as you know, is on content. They bought Direct TV
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  Speaker 1: and they're buying Time Warner both carriers have their eyes
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  Speaker 1: set on five G services, which are to put it
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  Speaker 1: in perspective, it's the next generation wireless technology, the next evolution.
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  Speaker 1: As we moved from two G to three G, we're
• 9:33
  Speaker 1: now at four G LT, which people probably recognize. The
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  Speaker 1: next step is five G. It promises to be ten
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  Speaker 1: times faster than where we are today. But you need
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  Speaker 1: new spectrum bands to deploy that service. And so the
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  Speaker 1: FCC initially licensed a number of bands, including twenty eight
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  Speaker 1: and thirty nine Gigga Hurts, and this little unknown company
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  Speaker 1: called Straight Path had nation wide licenses for thirty nine
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  Speaker 1: Giga Hurts and twenty eight Giga Hurts and some big
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  Speaker 1: markets like New York. So suddenly, you know, the carriers
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  Speaker 1: woke up to the fact that we're going to need
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  Speaker 1: this spectrum potentially down the road, and the bidding war
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  Speaker 1: began for Straight Path. So while we're at the twenty
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  Speaker 1: foot level, how did straight Path get that spectrum? Well
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  Speaker 1: that's a long story, but basically the backstory behind it
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  Speaker 1: is they really, to their credit, understood they skated to
• 10:37
  Speaker 1: where the puck was going, if you will, you know,
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  Speaker 1: they understood that there would be a need for these
• 10:42
  Speaker 1: high band spectrum frequencies, because high frequencies don't travel very
• 10:48
  Speaker 1: far and so they never had much value. But they
• 10:51
  Speaker 1: carry a lot more data than those lower bands. And
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  Speaker 1: so the carriers are now building networks a lot closer
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  Speaker 1: to you and me, the wireless networks, and they don't
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  Speaker 1: need that long haul distance anymore, but they want that
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  Speaker 1: big fat pipe. And so straight Path saw that they
• 11:09
  Speaker 1: bought the licenses from the f c C. And where
• 11:13
  Speaker 1: they came into violation is they squatted on them, as
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  Speaker 1: they say, they sat on those licenses and they didn't
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  Speaker 1: put them to use, and the f c C came
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  Speaker 1: back at them and they find them a hundred million
• 11:25
  Speaker 1: dollars the most of what most of those proceeds, by
• 11:29
  Speaker 1: the way, can be paid from the sale of the spectrum.
• 11:32
  Speaker 1: So they're they're forced to sell the spectrum now. Um,
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  Speaker 1: which is which is how this whole bidding war began. Well, so,
• 11:40
  Speaker 1: so is there going to be a six G? I mean,
• 11:43
  Speaker 1: can you go higher frequency? At this point? Uh? Number one?
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  Speaker 1: And number two? Is this sort of really bad news
• 11:49
  Speaker 1: for a T and T because they are going to
• 11:52
  Speaker 1: be behind in the speed wars. Well to the first question, Um,
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  Speaker 1: with five G, you can put it over any spec
• 12:00
  Speaker 1: from that's allocated for uh use some wireless communications, so
• 12:05
  Speaker 1: it's not like you have to use the up these
• 12:08
  Speaker 1: higher frequencies. But again I go back to their these
• 12:12
  Speaker 1: multi lane highways if you will. They're big fat pipes
• 12:16
  Speaker 1: then can carry a lot more data than some of
• 12:18
  Speaker 1: the lower frequencies that we use today for four G,
• 12:22
  Speaker 1: and so therein lies the value there for a T
• 12:25
  Speaker 1: and T. They have options. Actually, you know, Dish owns
• 12:28
  Speaker 1: a lot of spectrum in the higher frequencies. They own
• 12:31
  Speaker 1: something called the AWS which is not nearly as higher
• 12:35
  Speaker 1: frequency as straight paths, but it's it's pretty good stuff
• 12:39
  Speaker 1: and they could look to Dish to license that potentially.
• 12:43
  Speaker 1: And also I think the FCC is going to auction
• 12:47
  Speaker 1: off some of the bands around the twenty eight and
• 12:50
  Speaker 1: the thirty nine gig hurts in the future, although no
• 12:53
  Speaker 1: dates are set. And so there in lies the uncertainty
• 12:56
  Speaker 1: for a T and T. But they see behind a
• 12:59
  Speaker 1: curtain that you and I don't. I'm sure they've talked
• 13:01
  Speaker 1: to the f c C and they have a better
• 13:03
  Speaker 1: grasp on their options than we do. So let's get
• 13:06
  Speaker 1: to the price. Because straight path is down more than
• 13:09
  Speaker 1: although to be fair, they are up dramatically on the year,
• 13:13
  Speaker 1: dramatically by four fourth, So it's not you know, this
• 13:16
  Speaker 1: is nothing compared to what we've seen. Why, real quick,
• 13:21
  Speaker 1: why didn't A T and T fight this bid again?
• 13:24
  Speaker 1: I think it goes back to what we were just
• 13:26
  Speaker 1: talking about. I think they have options outside a straight path,
• 13:31
  Speaker 1: and everything comes at a price. And I think if
• 13:33
  Speaker 1: they look down the road and saw another auction coming,
• 13:36
  Speaker 1: maybe they wanted to keep dry powder for that because
• 13:39
  Speaker 1: three point one bagan is a lot of dough. You know,
• 13:42
  Speaker 1: it's a it's a lot of dough. That is the
• 13:43
  Speaker 1: technical term. And you've heard it from John Butler. Uh,
• 13:46
  Speaker 1: it is a lot of dough three point one billion
• 13:48
  Speaker 1: dollars that Verizon is paying to buy straight paths. Thank
• 13:52
  Speaker 1: you so much. John Butler is senior Telecom Services and
• 13:55
  Speaker 1: Equipment Analyst for Bloomberg Intelligence, and he joins us in
• 13:59
  Speaker 1: our Bloomberg eleven three oh studios here in New York.
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  Speaker 1: Learn more at Bloomberg dot com slash lens Well. I
• 14:50
  Speaker 1: am honored to bring in Craig Bouchard, who's chairman and
• 14:53
  Speaker 1: chief executive officer of Brady Industries, which is based in Kentucky,
• 14:56
  Speaker 1: not Chicago. Apologize for miss speaking, Craig, Thank you for
• 15:01
  Speaker 1: for coming first. Before we talk about your one point
• 15:04
  Speaker 1: three billion dollar investment. At first, can you just give
• 15:06
  Speaker 1: us a sense of what Brady Industries is. Well. Brady
• 15:08
  Speaker 1: Industries was created for the purpose of bringing jobs and
• 15:13
  Speaker 1: a great company to the Appellation, to the to the
• 15:15
  Speaker 1: northeast part of Kentucky UM and we're building what will
• 15:19
  Speaker 1: be um the highest quality, lowest cost producer of aluminium
• 15:24
  Speaker 1: in the United States. So, with this one point three
• 15:27
  Speaker 1: billion dollar investment in uh An Aluminum rolling mill to
• 15:31
  Speaker 1: create more eco friendly and very thin aluminiums that can
• 15:35
  Speaker 1: be used for for example, for making cars. Yes, so
• 15:38
  Speaker 1: you would think of Brady as making the sheet the
• 15:40
  Speaker 1: exterior of automobiles that aluminum, as well as the plate
• 15:44
  Speaker 1: aluminum that would be in the wings of airplanes, in
• 15:46
  Speaker 1: the interiors of airplanes. And then with an acquisition that
• 15:50
  Speaker 1: we'll be announcing here in a couple of weeks, making
• 15:52
  Speaker 1: ultra high strength parts, lightweights, high high strength parts for
• 15:57
  Speaker 1: the inside of cars and airplanes. So why has there
• 16:00
  Speaker 1: been a plant of this size in the US before? Well, actually,
• 16:06
  Speaker 1: I wouldn't say there hasn't been one before. There hasn't
• 16:08
  Speaker 1: been one in at least thirty years. So, UM, the competitors,
• 16:12
  Speaker 1: which are all great companies, Arconic, Nobela, Solaris, Constallium, Kaiser,
• 16:18
  Speaker 1: they all have plants, but they're older plants that have
• 16:20
  Speaker 1: had recent new additions to them, but they're they're older facilities. UM,
• 16:25
  Speaker 1: it's hard to say why there hasn't been one because, UM,
• 16:29
  Speaker 1: it's clear that greenfield is where advanced manufacturing is going.
• 16:34
  Speaker 1: It's the it's the only way to create the low
• 16:37
  Speaker 1: cost producer. UM. And I think in the case of
• 16:40
  Speaker 1: the metals companies, you know, they haven't had lots of
• 16:42
  Speaker 1: capital to spend because of you know, some tough years
• 16:46
  Speaker 1: over the last many years, and so this is an
• 16:49
  Speaker 1: opportunity to kind of change that change the whole mold. Actually, well,
• 16:53
  Speaker 1: you know, some people would say that the reason why
• 16:55
  Speaker 1: companies have created overseas factories because the labor is cheaper,
• 17:01
  Speaker 1: UH and you have to pay people more in the US.
• 17:04
  Speaker 1: Is that what you're finding And how much does that
• 17:06
  Speaker 1: contribute to the issue. Well, that was a real reason.
• 17:08
  Speaker 1: You know, ten years ago people outsourced a lot to China,
• 17:12
  Speaker 1: Vietnam and other places. But the wage rates in those
• 17:15
  Speaker 1: countries have gone way up in that time period, whereas
• 17:19
  Speaker 1: wage rates in the United States have stagnated and even
• 17:21
  Speaker 1: gone down. Even very skilled labors like exist in the
• 17:24
  Speaker 1: Ashland in the in the Northeast Kentucky area, so the
• 17:28
  Speaker 1: wage equation has flip flopped. Um, we're going to the
• 17:32
  Speaker 1: place that has an abundance of very skilled labor that's underutilized.
• 17:37
  Speaker 1: It's one of the main reasons that we went to
• 17:39
  Speaker 1: eastern northeastern Kentucky. And so these laborers and just to
• 17:42
  Speaker 1: be clear that this mill UH would create up to
• 17:46
  Speaker 1: a thousand construction jobs and that it would be that
• 17:48
  Speaker 1: these would be more, as you were saying, high skilled
• 17:50
  Speaker 1: jobs that would be better paid. Where where were these
• 17:54
  Speaker 1: workers employed previously? They were very skilled labors in workers
• 17:59
  Speaker 1: in coal mine. Uh. Big layoffs at companies like A
• 18:03
  Speaker 1: K Steel shut up plant down in that area recently.
• 18:05
  Speaker 1: Those are highly skilled workers. Ashland Oil was a Fortune
• 18:09
  Speaker 1: five company in that area many years ago and left.
• 18:12
  Speaker 1: And you know, it's been a it's been a troubled
• 18:14
  Speaker 1: twenty years in the appellations. We're about to change it. So,
• 18:18
  Speaker 1: given the fact that it's been about twenty years and
• 18:20
  Speaker 1: that a lot of people talk about brain drain from
• 18:22
  Speaker 1: certain areas that you know, have been in trouble for
• 18:25
  Speaker 1: a while, do you think that there will be a
• 18:27
  Speaker 1: sufficient stock of of qualified employees. So, Lisa, here's a
• 18:33
  Speaker 1: really good answer to this one. When we announced at
• 18:35
  Speaker 1: the press conference with Governor Bevan, who's, by the way,
• 18:39
  Speaker 1: one of the best governors in the United States, if
• 18:41
  Speaker 1: not the best, um we announced to a crowd of
• 18:45
  Speaker 1: three people under a tent um that um Brady was beginning.
• 18:50
  Speaker 1: We made the whole press release, and we we put
• 18:52
  Speaker 1: our website live at that moment with the press release
• 18:55
  Speaker 1: on it. In a career section, to click on on
• 18:58
  Speaker 1: the website where any individual could send us their resume,
• 19:02
  Speaker 1: tell us exactly what kind of a advanced manufacturing job
• 19:05
  Speaker 1: they're looking for, um, and get in a queue. Um,
• 19:09
  Speaker 1: it's been ten days. We've had two thousand, two hundred
• 19:12
  Speaker 1: applications already for those five and fifty jops. Well, it
• 19:16
  Speaker 1: seems like there's plenty of demand. Um. The one point
• 19:20
  Speaker 1: three billion dollars, how are you financing that? Yeah, so
• 19:22
  Speaker 1: or financed in the normal Wall Street way, UM, with
• 19:26
  Speaker 1: banks and investors and strategic investors. UM. Roughly one third
• 19:31
  Speaker 1: of that is equity and roughly two thirds will be debt.
• 19:34
  Speaker 1: That's priced pretty attractively given given our background. So we're
• 19:38
  Speaker 1: happy with how that's gone. Uh. The equity was done,
• 19:41
  Speaker 1: is done in two pieces. One of them has already
• 19:44
  Speaker 1: completed in way over subscribed, the other one coming up shortly.
• 19:47
  Speaker 1: So we're we're headed right down the path to breaking
• 19:49
  Speaker 1: ground in the first quarter. The eco friendly aluminum that
• 19:53
  Speaker 1: you were talking about, is it typically more expensive than
• 19:56
  Speaker 1: the other the other stuff out there. Well, first, aluminum
• 20:00
  Speaker 1: is the only commodity of all of the medals that
• 20:02
  Speaker 1: is one recyclable, so it's eco friendly from from the start,
• 20:07
  Speaker 1: and of course we're not a smelter, we're a rolling mill,
• 20:10
  Speaker 1: so we're using less carbon in general than, for instance,
• 20:14
  Speaker 1: the smelting industry, which is heavily heavily energy dependent. Um. Thirdly,
• 20:20
  Speaker 1: we're completely brand new, the best machines in the world,
• 20:24
  Speaker 1: coming in from the very best suppliers. Our emissions are
• 20:28
  Speaker 1: almost nothing for having three million square feet under roof
• 20:32
  Speaker 1: on the Ohio River. So it's a really good This
• 20:35
  Speaker 1: isn't the smoke stacks of our of our prior generation.
• 20:38
  Speaker 1: This is five fifty people walking around with an iPad
• 20:40
  Speaker 1: in their hands. Thank you so much for joining us.
• 20:42
  Speaker 1: Really interesting Craig Bouchard, chairman and chief executive officer of
• 20:46
  Speaker 1: Brady Industries, based in Kentucky, talking about the one point
• 20:50
  Speaker 1: three billion dollar investment that his company is making in
• 20:54
  Speaker 1: a new aluminum rolling mill that should create up to
• 20:58
  Speaker 1: a thousand construction jobs. Really interesting about the job dynamic.
• 21:01
  Speaker 1: And I do wonder how many other firms are going
• 21:03
  Speaker 1: to follow your your footsteps and really move into some
• 21:07
  Speaker 1: of these areas where you have seen companies move out
• 21:09
  Speaker 1: and people are unemployed. Well, there's some drama today over
• 21:24
  Speaker 1: in Detroit and Keith noton is going to explain it
• 21:27
  Speaker 1: to us. Keith Noon as the auto editor at large
• 21:30
  Speaker 1: for Bloomberg News located in Detroit, and Keith, we're talking
• 21:34
  Speaker 1: about Ford. Ford shareholders are really angry and they had
• 21:38
  Speaker 1: a call not an actual in person meeting or virtual
• 21:41
  Speaker 1: meeting I suppose, I should say, with the leadership of
• 21:44
  Speaker 1: the company today and it was it was pretty heated.
• 21:47
  Speaker 1: Can you first just lay out what some of the
• 21:51
  Speaker 1: issues were that these shareholders were so upset about. Well, Lisa,
• 21:55
  Speaker 1: the big issue is the stock. That's what they vented
• 21:58
  Speaker 1: their spleen on today in the Search annual meeting. It's
• 22:01
  Speaker 1: down thirty six percent since Mark Fields became CEO in
• 22:06
  Speaker 1: the summer of he followed, as you might recall, the
• 22:10
  Speaker 1: rock star CEO, Alan Moalley. And although he has generated,
• 22:14
  Speaker 1: you know, really strong profits, the US auto market is
• 22:19
  Speaker 1: at its peak and starting to head down. So investors
• 22:21
  Speaker 1: are fleeing, uh, the auto stocks for the most part,
• 22:25
  Speaker 1: US auto stocks UM, though Ford has taken it on
• 22:28
  Speaker 1: the chin more than others, and the shareholders are are
• 22:31
  Speaker 1: pretty fed up. So they hit UM executive chairman Bill
• 22:35
  Speaker 1: Ford and Mark Fields with a lot of tough questions
• 22:37
  Speaker 1: today in this annual meeting. You know, I just just
• 22:40
  Speaker 1: point out in your story you noted that Ford's shares
• 22:43
  Speaker 1: have traded down, traded down by about thirty six percent
• 22:47
  Speaker 1: since Mark Fields took the helm as chief executive officer
• 22:51
  Speaker 1: in July of two fourteen. So what were some of
• 22:54
  Speaker 1: the questions that shareholders wanted to know? Where were they focusing? Yeah, well,
• 22:57
  Speaker 1: they wanted to know essentially what management was going to
• 23:00
  Speaker 1: do about what they called the pathetic performance of the
• 23:03
  Speaker 1: of their stock. Bill Ford expressed frustration. He's the executive chairman.
• 23:08
  Speaker 1: He's also the great grandson as the founder Henry Ford,
• 23:11
  Speaker 1: and he said, um, people ask him, does the Ford
• 23:14
  Speaker 1: family care about the stock price? And he said the
• 23:16
  Speaker 1: short answer is yes, a lot. Most of our worth
• 23:19
  Speaker 1: is tied up in the company, so you know they
• 23:21
  Speaker 1: want to see the price go up as well. Um Uh.
• 23:25
  Speaker 1: He was faced with these questions, Bill Ford, uh at
• 23:29
  Speaker 1: last year's annual meeting too, and he gave it, you know,
• 23:31
  Speaker 1: a straight, full throated endorsement of Mark Fields. Um. This
• 23:35
  Speaker 1: time around, he certainly endorsed Mark Fields strategy, but he
• 23:38
  Speaker 1: didn't mention him by name. As he was defending the
• 23:41
  Speaker 1: strategy was which was a subtle difference. That's important because
• 23:45
  Speaker 1: Ford's board this week has been turning up the pressure
• 23:47
  Speaker 1: on the Fields. They scheduled extra time to meet with
• 23:50
  Speaker 1: him to ask him about his strategy for turning things around.
• 23:53
  Speaker 1: So the heat is on Mark Fields at the moment,
• 23:56
  Speaker 1: and let's talk about what he has done, right. I mean,
• 23:58
  Speaker 1: he's diverted quite a bit of money into the self
• 24:02
  Speaker 1: driving and electric technologies and saying that he's going to
• 24:06
  Speaker 1: invest in the road ahead. Um, he also has been uh,
• 24:11
  Speaker 1: I mean overseeing the company at a time of pretty
• 24:13
  Speaker 1: good growth, as you say, But so what what what
• 24:17
  Speaker 1: could he potentially how could he change? Yeah, so he
• 24:20
  Speaker 1: talks about trying to keep one foot in today and
• 24:23
  Speaker 1: one foot in tomorrow. You know, the the automotive and
• 24:26
  Speaker 1: transportation industries are going through these really you have huge
• 24:30
  Speaker 1: changes as as driverless cars approach in the next few
• 24:34
  Speaker 1: years in robot taxis. So Mark Fields is investing billions
• 24:38
  Speaker 1: and those new technologies that won't pay off for many,
• 24:41
  Speaker 1: many years. And he really gets no investor credit for
• 24:45
  Speaker 1: doing that, though he says if he doesn't, you know,
• 24:47
  Speaker 1: the company won't survive the changes that are coming. At
• 24:50
  Speaker 1: the same time, though he's not making as much money
• 24:53
  Speaker 1: on the good old fashioned you know business of selling
• 24:57
  Speaker 1: cars and trucks forwards U you know, adjusted earnings. So
• 25:02
  Speaker 1: in the first quarter, while GM was notching record earnings,
• 25:05
  Speaker 1: GM's making more money off SUVs than Ford. Ford's lineup
• 25:10
  Speaker 1: is aging a bit. They don't have UM at the
• 25:13
  Speaker 1: moment competitive big SUVs. They're coming with a redesigned Linket
• 25:17
  Speaker 1: Navigator next year. They also aren't present in some key
• 25:21
  Speaker 1: segments like small pickups and UM subcompact SUVs, which they
• 25:26
  Speaker 1: are rectifying that as well, but it's going to take
• 25:28
  Speaker 1: some time. And meanwhile GM is stealing the march. So
• 25:32
  Speaker 1: can you just put this shareholder meeting into perspective. I
• 25:36
  Speaker 1: know you've covered others and you've been covering the auto
• 25:38
  Speaker 1: industry for a long time. I mean, have you ever
• 25:42
  Speaker 1: heard such vitriol at a meeting during a generally positive
• 25:46
  Speaker 1: time for a company? Well that's the key, Uh, during
• 25:51
  Speaker 1: a positive time for the company. This company last year
• 25:54
  Speaker 1: had pretext earnings of ten point four billion dollars, which
• 25:57
  Speaker 1: was the second best in company has to So no, this,
• 26:01
  Speaker 1: this kind of ire from shareholders is unusual given you
• 26:05
  Speaker 1: know how the company is actually performing. But then again,
• 26:09
  Speaker 1: the stock price is pretty unusual for how the company
• 26:11
  Speaker 1: is performing as well. The stock is acting as if
• 26:14
  Speaker 1: the company is going out of business, when in fact
• 26:16
  Speaker 1: they're doing pretty well, given fact that the auto market,
• 26:19
  Speaker 1: after seven years of growth, is starting to slow down.
• 26:22
  Speaker 1: I want to get your take on the departure of
• 26:25
  Speaker 1: Chantelle Leonard. She was the executive director of US marketing.
• 26:29
  Speaker 1: She had been at the company for twenty five years,
• 26:32
  Speaker 1: and was it yesterday? Certainly this week the company announced
• 26:36
  Speaker 1: that she will be leaving to pursue other interests without
• 26:41
  Speaker 1: any more explanation, Um, do you have a better sense
• 26:45
  Speaker 1: of why she left and what this means? Yeah, it's
• 26:47
  Speaker 1: very unusual. She was She was sort of public face
• 26:51
  Speaker 1: of forward marketing in the US. She was always appearing
• 26:55
  Speaker 1: on TV or doing interviews about what the marketing plans were.
• 26:58
  Speaker 1: A week ago, she was in a video on the
• 27:01
  Speaker 1: advertising age who website talking about Ford's strategy for self
• 27:05
  Speaker 1: driving cars, and then suddenly she up and leaves. I
• 27:08
  Speaker 1: think it's a reflection of how tough things are right
• 27:11
  Speaker 1: now for Ford in its home market. Is it loses
• 27:14
  Speaker 1: market share as a sales decline on a retail basis,
• 27:17
  Speaker 1: sales directly to consumers. Chrysler actually outsold for the last month,
• 27:22
  Speaker 1: which is highly unusual. So you know, it's a time
• 27:25
  Speaker 1: of tumult um and Ford's North American operations, and they
• 27:29
  Speaker 1: just lost a pretty valuable veteran who Automotive News magazine
• 27:33
  Speaker 1: I had identified as a rising star just two years ago. Well,
• 27:36
  Speaker 1: I'm sure we will be talking more as this unfolds
• 27:40
  Speaker 1: about what Ford does plan to do going forward in
• 27:43
  Speaker 1: order to play kate its shareholders. Keith Noton, thank you
• 27:47
  Speaker 1: so much for joining us. Keith Noton is editor at
• 27:50
  Speaker 1: Large for the Auto Industry for Bloomberg News, coming to
• 27:53
  Speaker 1: us from Detroit. Thanks for listening to the Bloomberg P
• 27:58
  Speaker 1: and L podcast. You can sub gribe and listen to
• 28:00
  Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 28:05
  Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm
• 28:09
  Speaker 1: on Twitter at Lisa Abramo wits one. Before the podcast,
• 28:12
  Speaker 1: you can always catch us worldwide on Bloomberg Radio.