Latest / Bloomberg Intelligence / Transforming The Way Kids Learn Through LEGO

Transcript

Transforming The Way Kids Learn Through LEGO · Bloomberg Intelligence

0:00
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
0:04
Speaker 1: my co host Matt Miller. Every business day, we bring
0:06
Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along
0:11
Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast
0:15
Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and
0:18
Speaker 1: at Bloomberg dot com slash podcast. I love to watch
0:22
Speaker 1: some cricket occasionally. Also love to play with Legos, or
0:25
Speaker 1: at least I did an I as a kid, and
0:27
Speaker 1: I recently saw that they also have a Seinfeld set,
0:30
Speaker 1: so I might get back into it. Has been Stark joins,
0:32
Speaker 1: us president of Lego Education to talk to us about
0:36
Speaker 1: the pandemics impact on learning and what back to school
0:40
Speaker 1: means um for Lego as well. It has a mission
0:45
Speaker 1: to transform the way kids learn. I guess I didn't
0:48
Speaker 1: even realize I was learning when I was doing it,
0:50
Speaker 1: but I grew up, as did probably everybody around me
0:53
Speaker 1: as been playing with Legos. It must be one of
0:57
Speaker 1: the staple toys, at least for American children. Absolutely, I
1:03
Speaker 1: think it's a UM. I think it's a stable toy
1:07
Speaker 1: in a lot of places around the world, and isn't
1:09
Speaker 1: it wonderful that that you can learn without knowing that
1:13
Speaker 1: you're learning, and you can learn without being instructed. Has
1:16
Speaker 1: been with the world still dealing with the pandemic, but
1:19
Speaker 1: from an educational perspective, you know, the last year, last
1:23
Speaker 1: academic year was for a lot of places around the
1:26
Speaker 1: world remote learning. How do you think learning is changing
1:30
Speaker 1: evolving as as you guys look at it from your
1:33
Speaker 1: perspective going forward the pandemic? What was the impact that
1:36
Speaker 1: it will have going forward? Do you think? Well? I
1:40
Speaker 1: think immediately what we know is we're going to welcome
1:43
Speaker 1: a lot of students back into the classroom that that
1:47
Speaker 1: have faced a learning loss. Their social, emotional learning and
1:53
Speaker 1: development has been impacted as in validity they've been at home,
1:57
Speaker 1: and I think also importantly to many, we've seen reduced
2:00
Speaker 1: engagement in learning and and very unfortunately that that the
2:05
Speaker 1: most severe impact of those most severely impacted are often
2:09
Speaker 1: those already most disadvantaged. So of course we have to
2:13
Speaker 1: face how how do we pick up those students and
2:16
Speaker 1: how do we give them a healthy approach to learning
2:19
Speaker 1: while closing those gaps. What kind of learning are we
2:22
Speaker 1: talking about? I mean, I um, I think probably the
2:27
Speaker 1: skills that I picked up the most were with engineering,
2:30
Speaker 1: especially as I became a teenager and started buying the
2:33
Speaker 1: more complicated um you know, like a car sets for example,
2:39
Speaker 1: what what what are? What? Are people learning the most
2:42
Speaker 1: with your products? Our solutions are products are designed of
2:49
Speaker 1: course of all too, the delivered towards the standards and
2:54
Speaker 1: learning goals in the classrooms so that they're really highly
2:56
Speaker 1: re usable. But then of course we're also focused around
3:00
Speaker 1: really developing twenty century skillers as well, also things like creativity,
3:05
Speaker 1: critical thinking, problem solving, and important social emotional skills, also
3:10
Speaker 1: like collaboration, resilience. So when you have to solve the
3:14
Speaker 1: real world problem in the classroom with with one of
3:18
Speaker 1: your mates, there's a lot of problems solving, there's a
3:21
Speaker 1: lot of negotiations. So it's not the technique because I
3:25
Speaker 1: have so my godson in I got I got him
3:28
Speaker 1: recently the Lego Doukati Panagali V four R. And he's
3:33
Speaker 1: just a kid, he's only I think seven years old.
3:36
Speaker 1: But after he got it put together with his daddy
3:38
Speaker 1: said look, if I turned the crank, the cylinders go
3:40
Speaker 1: up and down. And I thought it was so cool
3:42
Speaker 1: that there was just that much detail on the set. Yeah,
3:46
Speaker 1: I think imagine that and imagine imagine you know, the
3:49
Speaker 1: imagining of that joy and the engagement that he has.
3:52
Speaker 1: I'm sure he spent sort of hours really deeply engaged
3:55
Speaker 1: in that. And then you layer over intentional content and
4:00
Speaker 1: to then take out learning outcomes of that. So while
4:04
Speaker 1: it's not do CARDI we bring into the classroom, it
4:07
Speaker 1: is hands on legal based solutions. They are also quoting
4:11
Speaker 1: elements in it where students then solve real world problems
4:16
Speaker 1: having subject based learning, but again also bringing on a
4:20
Speaker 1: lot of those twenty first century skills. And I could
4:23
Speaker 1: imagine that he's also practiced quite a bit of resilience
4:26
Speaker 1: as he's played built that big one and you know,
4:29
Speaker 1: finding the right elements and and ultimately succeeding. So I
4:33
Speaker 1: think take that magic, add the purposefulness of delivering towards
4:37
Speaker 1: specific outcomes, and then bring it into the classroom. That's
4:41
Speaker 1: what we look to deliver. So what is Lego Education
4:45
Speaker 1: you know doing specifically? I mean you think, I'll think
4:48
Speaker 1: about the last year we had that remote learning and
4:49
Speaker 1: I know you guys support Lego education supports learning through play.
4:53
Speaker 1: I'm guessing that took a pretty big hit last year
4:56
Speaker 1: as kids were working remotely. Um, of course, we try
5:02
Speaker 1: to do what we can to support teachers to have
5:05
Speaker 1: a learning wherever it takes place. But you're right, our
5:08
Speaker 1: solutions are optimized for using in the classroom where the
5:12
Speaker 1: students can engage in collaborative, iterative problem solving. And I
5:17
Speaker 1: think we've also seen through the pandemic actually the magic
5:20
Speaker 1: that the classroom has and what students are missing there
5:23
Speaker 1: and what's then really important for us to say, how
5:26
Speaker 1: can we make that even stronger? How can we optimize
5:29
Speaker 1: the learning potential in the classroom. And that's why we
5:33
Speaker 1: talk about the importance of rethinking learning. So again, how
5:37
Speaker 1: can we make learning engaging, personally meaningful, iterative, socially collaborative,
5:45
Speaker 1: so we can really press the students with the skills
5:48
Speaker 1: they need. It said, a very important healthy approach to them.
5:52
Speaker 1: Ashman Stark, thank you so much for joining us. Really
5:53
Speaker 1: appreciate a fascinating discussion here, ashpan Stark, President of Lego Education.
5:58
Speaker 1: And again, kids going back to school, that's the really
6:01
Speaker 1: good news, and getting them back into the classroom, getting
6:04
Speaker 1: back into activities after school, activities and clubs and sports,
6:07
Speaker 1: and that's the good news. And Lego is a big
6:10
Speaker 1: part of that. We had some better than expected manufacturing
6:17
Speaker 1: I s M data came out this morning. Good news
6:20
Speaker 1: there for the manufacturing front. Let's break it down with
6:23
Speaker 1: Tim Fury, chairman of the Manufacturing Business Survey for the
6:26
Speaker 1: Institute of Supply Management based in Miami. Tim, thanks so
6:30
Speaker 1: much for joining us here. Better than expected numbers give
6:32
Speaker 1: us the highlights. Yeah, really good demand again and the
6:35
Speaker 1: month of August uh, better than the month of July.
6:38
Speaker 1: And plus I mean that's a great number. The new
6:41
Speaker 1: export order number was really strong. To supporting that new
6:44
Speaker 1: order number. Backlog was again near records, second highest number
6:48
Speaker 1: ever since we've been keeping record since the nineties. And
6:50
Speaker 1: the customer inventory again was swallow months below forty which
6:54
Speaker 1: is a super too low. Empty cells everywhere. If you've
6:57
Speaker 1: been in any of the stores lately, try to buy
6:58
Speaker 1: a car, you can't. There's a went to a department store,
7:02
Speaker 1: going to a grocery store sells a rampy everywhere, and
7:04
Speaker 1: it's kind of indicative of what this reporter is signed.
7:09
Speaker 1: Our delivery side us a little bit uh, and prices
7:12
Speaker 1: are backing off there. There is some positive signs for
7:14
Speaker 1: the future go ahead well, I just um spent the
7:19
Speaker 1: my lunch hour trying to order a titanium um connecting
7:24
Speaker 1: pipe for um an a Kropovitch exhaust. And who doesn't
7:29
Speaker 1: do that in their lunch Well, it's just they're impossible
7:31
Speaker 1: to find. I called a ton of distributors and dealerships
7:35
Speaker 1: and they say, you know what, you're gonna be waiting weeks,
7:38
Speaker 1: like hope to get it at the earliest end of October.
7:42
Speaker 1: And it just feels like that's a long way away
7:45
Speaker 1: from you know, I feel like we just finished August.
7:48
Speaker 1: Um when is this going to When are we gonna
7:50
Speaker 1: see a recovery? Well, so let's let's expand on that.
7:54
Speaker 1: You know, our our number one industry sector that's expanding
7:57
Speaker 1: its furniture. And you go into a furn is to
8:00
Speaker 1: store these days and they'll tell you, well, maybe four weeks,
8:02
Speaker 1: but I don't really know. And even the day before
8:04
Speaker 1: we supposed to deliver, they'll call you up and say
8:06
Speaker 1: it's going to be another three weeks. A lot of
8:07
Speaker 1: that has to do with poor congestion. I think we're
8:10
Speaker 1: gonna be dealing with this uncertainty for quite some time.
8:14
Speaker 1: You know the fact that the Dela variant raised through
8:16
Speaker 1: UH the US to such an extent it didn't so
8:19
Speaker 1: much impact our panelists, but it's definitely impacting sentiment and
8:23
Speaker 1: you can see it in the conference board in the
8:25
Speaker 1: University of Michigan. So, and that's not a good thing.
8:28
Speaker 1: Our lead times are out so far we set record
8:30
Speaker 1: Romatory of lead times again, and what's happening is that's
8:33
Speaker 1: driving up our new order number. How much I can't
8:36
Speaker 1: really tell, but you can probably assume it's five points
8:39
Speaker 1: of it. So, and that's essentially advanced demands. That's if
8:44
Speaker 1: you have lead times that are typically six weeks, they're
8:46
Speaker 1: now twelve or fifteen. You're committing to higher prices at
8:50
Speaker 1: some point longer in the future than you normally do.
8:52
Speaker 1: And that's kind of risky. But but I think you know,
8:55
Speaker 1: overall suppliedment balances, we're in balance, but we're making progress.
9:00
Speaker 1: The input side mad some progress price disease that although
9:03
Speaker 1: they're still expanding not as fast rate as they were
9:05
Speaker 1: in July and June, the suppliers delibered better. You can
9:08
Speaker 1: see that in the rometary inventory account. We manufacturing inventory account.
9:12
Speaker 1: We got to fifty five first time in quite some time.
9:15
Speaker 1: So but I think We've got a new normal here
9:17
Speaker 1: that we're gonna be dealing with for at least a year.
9:19
Speaker 1: And that's the impacts of variants coming out and the
9:24
Speaker 1: attitude that it has on people tim manufacturing. What are
9:28
Speaker 1: they saying about their labor force? Are they getting the
9:31
Speaker 1: labor they need? Well, that's the big story for the months.
9:34
Speaker 1: We are still struggling attracting people. Hired to fire ratio
9:38
Speaker 1: is still eight or nine to one, Uh no, one is.
9:41
Speaker 1: I think I had one respond in talking about layoffs.
9:44
Speaker 1: Everybody else is talking about trying to hire. Of the people,
9:47
Speaker 1: I think eight two percent of my comments were higher
9:49
Speaker 1: related and of that, thirty five of those said that
9:53
Speaker 1: they were having difficulty, which is up five points from July.
9:56
Speaker 1: So that's that says a lot of The biggest thing
9:58
Speaker 1: on the labor side, I think in August is that
10:00
Speaker 1: what started in July turnover is now accelerating. So of
10:07
Speaker 1: those hiring clans is related to turnover, including retirements, and
10:12
Speaker 1: that's a big number. So you hire two, somebody retires,
10:16
Speaker 1: you have to hire three. It's and in most cases
10:19
Speaker 1: it's people chasing wages, and that's a direct result of
10:22
Speaker 1: people raising wages to try to fill up their staffing levels.
10:27
Speaker 1: All right, very interesting stuff. Great to get your take
10:30
Speaker 1: on this, Tim, thanks so much for joining us. The
10:32
Speaker 1: usual Tim Fiori, there's the chairman of the Manufacturing Business
10:36
Speaker 1: Survey out of the Institute for Supply Management in Miami.
10:41
Speaker 1: Of course, we've got that number. You can see it
10:43
Speaker 1: if you type eCos space US go UM, or you
10:46
Speaker 1: can type w E c O go in the blueboard terminal,
10:49
Speaker 1: click on the American flag and you will see I
10:51
Speaker 1: s M Manufacturing came in at fifty nine point function
10:54
Speaker 1: of nine from fifty eight the survey was fifty eight
10:57
Speaker 1: point five, so beating the survey and more than the
11:00
Speaker 1: prior reading of point five. We have had a ton
11:07
Speaker 1: of stories, well just daily deluge of stories about the
11:12
Speaker 1: changing regulatory environment and China, and a lot of investors
11:16
Speaker 1: have just said it's uninvestable at this point, but some
11:20
Speaker 1: are seeing opportunities, and Ashroff huck is among them. Among them.
11:23
Speaker 1: He's a senior portfolio manager at Sands Capital, and he
11:27
Speaker 1: joins us to talk about um the companies that could
11:31
Speaker 1: benefit from the regulatory revisions that we're seeing. Ashroff, thanks
11:37
Speaker 1: very much for joining us. What are you seeing as
11:40
Speaker 1: kind of the overall theme here in terms of what
11:43
Speaker 1: China is doing. Hey, Matt and Paul, thank you for
11:47
Speaker 1: having me on UM. You know, it's been a rocky
11:51
Speaker 1: and the regulation has been fast and furious, and you know,
11:54
Speaker 1: we've taken some hits, but we think the government is
11:57
Speaker 1: focused on strategic priority these improving its demographics, reducing income equality,
12:04
Speaker 1: moving to higher value manufacturing industries. And we don't think
12:08
Speaker 1: it's a case where they're trying to destroy capitalism or
12:10
Speaker 1: punish the wealthy. And so the attractive areas that they're pushing, uh,
12:15
Speaker 1: you know, they're encouraging more athletic participation, better access to
12:19
Speaker 1: affordable drugs and healthcare, and cleaning the environment. But when
12:23
Speaker 1: I take a look at big companies like Ali Baba,
12:27
Speaker 1: like ten Cent, which have been such winners not just
12:30
Speaker 1: for shareholders but also arguably for China itself on a
12:35
Speaker 1: global scale, seemed to reflect very well on China. It's
12:39
Speaker 1: surprised a lot of people that the government went after
12:43
Speaker 1: it was such a heavy hand. Those again, those companies
12:47
Speaker 1: that were really representing I thought China well on a
12:51
Speaker 1: global scale. How do you make make out or make
12:54
Speaker 1: peace with kind of how they're viewing some of their
12:56
Speaker 1: traditional stalwart companies. Yeah, I think that those tech companies
13:02
Speaker 1: have gotten so big, and a lot of the issues
13:05
Speaker 1: that the Chinese regulators are dealing with are the same
13:08
Speaker 1: issues that American and European regulators have with the big
13:10
Speaker 1: tech companies. Here the differences that China can regulate them
13:14
Speaker 1: much more efficiently and effectively. UM So, I don't think
13:18
Speaker 1: they're trying to destroy the ten cents and the baba's,
13:21
Speaker 1: but they want to ensure fair competition. They want to
13:24
Speaker 1: ensure that that the you know, the term that everyone's
13:28
Speaker 1: talking about common prosperity. They want to ensure that there's
13:31
Speaker 1: more equal participation in the growth that's being generated by
13:34
Speaker 1: those platforms. Are you concerned about the fact that, you know,
13:40
Speaker 1: things can change in a dime here? I mean it's
13:43
Speaker 1: not like, um, we get a plan that's laid out
13:46
Speaker 1: and we know in advance, they could just change their
13:49
Speaker 1: mind at any point. Yeah, I mean it is a
13:52
Speaker 1: little bit more dynamic. It's complicated, but I also think
13:56
Speaker 1: China's is too compelling to ignore. Um And as I mentioned,
13:59
Speaker 1: there are they're you know, right now the tech platforms
14:02
Speaker 1: and education, for example, are in the spotlight but there's
14:05
Speaker 1: a lot of growth in consumer businesses there that the
14:08
Speaker 1: government will regulate to make sure that it's it's fair competition,
14:12
Speaker 1: but they're not trying to control those businesses maybe as much.
14:15
Speaker 1: Uh So. For example, we own a business called Anta,
14:18
Speaker 1: which is one of our largest ways. It's a athletic
14:21
Speaker 1: footwear company. Uh and that's gonna grow as the as
14:24
Speaker 1: the government's pushing more uh kids into you know, stop
14:27
Speaker 1: playing video games and play more soccer. Um so uh
14:31
Speaker 1: And China's about to host the Winter Olympics. They're encouraging
14:34
Speaker 1: people to go skiing and things like that. So Anta,
14:37
Speaker 1: which you see Clay Thompson wearing, will be a big
14:39
Speaker 1: beneficiary of that. And um you know, it's something that
14:43
Speaker 1: we've helped for a long time with growth twenty over
14:46
Speaker 1: the next five years per year. So astra in in
14:49
Speaker 1: terms of new capital going into China, my guests would
14:53
Speaker 1: be it's gonna go in and demand a much higher
14:57
Speaker 1: risk premium. I'll pay a much lower multiple for my equities,
15:00
Speaker 1: a called demand a higher yield on my credit. Talk
15:04
Speaker 1: to us about what you're seeing in the capital markets there,
15:06
Speaker 1: the financial markets, the funding markets for China. Yeah, that's
15:10
Speaker 1: certainly in the case, and you're seeing that even reflected
15:13
Speaker 1: in the public company multiples. I mean, you look at
15:16
Speaker 1: a business like Ali Baba versus Amazon UM, you know,
15:19
Speaker 1: very similar growth rates. In fact, Baba is growing probably
15:22
Speaker 1: faster in its core business, and it trades that a
15:25
Speaker 1: much lower multiple, higher risk premiums and than Amazon. So
15:28
Speaker 1: it's certainly something we're seeing, uh, in both private and
15:33
Speaker 1: public funding markets. Interesting when you see UM everyone sort
15:41
Speaker 1: of rushing out of China heading for the exit, does
15:45
Speaker 1: that provide any kind of UM, any kind of opportunity?
15:49
Speaker 1: And I noticed there's some companies I think of ever
15:51
Speaker 1: Grand for example, that are having fire sales. Yeah, we're
15:55
Speaker 1: not really interested in UM businesses like that. You know,
15:59
Speaker 1: we run global growth portfolios or distressed or distressed assets. Now, yeah,
16:05
Speaker 1: we're really looking for great growth franchises. Some of those
16:08
Speaker 1: are on sale, but I think less than the fire sale.
16:12
Speaker 1: We're more interested in how innovation and technology are creating
16:15
Speaker 1: new opportunities, and that's certainly happening in China as well
16:18
Speaker 1: as many other parts. I mean, China is a small
16:20
Speaker 1: part portion of our of our global internationally and portfolios UM,
16:24
Speaker 1: so it is I think less you know, the fire
16:28
Speaker 1: sell more the opportunity that's been created by innovation invest
16:30
Speaker 1: what we're focused on right now. Alright, as, thank you
16:33
Speaker 1: so much. We appreciate that. Getting some thoughts there on China.
16:38
Speaker 1: And again the real question is to what extent, uh
16:41
Speaker 1: is China investable? Is it still investable? But it's such
16:43
Speaker 1: a big part of the m s c I index
16:45
Speaker 1: that you kind of have to be there as astrof,
16:47
Speaker 1: said Ashraff hawk Uh, senior portfolio manager for Sance Capital.
16:50
Speaker 1: Thanks so much. I love the joint. I love the
16:52
Speaker 1: the athletics shoe point. You know, because if kids are
16:55
Speaker 1: going to stop playing video games and yep, I think
16:58
Speaker 1: that's a very big if. Um, they are going to
17:02
Speaker 1: have to do something else, and it's probably going to
17:04
Speaker 1: involve running around, um, wearing shoes, especially if they're playing basketball,
17:09
Speaker 1: which they love to do. They're getting pushed down on
17:11
Speaker 1: the ski slopes and need new boots. Yeah, it should
17:14
Speaker 1: be interesting it but I'll be like like you said, Mattabie,
17:16
Speaker 1: I don't know how they're going to regulate Uh, the
17:18
Speaker 1: uh kids are gonna have parents can't do it. Good
17:22
Speaker 1: luck to the Chinese government. We'll have more coming up
17:24
Speaker 1: this is Bloomberg, But we have a good old fashioned
17:30
Speaker 1: price war in the m and a space this time
17:33
Speaker 1: for Kansas City Southern Railway. We've got the two Canadian railways,
17:37
Speaker 1: Canadian Pacific Railway and Canadian National, both vying for this asset.
17:42
Speaker 1: Would give them a great Canada through the US into
17:45
Speaker 1: Mexico line. There lots of opportunity. Let's dig deep into
17:49
Speaker 1: this deal. We can do it with nobody better than
17:51
Speaker 1: Tony Hatch. He has been covering these rails and truckers
17:54
Speaker 1: for decades on Wall Street, one of the top analysts there.
17:57
Speaker 1: He is knee deep in this deal. Tony again, it
18:00
Speaker 1: makes a lot of sense to buy for one of
18:02
Speaker 1: these Canadian companies to buy Kansas City Southern. What's the
18:05
Speaker 1: problem here for these two players. It seems like Canadian
18:08
Speaker 1: National had a kind of a setback, So Cannadian and
18:11
Speaker 1: I saying hey, Paul, Canadian National kind of like a
18:14
Speaker 1: combination in the ring yesterday, a straight left by the
18:18
Speaker 1: STB rejecting their voting truest and then a roundhouse by
18:22
Speaker 1: t c I trying to change the manager team out.
18:25
Speaker 1: So it was not a good day to be in Montreal.
18:28
Speaker 1: Say the deal is that c N was proposing this
18:31
Speaker 1: under new rules, the so called new rules for the
18:34
Speaker 1: STB which came about in two thousand one and require
18:38
Speaker 1: enchanced competition, not not just preventing reduced CP skated by
18:43
Speaker 1: any of the old rules and see and also had
18:46
Speaker 1: horrible timing. This STB is activist and wants to get
18:49
Speaker 1: out to get in the ring and punch it railroads,
18:51
Speaker 1: and c N has provided them with that opportunity. Is
18:55
Speaker 1: it damaging to have this kind of deal up in
18:57
Speaker 1: the air? I mean, um, what does the management do
19:00
Speaker 1: what when there's so much uncertainty. It's a very good question,
19:05
Speaker 1: you know. I think you would say that there's some
19:06
Speaker 1: lost time really maybe all three carriers involved, because certainly
19:10
Speaker 1: the top strategy lines were focused on on this and
19:13
Speaker 1: in Washington, d C rather than out in the field.
19:16
Speaker 1: I don't think it's you know, ultimately damaging. I think
19:19
Speaker 1: they all have good prospects. You know, we may see
19:22
Speaker 1: change and see ed which would in some ways be unfortunate,
19:25
Speaker 1: but I think they can get past that level of damage.
19:28
Speaker 1: These deals would whoever would win, would be transformative and
19:31
Speaker 1: may have been worth the time risk, if not the
19:34
Speaker 1: dollar risk. So Canadian Pacific. Now I guess from a
19:38
Speaker 1: regulatar perspective, seems to be in the driver's seat here.
19:41
Speaker 1: But there offers actually lower than what Canadian National did.
19:46
Speaker 1: So are they have to raise their offer or can
19:48
Speaker 1: there twenty seven billion dollar offers still win the day?
19:52
Speaker 1: I think at this point it probably wins the day.
19:54
Speaker 1: So the key thing, and you may remember, Paul, is
19:56
Speaker 1: the UH the voting trust issue if if C he
20:00
Speaker 1: has approved. If you if you were a Ryott Pennsy Southern,
20:03
Speaker 1: your board and your chry was voted to approve the
20:05
Speaker 1: CP deal, you could get paid almost instantly if you
20:08
Speaker 1: were to continue with the CN deal, which I don't
20:11
Speaker 1: think will happen, but if you work to you would
20:13
Speaker 1: have to take the entire regulatory review process, time and risk.
20:18
Speaker 1: So the question is is you know it's three hundred
20:20
Speaker 1: today or maybe in a year or more. So that's
20:25
Speaker 1: why they feel they don't need to raise that they
20:27
Speaker 1: can win with a lower face price face price offer,
20:33
Speaker 1: are there? UH this deal would have gone to Canadian
20:39
Speaker 1: National Railway and maybe it goes to Canadian Pacific now
20:44
Speaker 1: losing Kansas City Southern. It just strikes me as an
20:46
Speaker 1: American that we seem to be seating power to the north.
20:53
Speaker 1: The railroaders, you may recall, have always viewed this as
20:57
Speaker 1: a North American venture. After all, the CEO of the
21:01
Speaker 1: Canadian Pacific UH is an American. Most of the transformation
21:06
Speaker 1: of c N under Hunter Harrison and American were Americans. So, um,
21:11
Speaker 1: you know, from a rail shipper and a rail investor,
21:13
Speaker 1: you could buy Canadian Pacific and sell Union Pacific or
21:16
Speaker 1: vice versa. That we don't view it that way. In fact,
21:19
Speaker 1: it would be more likely if somebody were to go
21:21
Speaker 1: buy an American were trying to buy one of the
21:24
Speaker 1: two Canadian headquartered railroads, that would raise nationalistic fears than
21:28
Speaker 1: a fear about somebody buying the smallest American railroad, which
21:31
Speaker 1: really is a play in Mexico, the third country we
21:34
Speaker 1: haven't talked about. Yes, let's talk about this deal strategically.
21:37
Speaker 1: Let's say Canadian Pacific gets Kansas City Southern. Talk to
21:41
Speaker 1: us about the benefits of putting those two roads together. Well,
21:45
Speaker 1: you know, and I want to say this to if
21:46
Speaker 1: c N had been able to do this without competition
21:49
Speaker 1: or under the old rules, they would have gotten this
21:51
Speaker 1: the old rules, and this does not reduce competition questions
21:56
Speaker 1: as to enhance it for CP under the rules of
21:58
Speaker 1: nearly presenting that it does and hurt anything that currently exists.
22:03
Speaker 1: Would link you know, every railroad now wants to get
22:05
Speaker 1: access to more water, so it would get them to
22:07
Speaker 1: the US Gulf and get them all the way to Mexico.
22:09
Speaker 1: It would link the autoly industry from parts coming in
22:14
Speaker 1: manufacturing in Mexico. Detroit as well as in Ontario would
22:19
Speaker 1: all be linked. In addition, corn grown into the code
22:22
Speaker 1: is as the largest US import into Mexico and so
22:26
Speaker 1: they have infertile growing fields there and the end up
22:28
Speaker 1: single line service. So you know the it would create
22:31
Speaker 1: real power north South and most of the rail industry
22:35
Speaker 1: as you well call as focused east West. You know,
22:37
Speaker 1: containers from l A inbound to Chicago and that type
22:40
Speaker 1: of thing. Does it, though, um reduce the amount of
22:45
Speaker 1: competition in the industry, I mean it must it's CP
22:50
Speaker 1: if CPA were to win at the answer is no,
22:52
Speaker 1: because they only touch at one point in Kansas City.
22:55
Speaker 1: So you know, it does create more competitive options, it
22:58
Speaker 1: doesn't really reduce rail competition. One of them. You bring
23:01
Speaker 1: up a point the STV views this as railroad competition.
23:04
Speaker 1: There's fewer railroads now, etcetera. They ignore the fact that
23:08
Speaker 1: this North South railroad parallels the Mississippi River, which is
23:12
Speaker 1: a huge freight you know highway, as well as the
23:15
Speaker 1: actual highway system, the subsidized you know, interstate highway system.
23:20
Speaker 1: So from the shipper point of view, really neither reduces
23:24
Speaker 1: competition in a big overall in a big, big way,
23:27
Speaker 1: but CP certainly does not. Hey, Tony, we hear a
23:30
Speaker 1: lot are doing adds to it? Yeah, we we we
23:34
Speaker 1: hear a lot from across the industry's really over the
23:36
Speaker 1: last couple of quarters. And we listen to earnings calls
23:38
Speaker 1: about the supply chain issues in this country. Give us
23:41
Speaker 1: a sense of mer perspective from the railroad and the
23:43
Speaker 1: trucker's kind of how bad is it? Uh? When is
23:46
Speaker 1: it going to get better? Do you think? So? It
23:49
Speaker 1: is bad, but it's not fatal. Um, you and I
23:51
Speaker 1: have lived through worse. Um. This is, you know, a
23:55
Speaker 1: total supply chain issue in which continuing events. Think of
23:58
Speaker 1: this is not a rock and pond, but you know
24:01
Speaker 1: the biggest boulder you've seen. So the waves come and
24:03
Speaker 1: then they come again. If you shut a port down
24:05
Speaker 1: in China because of a new COVID. You know outbreak
24:09
Speaker 1: that affects ships coming into l a Long Beach. They're
24:11
Speaker 1: they're forty three stacked outside of the Valley Long, which
24:14
Speaker 1: it looks like a D Day photo. You have shortages
24:17
Speaker 1: of warehouse people, shortage support people. You have railroad issues
24:21
Speaker 1: because the boxes are staying in their terminals which are
24:23
Speaker 1: meant to be through stations, and they're not enough truck
24:26
Speaker 1: drivers or wherehouse people to handle those boxes. So it
24:29
Speaker 1: is a system one problem. Rails are not covering themselves
24:33
Speaker 1: in glory uh this year. They did pretty well last
24:36
Speaker 1: year in the first stages of the recovery. But they're
24:39
Speaker 1: they're they're part of the issue now. They get a
24:41
Speaker 1: lot of press. Remember Churchill's quote, they've let a good
24:44
Speaker 1: crisis go and used So ship or trade associations are
24:48
Speaker 1: piling on on railroads because they can. That's how the
24:51
Speaker 1: game is played. When will it get done? Probably done
24:54
Speaker 1: until early next year. But it is not something that
24:57
Speaker 1: Wilwoods themselves can solve, and if that they may be done.
25:00
Speaker 1: If you talk to most international shippers, it's the water.
25:04
Speaker 1: This is the biggest problem not to land all right, Tony,
25:07
Speaker 1: thank you so much for joining us to appreciate it
25:08
Speaker 1: as always expert opinion Tony Hatch railroad, trucking, transportation, animals
25:12
Speaker 1: for a b H Consulting. He's recovering this sector for decades.
25:16
Speaker 1: He's got the goods there. We appreciate it. Thanks for
25:18
Speaker 1: listening to the Bloomberg Markets podcast. You can subscribe and
25:22
Speaker 1: listen to interviews with Apple Podcasts or whatever podcast platform
25:26
Speaker 1: you prefer. I'm Matt Miller. I'm on Twitter at Matt
25:29
Speaker 1: Miller three. On Fall Sweeney, I'm on Twitter at pt
25:33
Speaker 1: Sweeney before the podcast. You can always catch us worldwide
25:36
Speaker 1: at Bloomberg Radio