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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: easterne on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: David Welsh, he is our Bloomberg Detroit Bureau chief, and

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Speaker 2: we'll talk about General Motors's earnings. But I was checking

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Speaker 2: out Canada's exports to the US, and energy is number

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Speaker 2: one on the list one hundred and sixty billion Canadian

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Speaker 2: dollars worth of exports to the US and twenty twenty

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Speaker 2: five number two is motor vehicles and parts at seventy

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Speaker 2: four billion Canadian dollars. What's the thinking in Detroit when

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Speaker 2: the President threatens tariffs on Canadian products?

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Speaker 3: Generally speaking, in Detroit, the car companies worry about this

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Speaker 3: because they've got long standing manufacturing There A want a

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Speaker 3: big Canadian hearts suppliers too. Magnet is big, Martin Ray

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Speaker 3: is another one that's a good sized company. They send

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Speaker 3: a lot of parts over the border very quietly. Toyota

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Speaker 3: makes a lot of vehicles in Ontario and Ford and

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Speaker 3: General Motors still have production over their soda Stilantis. So look,

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Speaker 3: the car companies don't like anything that really is going

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Speaker 3: to upset their supply chains anymore than it already has.

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Speaker 3: Mexico has already been a big deal for them and

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Speaker 3: certain parts of Asia as well, So they'd rather see

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Speaker 3: the status quo remain in place and hope it does here.

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Speaker 3: In fact, the car companies generally want to see us

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Speaker 3: MCA remain is similar to what it's been since Trump

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Speaker 3: set it up, what five six years ago to begin with,

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Speaker 3: But that's not gonna be the case. But they have

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Speaker 3: been fighting to sort of claw back some exemptions to

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Speaker 3: that and reduce their cost That's why General Motors. One

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Speaker 3: of the reasons General Motors had better earnings today is

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Speaker 3: they've managed to lobby their way into at least a

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Speaker 3: little bit of a reprieve on these tariffs.

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Speaker 4: And I'm looking at the gym results here. This is,

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Speaker 4: you know, right back to their playbook, which is I

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Speaker 4: mean they boost their twenty twenty six alib due to

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Speaker 4: premium pricing on big trucks. Boy, that is America auto

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Speaker 4: industry today. Premium pricing big trucks SUVs. That seems to

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Speaker 4: be working for certainly Forward here, I mean gim.

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Speaker 3: Well, it's working for all of them really a couple

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Speaker 3: of things. So, yeah, they're charging a lot of money

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Speaker 3: for their big vehicles. Now, we did, actually I will

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Speaker 3: say this, we did see some discounting on pickup trucks.

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Speaker 3: As you know, the competition is always tough in that segment,

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Speaker 3: and you've got high fuel prices that I think is

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Speaker 3: keeping some buyers on the fence for a while. So

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Speaker 3: you know, there's a bit of that going on. But

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Speaker 3: GM's average vehicles selling for fifty two thousand dollars, and

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Speaker 3: you know that's an expensive vehicle, so they are they're

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Speaker 3: keeping price up. That's one of the things I'm doing

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Speaker 3: well for them. We've we talked about terrorf relief. They

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Speaker 3: have lower warranty costs. That's helping them as well. The

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Speaker 3: other thing too, to keep an eye on. They've been

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Speaker 3: boosting production. They had pretty lean inventories throughout the second quarter,

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Speaker 3: so some of this is that they're just kind of

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Speaker 3: putting more into the channel to their dealerships. And now

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Speaker 3: GM says it's sustainable and that they seek similar momentum

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Speaker 3: into twenty twenty seven or twenty six and twenty seven.

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Speaker 3: But they've got to deliver on that otherwise, you know,

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Speaker 3: they're building inventory and they may have to pull back

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Speaker 3: at some point.

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Speaker 2: Okay, So GM and FOR they're all doubling down on

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Speaker 2: these big premium trucks. What does the carmaker strategy look

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Speaker 2: like when it comes to hybrids, when it comes to evs,

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Speaker 2: Because my understanding is there was another charge related to

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Speaker 2: a reduced production of evs.

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Speaker 3: That's right, And what that charge is, it's basically for

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Speaker 3: stuff they've already announced, but they've had to pull back

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Speaker 3: production on the batteries they make for the evs, and

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Speaker 3: they've had to pull back on production of the electric

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Speaker 3: vehicles themselves. They're retooing a plant in suburban Detroit that

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Speaker 3: they thought was going to make electric pickup trucks. But

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Speaker 3: nobody buys electric pickup trucks. They don't buy gms, they

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Speaker 3: don't buy fours, they don't buy tessels, they don't buy rivians.

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Speaker 3: No one wants an electric pickup truck. So right, so

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Speaker 3: right now we are seeing are these charges coming through

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Speaker 3: the system, and GM has taking a total of eleven

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Speaker 3: billion in charges there like they haven't canceled a single

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Speaker 3: electric vehicle in that lineup. They still sell a dozen

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Speaker 3: different evs and that's their strategy. They don't have any

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Speaker 3: hybrids on the market now except for the E Ray,

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Speaker 3: which is a Corvette very well volume. They say they're

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Speaker 3: going to have a handful of them coming. Mary Borrow

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Speaker 3: told Bloomberg TV that but not on the market yet.

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Speaker 3: Ford only has a couple of Stilantes, very little presence

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Speaker 3: there right now. That's a Hyndai in Toyota and two

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Speaker 3: degree Honda Game, and they're good. All three of them

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Speaker 3: are getting good sales gains in the US market because

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Speaker 3: they've got hybrid electric vehicles at a time when gas

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Speaker 3: is selling from more than four bucks.

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Speaker 4: Stay with us.

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Speaker 2: 's more from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live

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Speaker 1: weekdays at ten am Eastern on Apple Coarclay, and Android

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Speaker 1: Auto with the Bloomberg Business App, Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 4: Well here this is the story that just won't die.

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Speaker 4: Paramount Skydance, I'm not even used to calling it that,

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Speaker 4: but whatever, Warner Brothers Discovery, Paramoun wants to buy him

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Speaker 4: the federal regulator said, okay. The state said, whoa, whoa

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Speaker 4: wa wait up here, We've got some problem. And looking

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Speaker 4: it looks like they're going to hold off this deal

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Speaker 4: at least temporarily. This is Paramounts Guidance taking over a

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Speaker 4: Warner Brothers Discovery.

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Speaker 5: Wow.

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Speaker 4: Chris Palmary joins his here, senior editor and Entertainment team

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Speaker 4: leader for Bloomberg News. He's based out there in LA

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Speaker 4: with all those folks, but he's here in the greatest

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Speaker 4: city in world, New York. Chris, Thanks so much for

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Speaker 4: joining us here. The States are blocking the Paramounts Guidance

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Speaker 4: murder or acquisition of Warner Brothers Discovery. Can they do that?

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Speaker 5: Apparently?

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Speaker 6: Yes, very mad they can get a judge to do that.

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Speaker 4: Yeah. And you know, we've seen this a couple of instances.

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Speaker 6: We saw, you know, the States get together and go

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Speaker 6: around a Department of Justice deal with Live Nation, remember

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Speaker 6: and themal Ticketmaster thing. So so yes, they do have

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Speaker 6: this power and they're using it. This is seen as

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Speaker 6: sort of like antidote to a very sort of relaxed

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Speaker 6: Trump administration merger and acquisition policy.

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Speaker 4: So at the very least three they've got some I

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Speaker 4: guess a temporary streaming order. Is that what they have

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Speaker 4: here correct? And that's going to delay the deal for

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Speaker 4: a couple of weeks.

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Speaker 6: Right, So right now they can't close the deal until

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Speaker 6: August third. There's another hearing August third that will be

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Speaker 6: determining whether that injunction don't close. The deal goes until

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Speaker 6: there's a verdict in this case, so potentially pushing it

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Speaker 6: through next year, which would be very bad for Pairmount.

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Speaker 4: Yes, and now the I guess the seller here said

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Speaker 4: there's probably some risk when we were negotiating this deal

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Speaker 4: that something would happen, and so we negotiated a ticking

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Speaker 4: feeh what's that.

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Speaker 6: Seven million dollars a day that paramount must play Warner

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Speaker 6: Brothers shareholders if they fail to close by the end

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Speaker 6: of September. Okay, wow, And so that adds up to

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Speaker 6: more than six hundred million dollars a quarter.

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Speaker 5: Okay, holy all.

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Speaker 4: Right, So that again, that's you put that on the

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Speaker 4: deal if you think there's a material risk that for

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Speaker 4: whatever reason, it won't get approved, and so you got

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Speaker 4: to really put the onus on the buyer to make

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Speaker 4: sure it does get approved. What's the feeling in Hollywood

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Speaker 4: is this deal going to go through. Can it really

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Speaker 4: be blocked?

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Speaker 6: Well, yeah, we're going to do that sort of a

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Speaker 6: Hollywood version in the I think wall Street has largely

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Speaker 6: bet that that he's going to get.

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Speaker 5: This deal done.

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Speaker 4: Okay, Okay, he being Ellis David Allison, who is the

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Speaker 4: CEO of.

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Speaker 6: Whose father is one of the richest contents. Well, so

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Speaker 6: that helps, and how there's certainly people think it's going

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Speaker 6: to happen who've sort of resigned to the fate.

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Speaker 4: But they're very not happy about it.

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Speaker 6: I mean, we've seen the Writers Guild actually sue to

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Speaker 6: try to block the deal. We've seen very strong statements

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Speaker 6: from other unions. Uh, you know the rank and file

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Speaker 6: person in Hollywood who's never a happy person in general. Right,

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Speaker 6: it's a tough business. It sees this for for what

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Speaker 6: it is. There's going to be massive consolidation. There's going

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Speaker 6: to be layoffs. Uh, there's going to be one bigger

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Speaker 6: conglomerate that they have to answer to. Uh, you know

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Speaker 6: for pitching stories, you know, pitching movies and TV shows

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Speaker 6: and things like that, jobs, all of that. It's it's

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Speaker 6: it's it's going to be it's going to be difficult,

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Speaker 6: and it's already been a difficult market, particularly in Los

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Speaker 6: Angeles in the film business. A lot of jobs moving overseas,

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Speaker 6: a lot of cutbacks, and the threat of AI. It's

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Speaker 6: not a happy time there.

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Speaker 4: So I mean, in reality, I mean, you think about it.

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Speaker 4: You're putting two studios to get our Paramount and Warner Brothers,

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Speaker 4: two of the largest studios in the business. It's almost

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Speaker 4: like redund I mean, do I need this stage manager

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Speaker 4: on this studio if I've got one across the street

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Speaker 4: on the other, you know, I.

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Speaker 6: Mean yeah it well, and not just the two studios,

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Speaker 6: but two streaming services Paramount Plus and HBO Max, and

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Speaker 6: two giant cable network operations, I mean everything from CNN

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Speaker 6: to MTV, so a lot of redundancies. Paramount's argument is

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Speaker 6: that they're going to run Warner Brothers in Paramount studios separately,

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Speaker 6: separate lots, separate management teams. They said they're going to

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Speaker 6: have thirty movies a year they're releasing specifically for theaters,

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Speaker 6: which is higher output than they've had historically the two

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Speaker 6: companies separately.

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Speaker 4: We'll see if that all happens. That's the promises.

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Speaker 5: Now.

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Speaker 6: The question is, you know, when they do this deal

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Speaker 6: they've got eighty billion in debt. You know, the cable

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Speaker 6: networks are losing viewers and advertisers and very rapid clip

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Speaker 6: If things really get difficult, how how can they keep

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Speaker 6: all of that operations up?

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Speaker 4: Is there a chance that they walk away from this?

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Speaker 5: Parent?

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Speaker 4: Sky Instant says it's just too much. I have a

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Speaker 4: hassle here. What's the company been saying?

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Speaker 6: Well, no, that's not what they're saying publicly. But look

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Speaker 6: at this math seven billion dollar breakup fee if the

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Speaker 6: deal doesn't go through, whether it's their choice or a

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Speaker 6: court's choice. And that's on top of the two point

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Speaker 6: eight billion they've already paid Netflix to walk away, So

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Speaker 6: that would be close to ten billion sort of probably

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Speaker 6: considering all the lawyer's fees and all that ten billion

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Speaker 6: that the Ellisons have spent on this quest that potentially

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Speaker 6: could get them nothing.

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Speaker 4: Wow, it just goes I mean, you've been in this

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Speaker 4: business a long time. I've been in this business long time.

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Speaker 4: Hollywood is a tough place to do. Deals they just

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Speaker 4: buy and large don't work.

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Speaker 5: Well.

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Speaker 4: Just look at the history of Warner Brothers.

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Speaker 6: How many owners as it had in the last fifteen years, and.

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Speaker 7: How has it ended stay with us. More from Bloomberg

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Speaker 7: Intelligence coming up after this. You're listening to the Bloomberg

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Speaker 7: and Religion's podcast. Catch us live weekdays at ten am

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Speaker 7: Eastern on Apple Coarclay and Android Auto with the Blueberg

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Speaker 7: Business App. Listen on demand wherever you get your podcasts,

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Speaker 7: or watch us live on YouTube.

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Speaker 4: Through Speaking of real Estate, perfect timing. Scott Reclord joints

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Speaker 4: us here. He's the CEO and chairman of our x R.

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Speaker 4: Joining us here in studio. Scott, thanks so much for

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Speaker 4: coming back.

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Speaker 5: It's going to be here. Thanks Paul.

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Speaker 4: New York City office market give us an overview. How

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Speaker 4: are things out there these days? It seems like it's

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Speaker 4: coming back in a big way, but it gives the details.

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Speaker 5: It's more than back.

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Speaker 8: I mean, I've been in this business for thirty years

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Speaker 8: and i have not seen the New York office market.

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Speaker 5: Is as strong as it is today.

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Speaker 8: If you look at leasting for the first six months,

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Speaker 8: it was twenty three million square feet. If you think

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Speaker 8: that carries through this year, it will take us back

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Speaker 8: to levels that we haven't seen since two thousand. Rent

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Speaker 8: growth has been extraordinary, the fastest in the country. You know,

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Speaker 8: there's still a flight to quality. So you've seen the

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Speaker 8: higher quality buildings are really really doing well. But when

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Speaker 8: you take like the top fifty buildings, the vacancy rates

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Speaker 8: like three percent, right, So when you're in that mode,

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Speaker 8: and even big blocks of space, there's in all of

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Speaker 8: Manhattan there's about twenty two high quality big blocks of space,

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Speaker 8: and there's right now over sixty companies looking for over

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Speaker 8: one hundred thousand square feet, so one hundred thousand square

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Speaker 8: feet only twenty two available and sixty something looking for

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Speaker 8: one hundred thousand square feets of blocks. So it's shifted

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Speaker 8: to a landlord's market versus a tenant market right now.

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Speaker 2: Of course, all office buildings are not created equal, and

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Speaker 2: plenty of office buildings are being retrofitted to become residential.

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Speaker 2: And we saw in New York at least an incident

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Speaker 2: in which there was a buckling of one of those

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Speaker 2: commercial buildings that's being converted into residential. Tell us what

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Speaker 2: you thought when that first happened, and you know just

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Speaker 2: your thought process and how we can prevent things like that.

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Speaker 8: Yeah, So these conversions of office to residential has been

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Speaker 8: a great program for New York. There was actually they

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Speaker 8: put a tax incentive in place to encourage it, and

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Speaker 8: there's been almost fifteen million square feet that's underway right now.

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Speaker 5: So take an old office buildings.

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Speaker 8: Creating housing where we have like a one point eight

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Speaker 8: eight percent vacancy rate in housing. So great public policy,

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Speaker 8: but not all conversions are created equal either, because this

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Speaker 8: is not just taking an office building and putting residential

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Speaker 8: into it. They were actually building another building on top

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Speaker 8: of the existing structure, which already takes a complex construction

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Speaker 8: project and makes it more complex. And you know, the

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Speaker 8: initial read out is that there was two columns that

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Speaker 8: were supposed to have been reinforced that were in reinforced,

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Speaker 8: which created.

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Speaker 5: That buckling that you're talking about.

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Speaker 8: You know, I think we're going to get better clarity

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Speaker 8: as to what ultimately happened and was it an engineering issue,

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Speaker 8: was it an issue on the project? But you know,

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Speaker 8: clearly this is a program that New York should continue

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Speaker 8: to lean into. It's really created a great dynamic for

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Speaker 8: New York. It's not only great in terms of creating housing,

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Speaker 8: but think about these little neighborhoods that we're creating that

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Speaker 8: used to be just commercial. Now people live there, They

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Speaker 8: support the retail and the restaurants on the weekends. You know,

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Speaker 8: there's these twenty four to seven walkable communities. So you

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Speaker 8: know what you have seen is lenders and investors have

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Speaker 8: raised the risk spectrum now because we're doing four thousand

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Speaker 8: units ourselves, both on the investing side and development side,

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Speaker 8: and we've looked at these things now and said, Okay,

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Speaker 8: if this risk is higher, if you're going to have

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Speaker 8: this overbuild, maybe we wouldn't do it today.

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Speaker 4: So talk to us about retail in big cities like

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Speaker 4: New York because when you walk out it, when you're

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Speaker 4: done with us today, you can walk down on Lexington Avenue.

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Speaker 4: I'm going to ask you to look right across the street.

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Speaker 4: There's a ton of unused retail space that's been there

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Speaker 4: since the pandemic. Can you go rent that today?

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Speaker 5: What's what's going on?

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Speaker 8: You know, it's it's again sub market by sub market

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Speaker 8: when you think about New York, right, so even this

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Speaker 8: point about these conversions.

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Speaker 4: Right, it's across the street from Bloomberg rent the space interesting.

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Speaker 8: The Upper east Side you know has had a more

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Speaker 8: challenging time than some of the others. But you go

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Speaker 8: by you know, Rock Center, the retail's packed, right, Obviously

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Speaker 8: you go down to Midtown South Chelsea retail packed, and

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Speaker 8: so what you're seeing in these are the neighborhoods where

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Speaker 8: people want to be. Grant Central has in terms of

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Speaker 8: you know, in Park Avenue one of the strongest retail

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Speaker 8: markets office markets in the country right now. And you

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Speaker 8: know it's also because of public transportation, right. I mean

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Speaker 8: we're building a three week on square.

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Speaker 2: Public transportation here at fifty ninth and lex I mean

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Speaker 2: there's something in.

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Speaker 4: Mexas I'm not getting something's wrong, Like it's hunted, it's mispriced,

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Speaker 4: and people were talking about Lexington Avenue at fifty eighth Street.

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Speaker 4: It doesn't get that much better than that, and this

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Speaker 4: seems been vacant and it's a big slug of space.

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Speaker 2: Right, It's not just a corner property, it's kind of

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Speaker 2: the whole block.

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Speaker 5: Yeah, look relief.

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Speaker 4: Scarlett and I were oute in San Francisco six months ago,

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Speaker 4: maybe for a real estate.

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Speaker 2: Yeah, and it was like everyone was bullish.

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Speaker 4: They were saying AI saved San Francisco. Literally, you know

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Speaker 4: it's now fully you can't get an apartment and all

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Speaker 4: the space is being leased like crazy. How's AI impacted

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Speaker 4: other markets? I think It's interesting when you think about

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Speaker 4: the AI.

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Speaker 8: There's compute power and there's people power yep, right, And

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Speaker 8: the compute power is happening all these data centers that

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Speaker 8: are billion built in these areas around the country with

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Speaker 8: energy is cheap.

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Speaker 5: You know.

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Speaker 8: People power is in the office buildings, right. And I

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Speaker 8: think what you're seeing in San Francisco is very focused

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Speaker 8: on tech. What you've seen in New York is an

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Speaker 8: incredible diverse ecosystem where you have this you know, you

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Speaker 8: have capital, you have creativity, you have collaboration, all combust

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Speaker 8: together through all these different industries, right. And so we're

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Speaker 8: seeing with our law firms seeing you in the capital markets.

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Speaker 8: I mean, think about this year in terms of you've

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Speaker 8: had the largest IPO, we had the largest M and A.

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Speaker 5: Wall Street earnings are off the roof. Right.

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Speaker 8: I just told you about the office market. I Sie

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Speaker 8: Nicks win the championship, right, we had the World Cup,

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Speaker 8: and in the energy in New York is unbelievable. But

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Speaker 8: AI is just like everything else, is a big driver

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Speaker 8: of the economic growth, either directly or indirectly with the

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Speaker 8: wealth effect, right, And that's something that we're getting a

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Speaker 8: great benefit and tailwind in New York.

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Speaker 2: For do you see Miami as a competitor to New

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Speaker 2: York for the for the financial sector?

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Speaker 5: You know, I don't think so.

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Speaker 8: I think that what you've seen over the last decade

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Speaker 8: is the financial sector, like a lot of other sectors,

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Speaker 8: have thought about a distributable workforce. So they need to

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Speaker 8: be in New York. This is where their customers, is

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Speaker 8: where the activity is. But they also can put people

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Speaker 8: in other parts of the country, whether it's Miami, whether

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Speaker 8: it's Dallas, whether it's Atlanta, and then when they go there,

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Speaker 8: you know, what you find is it does not have

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Speaker 8: the infrastructure to be able to be as competitive and

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Speaker 8: as New York.

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Speaker 6: Right.

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Speaker 5: It's it's you know, even there was an article.

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Speaker 8: This weekend that's now said that Miami costs more to

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Speaker 8: live than in New York, right, So it's you know,

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Speaker 8: it's it's going to get to a point where it's

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Speaker 8: going to have the same challenge of capacity issues that

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Speaker 8: we have in New York in places like Miami. I

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Speaker 8: think places like Dallas and Phoenix, and you know, they

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Speaker 8: actually have more capacity and that's why you're seeing other

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Speaker 8: firms announced, you know, relocating other operations there.

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Speaker 4: At Dallas has been a huge beneficiary and making grow.

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Speaker 2: That's the thing, right, there's there's no really, there's nothing

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Speaker 2: really hemming that market in.

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Speaker 8: Right where it's it's not the case in Miami, right

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Speaker 8: the congestion schools, everything's becomes a challenge there.

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