1 00:00:00,800 --> 00:00:04,040 Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 2 00:00:04,040 --> 00:00:06,920 Speaker 1: my co host Matt Miller. Every business day we bring 3 00:00:06,960 --> 00:00:11,520 Speaker 1: you interviews from CEOs, market pros, and Bloomberg experts, along 4 00:00:11,520 --> 00:00:15,520 Speaker 1: with essential market moving news. Find the Bloomberg Markets Podcast 5 00:00:15,600 --> 00:00:18,439 Speaker 1: on Apple Podcasts or wherever you listen to podcasts, and 6 00:00:18,480 --> 00:00:22,400 Speaker 1: at Bloomberg dot com slash podcast. All right, we've got 7 00:00:22,800 --> 00:00:26,560 Speaker 1: SMP off year today. Now that's that close to thirty pcent. 8 00:00:26,640 --> 00:00:29,360 Speaker 1: You've got bonds down double digits. I mean, where do 9 00:00:29,680 --> 00:00:33,199 Speaker 1: you go? How does your alternative investment portfolio looking. Let's 10 00:00:33,280 --> 00:00:35,640 Speaker 1: check in with some folks on the private equity side. 11 00:00:35,640 --> 00:00:38,040 Speaker 1: Andrea our Back, she's the head of private investments at 12 00:00:38,080 --> 00:00:43,200 Speaker 1: Cambridge Associates. Andrea talk to us about the private equity markets. 13 00:00:43,640 --> 00:00:46,600 Speaker 1: I mean, is it tough to get deals done? Do 14 00:00:46,640 --> 00:00:50,960 Speaker 1: you have to mark down your existing portfolio? How's the 15 00:00:50,960 --> 00:00:55,080 Speaker 1: private ecto market dealing with this volatility this year? Yeah, 16 00:00:55,400 --> 00:00:58,800 Speaker 1: a great question. Good good morning to you both um. 17 00:00:58,880 --> 00:01:02,279 Speaker 1: In terms of the private markets at the moment it 18 00:01:02,440 --> 00:01:05,440 Speaker 1: is today, tough to get deals done is an interesting question. 19 00:01:05,600 --> 00:01:08,160 Speaker 1: I think all parties have moved to the sidelines to 20 00:01:08,200 --> 00:01:10,360 Speaker 1: try to see what exactly is going to happen as 21 00:01:10,440 --> 00:01:13,240 Speaker 1: market conditions continue to infer in front of us. Right, 22 00:01:13,600 --> 00:01:17,080 Speaker 1: So a lot of transaction activity is stalling at the 23 00:01:17,120 --> 00:01:20,920 Speaker 1: moment um, and so folks are investors are waiting to see, 24 00:01:20,959 --> 00:01:23,559 Speaker 1: how do I make adjustments to my projections, what price 25 00:01:23,600 --> 00:01:26,319 Speaker 1: am I willing to pay, et cetera. In terms of 26 00:01:26,319 --> 00:01:30,679 Speaker 1: the markdowns, though, great question. Private equity UM is a 27 00:01:30,720 --> 00:01:34,480 Speaker 1: fairly a liquid asset class, right. You you invest, the 28 00:01:34,760 --> 00:01:39,120 Speaker 1: group you invest with, buy something presumably works with that asset, 29 00:01:39,200 --> 00:01:42,120 Speaker 1: and that company holds it for a number of years privately, 30 00:01:42,200 --> 00:01:44,360 Speaker 1: and then sells it at some point in the future. Right, 31 00:01:44,720 --> 00:01:47,800 Speaker 1: So things unfold over a multi year period rather than 32 00:01:47,840 --> 00:01:50,880 Speaker 1: on a daily, monthly or quarterly period as you as 33 00:01:50,920 --> 00:01:53,680 Speaker 1: you all obviously observe in the public markets. And so 34 00:01:53,720 --> 00:01:56,880 Speaker 1: in terms of markdowns um. And the other element that 35 00:01:56,920 --> 00:01:59,040 Speaker 1: I should note for you and your listeners is that 36 00:01:59,120 --> 00:02:01,920 Speaker 1: private equity be because it's it's private, it's a little 37 00:02:02,200 --> 00:02:04,520 Speaker 1: it's a liquid we often have a bit of a 38 00:02:04,600 --> 00:02:07,320 Speaker 1: lag in the reporting. Right, So the quarterly marks, if 39 00:02:07,320 --> 00:02:10,239 Speaker 1: you will, a bit of a reference point for one 40 00:02:10,320 --> 00:02:15,960 Speaker 1: cube um private equity. The private equity benchmark that we 41 00:02:16,080 --> 00:02:19,240 Speaker 1: track was down roughly thirty five basis points relative to 42 00:02:19,280 --> 00:02:21,800 Speaker 1: what the public markets were down in one queue, just 43 00:02:21,880 --> 00:02:24,919 Speaker 1: to give you a sense, so it will take it. 44 00:02:24,560 --> 00:02:26,919 Speaker 1: What do you think it is right now? I mean, um, 45 00:02:27,160 --> 00:02:31,120 Speaker 1: I had a friend who invests big sums in private 46 00:02:31,120 --> 00:02:35,280 Speaker 1: equity and he said he's worried they're not marking the market. Well, 47 00:02:35,919 --> 00:02:38,680 Speaker 1: it's a great question. And what happens is in private 48 00:02:38,680 --> 00:02:41,560 Speaker 1: equity is you mark to market in different ways, right, 49 00:02:41,600 --> 00:02:44,200 Speaker 1: instead of just taking what the public equity markets are 50 00:02:44,200 --> 00:02:48,000 Speaker 1: telling you. There are multiple ways to value a private business, 51 00:02:48,040 --> 00:02:51,000 Speaker 1: and most investors take a look at all the different 52 00:02:51,000 --> 00:02:53,880 Speaker 1: ways you can you can value that private business and 53 00:02:53,919 --> 00:02:57,040 Speaker 1: thread the needle through all of those valuations. So we 54 00:02:57,080 --> 00:03:00,400 Speaker 1: don't involve precincts reporting, so Cambridge Associates track asists on 55 00:03:00,440 --> 00:03:03,359 Speaker 1: a quarterly basis. We don't have all precincts in yet 56 00:03:03,400 --> 00:03:07,200 Speaker 1: for two Q, but preliminary returns look like private equity 57 00:03:07,240 --> 00:03:10,400 Speaker 1: will be down four hundred basis points from our benchmark. 58 00:03:10,480 --> 00:03:12,600 Speaker 1: So our benchmark is looking like it's going to come 59 00:03:12,639 --> 00:03:16,040 Speaker 1: down again about four hundred basis points. Still not in 60 00:03:16,120 --> 00:03:18,840 Speaker 1: lock step with the public markets though for the reasons 61 00:03:18,880 --> 00:03:21,680 Speaker 1: I just told you, all right, so, Andrea, I mean, 62 00:03:21,919 --> 00:03:24,440 Speaker 1: I guess the theme over the last twenty years has 63 00:03:24,520 --> 00:03:27,840 Speaker 1: just been, you know, in terms of asset allocation, a big, 64 00:03:27,880 --> 00:03:30,760 Speaker 1: big move into alternative investments. I'm thinking about the average 65 00:03:31,320 --> 00:03:35,000 Speaker 1: you know, UM university endowment for for example. So there's 66 00:03:35,000 --> 00:03:40,200 Speaker 1: a tons of equity capital. Uh, there is this a 67 00:03:40,280 --> 00:03:45,080 Speaker 1: buying opportunity of inordinate magnitude. And if so, can you 68 00:03:45,120 --> 00:03:47,760 Speaker 1: get debt capital to fund the deals as well? M 69 00:03:48,760 --> 00:03:53,880 Speaker 1: m yeah. The amount of dry powder, right, the amount 70 00:03:53,880 --> 00:03:59,640 Speaker 1: of capital that's been committed by endowment foundations, pensions, UM families, right, 71 00:04:00,360 --> 00:04:02,839 Speaker 1: every You know, there are many types of investors that 72 00:04:02,840 --> 00:04:05,480 Speaker 1: that put capital into the private equity markets, the private 73 00:04:05,480 --> 00:04:08,360 Speaker 1: investment markets. There is a lot of dry powder waiting 74 00:04:08,400 --> 00:04:11,280 Speaker 1: to get in, right, hundreds of billions of dollars. I 75 00:04:11,320 --> 00:04:13,520 Speaker 1: think in the US we are tracking it around seven 76 00:04:13,600 --> 00:04:16,040 Speaker 1: hundred billions. To give you a sense of what there's 77 00:04:16,080 --> 00:04:17,640 Speaker 1: always a lot of dr power. I mean I go 78 00:04:17,680 --> 00:04:19,640 Speaker 1: to Superinturn every year and they're always like one point 79 00:04:19,640 --> 00:04:24,000 Speaker 1: seven trillion dollars of dry powder. You know, Yes, the yardstick. 80 00:04:24,600 --> 00:04:26,560 Speaker 1: What does Foxo Tony fail I'm going to say about 81 00:04:26,600 --> 00:04:29,560 Speaker 1: it today, Yes, But I mean, is that dry is 82 00:04:29,600 --> 00:04:32,040 Speaker 1: that just is that just always there is there always 83 00:04:32,040 --> 00:04:35,200 Speaker 1: going to be a trillion plus of capital ready to go. 84 00:04:36,560 --> 00:04:39,640 Speaker 1: I mean a bigger let me let me pan out 85 00:04:39,680 --> 00:04:42,560 Speaker 1: to give a slightly bigger perspective, right, So, the institutional 86 00:04:42,560 --> 00:04:46,200 Speaker 1: private markets are in their fourth decade, so it's it's 87 00:04:46,200 --> 00:04:50,200 Speaker 1: a growing space that continues to attract capital regardless of 88 00:04:50,320 --> 00:04:53,560 Speaker 1: prevailing market conditions because it is a productive place to 89 00:04:53,600 --> 00:04:56,520 Speaker 1: earn a good return. So to your point, yes, I 90 00:04:56,560 --> 00:04:59,200 Speaker 1: agree with you. I think every year that amount of 91 00:04:59,279 --> 00:05:01,520 Speaker 1: dry powder is going to grow. Is it a good 92 00:05:01,520 --> 00:05:04,800 Speaker 1: buying opportunity in front of us compared to what it 93 00:05:05,000 --> 00:05:08,600 Speaker 1: was over the last two years? I would argue most likely. 94 00:05:09,080 --> 00:05:11,279 Speaker 1: But you've got to pick your way through this market 95 00:05:11,680 --> 00:05:14,880 Speaker 1: taking in all of this information that we that's continually 96 00:05:14,880 --> 00:05:19,200 Speaker 1: getting updated every day. Inflation, interest rates, supply chain or 97 00:05:19,800 --> 00:05:22,960 Speaker 1: all of these factors can drive the long term value 98 00:05:23,000 --> 00:05:25,640 Speaker 1: of whatever company you're going to buy in the next year. 99 00:05:26,160 --> 00:05:29,000 Speaker 1: So you've got to be careful, all right, Andrea, great stuff. 100 00:05:29,040 --> 00:05:31,920 Speaker 1: I always appreciate getting your perspective on the private equity market. 101 00:05:32,120 --> 00:05:35,360 Speaker 1: Andrea our back. She's head of private Investments at Cambridge 102 00:05:35,400 --> 00:05:38,799 Speaker 1: Associates that's located up in Boston High Street. I believe 103 00:05:38,880 --> 00:05:43,800 Speaker 1: if I recall, uh, lots of good pe up there Cambridge. 104 00:05:43,920 --> 00:05:46,640 Speaker 1: She went to school there as well, so I understand, Yeah, 105 00:05:46,680 --> 00:05:53,040 Speaker 1: exactly right, they got them smart folks up there. Now 106 00:05:53,040 --> 00:05:54,880 Speaker 1: I'm very excited because I get talked to one of 107 00:05:54,880 --> 00:05:58,160 Speaker 1: my favorite reporters that ever and about one of my 108 00:05:58,240 --> 00:06:03,400 Speaker 1: favorite things. Um So Elizabeth Behrman covers runs the auto 109 00:06:03,440 --> 00:06:07,480 Speaker 1: coverage for US in Germany, and she's covering the Volkswagen 110 00:06:07,600 --> 00:06:12,880 Speaker 1: sale along with a team of really great journalists. Uh. 111 00:06:13,160 --> 00:06:16,320 Speaker 1: This the I p O of Porsche. Um. She joins 112 00:06:16,400 --> 00:06:19,680 Speaker 1: us now out of Munich. Elizabeth, thanks so much. Tell 113 00:06:19,760 --> 00:06:22,159 Speaker 1: us what we what we know about, just the details, 114 00:06:22,200 --> 00:06:24,480 Speaker 1: the sort of headline details. When is this ip A 115 00:06:24,560 --> 00:06:27,080 Speaker 1: going to happen, how much are they gonna sell? And 116 00:06:28,000 --> 00:06:32,320 Speaker 1: how popular is it right now? Well, it's one of 117 00:06:32,320 --> 00:06:36,280 Speaker 1: the most exciting deals in Europe today and also for 118 00:06:36,360 --> 00:06:39,839 Speaker 1: some years. UM. If Porter or v W Rad gets 119 00:06:39,880 --> 00:06:42,720 Speaker 1: this away at the top of the target range, which 120 00:06:42,760 --> 00:06:45,840 Speaker 1: we understand to be evaluation of as much as eighty 121 00:06:45,920 --> 00:06:49,800 Speaker 1: five billion euros um, it will be Europe's biggest ever 122 00:06:50,279 --> 00:06:52,719 Speaker 1: um I p O. And this is happening at the 123 00:06:52,760 --> 00:06:56,000 Speaker 1: time of course, you were just talking about it. Markets 124 00:06:56,000 --> 00:06:59,359 Speaker 1: at tanking conditions are really really difficult. But this is 125 00:06:59,360 --> 00:07:03,799 Speaker 1: an iconic spotsmaker and known around the world, and obviously 126 00:07:04,400 --> 00:07:07,400 Speaker 1: there is a unique opportunity to invest. Yeah, I'm gonna 127 00:07:07,400 --> 00:07:10,880 Speaker 1: go ahead and say they make the single greatest sports 128 00:07:10,880 --> 00:07:15,440 Speaker 1: car in the world. Well that's big and um, you know, 129 00:07:15,640 --> 00:07:19,840 Speaker 1: almost at any price. And at one time I remember 130 00:07:19,880 --> 00:07:22,960 Speaker 1: covering poor show when I first started at Bloomberg and Frankfurt, 131 00:07:23,000 --> 00:07:25,480 Speaker 1: it was the most profitable car maker in the world. 132 00:07:25,560 --> 00:07:27,920 Speaker 1: This is before the whole debacle where they tried to 133 00:07:28,520 --> 00:07:32,240 Speaker 1: sort of behind the back of the market by Volkswagen 134 00:07:32,280 --> 00:07:35,080 Speaker 1: and then backfired and then Volkswagen ended up buying them. 135 00:07:35,120 --> 00:07:38,760 Speaker 1: But um, they still are. They still have to be, Elizabeth, 136 00:07:38,760 --> 00:07:42,560 Speaker 1: one of the most profitable carmakers out there, right, they 137 00:07:42,600 --> 00:07:50,040 Speaker 1: absolutely are. Usually their their returns around fifteen to eight um. 138 00:07:50,080 --> 00:07:55,000 Speaker 1: That's still quite away below Ferrari obviously, and that's one 139 00:07:55,040 --> 00:07:58,320 Speaker 1: of the car makers they're tasting as well. Um, probably 140 00:07:58,360 --> 00:08:01,520 Speaker 1: they won't get to you know, Ferrari levels, but they 141 00:08:01,520 --> 00:08:05,360 Speaker 1: have in terms of valuations. You mean, no, in terms 142 00:08:05,400 --> 00:08:08,720 Speaker 1: of returns on some selling cars. Okay, okay, I was 143 00:08:08,760 --> 00:08:11,640 Speaker 1: just thinking in terms of because everybody has used Ferrari 144 00:08:11,840 --> 00:08:16,600 Speaker 1: is kind of a measuring stick. Um when comparing car makers. 145 00:08:17,480 --> 00:08:20,360 Speaker 1: I think they are worth like twenty times earnings, and 146 00:08:20,680 --> 00:08:22,960 Speaker 1: other car makers like in the US or worth like 147 00:08:23,040 --> 00:08:26,480 Speaker 1: five to six um. And then you've got a company 148 00:08:26,520 --> 00:08:30,000 Speaker 1: like Tesla that just comes and blows things away. Um, 149 00:08:30,000 --> 00:08:34,960 Speaker 1: where are we excited to see Porsche? And we're not 150 00:08:35,040 --> 00:08:39,080 Speaker 1: exactly sure yet, but they are certainly targeting that luxury 151 00:08:39,200 --> 00:08:42,880 Speaker 1: premium where Ferrari is settled at. And that's also what 152 00:08:42,960 --> 00:08:46,480 Speaker 1: they've been telling investors that they can add certain features 153 00:08:46,559 --> 00:08:49,560 Speaker 1: that they can translate the excitement that obviously with you 154 00:08:49,679 --> 00:08:54,040 Speaker 1: as well. These vehicles generate into a much bigger evaluation 155 00:08:54,480 --> 00:08:59,280 Speaker 1: than where they currently are inside the v W stable, 156 00:09:00,040 --> 00:09:03,200 Speaker 1: and if they get to that evaluation of eighty five billion, 157 00:09:03,480 --> 00:09:06,720 Speaker 1: that would be roughly on par with the entire value 158 00:09:06,800 --> 00:09:09,880 Speaker 1: of the W. So, Elizabeth, I understand that there's some 159 00:09:10,000 --> 00:09:13,520 Speaker 1: weird shareholder structure thing here, the Porsche family and all 160 00:09:13,520 --> 00:09:15,720 Speaker 1: that kind of stuff. You and some people think that 161 00:09:15,720 --> 00:09:17,120 Speaker 1: that might be or could be a little bit of 162 00:09:17,120 --> 00:09:21,719 Speaker 1: a drag on valuation. Can you explain that? Yeah, it's 163 00:09:21,720 --> 00:09:24,520 Speaker 1: I mean, it's it's hellishly complex. You you would know 164 00:09:24,600 --> 00:09:27,000 Speaker 1: about this because you were around at the time of 165 00:09:27,240 --> 00:09:31,760 Speaker 1: the big takeover battle between Porsche and b W. But 166 00:09:31,960 --> 00:09:36,080 Speaker 1: essentially m v W is a family run business and 167 00:09:36,280 --> 00:09:40,200 Speaker 1: Porsche before the takeover was also a family run business. 168 00:09:40,240 --> 00:09:43,920 Speaker 1: And this deal is very much driven also by the 169 00:09:44,040 --> 00:09:48,240 Speaker 1: Porsche p a billionaire family clan trying to get back 170 00:09:48,320 --> 00:09:54,120 Speaker 1: a medicum of influence on decision making um At Porsche. 171 00:09:54,880 --> 00:09:57,679 Speaker 1: It's too complex to get into this in this radio 172 00:09:57,720 --> 00:10:02,000 Speaker 1: and TV right now, but what the family will emerge 173 00:10:02,160 --> 00:10:06,319 Speaker 1: with if the steel goes ahead is a blocking minority 174 00:10:06,400 --> 00:10:11,440 Speaker 1: stake which will allow them to influence decisions on where 175 00:10:11,480 --> 00:10:14,360 Speaker 1: to make cars, for instance, on on the key decisions 176 00:10:14,400 --> 00:10:17,840 Speaker 1: in future, so they'll be they'll own it again. By 177 00:10:17,880 --> 00:10:20,400 Speaker 1: the way, John Tucker was talking about Ferdinand Porsche earlier. 178 00:10:20,440 --> 00:10:24,080 Speaker 1: He's the original family members designed the Volkswagen Bug and 179 00:10:24,120 --> 00:10:26,400 Speaker 1: then the three fifty six and so on. Then he 180 00:10:26,480 --> 00:10:29,360 Speaker 1: had a son, Fairy, who designed UM I think the 181 00:10:30,200 --> 00:10:33,120 Speaker 1: which is what Tom Cruise drove in Risky business, and 182 00:10:33,120 --> 00:10:37,719 Speaker 1: then Wolfgang Porsche as the grandson. But his cousin um 183 00:10:37,760 --> 00:10:41,520 Speaker 1: what was Pisha's I'm blanking on Friedrich. What was PISA's 184 00:10:41,520 --> 00:10:45,559 Speaker 1: first name? I'm blanking on Pisha's first name. Pe Okay, 185 00:10:45,600 --> 00:10:50,120 Speaker 1: So Pieche was uh Wilkins cousin. He ran Volkswagen. He's 186 00:10:50,160 --> 00:10:52,200 Speaker 1: the one who made all these huge takeovers. He bought 187 00:10:52,240 --> 00:10:56,480 Speaker 1: all these marquis brands like Bugatti and Ducati. And it'll 188 00:10:56,480 --> 00:11:00,240 Speaker 1: be interesting to see how Porsche um does. It won't 189 00:11:00,240 --> 00:11:02,439 Speaker 1: be completely outside of the Volkswagen family. They're going to 190 00:11:02,520 --> 00:11:04,920 Speaker 1: have the same CEO for Porsche and for Volkswagen, and 191 00:11:04,920 --> 00:11:09,439 Speaker 1: they'll still be able to use the same resources. Yeah. Absolutely, 192 00:11:09,440 --> 00:11:11,439 Speaker 1: And that your role. Just to come back to your 193 00:11:11,520 --> 00:11:16,360 Speaker 1: earlier question as well. Um, that's also triggering governance concern 194 00:11:16,760 --> 00:11:19,920 Speaker 1: because the question that is raised, of course that well, 195 00:11:19,960 --> 00:11:23,400 Speaker 1: how independent is Porsche really ever going to be if 196 00:11:23,400 --> 00:11:27,120 Speaker 1: you've got the same guy running the show? I know, 197 00:11:27,280 --> 00:11:30,800 Speaker 1: the the economy in Europe in particular is rough. Is 198 00:11:30,840 --> 00:11:34,280 Speaker 1: anybody buying these expensive cars? I mean, what's the forecast 199 00:11:34,280 --> 00:11:37,040 Speaker 1: for who's not g T three right now? You'll be 200 00:11:37,040 --> 00:11:38,960 Speaker 1: on a two year waiting list? Really let you on it? 201 00:11:39,080 --> 00:11:43,000 Speaker 1: Yeah wow, um, I mean the less expensive cars are 202 00:11:43,000 --> 00:11:45,560 Speaker 1: bigger set are you know, easier to get? But yeah, 203 00:11:45,640 --> 00:11:47,599 Speaker 1: tell us about the sales right now, and we have 204 00:11:47,720 --> 00:11:49,880 Speaker 1: some positive sales news out of in terms of cars 205 00:11:49,880 --> 00:11:53,199 Speaker 1: out of Europe today, didn't we Yeah, exactly. I mean, 206 00:11:53,200 --> 00:11:55,040 Speaker 1: on the face of it, it looked as though the 207 00:11:55,080 --> 00:11:58,920 Speaker 1: market is getting better across Europe, but I mean it's 208 00:11:58,920 --> 00:12:04,079 Speaker 1: been a year declines, mostly because there weren't enough A 209 00:12:04,200 --> 00:12:08,319 Speaker 1: semiconductors to build cars. Um. But now what we're seeing 210 00:12:08,640 --> 00:12:12,160 Speaker 1: is that the inflation concerns, the concerns about energy build 211 00:12:12,400 --> 00:12:15,960 Speaker 1: are increasingly driving and consumer behavior. So while we had 212 00:12:15,600 --> 00:12:19,520 Speaker 1: arise this month and last month, that's still way below 213 00:12:19,559 --> 00:12:22,480 Speaker 1: what we had in twin And just to turn back 214 00:12:22,559 --> 00:12:26,000 Speaker 1: to Porsche, I mean, this is what the bankers on 215 00:12:26,080 --> 00:12:28,719 Speaker 1: the deal and what the Porsche exacts will have been 216 00:12:28,720 --> 00:12:33,000 Speaker 1: telling investors as they've been road sharing this, which is 217 00:12:33,200 --> 00:12:36,240 Speaker 1: they would have been telling them, well, we're Porter, we're 218 00:12:36,360 --> 00:12:39,600 Speaker 1: Todd luxury car make and were an iconic brand. We're 219 00:12:39,679 --> 00:12:42,319 Speaker 1: kind of exempt from all of that. And to an 220 00:12:42,360 --> 00:12:45,640 Speaker 1: extent that's true as well. I would I suppose it's 221 00:12:46,320 --> 00:12:48,080 Speaker 1: when is it still happen? When when can I buy 222 00:12:48,080 --> 00:12:52,400 Speaker 1: my start? What day are we looking at? Elizabeth? Um? 223 00:12:52,640 --> 00:12:55,200 Speaker 1: It's not completely officially yet, but it will be very 224 00:12:55,320 --> 00:12:59,040 Speaker 1: very shortly at some point in this month. A good 225 00:12:59,080 --> 00:13:01,360 Speaker 1: stuff gonna be really interesting. I think a lot of 226 00:13:01,400 --> 00:13:04,280 Speaker 1: people are gonna just go nuts over this deal. All right, Elizabeth, 227 00:13:04,280 --> 00:13:06,720 Speaker 1: thanks so much for joining us, Elizabeth Berman. I gotta 228 00:13:06,720 --> 00:13:09,839 Speaker 1: tell you a team quality also of these cars, it's 229 00:13:09,880 --> 00:13:14,320 Speaker 1: just it's another level, right because I got my uh 230 00:13:14,480 --> 00:13:19,319 Speaker 1: nine eleven Carrera s in two thousand fourteen. Never had 231 00:13:19,360 --> 00:13:22,760 Speaker 1: any kind of mechanical never have any mechanical issue or 232 00:13:22,800 --> 00:13:25,800 Speaker 1: even electronics issues. Right. Meanwhile, a lot of people you 233 00:13:25,840 --> 00:13:27,640 Speaker 1: go out and you buy a new truck and then 234 00:13:27,640 --> 00:13:31,360 Speaker 1: two weeks later, your front collision warning light is on, 235 00:13:31,600 --> 00:13:35,120 Speaker 1: your trus control isn't working, the lane split lane keep 236 00:13:35,120 --> 00:13:37,880 Speaker 1: assist isn't working, and you know, two weeks into your 237 00:13:37,880 --> 00:13:41,840 Speaker 1: purchase and you've got these kind of problems. We'll see 238 00:13:41,840 --> 00:13:44,640 Speaker 1: about it, all right, Porsche, I p O. That's gonna 239 00:13:44,679 --> 00:13:50,080 Speaker 1: be fun. All right. It looks like the railroad guys 240 00:13:50,080 --> 00:13:52,360 Speaker 1: that got a deal done with their unions, so the 241 00:13:52,400 --> 00:13:55,439 Speaker 1: freight will continue moving. That is good news for everybody 242 00:13:55,600 --> 00:13:57,959 Speaker 1: depends on that kind of stuff, and good news for 243 00:13:57,960 --> 00:14:00,360 Speaker 1: the US economy. Let's bring on Tony Hatch. Tony has 244 00:14:00,360 --> 00:14:03,720 Speaker 1: been covering the railroad and trucking industry for decades on 245 00:14:03,800 --> 00:14:08,280 Speaker 1: Wall Streets guy's own consulting company, ABH Consulting. Um, he's 246 00:14:08,320 --> 00:14:10,120 Speaker 1: the guy to go to, Tony. Thanks much for joining 247 00:14:10,240 --> 00:14:13,760 Speaker 1: us here. It seems like a pretty good deal. It 248 00:14:13,800 --> 00:14:15,600 Speaker 1: seems like the workers got a lot of what they 249 00:14:15,600 --> 00:14:18,120 Speaker 1: were looking for. And I guess it's good for the 250 00:14:18,160 --> 00:14:21,080 Speaker 1: railroads because they continue to move stuff around. What do 251 00:14:21,120 --> 00:14:24,640 Speaker 1: you think? So I never thought there would was going 252 00:14:24,720 --> 00:14:28,280 Speaker 1: to be a strike? Um, you recall the process. This 253 00:14:28,400 --> 00:14:30,560 Speaker 1: is just a part of the product. This is just 254 00:14:30,600 --> 00:14:34,400 Speaker 1: the ongoing wage negotiations and how the process plays out 255 00:14:34,840 --> 00:14:36,560 Speaker 1: with under the Rail and Labor Act, where it goes 256 00:14:36,600 --> 00:14:38,960 Speaker 1: on forever and they're all these cooling off periods. What's 257 00:14:39,000 --> 00:14:41,520 Speaker 1: different about it this time is that labor had a 258 00:14:41,520 --> 00:14:44,280 Speaker 1: lot of cards to play. Labor shortages in general, supply 259 00:14:44,360 --> 00:14:48,960 Speaker 1: chain issues, Democratic House, Democratic White House, rail service issues, 260 00:14:49,000 --> 00:14:52,760 Speaker 1: making railroads already in the penalty box in Washington, right. 261 00:14:52,800 --> 00:14:55,880 Speaker 1: So the the rail labor leaders did the smart thing, 262 00:14:55,880 --> 00:14:57,800 Speaker 1: which is go to the very end of the of 263 00:14:57,840 --> 00:15:00,960 Speaker 1: the story, why settle early? Every day you wait is 264 00:15:01,040 --> 00:15:04,680 Speaker 1: pressure on them, and by waiting until almost the last minute, 265 00:15:05,560 --> 00:15:08,360 Speaker 1: they were able to secure an additional eleven bonus and 266 00:15:08,440 --> 00:15:11,480 Speaker 1: some changes in work rules about how attendance is kept 267 00:15:11,720 --> 00:15:14,600 Speaker 1: literally and uh sick days. So they've got a pretty 268 00:15:14,640 --> 00:15:17,520 Speaker 1: fine package. Hopefully they'll ratify it. From the From the 269 00:15:17,600 --> 00:15:19,760 Speaker 1: rail point of view, all of their service issues and 270 00:15:19,800 --> 00:15:22,840 Speaker 1: their lack of growth issues come down to labor shortage, 271 00:15:23,120 --> 00:15:28,000 Speaker 1: high attrition, the great resignation, um, etcetera, etcetera. It takes 272 00:15:28,080 --> 00:15:30,760 Speaker 1: nine months to two from hiring to putting somebody in 273 00:15:30,760 --> 00:15:33,960 Speaker 1: the field. Uh, it's a network business. Or shortages and 274 00:15:34,080 --> 00:15:38,360 Speaker 1: small regions can affect the entire continent. So the for railroads, 275 00:15:38,360 --> 00:15:40,760 Speaker 1: if they get labor peace, that's a big victory. They 276 00:15:40,760 --> 00:15:43,000 Speaker 1: need to get people into the field and pick up 277 00:15:43,000 --> 00:15:45,000 Speaker 1: pent up demand. So, Tony, one of the things I 278 00:15:45,120 --> 00:15:46,880 Speaker 1: learned about, you know, kind of reading all this stuff 279 00:15:46,920 --> 00:15:49,680 Speaker 1: about you know, the conditions for the workers is this 280 00:15:49,720 --> 00:15:54,280 Speaker 1: percision railroading has really been tough on rail workers. Explain 281 00:15:54,360 --> 00:15:57,400 Speaker 1: that side of the story. What precision railroading is. So 282 00:15:58,040 --> 00:15:59,400 Speaker 1: this is you know, I could take up the rest 283 00:15:59,400 --> 00:16:00,640 Speaker 1: of your time, and I know you have the pown 284 00:16:00,720 --> 00:16:04,800 Speaker 1: to talk about, but decision schedule railroading is um. You know, 285 00:16:05,040 --> 00:16:08,400 Speaker 1: Hunter Harrison was a famous now a late rail CEO, 286 00:16:08,480 --> 00:16:10,480 Speaker 1: and it's really a way of of doing more with 287 00:16:10,600 --> 00:16:13,320 Speaker 1: less and trying to bring full schedule into a railroad. 288 00:16:13,360 --> 00:16:16,280 Speaker 1: Railroads were only semi scheduled before you would hold a 289 00:16:16,280 --> 00:16:19,400 Speaker 1: train to get more volume to justify moving the train 290 00:16:19,480 --> 00:16:21,880 Speaker 1: because of the high costs of a train. Start and 291 00:16:21,920 --> 00:16:24,560 Speaker 1: Hunter reversed that said, move the trains, that if we 292 00:16:24,560 --> 00:16:27,440 Speaker 1: will them regularly, will get the volume eventually. Uh. And 293 00:16:27,440 --> 00:16:30,920 Speaker 1: in so doing we need fewer of everything, including people. Uh. 294 00:16:30,960 --> 00:16:33,920 Speaker 1: That process, which we worked so well in Canada, was 295 00:16:33,960 --> 00:16:39,320 Speaker 1: brought to the US starting and I was just gonna 296 00:16:39,360 --> 00:16:41,840 Speaker 1: say that it was mostly over with. It is being 297 00:16:42,000 --> 00:16:45,760 Speaker 1: used as the as the boogeyman by labor and by 298 00:16:46,200 --> 00:16:49,760 Speaker 1: Washington regulators and whatnot. It's not the cause really of 299 00:16:49,800 --> 00:16:53,680 Speaker 1: this issue. The the the relads have really gone beyond 300 00:16:53,720 --> 00:16:56,400 Speaker 1: the cost cutting phase by the beginning of the pandemic. 301 00:16:56,560 --> 00:16:59,680 Speaker 1: The pandemic is the cause that when people didn't come back, 302 00:17:00,280 --> 00:17:02,360 Speaker 1: the rail workers who had to deal with the recovery. 303 00:17:02,360 --> 00:17:05,080 Speaker 1: If you remember in the second all the people are 304 00:17:05,080 --> 00:17:08,640 Speaker 1: out there who were working, we're working doubly hard. Uh. 305 00:17:08,720 --> 00:17:12,200 Speaker 1: It was they were just stressed. They were massively impacted 306 00:17:12,200 --> 00:17:15,399 Speaker 1: by only Crown. You can line up rail, labor and 307 00:17:15,760 --> 00:17:18,600 Speaker 1: vaccines in a in a complete opposite order, right, and 308 00:17:18,640 --> 00:17:22,320 Speaker 1: you can they So all of this stress has been 309 00:17:22,320 --> 00:17:25,600 Speaker 1: attributed to PSR PSR like any kind of just in 310 00:17:25,720 --> 00:17:27,960 Speaker 1: time system. And this instead of by a just in 311 00:17:28,040 --> 00:17:30,560 Speaker 1: time by a shipper, this is by a carrier. If 312 00:17:30,600 --> 00:17:33,600 Speaker 1: you will that that makes the system a little more fragile. 313 00:17:33,600 --> 00:17:36,240 Speaker 1: And I won't say it didn't contribute to the problems 314 00:17:36,320 --> 00:17:38,960 Speaker 1: once they got a shock, but they aren't the cause 315 00:17:39,000 --> 00:17:41,879 Speaker 1: of the problem. The shock was. Yeah, I want I 316 00:17:41,880 --> 00:17:45,200 Speaker 1: wanted to ask you about the conditions because I suspected 317 00:17:45,280 --> 00:17:49,159 Speaker 1: that the media to which I listened is mostly just 318 00:17:49,240 --> 00:17:51,480 Speaker 1: super lefties. But I heard you know, they weren't getting 319 00:17:51,480 --> 00:17:54,359 Speaker 1: any sick days. There's like one guy running a whole train, 320 00:17:55,040 --> 00:17:59,200 Speaker 1: um and uh, they haven't gotten a raisin forever. It 321 00:17:59,359 --> 00:18:01,520 Speaker 1: just seem like they were due for a for a 322 00:18:01,560 --> 00:18:04,200 Speaker 1: good deal. Well, here's the deal under the rail labor actor. 323 00:18:04,280 --> 00:18:07,200 Speaker 1: You know, they didn't get a raised because once your contract, 324 00:18:07,560 --> 00:18:10,200 Speaker 1: the terms are out the contractors in perpetuity, the terms 325 00:18:10,240 --> 00:18:12,720 Speaker 1: are up, it's ready to go. You're you're working under 326 00:18:12,760 --> 00:18:16,320 Speaker 1: the old rules. They didn't get a raise every three years. 327 00:18:16,359 --> 00:18:18,560 Speaker 1: They go through this process and it actually turns into 328 00:18:18,840 --> 00:18:21,320 Speaker 1: a five year process where you get back pay. So 329 00:18:21,359 --> 00:18:23,880 Speaker 1: they got back pay. That is a normal I mean 330 00:18:23,960 --> 00:18:26,800 Speaker 1: for seventy years that's going on. They didn't not get 331 00:18:26,800 --> 00:18:30,080 Speaker 1: a raised because they the rail managers were cheap. They 332 00:18:30,080 --> 00:18:31,879 Speaker 1: couldn't give them a raise because they didn't have a 333 00:18:31,880 --> 00:18:35,000 Speaker 1: new contract yet. Until they ratified this contract, they won't 334 00:18:35,040 --> 00:18:37,879 Speaker 1: get the raise. That is, they wouldn't have accepted a 335 00:18:37,960 --> 00:18:40,160 Speaker 1: raise when rail was tried to give them some in fact, 336 00:18:40,280 --> 00:18:42,080 Speaker 1: in order to get people to go, because they didn't 337 00:18:42,080 --> 00:18:45,440 Speaker 1: want that to impact this national round of negotiations. They 338 00:18:45,440 --> 00:18:48,040 Speaker 1: were working harder, there is no doubt about it. They 339 00:18:48,080 --> 00:18:50,960 Speaker 1: also were politically a student enough to see the railroads 340 00:18:51,000 --> 00:18:54,440 Speaker 1: had become public issues as part of the supply chain crisis. 341 00:18:54,720 --> 00:18:56,959 Speaker 1: You know that so dominated say the spring and summer, 342 00:18:57,160 --> 00:19:00,000 Speaker 1: they were called in three separate hearings to be taken 343 00:19:00,040 --> 00:19:03,120 Speaker 1: to the woodshed by their regulator, the STB. So rail 344 00:19:03,200 --> 00:19:06,240 Speaker 1: labor has definitely been pounding the table about this because 345 00:19:06,280 --> 00:19:08,679 Speaker 1: they know that if they had gone on stripe, the 346 00:19:08,760 --> 00:19:14,199 Speaker 1: ultimate arbiter of their wages is Congress. Jeez, you know, 347 00:19:14,240 --> 00:19:17,040 Speaker 1: publicly in all those lefty publications that I like to read. 348 00:19:17,400 --> 00:19:20,360 Speaker 1: That's right, exactly, all right, Tony, thank you so much. 349 00:19:20,840 --> 00:19:22,399 Speaker 1: Next time, we'll get you in the studio because we've 350 00:19:22,400 --> 00:19:24,720 Speaker 1: got a whole supply chain thing we want to go down. 351 00:19:24,880 --> 00:19:27,240 Speaker 1: Tony Hatch, consultant and analysts at a B H Consulting. 352 00:19:32,000 --> 00:19:35,879 Speaker 1: Let's bring in Lee Classgow. He's the finally senior analysts 353 00:19:35,880 --> 00:19:38,639 Speaker 1: covering all the transportation stuff for Bloomberg Intelligence. Lee, we 354 00:19:38,680 --> 00:19:40,560 Speaker 1: got a million things to talk about. We spoke with 355 00:19:40,600 --> 00:19:43,760 Speaker 1: your old buddy Tony Hatch earlier this morning about the 356 00:19:43,800 --> 00:19:46,719 Speaker 1: trained stuff. Lee. Everybody, I gotta tell you, everyone for 357 00:19:46,800 --> 00:19:50,320 Speaker 1: days has been like, get Lee Classo on the horn exactly. Well, 358 00:19:50,320 --> 00:19:52,760 Speaker 1: he's probably on a beach somewhere knowing him. But Lee, 359 00:19:52,760 --> 00:19:54,880 Speaker 1: thanks so much for joining us here. Let's start with FedEx. 360 00:19:55,400 --> 00:19:58,560 Speaker 1: Man that stocks taken a beating today. Didn't people know 361 00:19:58,640 --> 00:20:01,360 Speaker 1: there's kind of recession to She's out there supply chain 362 00:20:01,400 --> 00:20:04,320 Speaker 1: issues out there. Yeah, but you know there are all 363 00:20:04,320 --> 00:20:06,080 Speaker 1: those things. But you know what I would say about 364 00:20:06,119 --> 00:20:09,679 Speaker 1: FedEx and the pre announcement, which was extremely disappointing to 365 00:20:09,720 --> 00:20:11,679 Speaker 1: say the least, is that you know a lot of 366 00:20:11,680 --> 00:20:14,160 Speaker 1: what FedEx is facing is not the macro it's really 367 00:20:14,200 --> 00:20:17,800 Speaker 1: company specific. Their express business, which is a lot of 368 00:20:17,800 --> 00:20:21,639 Speaker 1: their international stuff has really suffered because of an integration 369 00:20:21,680 --> 00:20:26,040 Speaker 1: with TNT. It's an acquisition they bought six years ago, uh, 370 00:20:26,080 --> 00:20:29,879 Speaker 1: and it's really having problems because they didn't mention specifically 371 00:20:29,960 --> 00:20:32,560 Speaker 1: in their release that uh, you know, they were dealing 372 00:20:32,640 --> 00:20:36,040 Speaker 1: with some service issues in Europe and we just you 373 00:20:36,040 --> 00:20:38,720 Speaker 1: know read that as you know t n T and 374 00:20:38,840 --> 00:20:41,480 Speaker 1: you know, uh, the fact that it's going to take 375 00:20:41,520 --> 00:20:44,679 Speaker 1: even longer for this acquisition to pay off. And the 376 00:20:44,720 --> 00:20:47,679 Speaker 1: whole you know, genesis of the acquisition back in sixteen 377 00:20:47,800 --> 00:20:51,040 Speaker 1: was to put it on better footing against UPS and 378 00:20:51,359 --> 00:20:54,400 Speaker 1: deutsch A Post and and just just on on those 379 00:20:54,440 --> 00:20:57,840 Speaker 1: two other competitors. You know, Deutscha Post held a capital 380 00:20:57,840 --> 00:21:00,800 Speaker 1: markets day in September eight and they didn't see anything 381 00:21:00,920 --> 00:21:03,959 Speaker 1: as terrible as fed X as seeing, and UPS at 382 00:21:03,960 --> 00:21:06,880 Speaker 1: a sell side event on September nine, and they maintain 383 00:21:06,920 --> 00:21:11,080 Speaker 1: their two outlook. So a lot of this, you know, listen, 384 00:21:11,200 --> 00:21:13,240 Speaker 1: I'm not going to say that everything is fantastic and 385 00:21:13,280 --> 00:21:16,000 Speaker 1: the world is great. Well, you know, the world is great, 386 00:21:16,040 --> 00:21:19,520 Speaker 1: but like demand, demand is moderating, the economy is moderating. 387 00:21:19,560 --> 00:21:22,760 Speaker 1: Inflation is real. It's impacting demand, but you know it's 388 00:21:22,800 --> 00:21:25,199 Speaker 1: not in a way that you know, we're seeing in 389 00:21:25,200 --> 00:21:27,520 Speaker 1: the shares of fed X because we just think that 390 00:21:27,520 --> 00:21:30,320 Speaker 1: that is really company specific. And you know, FedEx has 391 00:21:30,320 --> 00:21:34,639 Speaker 1: had a long line of um of disappointing announcements. To 392 00:21:34,960 --> 00:21:38,680 Speaker 1: be frank, uh, you know, they really need to focus 393 00:21:38,840 --> 00:21:41,920 Speaker 1: on their operations. A lot of a lot of analysts 394 00:21:42,000 --> 00:21:46,399 Speaker 1: kind of question the ground and Express separate models, uh 395 00:21:46,520 --> 00:21:51,040 Speaker 1: networks being more like a UPS and more integrated provider. 396 00:21:51,359 --> 00:21:54,880 Speaker 1: You know, the fact is that the Express margins from 397 00:21:54,880 --> 00:21:57,399 Speaker 1: the release and in in the one the first quarter 398 00:21:57,720 --> 00:22:00,760 Speaker 1: are about one point seven percent versus five point two 399 00:22:00,800 --> 00:22:04,040 Speaker 1: percent last year. UM the ground, you know, their goals 400 00:22:04,080 --> 00:22:06,879 Speaker 1: get double digit margins, it was only eight point five. 401 00:22:07,440 --> 00:22:09,239 Speaker 1: And what I will say is that they're less than 402 00:22:09,280 --> 00:22:13,240 Speaker 1: truckload business, which is FedEx fright is on fire. They've 403 00:22:13,280 --> 00:22:17,159 Speaker 1: had margins of at FedEx right um and in the 404 00:22:17,200 --> 00:22:19,119 Speaker 1: first quarter, and a lot of that is not because 405 00:22:19,119 --> 00:22:21,399 Speaker 1: the volumes, because they have great pricing power in that 406 00:22:21,480 --> 00:22:24,000 Speaker 1: business and and that's a real strong business and some 407 00:22:24,040 --> 00:22:27,520 Speaker 1: of its competitors or or companies like Old Dominion and XPO. 408 00:22:27,880 --> 00:22:30,400 Speaker 1: But the issue you're saying, so FedEx is worse off 409 00:22:30,440 --> 00:22:36,240 Speaker 1: than Deutscha Post and UPS still um, the world as 410 00:22:36,240 --> 00:22:39,640 Speaker 1: awesome as it is, has seen or at least, let's say, 411 00:22:39,680 --> 00:22:42,719 Speaker 1: the Port of l A has seen a plunge in shipments, 412 00:22:42,800 --> 00:22:46,080 Speaker 1: the biggest plunge. Um. The story came out yesterday the 413 00:22:46,160 --> 00:22:48,440 Speaker 1: l A Port saw the biggest plunge and shipments since 414 00:22:48,880 --> 00:22:52,240 Speaker 1: um the pandemic early in the pandemic era. So things 415 00:22:52,320 --> 00:22:56,040 Speaker 1: are slowing down. Yeah, And what I'll also say to that, 416 00:22:56,119 --> 00:22:58,119 Speaker 1: and I don't mean to always find a silver lining 417 00:22:58,200 --> 00:23:00,919 Speaker 1: or the or the positive, because at least really not 418 00:23:01,000 --> 00:23:04,199 Speaker 1: that positive guy. Yeah, I think I might say I 419 00:23:04,280 --> 00:23:07,320 Speaker 1: like it. I like it, But like on the ports, 420 00:23:07,359 --> 00:23:08,960 Speaker 1: if you think about it, you know, the peak season 421 00:23:09,040 --> 00:23:11,679 Speaker 1: is probably going to be relatively muted this year, and 422 00:23:11,720 --> 00:23:13,200 Speaker 1: a lot of that has to do with the fact 423 00:23:13,240 --> 00:23:17,280 Speaker 1: that retailers were ordering way aheaded in advance because they 424 00:23:17,280 --> 00:23:19,800 Speaker 1: were afraid of the delays. I mean, the poort backup 425 00:23:19,920 --> 00:23:21,480 Speaker 1: used to be I think it was the peak was 426 00:23:21,600 --> 00:23:23,639 Speaker 1: one of a hundred and nine ships. Now it's like, 427 00:23:23,840 --> 00:23:27,600 Speaker 1: uh ten or eleven year or eight. Uh So it's 428 00:23:27,680 --> 00:23:30,879 Speaker 1: it's down significantly, and so a lot of that freight 429 00:23:30,960 --> 00:23:36,320 Speaker 1: probably came in probably in July for the holiday season. 430 00:23:36,400 --> 00:23:40,400 Speaker 1: I know that sounds crazy because p's usually starts around September. Uh, 431 00:23:40,400 --> 00:23:44,600 Speaker 1: and and so we're facing more difficult comparisons from last year. Um, 432 00:23:44,640 --> 00:23:46,320 Speaker 1: you know, and some of that inventory. I was at 433 00:23:46,320 --> 00:23:49,280 Speaker 1: a conference earlier in the week and uh someone from 434 00:23:49,320 --> 00:23:53,040 Speaker 1: the National Retail Federation was speaking, and he pointed out, 435 00:23:53,080 --> 00:23:56,480 Speaker 1: like a really interesting fact that inventory our levels are 436 00:23:56,560 --> 00:23:59,240 Speaker 1: high at certain retailers and certain parts of the market, 437 00:23:59,520 --> 00:24:02,240 Speaker 1: but also inventory levels are low at other parts of 438 00:24:02,240 --> 00:24:04,000 Speaker 1: the market. I know, Math's gonna like to talk about it. 439 00:24:04,040 --> 00:24:07,520 Speaker 1: The automotive industry, you know, they have low inventories. So 440 00:24:07,600 --> 00:24:10,639 Speaker 1: it's it's not there's some definitely weakness in the market, 441 00:24:10,640 --> 00:24:13,159 Speaker 1: but there's also pockinsive strength that people didn't look towards. 442 00:24:14,600 --> 00:24:16,840 Speaker 1: Thirty seconds. Where are we in terms of getting through 443 00:24:16,880 --> 00:24:22,840 Speaker 1: the supply chain problem? Honestly, Um, since the pandemic, it's 444 00:24:22,880 --> 00:24:25,520 Speaker 1: been one thing after the next. You mentioned the rail strike, 445 00:24:25,840 --> 00:24:27,760 Speaker 1: you know, the fact that the rails kind of started 446 00:24:27,840 --> 00:24:30,200 Speaker 1: closing shop ahead of a strike. It's going to take 447 00:24:30,240 --> 00:24:32,800 Speaker 1: weeks before that even gets back to normal. Before that, 448 00:24:32,880 --> 00:24:36,600 Speaker 1: the war in Ukraine, it's just it's just one thing 449 00:24:36,680 --> 00:24:42,880 Speaker 1: to yes that that is a tragedy. Um. Just it's 450 00:24:42,880 --> 00:24:46,239 Speaker 1: also may just really slow down business in Britain, right, 451 00:24:46,240 --> 00:24:48,320 Speaker 1: I mean, no one's doing anything there except for queuing 452 00:24:48,320 --> 00:24:51,200 Speaker 1: out to see your coffin. Yeah, and and and Britain 453 00:24:51,240 --> 00:24:54,720 Speaker 1: also had a couple of port strikes over the last 454 00:24:54,880 --> 00:24:57,639 Speaker 1: I think eight weeks, so you know, so they're facing 455 00:24:57,680 --> 00:25:01,439 Speaker 1: their own internal kind of um stri striking, which is 456 00:25:01,480 --> 00:25:04,720 Speaker 1: impacting freight flows not only with them, but around the 457 00:25:04,720 --> 00:25:07,280 Speaker 1: globe because if you know, if one port has a strike, 458 00:25:07,560 --> 00:25:11,520 Speaker 1: means that's going to impact everybody. People have to reroute freight. Right, Lee, 459 00:25:11,600 --> 00:25:13,240 Speaker 1: great stuff. We're gonna get you back on with Tony 460 00:25:13,240 --> 00:25:15,800 Speaker 1: Hatch with a little roundtable here and supply chains Lee 461 00:25:15,800 --> 00:25:22,439 Speaker 1: Classgo bloomorgan Intelligence. I am very excited and I'm honored 462 00:25:22,560 --> 00:25:25,919 Speaker 1: even to bring in a legend in the automotive public. 463 00:25:25,920 --> 00:25:27,840 Speaker 1: We've got a lineup today just by the way, we 464 00:25:28,000 --> 00:25:31,879 Speaker 1: got a great lineup. But this guy Um is someone 465 00:25:31,880 --> 00:25:34,560 Speaker 1: I've been kind of looking up to for ten years now, 466 00:25:34,600 --> 00:25:37,520 Speaker 1: and so is everybody else Um that covers cars. He 467 00:25:37,760 --> 00:25:41,040 Speaker 1: is the founder, CEO, chairman, and editor in chief of 468 00:25:41,080 --> 00:25:44,119 Speaker 1: Motor Trend magazine. Ed Low joins us to talk about 469 00:25:44,400 --> 00:25:46,879 Speaker 1: a new award that they're going to a new awards 470 00:25:46,880 --> 00:25:48,600 Speaker 1: program that they're going to bring in so and thanks 471 00:25:48,640 --> 00:25:51,520 Speaker 1: so much for joining us. Really appreciate having you today 472 00:25:52,359 --> 00:25:57,240 Speaker 1: talk to us about the Software Defined Vehicle Innovators Award, 473 00:25:57,359 --> 00:26:00,520 Speaker 1: which I hope you have a better name for that 474 00:26:00,480 --> 00:26:03,359 Speaker 1: that yes, really and I can't believe that the introduction. 475 00:26:03,440 --> 00:26:05,359 Speaker 1: Thank you so much. I'm probably watching into the opposite 476 00:26:05,359 --> 00:26:09,239 Speaker 1: different characters, you know, take the channel as here catch up. 477 00:26:09,680 --> 00:26:12,760 Speaker 1: We are launching at voter trend Um a ton of 478 00:26:12,800 --> 00:26:16,720 Speaker 1: content around this stage of the software divince view focus 479 00:26:16,880 --> 00:26:20,439 Speaker 1: is yes, a mouthful, but it's basically about how yourr 480 00:26:20,520 --> 00:26:24,440 Speaker 1: car is going to become smarter and your the smartest 481 00:26:24,520 --> 00:26:28,840 Speaker 1: smartphone out there. All of the over ther updates, all 482 00:26:28,880 --> 00:26:31,199 Speaker 1: of the new features that are coming, you know Tesla 483 00:26:31,280 --> 00:26:35,480 Speaker 1: to this dancing car mode last Christmas. All of these 484 00:26:35,520 --> 00:26:39,280 Speaker 1: new features are coming throughout the industry. It's massively disruptive. 485 00:26:39,720 --> 00:26:42,399 Speaker 1: It's going to fundamentally change the way you know, you know, 486 00:26:42,520 --> 00:26:48,320 Speaker 1: actiss by drive riding, and they become autonomous, these these 487 00:26:48,320 --> 00:26:51,160 Speaker 1: new vehicles and you know, some of the future technologies 488 00:26:51,200 --> 00:26:54,879 Speaker 1: way off. It's autonomous for instances just quite a far 489 00:26:54,960 --> 00:26:58,320 Speaker 1: ways off. But we thought it's really important to focus 490 00:26:58,320 --> 00:27:02,200 Speaker 1: on the innovators the pioneer and the leaders and highlight them, 491 00:27:02,720 --> 00:27:04,840 Speaker 1: just like we've been doing with our like Power List 492 00:27:05,000 --> 00:27:08,119 Speaker 1: and our Person Year Award. But this is specific to 493 00:27:08,240 --> 00:27:12,320 Speaker 1: the automotive side. So we just saun this and it's 494 00:27:12,400 --> 00:27:15,240 Speaker 1: it's We're hopeful it's gonna get construction, all right. I'm 495 00:27:15,359 --> 00:27:18,720 Speaker 1: very excited about it because I have only recently realized 496 00:27:18,760 --> 00:27:22,719 Speaker 1: how important and how difficult the software side of this is. 497 00:27:23,160 --> 00:27:27,479 Speaker 1: I'm gonna ask my producer, Eric Molow, though, to just 498 00:27:27,600 --> 00:27:30,240 Speaker 1: quickly disconnect and call you right back because the line 499 00:27:30,359 --> 00:27:33,720 Speaker 1: is bad. Paul. It's it's interesting. Here's my pitch. Yeah, 500 00:27:33,800 --> 00:27:36,359 Speaker 1: you and I go out to CES this January and 501 00:27:36,400 --> 00:27:38,200 Speaker 1: we do a couple of days of shows there because 502 00:27:38,600 --> 00:27:42,520 Speaker 1: the CS show has only gotten bigger and more important 503 00:27:42,560 --> 00:27:45,399 Speaker 1: in this economy, for example, the auto industry. I mean, 504 00:27:45,440 --> 00:27:49,240 Speaker 1: if they have four huge auditorium set up for CS, 505 00:27:49,720 --> 00:27:52,639 Speaker 1: I'm gonna say two are for the auto industry. It's 506 00:27:52,680 --> 00:27:55,520 Speaker 1: unbel it's an auto show with some computers around it. 507 00:27:55,640 --> 00:27:58,200 Speaker 1: I'm with you, And they have SEEMA also in Vegas, 508 00:27:58,240 --> 00:28:00,760 Speaker 1: and look there. You know, from most of my life, 509 00:28:00,800 --> 00:28:04,560 Speaker 1: the Detroit Auto Show was the pinnacle event of the year. 510 00:28:04,600 --> 00:28:07,240 Speaker 1: It was what I looked forward to, you know, after 511 00:28:07,280 --> 00:28:11,280 Speaker 1: I was seven, even more than Christmas. And now, I mean, 512 00:28:11,320 --> 00:28:13,960 Speaker 1: nobody even knows that the Detroit Auto Show is happening 513 00:28:14,080 --> 00:28:16,080 Speaker 1: right now. It's just like no one even goes to 514 00:28:16,119 --> 00:28:18,879 Speaker 1: the Detroit Auto Show. Vegas is where it's at, and 515 00:28:18,920 --> 00:28:21,240 Speaker 1: really it's all about CS and that's where Motor Trend 516 00:28:21,280 --> 00:28:24,359 Speaker 1: is gonna hold this new awards program. They're gonna do 517 00:28:24,400 --> 00:28:26,720 Speaker 1: it at CS in January. So yeah, I'd love to 518 00:28:26,720 --> 00:28:30,200 Speaker 1: get down there if I can. Out there, if I can, 519 00:28:31,000 --> 00:28:33,000 Speaker 1: hopefully we have ed back on the line and we 520 00:28:33,000 --> 00:28:35,439 Speaker 1: can just talk about why this is so difficult. You know, 521 00:28:35,600 --> 00:28:39,640 Speaker 1: Herbert Deee, retiring from Volkswagen the other day, was saying, 522 00:28:40,200 --> 00:28:44,320 Speaker 1: the shift to electric is no problem. That's a slam dunk, 523 00:28:44,440 --> 00:28:47,680 Speaker 1: super easy. I mean, yes, Tesla does it better arguably 524 00:28:47,760 --> 00:28:49,960 Speaker 1: right now than anyone else. But they'll catch up, UM, 525 00:28:50,000 --> 00:28:52,160 Speaker 1: and they're gonna make leaps and bounds. The shift to 526 00:28:52,840 --> 00:28:57,160 Speaker 1: UM new software oriented systems. That's hard. That's where everybody's 527 00:28:57,200 --> 00:29:01,160 Speaker 1: failing right now. And UM, those who figure out how 528 00:29:01,160 --> 00:29:03,200 Speaker 1: to do it right are going to be the leaders 529 00:29:03,280 --> 00:29:06,640 Speaker 1: for sure. And hopefully we have you back on the 530 00:29:06,640 --> 00:29:10,280 Speaker 1: line here. Who are who is doing the best in 531 00:29:10,400 --> 00:29:14,720 Speaker 1: terms of the software side right now. You know, the 532 00:29:14,840 --> 00:29:19,680 Speaker 1: industry leader has always been the actual example of the 533 00:29:19,680 --> 00:29:22,720 Speaker 1: software to find vehicle would be Tesla. Despite a lot 534 00:29:22,760 --> 00:29:25,000 Speaker 1: of their you know, there's some quality concerns on the vehicles, 535 00:29:25,040 --> 00:29:28,200 Speaker 1: but from the start, they actually built the world's first 536 00:29:28,800 --> 00:29:31,400 Speaker 1: software to find a vehicle. That is the story that's 537 00:29:31,400 --> 00:29:34,720 Speaker 1: gonna be emerging as you go into automotive history. Everybody 538 00:29:34,760 --> 00:29:38,240 Speaker 1: thinks that like the big EV producer, but they put software, 539 00:29:38,560 --> 00:29:41,280 Speaker 1: They put all the micropost decision, the chips all talking 540 00:29:41,320 --> 00:29:43,600 Speaker 1: to each other into their very first products from the start, 541 00:29:43,840 --> 00:29:46,360 Speaker 1: and everybody is playing catchup. And if you ask any 542 00:29:46,360 --> 00:29:48,360 Speaker 1: of the on the ends, they would admit this. And 543 00:29:48,480 --> 00:29:51,000 Speaker 1: you know, when you talk to card geeks like Matt, 544 00:29:51,360 --> 00:29:55,760 Speaker 1: like you, you guys talk about aspirated engines and horsepower 545 00:29:55,800 --> 00:29:57,120 Speaker 1: and on this kind of stuff. I kind of feel 546 00:29:57,120 --> 00:29:59,400 Speaker 1: like in the next few years you're gonna be talking 547 00:29:59,400 --> 00:30:04,120 Speaker 1: about electronics as the differentiator between cars. How big is 548 00:30:04,160 --> 00:30:09,560 Speaker 1: it gonna get? It's a good point. You know, this 549 00:30:09,600 --> 00:30:12,200 Speaker 1: is a massively Again I hate to use the word 550 00:30:12,200 --> 00:30:15,080 Speaker 1: it's very overused disruptive time, but I will tell you, 551 00:30:15,160 --> 00:30:17,520 Speaker 1: as the cars are all coming that the O E 552 00:30:17,640 --> 00:30:20,600 Speaker 1: M s are clearing the decks of internal combustion, gas power, 553 00:30:20,680 --> 00:30:23,520 Speaker 1: you know, vates, manual transmissions, all the stuff we know 554 00:30:23,600 --> 00:30:25,760 Speaker 1: and love is going away. There's a lot of people 555 00:30:25,880 --> 00:30:29,320 Speaker 1: really not happy about that. So while this future of 556 00:30:29,360 --> 00:30:32,120 Speaker 1: electrified vehicles, of software to find deals this is coming, 557 00:30:32,520 --> 00:30:35,200 Speaker 1: there's a narrative taking place a bit like in n RA. 558 00:30:35,440 --> 00:30:37,959 Speaker 1: You'll know, you'll take take this from my cold dead hands. 559 00:30:37,960 --> 00:30:41,520 Speaker 1: But the future that's promised, and the efficiencies and all 560 00:30:41,560 --> 00:30:44,120 Speaker 1: the things you can do with making the cars better 561 00:30:44,280 --> 00:30:47,880 Speaker 1: through over the air updates, that's the part, along with 562 00:30:48,000 --> 00:30:50,640 Speaker 1: to reduced part complexity and taking away you know, you've 563 00:30:50,640 --> 00:30:53,200 Speaker 1: gotta take away vowels and pistons and cans and all 564 00:30:53,240 --> 00:30:55,640 Speaker 1: these parts. All the stuff goes away when you just 565 00:30:55,680 --> 00:30:58,800 Speaker 1: need a battery and a motor and single speed transmission. 566 00:30:59,160 --> 00:31:03,280 Speaker 1: The efficiency, these and the creative opportunities with these new 567 00:31:03,280 --> 00:31:05,960 Speaker 1: cars are really compelling. And that's what we're going to 568 00:31:05,960 --> 00:31:10,000 Speaker 1: be talking about. Going to be fast. Yeah, yeah, no, yeah, 569 00:31:10,000 --> 00:31:12,400 Speaker 1: this is exactly why I think that the that your 570 00:31:12,440 --> 00:31:17,800 Speaker 1: awards program is so important and so cool. Um, the 571 00:31:17,800 --> 00:31:21,360 Speaker 1: there's there are gonna be fewer distinctions between electric power trains. Right, 572 00:31:21,400 --> 00:31:23,760 Speaker 1: everyone's going to have a fast car. They're all gonna be, 573 00:31:24,240 --> 00:31:28,520 Speaker 1: um pretty much maintenance free. Um. The power train isn't 574 00:31:28,520 --> 00:31:31,800 Speaker 1: the issue. What's gonna make or break you. Um. The 575 00:31:31,800 --> 00:31:34,320 Speaker 1: reason that we're going to prefer a car, one car 576 00:31:34,400 --> 00:31:37,480 Speaker 1: over the other or not is the design obviously, which 577 00:31:37,480 --> 00:31:39,440 Speaker 1: has always been the case. But the software and the 578 00:31:39,480 --> 00:31:42,120 Speaker 1: way it works with you on the inside. And that's 579 00:31:42,240 --> 00:31:44,960 Speaker 1: what I think no one gets. Everybody knows we're going 580 00:31:45,000 --> 00:31:49,560 Speaker 1: to electric. Nobody understands, or fewer people maybe understand. UM. 581 00:31:49,560 --> 00:31:52,600 Speaker 1: And now you're highlighting it the importance of UM the 582 00:31:52,680 --> 00:31:56,920 Speaker 1: code exactly, and I mean you nail that. You should. 583 00:31:57,040 --> 00:31:59,560 Speaker 1: Can you want to go like the you have absolutely 584 00:32:00,520 --> 00:32:05,880 Speaker 1: crystallize it, which is everybody knows. Evs are quick, lucid ready, 585 00:32:05,960 --> 00:32:08,680 Speaker 1: and they've all shown this. Right, we're going to solve 586 00:32:08,720 --> 00:32:10,640 Speaker 1: for the range issue. And there are cars now we're 587 00:32:10,640 --> 00:32:13,960 Speaker 1: gonna easily three hundred even five miles of electric trains. 588 00:32:13,960 --> 00:32:16,480 Speaker 1: We're sovolving for the recharge time. You go to twenty 589 00:32:16,680 --> 00:32:19,200 Speaker 1: eight percent of some of these batteries in thirty minutes, 590 00:32:19,680 --> 00:32:23,280 Speaker 1: so evis once all of that. Unfortunately, all that performances, 591 00:32:23,400 --> 00:32:27,520 Speaker 1: all all of these car brands have to figure out 592 00:32:27,680 --> 00:32:30,440 Speaker 1: how do I differentiate from the other side, And it's 593 00:32:30,480 --> 00:32:33,120 Speaker 1: going to be about the experience that's delivered to reap 594 00:32:33,160 --> 00:32:35,880 Speaker 1: the code, and we are trying to highlight the people 595 00:32:35,960 --> 00:32:39,360 Speaker 1: that are driving that change and doing the best. All right, 596 00:32:39,640 --> 00:32:42,080 Speaker 1: And all I want is BMW to bring back my 597 00:32:42,200 --> 00:32:44,880 Speaker 1: five six speed to my BMW five series, but so 598 00:32:44,920 --> 00:32:47,640 Speaker 1: far that's not really getting much traction ed Low head 599 00:32:47,640 --> 00:32:51,760 Speaker 1: of editorial at Motor Trend Magazine, I think we gotta 600 00:32:51,760 --> 00:32:53,560 Speaker 1: go out to see Yes January, I'm gonna make a 601 00:32:53,560 --> 00:32:56,520 Speaker 1: phone call. Yeah, I think anybody. I think we definitely 602 00:32:56,520 --> 00:32:58,280 Speaker 1: want to want to go down there as well. That's 603 00:32:58,280 --> 00:33:01,600 Speaker 1: gonna be where well, all of the most powerful executives 604 00:33:01,600 --> 00:33:03,480 Speaker 1: in the industry will be there. In every industry, it 605 00:33:03,520 --> 00:33:07,760 Speaker 1: seems like tech and media. Thanks for listening to the 606 00:33:07,760 --> 00:33:11,720 Speaker 1: Bloomberg Markets podcast. You can subscribe and listen to interviews 607 00:33:11,720 --> 00:33:16,000 Speaker 1: with Apple Podcasts or whatever podcast platform you prefer. I'm 608 00:33:16,040 --> 00:33:20,480 Speaker 1: Matt Miller. I'm on Twitter at Matt Miller three. On 609 00:33:20,600 --> 00:33:23,680 Speaker 1: Fall Sweeney, I'm on Twitter at pt Sweeney. Before the podcast, 610 00:33:23,720 --> 00:33:26,200 Speaker 1: you can always catch us worldwide at Bloomberg Radio