WEBVTT - Hindenburg Sends Block Falling With Short Attack 0:00:01.280 --> 0:00:05.640 This is Bloomberg business Week Inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine, plus 0:00:09.480 --> 0:00:13.640 global business finance and tech news. The Bloomberg Business Week 0:00:13.680 --> 0:00:18.600 Podcast with Carol Masser and Tim Stenebec from Bloomberg Radio. 0:00:20.079 --> 0:00:24.160 Certainly on our radar is Shares a Block because we 0:00:24.280 --> 0:00:27.360 have seen them take a major hit as a result 0:00:27.400 --> 0:00:29.800 of some research out by Hindberg. You remember that's the 0:00:29.800 --> 0:00:32.360 firm run by Nathan Anderson bolstered its profile with that 0:00:32.560 --> 0:00:37.239 scathing report billionaire guantam Adanni's business Empire earlier this year 0:00:37.280 --> 0:00:40.040 that really took down that name. Well, right now, he 0:00:40.520 --> 0:00:43.040 and their team has set their sights on Block. They 0:00:43.040 --> 0:00:46.280 did a two year investigation, and just about one and 0:00:46.360 --> 0:00:49.239 a half hours ago, Block fought back a little bit. 0:00:49.320 --> 0:00:51.800 So let's get into it with our own Bloomberg News 0:00:51.800 --> 0:00:54.680 finance reporter Cat Doherty. She's here on a Bloomberg Interactive 0:00:54.680 --> 0:00:58.400 Brokers studio joining myself and Mike Reagan, and I just 0:00:58.400 --> 0:01:01.160 want to check Shares a Block down, still about sixteen 0:01:01.200 --> 0:01:04.319 percent off their lows, but still taking a hit. All right, Cat, 0:01:04.360 --> 0:01:07.520 what first of all did the Hindburg research say? I know, 0:01:07.560 --> 0:01:09.320 it's out on social media, so people can read it 0:01:09.360 --> 0:01:12.800 as well. But what were the highlights or lowlights. The 0:01:12.920 --> 0:01:17.640 lowlights that their alleging is that this company took advantage 0:01:17.680 --> 0:01:22.720 and facilitated, essentially the fraudsters who were then using government 0:01:22.840 --> 0:01:27.959 stimulus programs during the pandemic and essentially allowing folks to 0:01:28.000 --> 0:01:31.280 have multiple accounts. So even if an account the report 0:01:31.360 --> 0:01:36.720 would say had been flagged as fraud, that account was 0:01:36.760 --> 0:01:39.679 then tied to multiple other accounts and it wasn't dealt 0:01:39.680 --> 0:01:42.959 with in a proper way. So essentially, I think that 0:01:43.040 --> 0:01:46.399 was the key here is the extent to which the 0:01:46.400 --> 0:01:50.040 fraudsters could actually take advantage of the system. And so 0:01:50.160 --> 0:01:56.240 this report goes further into saying that they manipulated certain 0:01:57.000 --> 0:02:01.840 numbers and that they either didn't go far enough to 0:02:02.680 --> 0:02:06.279 say how many of these accounts were a fraud or 0:02:06.320 --> 0:02:11.040 that they understated especially the customer acquisitions as well, so 0:02:11.080 --> 0:02:14.600 that obviously, if true, it would have inflated Block's business 0:02:14.680 --> 0:02:17.239 correct the metrics then would be off the financial metric correct. 0:02:17.320 --> 0:02:21.160 So then Block came out and said that these claims 0:02:21.160 --> 0:02:25.000 were inaccurate and misleading. They're saying we are registered with 0:02:25.000 --> 0:02:31.840 the SEC we report factual, accurate information and that the 0:02:31.880 --> 0:02:36.799 report that we saw from Hindenburg manipulated information and it 0:02:37.320 --> 0:02:39.680 was not an accurate depiction of what's actually going on. 0:02:40.160 --> 0:02:42.240 You know, Ken, I think when I think of block 0:02:42.320 --> 0:02:45.960 I think of the sort of point of sale, use 0:02:46.000 --> 0:02:49.600 a tablet iPad or whatever to swipe your credit card 0:02:49.600 --> 0:02:52.040 out of small store or something like that. This seems 0:02:52.080 --> 0:02:55.600 to center on a different block product, the cash app. 0:02:55.720 --> 0:02:58.360 Is that basically the gist of that most of this 0:02:58.440 --> 0:03:01.359 fraud that Hindenberg is alleged was using the cash app 0:03:01.520 --> 0:03:03.400 a big part of it. And the report does seem 0:03:03.440 --> 0:03:06.119 to be that that this cash app was likely facilitating 0:03:06.160 --> 0:03:10.240 fraudsters taking advantage again of that government stimulus program and 0:03:10.320 --> 0:03:13.760 in response, the state of Massachusetts. This is something that 0:03:13.800 --> 0:03:17.839 was referenced told the short seller, So this report that 0:03:17.960 --> 0:03:22.200 it sought to claw back close to seventy thousand unemployment 0:03:22.240 --> 0:03:25.680 payments from the bank behind cash app accounts. That's something 0:03:25.720 --> 0:03:28.720 that is referred to in this report. So again we'll 0:03:28.760 --> 0:03:32.880 see what the company actually comes back, and they said 0:03:32.919 --> 0:03:34.840 that they're going to take some legal action and they 0:03:34.840 --> 0:03:39.080 probably will have further statements to provide. But this was 0:03:39.160 --> 0:03:44.280 a report that was facilitated or underwent for two years. 0:03:44.480 --> 0:03:47.680 I just want to reiterate. So the research from Hindenburgh 0:03:48.040 --> 0:03:51.480 says Block has widely overstated its genuine user accounts and 0:03:51.520 --> 0:03:54.920 has understated its customer acquisition costs. FORM employees estimated that 0:03:55.080 --> 0:03:58.240 forty to seventy five percent of counts they reviewed were fake, 0:03:58.360 --> 0:04:00.720 involved in fraud, or were additional counts tied to a 0:04:00.720 --> 0:04:05.840 single individual. If that is the case, and I'm curious, 0:04:05.840 --> 0:04:08.240 as you guys are reporting this out, looking at Block 0:04:08.360 --> 0:04:12.440 and looking at its balance sheet, how would that materially 0:04:13.000 --> 0:04:17.080 financially change the story of Block. Well, I think the 0:04:17.120 --> 0:04:20.040 first thing to look at is regulatory or response. So 0:04:20.120 --> 0:04:24.560 this is going to be this is already a regulated company, 0:04:24.640 --> 0:04:26.960 but it's going to be scrutinized, and the report is 0:04:27.000 --> 0:04:29.000 going to be cross checked, I'm sure with the public 0:04:29.040 --> 0:04:32.159 information that's out there. So that's the first thing that 0:04:32.279 --> 0:04:34.280 I think is going to be the next course of action. 0:04:35.120 --> 0:04:38.039 And then as information starts to come out, either a 0:04:38.080 --> 0:04:42.120 company may clarify certain things, or who knows, parts of 0:04:42.120 --> 0:04:44.760 this report could be corroborated, in which case if things 0:04:44.760 --> 0:04:47.800 are proven true, well then we have other problems, or 0:04:47.839 --> 0:04:50.599 the company has further problems that then answers that they 0:04:50.680 --> 0:04:52.280 need to get. If I guess my case is like Mike, 0:04:52.360 --> 0:04:54.880 I think if that's the case, If that's true, right, 0:04:54.960 --> 0:04:57.320 it's a very different in terms of how you value 0:04:57.320 --> 0:04:59.119 the company, how you look at the growth in the business, 0:04:59.560 --> 0:05:02.159 lack their do they need to restate earnings or you know, 0:05:02.279 --> 0:05:05.240 is it really facing a big fine and punitive damages 0:05:05.320 --> 0:05:08.360 that has everyone concerned in the stock price? But ket 0:05:08.360 --> 0:05:10.800 you know, one thing I think's interesting is, um they're 0:05:10.839 --> 0:05:13.039 not the only company you who's had to deal with 0:05:13.200 --> 0:05:17.200 fraud claims when it comes to the government stimulus payments. 0:05:17.240 --> 0:05:19.360 Other other banks have two. Right? Is it just that 0:05:19.800 --> 0:05:24.800 block is way at least according to Hindenberg, just way 0:05:24.839 --> 0:05:26.840 out there. As far as how many they allowed happen, 0:05:27.440 --> 0:05:30.279 I don't know the exact comparison in terms of numbers. 0:05:30.320 --> 0:05:32.520 I do know that there there have been other banks 0:05:32.600 --> 0:05:36.320 that were caught in. It was like credit card payments 0:05:36.320 --> 0:05:39.800 when when the government was giving out stimulus on the 0:05:39.839 --> 0:05:43.040 form of what was essentially debit cards, and those were 0:05:43.480 --> 0:05:46.200 manipulated in ways where people were taking more debit cards 0:05:46.200 --> 0:05:49.880 than they actually were allowed. Um. So that's that's another 0:05:50.000 --> 0:05:52.640 case I think this is very different. It sounds I'm 0:05:52.640 --> 0:05:56.760 not I'm not exactly sure how the the app. It 0:05:57.160 --> 0:05:59.640 seems like how the app was used was just adding 0:05:59.720 --> 0:06:03.480 more accounts and so you had one person. But they're 0:06:03.520 --> 0:06:06.719 taking advantage and using multiple accounts that they're therefore getting 0:06:06.760 --> 0:06:09.440 more stimulus when they're only supposed to be allowed to 0:06:09.480 --> 0:06:11.680 use one account. Yeah, and it's interesting. You do have 0:06:11.760 --> 0:06:14.680 the analyst community, you know, starting to weigh in. Certainly. 0:06:14.720 --> 0:06:18.720 Raymond James came out earlier today contending that the report 0:06:19.360 --> 0:06:21.719 and the short by Hindenburg doesn't include a lot of 0:06:21.960 --> 0:06:25.800 new and in quotation marks news are a bombshell and 0:06:25.880 --> 0:06:28.160 argues that the biggest risk is potentially drawing scrutiny from 0:06:28.200 --> 0:06:31.679 regulators and politicians, which would create some overhang on the stock. 0:06:31.760 --> 0:06:34.200 Right now, we've got forty one buys on block ten 0:06:34.240 --> 0:06:36.520 holes and two cells, So you know, Wall Street for 0:06:36.520 --> 0:06:40.800 the most part, likes this. I was curious and forgive 0:06:40.800 --> 0:06:42.520 me if this is out of your purview, But when 0:06:42.560 --> 0:06:45.400 I think about short sellers, we're always so careful right 0:06:45.440 --> 0:06:47.679 when we bring up a short seller, and we always 0:06:47.680 --> 0:06:49.400 want to make sure we get a comment from the company. 0:06:49.440 --> 0:06:53.080 But having said that, what are the laws rules, if 0:06:53.120 --> 0:06:55.919 you will, if any when it comes to somebody at 0:06:55.960 --> 0:06:59.520 somebody coming out with a blockbuster report like Hindenburg and 0:06:59.640 --> 0:07:03.400 being such a short on the company, what are their responsibilities. 0:07:03.520 --> 0:07:06.000 So we've we've seen a number of reports from Hindenburgh, 0:07:06.560 --> 0:07:09.440 most notably recently a Donnie Right UM, and we saw 0:07:09.480 --> 0:07:12.320 Clover Health UM. And these reports they are they are allowed. 0:07:12.360 --> 0:07:14.320 It's not as if once these reports come out then 0:07:16.320 --> 0:07:19.440 now yeah, exactly, it's it's it's as if another analyst 0:07:19.560 --> 0:07:22.760 is putting out UM. I mean, it's it's commentary, and 0:07:22.800 --> 0:07:24.680 it's it's you could even put out a tweet, now 0:07:24.680 --> 0:07:26.400 that's going to be scrutinized in a different way. I 0:07:26.400 --> 0:07:29.680 think this, this report actually I believe did come through 0:07:29.800 --> 0:07:32.760 a tweet, which is did it through social media? Through 0:07:32.840 --> 0:07:35.640 social media? And I know that that's been circulated and 0:07:35.680 --> 0:07:38.800 there's been a lot of responses since then. UM. But 0:07:38.960 --> 0:07:42.480 I do think that the big question is the regulatory 0:07:42.520 --> 0:07:46.640 scrutiny of the company here. Um. The report is what 0:07:46.680 --> 0:07:50.400 it is, and it'll be used and looked at. UM. 0:07:50.480 --> 0:07:54.960 But some of the fundamental questions or I guess fundamental 0:07:55.120 --> 0:07:57.480 aspects of the company that the report is pointing out 0:07:57.960 --> 0:07:59.760 they may be looked at in a different way just 0:07:59.800 --> 0:08:02.640 because of what they started to explore. And it's you know, 0:08:02.640 --> 0:08:06.320 it's interesting because not every activist short seller report is 0:08:06.400 --> 0:08:08.600 met with this type of reaction in the stock market, 0:08:08.680 --> 0:08:13.000 which kind of speaks to the reputation Hindenburg has. What 0:08:13.120 --> 0:08:15.040 can you tell us about sort of their track record 0:08:15.080 --> 0:08:17.120 with this type of thing. It seems to me like 0:08:17.160 --> 0:08:21.000 they're pretty good at knocking share prices down and leaving 0:08:21.040 --> 0:08:24.800 them down for a long time. Yes, especially immediately. I 0:08:24.840 --> 0:08:28.680 mean the shares today of block were down twenty two percent. 0:08:28.720 --> 0:08:31.240 They've since recovered a little bit, especially since the company 0:08:31.320 --> 0:08:38.400 responded put out its own statement, But Donnie Clover Health, 0:08:38.440 --> 0:08:40.120 those were some of the big ones that at least 0:08:40.160 --> 0:08:43.880 I was tracking. They've recovered the six month period. Some 0:08:43.920 --> 0:08:47.760 of these stocks they lost significant market valuation and then 0:08:48.160 --> 0:08:52.199 have after half of a year gone back to before, 0:08:52.920 --> 0:08:54.760 to where they were before the reports came out. So 0:08:54.800 --> 0:08:57.200 it really depends on the name and I think to 0:08:57.240 --> 0:08:59.400 the extent of what is included in the report, how 0:08:59.520 --> 0:09:05.760 damning actually is. And then also if there's any information 0:09:05.800 --> 0:09:08.720 that comes out even after the report, either to prove 0:09:08.760 --> 0:09:11.280 it false, or true. Yeah, that's what I'm thinking out. 0:09:11.280 --> 0:09:13.240 I mean the stock, I mean, Block could do no 0:09:13.320 --> 0:09:15.360 wrong for such a long time and Wall Street loved 0:09:15.400 --> 0:09:17.720 it right, and then it's down I think about seventy 0:09:17.720 --> 0:09:21.880 five percent since August of I think, going back to 0:09:22.200 --> 0:09:25.520 twenty twenty one. I mean, it's way down a lot. 0:09:25.640 --> 0:09:27.800 One of those high growth fintects that it was a 0:09:27.880 --> 0:09:31.280 pandemic Darling really was, and none of them are performing 0:09:31.320 --> 0:09:35.160 too well in this environment. But you don't see that 0:09:35.240 --> 0:09:38.679 kind of instant knee jerk reaction very often. It's pretty dramatic. Well, 0:09:38.720 --> 0:09:40.760 I guess stay tuned right and just see kind of 0:09:40.760 --> 0:09:42.439 what the next step is. The stock though shares a 0:09:42.440 --> 0:09:44.920 block still down about sixteen percent here off their loads 0:09:44.920 --> 0:09:48.440 of the day, but nonetheless a pretty significant hit. Kat, 0:09:48.480 --> 0:09:50.320 thank you so much. Glad you could come in and 0:09:50.360 --> 0:09:53.200 just kind of laid out for us. Kat Doherty, Finance reporter, 0:09:53.280 --> 0:09:56.360 apt Bloomberg News. Here in our Bloomberg Interactive Brokers studio, 0:09:57.040 --> 0:10:00.640 you're listening to the Bloomberg Business Week podcast. Catch us 0:10:00.640 --> 0:10:04.000 live weekday afternoons from three to six Eastern Listen on 0:10:04.080 --> 0:10:07.320 Bloomberg dot com, the Ion Radio app, and the Bloomberg 0:10:07.400 --> 0:10:11.439 Business app or watch us live on YouTube. We want 0:10:11.440 --> 0:10:13.600 to talk a little bit about something Bloomberg News giving 0:10:13.679 --> 0:10:16.880 heads up on yesterday, and that is the Ford Motor Company. 0:10:16.960 --> 0:10:21.600 We're getting more clarity, more specifics, the company predicting losses 0:10:21.600 --> 0:10:24.680 in its EV business electric vehicle business will grow to 0:10:24.800 --> 0:10:27.120 three billion dollars this year as it spends big on 0:10:27.160 --> 0:10:30.960 new models and factories, the deficit matching it's accumulated EV 0:10:31.120 --> 0:10:34.760 losses over the past two years. The stock right now 0:10:34.800 --> 0:10:36.360 a little bit lower, though we did see a little 0:10:36.360 --> 0:10:38.640 bit higher earlier in today's session. So let's get to 0:10:38.679 --> 0:10:41.240 it with Bloomberg News auto reporter Keith Noughton. He's with 0:10:41.360 --> 0:10:45.400 us following this via zoom in Detroit. So, Keith, three 0:10:45.400 --> 0:10:49.000 billion dollars sounds like a lot you guys were giving us. 0:10:49.040 --> 0:10:50.920 You were giving us a heads up on it yesterday. 0:10:50.960 --> 0:10:54.439 Why the losses and put it in perspective? Well, what 0:10:54.520 --> 0:10:57.920 Ford says, Carol, is that the EV business is like 0:10:58.000 --> 0:11:01.680 a startup within side side Ford Boda company, and like 0:11:01.800 --> 0:11:05.200 any startup, they incur a lot of losses as they 0:11:05.240 --> 0:11:09.959 spend for future growth. So what that spending is they 0:11:09.960 --> 0:11:13.480 are currently working on their second generation of electric vehicles. 0:11:13.480 --> 0:11:16.280 You know, they already have the electric F one fifty 0:11:16.360 --> 0:11:19.760 lightning pickup truck out there and the Mustang Makie. So 0:11:19.840 --> 0:11:22.440 now they're working on the second generation of electric vehicles, 0:11:22.480 --> 0:11:25.600 which will be ground up and cost a lot of money. 0:11:25.640 --> 0:11:28.120 And they are on a building spree. They're building their 0:11:28.120 --> 0:11:31.880 first new assembly plant in fifty years in Tennessee to 0:11:31.960 --> 0:11:36.320 build electric F series trucks, and they're building battery factories 0:11:36.360 --> 0:11:39.120 in Tennessee, Kentucky, and Michigan. So they've got a lot 0:11:39.160 --> 0:11:42.800 of factory construction going on, and they've got a lot 0:11:42.840 --> 0:11:46.120 of spending on new models. You know, Keith, it seems 0:11:46.120 --> 0:11:48.600 to have caught the market at least somewhat by surprise 0:11:48.760 --> 0:11:51.760 that the loss would be this big. Correct me if 0:11:51.800 --> 0:11:55.400 I'm wrong about that. But what is the story? There's 0:11:55.520 --> 0:11:59.679 just that this spending, these investments they're making are a 0:11:59.720 --> 0:12:01.800 lot bigger than what they projected, or at least what 0:12:01.840 --> 0:12:05.120 analysts were penciling in. You know, Ford has said that 0:12:05.160 --> 0:12:08.480 they're planning to spend fifty billion in total on electric 0:12:08.559 --> 0:12:11.840 vehicles by twenty twenty six. The plan is to ramp 0:12:11.960 --> 0:12:16.040 up their factory production to be producing two million vehicles 0:12:16.040 --> 0:12:18.800 a year by the end of twenty twenty six. Last 0:12:18.880 --> 0:12:22.200 year they sold about sixty five thousand in America. So 0:12:22.400 --> 0:12:26.120 it's a very steep ramp and a very big spend 0:12:26.559 --> 0:12:29.160 because you know, they don't want to be left behind 0:12:29.240 --> 0:12:32.280 in this transition to electric vehicles and they're trying to 0:12:32.360 --> 0:12:37.760 catch Tesla. The losses are rising, not going down. They 0:12:37.800 --> 0:12:40.280 had a nine hundred million dollars loss in twenty one. 0:12:40.760 --> 0:12:43.080 They had a two point one billion dollar loss on 0:12:43.160 --> 0:12:45.959 evs last year, and then it'll be up forty three 0:12:46.000 --> 0:12:48.800 percent this year to that three billion figure we're talking about. 0:12:49.080 --> 0:12:52.679 So they're in this heavy investment period. But they say 0:12:53.200 --> 0:12:56.000 they will be profitable on an earning sefore interest in 0:12:56.080 --> 0:12:59.719 taxes basis by the end of twenty twenty six of 0:13:00.120 --> 0:13:03.520 an eight percent EBIT margin. They say on the evs, Hey, Keith, 0:13:03.520 --> 0:13:05.600 help me out though. Like two Mike's point, And you 0:13:05.640 --> 0:13:07.840 know the stock earlier Ford was up two point six 0:13:07.880 --> 0:13:11.920 percent earlier in the session before it moved a little 0:13:11.920 --> 0:13:14.800 bit lower. And I guess you've covered this inside and out, 0:13:14.840 --> 0:13:17.280 and I feel like the Wall Street community who covers 0:13:17.920 --> 0:13:19.800 Ford gets what they have to do. I get this 0:13:19.880 --> 0:13:22.840 concept of a startup within you a bigger, broader company. 0:13:23.960 --> 0:13:26.960 Is the street to somewhat to some extent, kind of 0:13:27.080 --> 0:13:29.439 comfortable with it. I'm not seeing any analys calls come out, 0:13:29.480 --> 0:13:32.760 any downgrades at least not yet, or any kind of moves, 0:13:32.840 --> 0:13:35.400 So the street aware that this is what it's going 0:13:35.440 --> 0:13:39.640 to take for this transition. Yeah, Carol. Actually, the three 0:13:39.720 --> 0:13:43.560 billion dollars loss, which sounds awful, I understand, is not 0:13:43.679 --> 0:13:46.840 as bad as some analysts were projecting. There are projections 0:13:46.840 --> 0:13:50.520 out there of they thought Ford lost six billion last 0:13:50.600 --> 0:13:54.800 year on electric vehicles. So while three billions bad, maybe 0:13:54.840 --> 0:13:57.599 not as bad as the market expected. The stock was 0:13:57.679 --> 0:14:00.240 up as much as two percent in the morning. Um. 0:14:01.000 --> 0:14:04.600 During the morning. Also, Fords CFO John Lawler was doing 0:14:04.600 --> 0:14:08.800 this teach in at the NYS with analysts, so, um, 0:14:09.120 --> 0:14:12.080 you know, they are trying to explain this walk to profitability. 0:14:12.240 --> 0:14:15.640 I was listening in. The analysts seemed fairly skeptical that 0:14:15.679 --> 0:14:19.200 they could get to there from here. It's a big walk. 0:14:20.240 --> 0:14:26.800 Last year's EBIT margin on electric vehicles as negative forty percent. Yeah, 0:14:27.640 --> 0:14:29.960 it's a say, by the end of twenty six will 0:14:29.960 --> 0:14:34.160 be a positive eight percent. That's a lot. So analysts 0:14:34.160 --> 0:14:37.960 were skeptical probably right there. So you know, Keith as 0:14:37.960 --> 0:14:40.680 a Twitter addict over here, you know, it's it's hard 0:14:40.760 --> 0:14:46.040 not to notice the distraction Elon Musk has undertaken with 0:14:46.120 --> 0:14:50.280 his purchase of Twitter and getting very political on that 0:14:50.840 --> 0:14:54.240 on the site itself, turning a lot of people off 0:14:54.320 --> 0:14:58.600 with some of his m political opinions and culture war 0:14:58.760 --> 0:15:01.560 type of opinions. So I'm wondering, like, what is the 0:15:01.680 --> 0:15:04.600 lane do you think and the strategy at Ford to 0:15:04.720 --> 0:15:10.360 actually take some share from Tesla? Does Musk's personality play 0:15:10.360 --> 0:15:12.080 into it at all? Or is it just a matter 0:15:12.160 --> 0:15:15.440 of they want to make cheaper cars, better cars? What's 0:15:15.480 --> 0:15:20.720 their strategy entail for getting that share away from Tesla? Right? So? 0:15:20.800 --> 0:15:23.600 I mean Ford strategy is they are going straight for 0:15:23.640 --> 0:15:27.000 the mainstream. You know where Tesla's sell best is on 0:15:27.040 --> 0:15:29.800 the coasts right there. They kind of sell to the converted, 0:15:29.880 --> 0:15:33.280 if you will, Folks who are wealthy and are inclined 0:15:33.680 --> 0:15:38.240 to take actions to either because of climate change or 0:15:38.280 --> 0:15:43.520 because that's you know, that's what is the current you know, 0:15:43.640 --> 0:15:45.880 going Trent, and they have the money to afford that. 0:15:46.440 --> 0:15:50.040 Ford's going for the big middle in America that buy 0:15:50.080 --> 0:15:53.440 pickup trucks and buy Mustangs. The things that Ford is 0:15:53.480 --> 0:15:57.320 electrifying are these sort of classic names that have been 0:15:57.360 --> 0:16:00.440 popular in Middle America for years, and so far they're 0:16:00.480 --> 0:16:02.920 after a very strong start. You know, the F one 0:16:03.040 --> 0:16:06.160 fifty lightning plug in pickup truck head two hundred thousand 0:16:06.240 --> 0:16:09.240 reservations when it went out to sale last April. And 0:16:09.280 --> 0:16:12.160 they are doubling the capacity right now at the Mexican 0:16:12.240 --> 0:16:15.520 factory that builds the Mustang Maki. That'll be able to 0:16:15.560 --> 0:16:18.640 produce two hundred and ten models, two hundred and ten 0:16:18.680 --> 0:16:20.680 thousand models a year by the end of this year. 0:16:21.600 --> 0:16:23.960 And you know, last year they produced fewer than one 0:16:24.040 --> 0:16:28.000 hundred thousand, So it's it's working so far, but it's 0:16:28.200 --> 0:16:30.840 very early days. For four they are the second bestseller 0:16:30.880 --> 0:16:34.560 of electric vehicles in America, but they're miles behind Tesla, 0:16:34.920 --> 0:16:38.440 which controls two thirds of the EV market in America. 0:16:38.680 --> 0:16:41.400 You know, I keep wondering, you know, Keith, in terms 0:16:41.440 --> 0:16:44.240 of a company like a Ford or General Motors that 0:16:44.480 --> 0:16:47.240 still think, oh, they have internal combustion engine vehicles, right, 0:16:47.240 --> 0:16:49.400 because they still make a lot of money off of that, right, 0:16:49.440 --> 0:16:52.120 And that's kind of the flip side. But having said that, 0:16:52.480 --> 0:16:55.880 I wonder how much of that is a drag, you know, 0:16:56.000 --> 0:16:58.880 in terms of really being out there with evs right 0:16:58.920 --> 0:17:02.000 Elon Musk is a pure play doing it differently, And 0:17:02.120 --> 0:17:06.159 I just wonder if that longer term is going to 0:17:06.200 --> 0:17:09.439 be a problem for Ford or GM or not. I 0:17:09.440 --> 0:17:12.639 mean Ford and GM, but Ford is saying that, you know, 0:17:13.240 --> 0:17:16.280 internal combustion engine vehicles are still a growth business for them. 0:17:16.280 --> 0:17:20.800 They sell lots of Bronco SUVs. They sell you know, 0:17:20.880 --> 0:17:23.800 like nine hundred thousand F series trucks every year. I mean, 0:17:23.840 --> 0:17:27.439 it's the best selling vehicle in America since the first 0:17:27.640 --> 0:17:32.360 Reagan administration. Wow. So so there's a huge I mean, 0:17:32.640 --> 0:17:34.679 you have to keep in mind that electric vehicles make 0:17:34.760 --> 0:17:38.320 up five point eight percent of the US market. So 0:17:38.560 --> 0:17:42.119 every nine and a half vehicle sold is still a 0:17:42.200 --> 0:17:46.840 gas fueled car or truck. And is the F one 0:17:46.960 --> 0:17:51.359 fifty lightning the actual performance of that vehicle enough to 0:17:51.600 --> 0:17:54.920 convert the type of people that already own the gas 0:17:54.920 --> 0:17:58.760 powered pickup truck. Yeah. You know, it's an interesting question 0:17:58.880 --> 0:18:02.280 because you know, those folks wouldn't seem to be necessary 0:18:02.280 --> 0:18:04.679 they sell mostly in Red states. They wouldn't seem to 0:18:04.720 --> 0:18:08.600 necessarily be folks who are um, you know, trying to 0:18:08.640 --> 0:18:11.879 address climate change in their vehicle purchases. But you know 0:18:11.960 --> 0:18:14.840 what the Lightning has done. It's popularity is actually with 0:18:14.920 --> 0:18:19.040 newcomers to Ford and newcomers to pickup trucks. Ford says, 0:18:19.040 --> 0:18:21.600 you know, more than sixty percent of the sales of 0:18:21.720 --> 0:18:24.359 the Lightning go to these new beats, not to the 0:18:24.480 --> 0:18:28.040 traditional truckers. But eventually, if you're going to convert the fleet, 0:18:28.040 --> 0:18:30.879 the best selling vehicles in America are the Ford truck, 0:18:31.480 --> 0:18:35.879 the GM truck, and the you know, uh Ram truck. 0:18:35.920 --> 0:18:38.960 It's that's that's what Americans buy. And so if you're 0:18:38.960 --> 0:18:41.760 going to electrify the vehicle fleet in this country, you 0:18:41.840 --> 0:18:45.000 have to be successful in electrifying pickup trucks, which is 0:18:45.000 --> 0:18:47.520 of course why Elon Musk is doing the cyber truck. 0:18:48.600 --> 0:18:51.560 It's so interesting in terms of all that's going on. Um, 0:18:51.840 --> 0:18:54.119 I forgot about the cyber truck. How could you forget 0:18:54.119 --> 0:18:59.640 how cyber truck? We're waiting right exactly all right? But yeah, 0:19:00.880 --> 0:19:03.720 Keith not in good stuff. Out of reporter at Bloomberg News. 0:19:03.760 --> 0:19:07.960 Joining us via zoom from Detroit. You're listening to the 0:19:08.000 --> 0:19:12.240 Bloomberg Business Week podcast. Catch us Live weekday afternoons from 0:19:12.280 --> 0:19:16.160 three to six Eastern on Bloomberg Radio, the Bloomberg Business App, 0:19:16.240 --> 0:19:19.720 and YouTube. You can also listen live on Amazon Alexa 0:19:19.800 --> 0:19:23.160 from our flagship New York station, Just say Alexa play 0:19:23.240 --> 0:19:28.160 Bloomberg eleven thirty, joining Mike and myself. Bloomberg News Technology. 0:19:28.240 --> 0:19:31.959 Put Alex Barenka joining us right now. She's been up 0:19:32.000 --> 0:19:35.640 on Capitol Hill, So all right, Alex. First of all, 0:19:35.680 --> 0:19:37.640 a lot to get to tell us about the mood 0:19:37.640 --> 0:19:40.000 in the room, how packed it was. Paint the picture 0:19:40.080 --> 0:19:43.760 for us, Carol. It was packed to the brim. Folks 0:19:43.760 --> 0:19:47.080 were overflowing, We were dropping for seats, even as credentialed 0:19:47.119 --> 0:19:50.560 media and sitting right behind TikTok was also kind of 0:19:50.560 --> 0:19:53.399 a slew of creators. All of these folks got to 0:19:53.400 --> 0:19:55.359 witness what I would say is probably one of the 0:19:55.400 --> 0:19:58.960 more contentious congressional hearings that we heard. There was a 0:19:59.000 --> 0:20:02.240 lot of cutting off of the CEO when he was 0:20:02.280 --> 0:20:04.920 trying to give answers, a lot of pushing to try 0:20:04.960 --> 0:20:08.080 to get him to commit to these yes or no questions? 0:20:08.800 --> 0:20:11.840 Do you have any relationship with the Chinese Communist Party? 0:20:12.040 --> 0:20:15.399 Who is prepping you today for today? Was there anyone 0:20:15.440 --> 0:20:18.280 from China in doing so. There was also a lot 0:20:18.320 --> 0:20:21.560 of emotion both when it came to the protection of 0:20:22.000 --> 0:20:25.800 US American users data, which those national security concerns have 0:20:25.880 --> 0:20:28.959 been top of mind, but there was also some really 0:20:29.040 --> 0:20:32.960 kind of emotional moments talking about the impact that social 0:20:33.000 --> 0:20:36.000 media can have on teens, particularly around users who are 0:20:36.000 --> 0:20:39.760 posting about suicide on the app. So very high stakes moment, 0:20:39.880 --> 0:20:43.080 and a lot of tension in that room between the 0:20:43.119 --> 0:20:46.840 CEO and the lawmakers who were not holding back in 0:20:46.960 --> 0:20:49.639 firing questions his way. You know, Alex, I'd love to 0:20:49.720 --> 0:20:52.600 unpack a little bit that notion of the personal data. 0:20:53.119 --> 0:20:54.840 You know, that seems to be one of the main 0:20:55.200 --> 0:20:59.720 lynch pins here that Agger's politicians about TikTok, is all 0:20:59.760 --> 0:21:02.280 this personal data. I gotta say, I've got three teenage 0:21:02.359 --> 0:21:05.239 daughters who were all TikTok addicts. I don't know what 0:21:05.320 --> 0:21:09.320 data they have that the communists China would be interested in, 0:21:09.359 --> 0:21:12.560 but obviously that's probably not what's wearing people. What is 0:21:12.600 --> 0:21:15.560 the type of data that's so precious and so dangerous 0:21:15.600 --> 0:21:19.440 to leak from TikTok into China. So today we heard 0:21:19.880 --> 0:21:23.879 folks talk about IP addresses, which is kind of could 0:21:24.080 --> 0:21:28.800 narrow down your location GPS data and that additional location data. 0:21:29.080 --> 0:21:32.160 And then you had some questions from TikTok CEO show 0:21:32.200 --> 0:21:35.679 to himself saying, what else should I be kind of 0:21:35.680 --> 0:21:38.920 helping protect US user data for? You asked this question, Michael, 0:21:38.920 --> 0:21:41.560 and it's one that a lot of folks have talked 0:21:41.560 --> 0:21:44.920 about in context of TikTok. They're being national security concerns 0:21:44.960 --> 0:21:48.479 about data. The company feels like they are doing as 0:21:48.600 --> 0:21:51.479 much as they can to protect American users data. They 0:21:51.480 --> 0:21:54.639 would argue more than any of their peers by basically 0:21:54.720 --> 0:21:58.680 setting up this firewall with Oracle to bring all Americans 0:21:58.800 --> 0:22:02.960 data onto US soil. You saw him push back today 0:22:03.560 --> 0:22:05.680 in the very few times that he did push back, 0:22:06.000 --> 0:22:09.200 basically saying, some of these concerns that you guys are alleging, 0:22:09.640 --> 0:22:13.119 they're hypotheticals. If you give us more specific information, we 0:22:13.200 --> 0:22:15.960 can kind of work for that. So, you know, young 0:22:16.040 --> 0:22:18.880 folks might say, TikTok and everyone under the sun has 0:22:18.920 --> 0:22:22.240 my information. But when that argument came up today in 0:22:22.440 --> 0:22:25.359 the hearing, lawmakers push back and said, well, we're not 0:22:25.440 --> 0:22:27.640 here to talk about everyone else, We're here to talk 0:22:27.680 --> 0:22:31.120 about TikTok. Well, there is something to be said to like, 0:22:31.400 --> 0:22:33.920 can't the government, Like we work for a company where 0:22:33.920 --> 0:22:36.159