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Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.

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Speaker 1: Along with my co host Lisa A. Bramowitz. Each day

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Speaker 1: we bring you the most important, noteworthy, and useful interviews

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Speaker 1: for you and your money, whether you're at the grocery

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Speaker 1: store or the trading floor. Find the Bloomberg p m

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Speaker 1: L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com.

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Speaker 1: Donald Trump has tweeted that caught red handed, very disappointed

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Speaker 1: that China is allowing oil to go into North Korea.

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Speaker 1: There will never be a friendly solution to the North

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Speaker 1: Korea problem if this continues to happen. Exclamation point. Here

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Speaker 1: to tell us a little bit more about North Korea

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Speaker 1: and the strategic options that the United States has is

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Speaker 1: a General Meryl mcpeaky's a retired four star general Formula

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Speaker 1: Air Force Chief of Staff. He can be followed on

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Speaker 1: Twitter at General McPeak He basically is currently in Lake Oswego, Oregon.

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Speaker 1: Thank you very much for being with us, sir, and

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Speaker 1: he is also the author of the recently completed The

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Speaker 1: Aerial View Trilogy. It is a three volume memoir that

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Speaker 1: takes the reader throughout his career. General mcpeaque, thank you

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Speaker 1: for your service as we honor all of our servicemen

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Speaker 1: and women. Your comments on North Korea, your thoughts and

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Speaker 1: reactions to the President's handling of the situation. Good morning,

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Speaker 1: dam Well. I think the North Korea problem is the

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Speaker 1: most important one facing our country, most important national security problem.

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Speaker 1: And uh, it's visible to on the horizon. Everybody can

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Speaker 1: see it. Even those who don't want to do anything

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Speaker 1: about it, understand that it constitutes a real threat to

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Speaker 1: the United States. Uh, probably now and certainly in the

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Speaker 1: next six months to a year. So I do believe

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Speaker 1: we ought to do something about it, to take vigorous action.

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Speaker 1: I'm not sure the President has gone about it in

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Speaker 1: the right way. I would have done it perhaps differently,

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Speaker 1: but he's right in saying that we probably have to

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Speaker 1: do something here, and it may end up being a

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Speaker 1: military action that's required. Now. You previously served as the

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Speaker 1: chief of staff of the Air Force. You served in

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Speaker 1: Vietnam over two d and sixty missions. There a variety

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Speaker 1: of awards, a Silver Star, Legion of Merit, Distinguished Flying Cross.

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Speaker 1: If the President or someone on his staff called General

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Speaker 1: McPeak and said, Tony, I know they're the only ones

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Speaker 1: that get to call you that if they said, Tony,

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Speaker 1: lay out for us, what would be some of my options,

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Speaker 1: What would be some of the options that wouldn't blow

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Speaker 1: us all but would really try to solve this problem. Well,

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Speaker 1: blowing us all up as a real life possibility here,

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Speaker 1: especially if we do nothing so UH. First of all,

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Speaker 1: I would favor any kind of action that we could

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Speaker 1: take short of military intervention. You want diplomacy, sign me up.

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Speaker 1: You want to try to get China to lean on

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Speaker 1: them Great Russia, economic sanctions, I'm all for all these steps,

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Speaker 1: but so far we've tried them all, it seems to me,

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Speaker 1: and nothing's really worked. My opinion is that we'll probably

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Speaker 1: have to intervene and help the North dismantle UH their

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Speaker 1: nuclear capability, and that means we would have to do

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Speaker 1: some very specific targeting against nuclear infrastructure in the North

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Speaker 1: and command and control UH. And of course, at the

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Speaker 1: same time, we'd have to go to work on those

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Speaker 1: guns that are dug and in the reverse slopes of

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Speaker 1: the hills north of the demilitarized zone which range Soul.

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Speaker 1: So Soul will be badly damaged in the opening moments

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Speaker 1: of any military action there, and we simply have to

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Speaker 1: start work immediately trying to dig those guns out of

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Speaker 1: the caves that they're in north of the d MZ.

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Speaker 1: So this target set PIM is rich. I mean, there's

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Speaker 1: a very very large number of aiming points that we

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Speaker 1: have to go after immediately. And uh and it will

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Speaker 1: be a tough campaign, no doubt about it. Especially Soul

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Speaker 1: will take a lot of damage. But our alternative is

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Speaker 1: to allow this crazy, uh perhaps non deterable regime in

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Speaker 1: the North to have the capability to wipe out Washington

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Speaker 1: and New York City in Chicago. Uh, you know, with

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Speaker 1: minutes notice. And that's unacceptable in general? Is it? Is

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Speaker 1: there any tempt? Is there any way we can look at,

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Speaker 1: for example, our relationship with Pakistan, which is a nuclear power.

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Speaker 1: Is it possible to leave North Korea with a with

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Speaker 1: nuclear weapons and still reach some kind of accommodation that

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Speaker 1: would leave them in place? But without these threats, I

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Speaker 1: don't see it. I mean, look, the Pakistani's have nuclear

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Speaker 1: weapons to give them a deterrence capability against India. I'm

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Speaker 1: not happy about that. I'd be much happier if nobody

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Speaker 1: had nuclear weapons. I think we'd be much more secure

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Speaker 1: in the United States because our conventional military capabilities are

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Speaker 1: far greater than anybody else's. So if all nuclear weapons disappeared,

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Speaker 1: we'd all be better off for it. But in the

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Speaker 1: case of judging, you know, from the more extreme to

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Speaker 1: the less extreme, UH, this government North Korea is perhaps

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Speaker 1: the worst in the world that we should want to

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Speaker 1: see have nuclear weapons, and there's the risk is simply

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Speaker 1: too great to let them hold large American cities at hostage.

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Speaker 1: We simply, in my opinion, we simply have to dismantle

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Speaker 1: their nuclear capability and put them under International instruction UH

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Speaker 1: inspection for years to make sure that that doesn't rebuild.

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Speaker 1: I want to turn your attention now to the Middle

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Speaker 1: East and Iran, which, of course UH then begs the

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Speaker 1: question of potential nuclear weapons. Your thoughts on what is

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Speaker 1: going on currently in the Middle East with the potential

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Speaker 1: confrontation between Iran and Saudi Arabia, And just as a note,

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Speaker 1: you know you've taken a lot of flak over the

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Speaker 1: course of your career for some of your thoughts about

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Speaker 1: the Middle East. Give us your ideas well. I think

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Speaker 1: the Middle East is a chronic problem, you know, that's

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Speaker 1: been with us forever, UH, and there's no sign that

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Speaker 1: we can sort out the issues that are involved there.

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Speaker 1: I do think that the treaty or the agreement with

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Speaker 1: the Iranians to put a pause on their nuclear program

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Speaker 1: for a decade or so was a very good one

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Speaker 1: and one one we should support UH and perhaps gives

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Speaker 1: us time to work out some longer term relationship with

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Speaker 1: the Iranians. At the end of the day, it's just

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Speaker 1: gonna be hard for us to pick the course that

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Speaker 1: makes sense in the Middle East. I mean, every everything

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Speaker 1: we try to do seems to have awful consequences, including

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Speaker 1: what we're doing today. I mean, we spent what a

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Speaker 1: trillion dollars in Iraq with the Second Iraq War, maybe

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Speaker 1: more than that before we're done, and lost thousands of people,

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Speaker 1: and it's not obvious to me that Iraq is better

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Speaker 1: off to day than it was before we intervene to

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Speaker 1: remove Sadamus. So I don't have any brilliant ideas about

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Speaker 1: what to do there. It's kind of like having cancer.

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Speaker 1: You just sort of earned to live with it and

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Speaker 1: hope you can die of something else. Well. I think,

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Speaker 1: thank you very much for your time and just want

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Speaker 1: to mention once again, UH, you're the Aerial View trilogy,

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Speaker 1: the three volume memoir. Just quickly, General, can you tell

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Speaker 1: what was the favorite single seat aircraft that you flew?

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Speaker 1: Because I know you flew F one Super Sabers and

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Speaker 1: F one of four Starfighters. What was your favorite aircraft?

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Speaker 1: My all time favorite was the F sixteen. Wonderful airplane. Uh,

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Speaker 1: you know, a lot of innovation there. But the thing is,

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Speaker 1: when you climb up the ladder and strap the thing on,

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Speaker 1: you feel small. It's really good to feel small when

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Speaker 1: you're entering a fight. Thanks. General Merrow McPeak, retired four

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Speaker 1: star general, former Air Force Chief of Staff, his book

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Speaker 1: The air View Trilogy. Delinquencies auto loan delinquencies they arise

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Speaker 1: in credit card charge offs have increased. Is this a

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Speaker 1: problem for US banks? Let's ask David Fanger. He is

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Speaker 1: senior analyst at Moody's Investors Services and he joins us

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Speaker 1: in our eleven three oh studios. David, thank you for

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Speaker 1: being here. So are these problems for banks or have

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Speaker 1: they figured out a way around this? Well, certainly what

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Speaker 1: you cited on in terms of auto loan delinquacies credit

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Speaker 1: card delinquencies is um. I would say both of those

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Speaker 1: markets are in a little bit of a different position

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Speaker 1: in terms of where they are post crisis. UH no

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Speaker 1: bank has Most banks do not have significant exposures to

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Speaker 1: either of those businesses. They're one of many businesses that

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Speaker 1: US banks are engaged in. So what we are expect

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Speaker 1: think those delinquencies UM could rise further UM as long

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Speaker 1: as the employment picture is healthy and it is are

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Speaker 1: unlikely to to significantly rock the boat. Of what we've

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Speaker 1: seen in both cases is, you know, graduate deturation underwriting standards,

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Speaker 1: particularly an on a lending where we've seen for the

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Speaker 1: past several years weaker underwriting standards, which is now leading

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Speaker 1: to higher delinquencies. Weaker underwriting standards and longer duration of

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Speaker 1: the actual loan. Correct that's correct, Yes, would that also

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Speaker 1: have an effect on people's ability to pay well? Actually,

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Speaker 1: the longer duration loan should be helped, intended intended to

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Speaker 1: help them. So so when auto buyer is looking at

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Speaker 1: their payment the amount of the payment UM, a longer

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Speaker 1: live loan makes it easier to meet your monthly payments.

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Speaker 1: The challenge for longer tenored loans is UM really again

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Speaker 1: in in a weaker economic environment, UM, the the the

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Speaker 1: ability to pay back the remainder of that loan may

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Speaker 1: be more challenged. Uh. And what we see, indeed is

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Speaker 1: increasing willingness in the part of lenders. When a buyer

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Speaker 1: wants to auto owner wants to buy a new car,

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Speaker 1: they have a significant remaining balance on their existing loan,

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Speaker 1: and lenders have been increasingly going to roll those into

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Speaker 1: the new loan, which creates an even larger problem potentially

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Speaker 1: down the road. Okay, but before we get to that road,

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Speaker 1: I have a feeling that banks have a way to

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Speaker 1: become profitable despite all this. And you've issued a recent report,

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Speaker 1: what about the health of the US banking system right now?

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Speaker 1: Over capitalized? Um? Well, again, so Moody's rates banks. We

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Speaker 1: focus on the interest of bondholders, and we would not

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Speaker 1: view banks as being over capitalized. We certainly think the

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Speaker 1: improvements to capital at banks have been positive for creditors

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Speaker 1: and bondholders. UM in the aftermath of financial crisis. UM.

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Speaker 1: The trajectory we think over the next year UM, particularly

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Speaker 1: for the largest US banks, the global investment banks, is

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Speaker 1: positive because we are looking at a gradual broadening of

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Speaker 1: growth across the global economy. We're looking at higher interesting

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Speaker 1: than the US, and so particularly for those banks that

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Speaker 1: are core funded that is as significant reliance on deposits

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Speaker 1: for funding UM. Higher interest rates have been positive and

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Speaker 1: are likely to continue to be positive for US banks.

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Speaker 1: So expanding net interest margins exactly the loans that the

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Speaker 1: banks make, have they at all been crowded out by

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Speaker 1: non bank financial lenders because you keep hearing that banks

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Speaker 1: can't hold certain assets, don't hold certain assets, and that

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Speaker 1: the place has been taken by non bank financials. Well

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Speaker 1: to some extent, that's by choice. UM. Certainly, for example,

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Speaker 1: in auto ending, there's a significant portion of the auto

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Speaker 1: ending business is conducted through by non bank financials. UM.

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Speaker 1: I think the bank always represent about the total auto

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Speaker 1: loan market. UM. And there where we've seen weaker underwriting,

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Speaker 1: deteriorating underwriting standards. UM. Now there's there's paper that banks

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Speaker 1: don't want to hold their loans, banks don't want to

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Speaker 1: make that the non bank financial sector is more willing

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Speaker 1: to make and and and frankly that's positive for banks

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Speaker 1: in terms of credit risk. Talk about real estate. Let's

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Speaker 1: start with commercial real estate and bank exposure to see

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Speaker 1: ANIE loans for example, UM. So we had been concerned

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Speaker 1: about the rate of growth of CNI loans UM over

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Speaker 1: the past couple of years. UH. Normally we look at

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Speaker 1: CNI loan growth as as you know, a healthy rate

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Speaker 1: of growth for SEENI loans should not deviate that much

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Speaker 1: from the rate of nominal GDP growth. Think about the

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Speaker 1: rate of growth of the economy is rate at which

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Speaker 1: loan should go out exither growing much faster than corporations

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Speaker 1: are leveraging up um, which ultimately can be negative for

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Speaker 1: credit risk UM. We saw a rate of growth for

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Speaker 1: SEINGI landing in excessive nominal GDP growth for several years. However,

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Speaker 1: over the most recent year that rad of growth has

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Speaker 1: slowed some extent as well, and nominal GDP growth has accelerated,

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Speaker 1: So we're we're a little bit more comfortable, if you will,

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Speaker 1: with the current rate of growth for seeing is landing.

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Speaker 1: Are there any specific geographical issues that we need to

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Speaker 1: pay attention to, because many of the problems that created

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Speaker 1: the two thousand seven two thousand eight financial crisis were

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Speaker 1: centered in areas where mortgages were made very inexpensive for

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Speaker 1: people that probably should not have been able to access them.

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Speaker 1: But some were exceptions, like for example, in Texas. You

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Speaker 1: didn't see this happen um at this point, I'm not

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Speaker 1: sure I can in the US at any rate can

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Speaker 1: highlight specific geographic regions UM that are are are performing

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Speaker 1: better or worse off than initiarily affecting the banks UH

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Speaker 1: credit profile. I think it's we we focus on the

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Speaker 1: larger banks. Of those banks typically tend to have fairly

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Speaker 1: broad footprints UM and so they're for are a little

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Speaker 1: bit less exposed or vulnerable to a specific to an

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Speaker 1: energy market or to a housing market. Precisely, and certainly

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Speaker 1: the energy markets have had some challenges of the last

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Speaker 1: couple of years, and and but the but the banks

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Speaker 1: have been able to Although they have did suffer a

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Speaker 1: period of higher loss rates on some energy loans, the

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Speaker 1: overall impact on bank earnings and risk profile was relatively modest.

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Speaker 1: Thank you very much for coming in and spending time

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Speaker 1: with us. David Fanger is senior analyst for Moody's Investors Services,

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Speaker 1: giving us an outlook for the US banking industry. Joining

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Speaker 1: me now is Brian Schappatta. He is our US Treasury

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Speaker 1: as reporter for Bloomberg News, and Bryan can be followed

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Speaker 1: on Twitter at beach Chapatta. That's h A double P

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Speaker 1: A double T A alright, double P a T T.

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Speaker 1: A great story today where you go through with the

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Speaker 1: experts like black Rock and Goldman Sacks are saying about

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Speaker 1: the bond market and their calls for eighteen. Let's go

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Speaker 1: through and let's begin with black Rock. What are they

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Speaker 1: suggesting if you are in the world of fixed income, Well,

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Speaker 1: I was going to alphabetical order these big money managers.

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Speaker 1: So the thing about black Rock is that you go

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Speaker 1: through their twenty you're not looking. What's interesting is they

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Speaker 1: have no overweight recommendations in the entire fixed income landscape. UM.

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Speaker 1: You know, whether it's you know, their neutral communities, US credit,

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Speaker 1: emerging markets, things like that, don't like treasuries much or

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Speaker 1: European sovereigns um. But there their chief fixed income start

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Speaker 1: as Jeff Rosenberg basically said, you know, it's all well

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Speaker 1: and good when everyone's buying and you can flip bonds

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Speaker 1: and make a profit everyone everyone gets a trophy essentially,

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Speaker 1: But the risk is that once that stops and the

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Speaker 1: selling begins, everyone's left with all these liquid securities you

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Speaker 1: can't sell and you have to take big losses. So,

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Speaker 1: you know, and he wants to be on that side

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Speaker 1: of the would rather be on that side of sha

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Speaker 1: he says, go up in credit quality and you know,

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Speaker 1: be content with you know, maybe a little bit lower

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Speaker 1: returns in return for being able to get out of

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Speaker 1: your position if you absolutely need to. Was the black

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Speaker 1: rock was his position an outlier when it came to

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Speaker 1: some of the others that you interviewed, for example at

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Speaker 1: Fidelity Investments or Goldmen Sacks. You know, uh, there's a

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Speaker 1: lot of caution I think underlying a lot of these

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Speaker 1: Yeah they are so they're they're yeah, they're pessimists by

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Speaker 1: uh by trade now. Um. But you know Ford O'Neil

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Speaker 1: at Fidelity Investments, he was morning Stars Fixed Income Fund

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Speaker 1: Manager of the Year this year. Uh and basically sorry

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Speaker 1: in sixteen and he basically said, you know, I really

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Speaker 1: want to protect all the gains I made over the

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Speaker 1: last two years next year. Um, trying not to do

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Speaker 1: anything too uh too exotic. Uh, you know, add some

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Speaker 1: inflation protection uh chips. He likes those inflation Treasury inflation

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Speaker 1: for protected security. He says, inflation is going to accelerate

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Speaker 1: in YEP. I mean people said I was going to

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Speaker 1: accelerate this year. So you do have to take it

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Speaker 1: with a little bit with a grain of salt. Um.

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Speaker 1: But again, like the reflation trade this year. I mean

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Speaker 1: that was like the buzzword going into the start of

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Speaker 1: UM didn't exactly materialize, but we'll see what happens this year.

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Speaker 1: He also likes, uh, some floating rate securities which will

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Speaker 1: reset higher with FED rate hikes, so you know, protecting

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Speaker 1: yourself both on a long end if inflation starts to accelerate,

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Speaker 1: also on the short end if the FED continues hiking rates.

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Speaker 1: And he also mentioned Brazil and Mexico. Yeah, Brazil's a

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Speaker 1: fan favorite among these among all these folks. UM. You know,

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Speaker 1: obviously they offer you know, much higher yields that you

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Speaker 1: can get anywhere and sort of the you know, typical

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Speaker 1: developed markets. So if you're looking for some yield pick up,

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Speaker 1: that's a place to be along with Mexico. UM, I

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Speaker 1: know that. Goldman Sachs also mentioned places like Hungary, Poland,

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Speaker 1: Columbia to stay in South America and Czech Republic. Yeah,

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Speaker 1: this is Mike Swell right over at the Goldman Sex

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Speaker 1: Asset Management. He also says volatility, so let's just go

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Speaker 1: to just we understand this black rock. They're basically not

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Speaker 1: that excited. Be careful. Increased credit quality, fidelity inflation may

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Speaker 1: be accelerating so be mindful there. But we like Brazilian Mexico,

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Speaker 1: Goldman Sex also Brazilian Mexico. But volatility, right, volatility, I

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Speaker 1: mean it's so low. I mean well, I mean I'm

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Speaker 1: sure you know with the VIX, whether what you okay

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Speaker 1: at the VIX or whether you're looking at UM measures

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Speaker 1: of bond market volatility like the move Index from Merrill Lynch.

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Speaker 1: I mean, they're all they set record lows this year,

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Speaker 1: just kept grinding lower. Um. It's just been a study

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Speaker 1: march higher in equities and sort of a range bound

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Speaker 1: treasury market. So the idea that volatility will pick up, UM,

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Speaker 1: it's sort of something that's you know, I mean, it

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Speaker 1: might happen, but also it's like everyone wants that to happen,

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Speaker 1: so they're hoping that it happens. UM in a lot

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Speaker 1: of ways, because you know, if you have active fixed income,

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Speaker 1: which all these all these people are basically with the

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Speaker 1: exception I guess of a vanguard who I also spoke

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Speaker 1: with UM. I mean, you wanted to pick up, you

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Speaker 1: want opportunities. Everything is being bought right now, so there's

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Speaker 1: not a lot of opportunities to sort of find things

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Speaker 1: on the cheap. What is JP Morgan Asset Managements as

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Speaker 1: a good strategy for so. Bob Michelle at JP Morgan

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Speaker 1: Asset Management UH is probably one of the more aggressive

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Speaker 1: folks that I that I talked with. UM. He likes

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Speaker 1: a European additional tier one securities UH Coco bonds. I

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Speaker 1: believe they're also referred to as UH and high yield

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Speaker 1: within Europe. He just thinks of Europe looks healthy UH

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Speaker 1: and its economy is you know, maybe a year or

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Speaker 1: so behind the US as far as picking up so

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Speaker 1: UH more good things to come from there. Also likes

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Speaker 1: the steeper yield curve, which is kind of interesting. UM.

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Speaker 1: Other people are saying that as well. If PIMCO also

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Speaker 1: thinks the yield curve uh uh will steep in as well.

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Speaker 1: So that would be a departure, obviously from this year

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Speaker 1: where the big trend has been, especially in the last

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Speaker 1: few months of the year, this relentless flattening as short

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Speaker 1: term meelds rise with a long term meals hold study.

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Speaker 1: I like the point from a JP work and asset management.

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Speaker 1: What don't they like anything? The Central Bank in Europe,

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Speaker 1: the European Central Bank has purchased t c W Let's

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Speaker 1: tell us. What did Ted Revella TCW say, Yeah, I

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Speaker 1: mean he is sort of in the camp of black rock.

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Speaker 1: I would say, um, just sort of protecting yourself against

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Speaker 1: uh potential swing in the other direction where there's a

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Speaker 1: big sell off in bonds or stocks or both just

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Speaker 1: markets in general. Uh, he's just saying, be happy with

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Speaker 1: the two and a half to three and a half

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Speaker 1: percent return um. You know, obviously in an era where

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Speaker 1: you know, the SMP five hundred games, you know, six

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Speaker 1: and a half percent and a quarter. Uh. You know,

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Speaker 1: maybe people might not be too pleased with that, but

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Speaker 1: it's something that you know, if you want to diversify

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Speaker 1: and you know, not be too exposed if you feel

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Speaker 1: markets are a little frothy. Um, you know, going up

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Speaker 1: in credit quality, high quality corporate bonds, agency mortgages. You know,

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Speaker 1: take that clip that coupon essentially, and I have less

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Speaker 1: price volatility than some of the other more risky securities.

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Speaker 1: Thanks for being with us, Always a pleasure. Brian Sappada.

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Speaker 1: He is a US Treasurer supporter for Bloomberg News and Yes.

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Speaker 1: He can be followed on Twitter at b Shapata c

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Speaker 1: H A double P, A double T A Ford's luxury

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Speaker 1: brand Lincoln, what is the future for the brand? Well,

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Speaker 1: here to help us understand it is Jamie Butters. He's

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Speaker 1: our US auto supporter for Bloomberg and Jamie always a pleasure.

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Speaker 1: You can be followed on Twitter at mid in Hawk

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Speaker 1: M I T T E N and then just Hawk

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Speaker 1: H A W K all right, mitten Hawk. Tell us

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Speaker 1: what is the deal with the Lincoln brand? For tell us?

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Speaker 1: How many they sell and what are they trying to accomplish?

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Speaker 1: You know, Lincoln is a is a challenge brand here

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Speaker 1: in the US. It's uh, you know, the big brands,

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Speaker 1: the leaders in the luxury market, the volume luxury market

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Speaker 1: are Mercedes, BMW and Lexus and they all sell three

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Speaker 1: thousand or more a year and Lincoln, you know, barely

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Speaker 1: cracks a hundred thousand, so it's not really getting enough

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Speaker 1: volume to justify you know, the cost of product development

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Speaker 1: and and advertising support and all that. But it's not

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Speaker 1: a simple decision at all. You've got you've got these

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Speaker 1: contracts with dealers out there, and you've got a lot

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Speaker 1: of growth coming for Lincoln in China. And it's kind

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Speaker 1: of like with GM and Buick. Buick is not a

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Speaker 1: great brand in the US either, but it I think

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Speaker 1: there's a sense that in order for an American brand

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Speaker 1: to have credibility in China, it needs to continue to

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Speaker 1: be sold in the US. So it's a it's a

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Speaker 1: tough tough call for Jim Hackett at the CEO of Ford.

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Speaker 1: So you mean that Matthew McConaughey is not really going

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Speaker 1: to be able to move these Lincolns off the off

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Speaker 1: the lot. I understand he's going to be starring in

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Speaker 1: a couple of new Lincoln commercials and you get to

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Speaker 1: watch them during college football playoffs on New Year's Day.

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Speaker 1: That'll be fun. The commercials have been entertaining at times.

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Speaker 1: They've certainly inspired some other entertainment. A lot of comedians

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Speaker 1: have had fun riffing on spoofing on him. But no,

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Speaker 1: you know, I think he brings some uh some fun

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Speaker 1: to the brand and gets some attention and maybe hits

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Speaker 1: at some of the the cool factor that they're trying

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Speaker 1: to capture. But but the way it plays out, they

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Speaker 1: just they don't have enough volume, they have enough demand,

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Speaker 1: and they're not selling it a high enough high enough

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Speaker 1: prices and profit margins. You know, you can get by

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Speaker 1: on a hundred thousand a year. If you're Porsche, if

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Speaker 1: you're Lamborghini, if you're Ferrari, you can sell a lot

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Speaker 1: fewer than that. But that Lincoln, you know, it needs,

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Speaker 1: it needs bigger volumes. Well, doesn't it start at around

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Speaker 1: thirty five to forty dollars or am I misreading that? Yeah,

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Speaker 1: that that's probably about right for for Lincoln MK Z Sedan.

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Speaker 1: I mean those are, but you're competing with a lot

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Speaker 1: of other vehicles in that size and price category. And okay,

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Speaker 1: so that's but the good ones. So the hot ones

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Speaker 1: for them are that they've got the new Continental, which

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Speaker 1: is kind of an exciting throwback design, and the combined

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Speaker 1: sales of the Continental and the vehicles replacing the Mk

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Speaker 1: S Sedan, you know, they're up about three thousand thirty

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Speaker 1: six vehicles this year. You take that out, and Lincoln

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Speaker 1: sales would be down in line with the rest of

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Speaker 1: the market. The other hot Lincoln or potentially hotly other

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Speaker 1: good name they have is Navigator UM, which is you know,

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Speaker 1: was one of the original big, you know, sort of

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Speaker 1: hip hop, very sleek luxury type SUVs and it has

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Speaker 1: just been really left in the dust by the Escalade

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Speaker 1: and Mercedes and everyone else that wants to get in

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Speaker 1: that space. You mean that the dollar black label navigator

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Speaker 1: in baby blue is not going to just sell itself.

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Speaker 1: It sure doesn't, It sure doesn't. Maybe if they'd done

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Speaker 1: the goal wing doors like they showed it the New

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00:26:24,800 --> 00:26:27,400
Speaker 1: York Auto Show a couple of years ago, they could

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00:26:27,400 --> 00:26:30,720
Speaker 1: have could have captured Why didn't do that? Because it's

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00:26:30,760 --> 00:26:35,320
Speaker 1: really ridiculously hard to manufacture, uh, the same reason. You know,

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00:26:35,400 --> 00:26:37,840
Speaker 1: Tesla has had trouble with it. Uh, And that was

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00:26:37,880 --> 00:26:40,919
Speaker 1: really a signature thing for for Elon Musk and Tesla.

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00:26:40,960 --> 00:26:43,840
Speaker 1: But it's really hard to do, especially in a reliable way.

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00:26:43,840 --> 00:26:45,800
Speaker 1: And I don't know if I saw some stuff, you

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00:26:45,800 --> 00:26:47,840
Speaker 1: know at the show where they just they were really

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00:26:47,840 --> 00:26:50,280
Speaker 1: reluctant to demonstrate it any more than they had to.

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00:26:50,400 --> 00:26:53,320
Speaker 1: It worked perfectly at the press conference, but it was

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00:26:53,920 --> 00:26:56,159
Speaker 1: the rest of the time. Is a little um, you know,

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00:26:56,200 --> 00:26:58,200
Speaker 1: a little bulky, a little clusi as it would kind

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00:26:58,200 --> 00:27:02,000
Speaker 1: of uh chunk its way open and closed. How are

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00:27:02,040 --> 00:27:05,800
Speaker 1: these the service pilots working that You've got a customer

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00:27:05,880 --> 00:27:09,959
Speaker 1: service pilot program, you've got a concierge program, chauffeurs service,

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00:27:10,280 --> 00:27:13,920
Speaker 1: and also a planned subscription service in some markets. What's

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00:27:13,960 --> 00:27:17,560
Speaker 1: that doing in the brand? Yeah, it's some they're getting

447
00:27:17,600 --> 00:27:19,320
Speaker 1: some mixed results. I think they're getting you know, they're

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00:27:19,320 --> 00:27:22,240
Speaker 1: getting to run some pilots and see what what will

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00:27:22,280 --> 00:27:25,199
Speaker 1: take uh, kind of like we're seeing with some of

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00:27:25,240 --> 00:27:27,560
Speaker 1: the other brands, some others that are maybe pushing a

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00:27:27,560 --> 00:27:30,399
Speaker 1: little harder on it, like Volvo and Lexus. But Lincoln

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00:27:30,480 --> 00:27:33,800
Speaker 1: is definitely trying to do some learning out there, trying

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00:27:33,800 --> 00:27:36,600
Speaker 1: to catch lightning in a bottle. Again. The key for them,

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00:27:36,720 --> 00:27:38,600
Speaker 1: or what it seems to be, is seeing what they

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00:27:38,640 --> 00:27:41,600
Speaker 1: can learn and do some experiments in the US where

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00:27:41,640 --> 00:27:43,760
Speaker 1: they know the market pretty well, and then figure out

457
00:27:43,760 --> 00:27:46,879
Speaker 1: what they need to bring to China to really accelerate

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00:27:46,920 --> 00:27:49,800
Speaker 1: their growth there. Right, because that that seems to write

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00:27:49,800 --> 00:27:53,160
Speaker 1: that high end trim, that seems like that could be

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00:27:53,240 --> 00:27:57,879
Speaker 1: pretty attractive to those purchasers. Right. They're trying to figure

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00:27:57,880 --> 00:27:59,600
Speaker 1: out so one of the things they do. I asked,

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00:28:00,160 --> 00:28:02,920
Speaker 1: you know, one of the Lincoln marketing directors out in

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00:28:03,119 --> 00:28:05,080
Speaker 1: at the l A Auto Show, he had just come

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00:28:05,119 --> 00:28:07,720
Speaker 1: back from three years in China and they're talking about

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00:28:07,760 --> 00:28:13,439
Speaker 1: expanding the the driver service that they would offer, and

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Speaker 1: I said, you know, do you ever try that in

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00:28:15,320 --> 00:28:17,680
Speaker 1: in China or is it redundant because so many people

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00:28:17,680 --> 00:28:19,960
Speaker 1: already have drivers And he said, you know, they they

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00:28:19,960 --> 00:28:22,640
Speaker 1: tried it during the New Year's times when people tend

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00:28:22,640 --> 00:28:26,680
Speaker 1: to get festive, and they got some interesting response to it.

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00:28:26,840 --> 00:28:31,800
Speaker 1: But it's it's a real it's really challenging to trans

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00:28:31,960 --> 00:28:36,160
Speaker 1: to try to translate always what you can offer UH

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00:28:36,320 --> 00:28:39,320
Speaker 1: in services across the globe because different markets are so

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00:28:39,440 --> 00:28:42,280
Speaker 1: are so different. Thanks very much. Jamie Butter is better

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00:28:42,320 --> 00:28:45,120
Speaker 1: known as mitten Hawk on Twitter. He's our US autos

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00:28:45,160 --> 00:28:52,840
Speaker 1: reporter for Bloomberg News. Thanks for listening to the Bloomberg

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00:28:52,880 --> 00:28:55,520
Speaker 1: P and L podcast. You can subscribe and listen to

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00:28:55,560 --> 00:29:00,000
Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.

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00:29:00,480 --> 00:29:04,080
Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm

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00:29:04,080 --> 00:29:07,400
Speaker 1: on Twitter at Lisa Abramo wits one. Before the podcast,

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00:29:07,440 --> 00:29:10,040
Speaker 1: you can always catch us worldwide on Bloomberg Radio.