WEBVTT - DirecTV and Dish To Merge, Beijing Wants to Ditch Nvidia Chips 0:00:02.440 --> 0:00:09.080 Bloomberg Audio Studios, podcasts, radio news from. 0:00:08.920 --> 0:00:13.000 The Heart where innovation, money and power. Collie in Silicon 0:00:13.119 --> 0:00:14.040 Valley and beyond. 0:00:14.320 --> 0:00:18.560 This is Bloomberg Technology with Caroline Hyde and Ed Loved Love. 0:00:32.200 --> 0:00:32.360 Live. 0:00:33.240 --> 0:00:34.480 This is Broomberg Technology. 0:00:35.120 --> 0:00:38.320 Now we get to direct TV in the dish, become 0:00:38.880 --> 0:00:42.960 the PTV provider in the United States. Plus, Beijing steps 0:00:43.040 --> 0:00:45.960 up pressure on domestic companies to ditch in video chips, 0:00:46.120 --> 0:00:50.160 and California Governor gab Newson Brooks proposed AI safety bill 0:00:51.600 --> 0:00:55.480 Center West the bill. But first, let's check in on 0:00:55.520 --> 0:00:58.200 these markets at the moment, because as I battle perhaps 0:00:58.320 --> 0:01:00.480 some technical issues with my microphone will crently seeing the 0:01:00.520 --> 0:01:02.200 Nasdaq one hundred off by a quarter of a percent 0:01:02.200 --> 0:01:04.679 at the moment that we're all awaiting fedshare Pal what 0:01:04.760 --> 0:01:07.960 he will be saying regarding the economy post of course 0:01:08.000 --> 0:01:10.800 those FED cuts. We're looking at the Dragon, Golden Dragon Inecks. 0:01:10.880 --> 0:01:13.960 Over in China though, up another four percent. Tech stocks 0:01:14.000 --> 0:01:16.400 on fire amid the stimulus and of course a feeling 0:01:16.440 --> 0:01:18.959 of fomo continuing to perpetuate in the market. We are 0:01:19.000 --> 0:01:22.119 the highest on these Chinese related names in more than 0:01:22.120 --> 0:01:24.679 a year. Look at some individual movers though, because We 0:01:24.720 --> 0:01:26.720 have got a merging Monday on our hands, and a 0:01:26.720 --> 0:01:28.960 lot of stocks are being impacted. AT and T for one, 0:01:29.000 --> 0:01:31.000 only up about a tenth of a percent. But this 0:01:31.080 --> 0:01:33.720 has been long in the making, DirecTV and Dish combining 0:01:33.760 --> 0:01:36.319 to create the biggest PATV provider in the United States. 0:01:36.480 --> 0:01:38.440 AT and T is part of the deal while it's 0:01:38.480 --> 0:01:43.040 selling its seventy percent stake in Direct Tv to TPG. Meanwhile, 0:01:43.240 --> 0:01:46.240 that earns seven point six billion dollars Echo Star, as 0:01:46.280 --> 0:01:48.480 you'll see, under pressure, the owner of Dish and Sling 0:01:48.760 --> 0:01:52.520 especially dodging bankruptcy here according to BlueBag Intelligence, by offloading 0:01:52.520 --> 0:01:56.280 the debt associated with PayTV assets, and is set to 0:01:56.320 --> 0:01:57.800 sell more shares itself. 0:01:58.360 --> 0:01:59.280 Let's discuss all of this. 0:02:00.040 --> 0:02:03.240 Shell Davis, who throughout has been following this deal. You 0:02:03.320 --> 0:02:05.120 take a victory lap because you're ahead of the curve 0:02:05.160 --> 0:02:06.920 on this. This is why AT and T isn't moving 0:02:06.920 --> 0:02:10.480 that much, because we'd anticipated it's offloading of Direct TV. 0:02:10.720 --> 0:02:13.120 But just remind us what they're creating here by merging 0:02:13.160 --> 0:02:13.880 the two companies. 0:02:14.000 --> 0:02:16.040 So, as you just said, you know, this deal has 0:02:16.080 --> 0:02:18.959 been a long time coming, and there's a lot happening here. 0:02:19.520 --> 0:02:21.120 The news all came out this morning. 0:02:20.880 --> 0:02:24.160 Through a series of five six press releases filings, and 0:02:24.240 --> 0:02:26.920 what's happening is that Dish and direct TV are going 0:02:26.960 --> 0:02:31.000 to combine. Direct TV is acquiring Dish to form if 0:02:31.040 --> 0:02:34.360 it gets approved, the biggest paid TV provider in the US, 0:02:34.680 --> 0:02:36.640 and the way they're doing that is Direct TV is 0:02:36.680 --> 0:02:40.840 paying one dollar in equity and then assuming ten billion 0:02:40.880 --> 0:02:44.880 dollars of Dish debt in order to acquire the business. 0:02:45.240 --> 0:02:48.359 As part of that, though, Dish or Direct TV has 0:02:48.440 --> 0:02:50.919 to get Dish bondholders to agree to take a haircut 0:02:51.000 --> 0:02:51.919 on some of their debts. 0:02:51.919 --> 0:02:54.280 So if this goes through, it. 0:02:54.240 --> 0:02:58.880 Will mean a stronger balance sheet, you know, behind those 0:02:58.960 --> 0:03:03.040 lenders that are agreeing to this, But the bondholders have 0:03:03.080 --> 0:03:05.000 to agree to take that haircut. 0:03:04.840 --> 0:03:07.440 And that is why some of these bond prices are 0:03:07.440 --> 0:03:09.760 significantly under pressure today. It's not just a stock of 0:03:09.800 --> 0:03:13.000 Echo style. For example, EchoStar meanwhile is going more into 0:03:13.000 --> 0:03:15.880 the infrastructure side, into the five G side, and into 0:03:16.080 --> 0:03:18.920 selling about five billion dollars worth of stock. That's why 0:03:18.960 --> 0:03:21.120 it shares full on the day. There are some of 0:03:21.120 --> 0:03:24.520 the outstanding debt that's involved in this dead exchange. But 0:03:25.240 --> 0:03:28.240 why then at and T exit it's holding of DirecTV, 0:03:28.320 --> 0:03:30.560 does it not see the future potential of a bigger deal. 0:03:30.919 --> 0:03:31.959 So this is all. 0:03:31.840 --> 0:03:34.960 Part of a bigger theme that we're seeing in M 0:03:34.960 --> 0:03:37.640 and A and in corporate America, where companies are increasingly 0:03:37.680 --> 0:03:41.320 looking to simplify their businesses. AT and T has done 0:03:41.320 --> 0:03:41.640 a bit of. 0:03:41.680 --> 0:03:44.120 A three sixty years ago, they. 0:03:44.120 --> 0:03:47.480 Got into the content game, and you'll remember a couple 0:03:47.520 --> 0:03:50.120 of years ago they spun out and sold Warner Brothers 0:03:50.640 --> 0:03:54.080 to Discovery. Now with DirecTV, you know, they're looking to 0:03:54.120 --> 0:03:56.000 exit that and they say that this is all about 0:03:56.000 --> 0:03:58.040 them wanting to focus on what their core is, which 0:03:58.080 --> 0:04:01.800 is wireless broadband. They don't see you know, value in 0:04:02.840 --> 0:04:05.280 content the way that they had before. 0:04:05.280 --> 0:04:06.240 And under TPG. 0:04:06.360 --> 0:04:09.240 With this this TV that they have, DirecTV has done 0:04:09.240 --> 0:04:13.160 really well because TPG has been able to cut costs 0:04:13.240 --> 0:04:15.480 and so the thought is maybe it's better in their 0:04:15.520 --> 0:04:17.880 hands than a split you know deal. 0:04:18.360 --> 0:04:19.960 I like the fact that you're saying this is all 0:04:20.000 --> 0:04:22.719 part of a trend to simplify, because you're also on 0:04:22.760 --> 0:04:26.039 the byline for Verizon's story today where we're seeing a 0:04:26.080 --> 0:04:29.080 three point three billion dollar deal to basically sale and 0:04:29.120 --> 0:04:31.000 then lease back access to its towers. 0:04:31.040 --> 0:04:32.560 Why do that for a Verizon? 0:04:33.120 --> 0:04:36.480 So it's a way for a Verizon to get some cash. 0:04:36.560 --> 0:04:39.840 They announced a deal themselves a couple a couple of 0:04:39.880 --> 0:04:42.640 weeks ago to buy Frontier, which is a big broadband 0:04:42.720 --> 0:04:45.680 internet player. And we're seeing just a big theme of 0:04:46.320 --> 0:04:49.800 the wireless players tapping out on kind of you know, 0:04:49.920 --> 0:04:52.080 cell phone and seeing we need to find ways to 0:04:52.080 --> 0:04:53.719 get more customers and the way to do that is 0:04:53.760 --> 0:04:56.599 by offering internet access. So this is a way for 0:04:56.640 --> 0:04:59.880 them to pay for that without you know, boosting their 0:05:00.040 --> 0:05:02.560 average as much. It gives them a little bit of cash. 0:05:02.720 --> 0:05:06.280 Michelle, which has been busy, we appreciate it. Meanwhile, let's 0:05:06.279 --> 0:05:09.040 talk about this in the broader market context. Empower's chief 0:05:09.040 --> 0:05:13.279 investment strategist, Martin Norton is here for more and Marta, look, 0:05:13.320 --> 0:05:15.040 we do have a feeling of m and a Monday 0:05:15.040 --> 0:05:17.599 on our hands. Are we going to see more deals 0:05:17.640 --> 0:05:19.480 go through as we see rates get lower? 0:05:20.600 --> 0:05:23.760 Well, listen, I mean we have seen some pickup in 0:05:23.880 --> 0:05:26.600 deals this year, and I think one of the challenges 0:05:26.720 --> 0:05:30.599 has been higher rates. And so the expectation that you know, 0:05:30.680 --> 0:05:33.480 as if FED enters a definitive cutting cycle, we're going 0:05:33.520 --> 0:05:35.800 to see some shifts broadly, and that can impact the 0:05:35.920 --> 0:05:39.960 M and A environment as well. There's also the regulatory 0:05:40.040 --> 0:05:43.240 angle and of course getting deals through and that's been 0:05:43.320 --> 0:05:46.080 harder in recent years, and so that remains something that 0:05:46.279 --> 0:05:48.520 you know, is something that investors and companies are going 0:05:48.560 --> 0:05:51.160 to have to continue to contend with. But certainly lower 0:05:51.240 --> 0:05:52.920 rates are a bit of a tailwind. 0:05:53.240 --> 0:05:55.599 What's interesting is when you felt perhaps M and A 0:05:55.720 --> 0:05:58.720 and indeed IPOs there, we say it are all going 0:05:58.720 --> 0:06:01.599 to be held back until post the political anxiety that 0:06:01.720 --> 0:06:03.960 is the US election, That doesn't seem to be holding 0:06:03.960 --> 0:06:06.320 it back right now. Is that your view? 0:06:06.360 --> 0:06:07.600 Marta? 0:06:07.880 --> 0:06:12.080 Well, you know, I do think that regulatory impact has 0:06:12.160 --> 0:06:14.960 been felt. That doesn't mean that companies aren't going to 0:06:15.040 --> 0:06:17.640 engage in deals when it makes strategic sense. I think 0:06:17.680 --> 0:06:20.839 that's what we're seeing with the Dish Direct TV deal. 0:06:21.520 --> 0:06:25.240 But I do think that there's potentially been less activity 0:06:25.240 --> 0:06:27.560 than there otherwise would be, and so I think that 0:06:27.640 --> 0:06:30.560 as we turn the elective corner and start to have 0:06:30.600 --> 0:06:33.360 some clarity on what that looks like, we may start 0:06:33.400 --> 0:06:35.640 to see a pickup in activity on the M and 0:06:35.680 --> 0:06:36.040 A front. 0:06:36.400 --> 0:06:38.960 What about activity and ownership of big tech right now? 0:06:39.040 --> 0:06:41.360 Because we're down on the day on the NASDAC. There 0:06:41.440 --> 0:06:43.680 is talk that hedge funds are selling out of technology 0:06:43.760 --> 0:06:47.400 names to get into lumberhold Chinese companies. How are we 0:06:47.480 --> 0:06:49.880 seeing that play out in terms of people's desire to 0:06:49.920 --> 0:06:51.760 stay committed to the Magnificent seven? 0:06:52.560 --> 0:06:55.200 You know, it's such an interesting question because a lot 0:06:55.200 --> 0:06:57.400 of times when we're talking about the environment that we're in, 0:06:57.440 --> 0:07:00.000 there's really been two drivers of returns in twenty two. 0:07:00.200 --> 0:07:02.479 For of course, there's been the AI theme, and of 0:07:02.520 --> 0:07:05.600 course that's really benefited the big tech space. And there's 0:07:05.640 --> 0:07:08.440 also been this soft landing theme, and now we're adding 0:07:08.440 --> 0:07:10.200 the cunning cycle to the mix. So I think that's 0:07:10.240 --> 0:07:14.200 really within the US broadening out the trade, not necessarily 0:07:14.240 --> 0:07:17.000 meaning that folks need to abandon big tech. I mean, 0:07:17.040 --> 0:07:19.360 lower rates aren't necessarily bad for big tech, but it 0:07:19.400 --> 0:07:22.680 certainly brings other areas, like the small cap area into 0:07:22.720 --> 0:07:25.800 the front of investors' minds. Now what's happening in China 0:07:25.960 --> 0:07:28.880 is so fascinating because this has been an area that 0:07:28.920 --> 0:07:33.200 has been under pressure, it's had multiple false dawns, and now, 0:07:33.280 --> 0:07:36.840 as Bloomberg has recorded, so clearly there's the monetary and 0:07:36.880 --> 0:07:40.400 the fiscal side coming together to push these stocks higher, 0:07:40.720 --> 0:07:43.080 and so I think that's giving a lot of investor 0:07:43.200 --> 0:07:46.520 enthusiasm to assets that have been really depressed. You can 0:07:46.560 --> 0:07:49.920 find some very healthy, big tech names in China, but 0:07:49.960 --> 0:07:52.880 the overhang there has just been made it very difficult 0:07:52.880 --> 0:07:54.640 for investors to want to get involved. 0:07:55.280 --> 0:07:59.480 We've already seen the Faumo kick in the rallying of 0:07:59.480 --> 0:08:00.800 the names we can only have on the screen the 0:08:00.880 --> 0:08:03.960 Ali Baba's, the JD dot COM's, the by Dos. Is 0:08:03.960 --> 0:08:06.120 there still juice to go hair or do you wait 0:08:06.240 --> 0:08:10.240 to see how bigger impact the stimulus actually has. 0:08:10.280 --> 0:08:12.240 From a fundamental perspective. 0:08:12.760 --> 0:08:15.440 I'd argue that the valuations are still there. I mean 0:08:15.480 --> 0:08:18.640 when you take a look at something like Crane shares 0:08:19.160 --> 0:08:22.160 etf that's shocking the China market, and you look at 0:08:22.200 --> 0:08:24.680 where it peaked in February twenty twenty one, it was 0:08:24.720 --> 0:08:27.400 around one hundred and thirty and it's come down all 0:08:27.440 --> 0:08:29.360 the way down to about eighteen at one point now 0:08:29.600 --> 0:08:32.760 in the thirties. It potentially won't go all the way 0:08:32.800 --> 0:08:35.120 back up to something like one thirty, but you can 0:08:35.200 --> 0:08:38.280 see a little bit room left on the valuation side 0:08:38.320 --> 0:08:41.480 because the sentiment has been so bleak. I mean, there's 0:08:41.480 --> 0:08:44.200 been numerous seal side research pieces out over the past 0:08:44.240 --> 0:08:46.880 several years saying that this is a no go space. 0:08:47.000 --> 0:08:49.760 And so now that you have kind of the support 0:08:49.800 --> 0:08:52.000 for the demand side, I'm not saying there aren't still issues. 0:08:52.040 --> 0:08:54.560 There are plenty of issues left, but I think that's 0:08:54.559 --> 0:08:57.719 take at least some of the concerns away from investors' minds. 0:08:57.920 --> 0:09:00.960 And we have had such a US is the only 0:09:01.000 --> 0:09:03.440 game in town for technology trade? 0:09:03.640 --> 0:09:04.600 Is that still the case? 0:09:05.679 --> 0:09:10.440 Well, it's hard to find similar opportunities from kind of 0:09:10.440 --> 0:09:15.000 a financial resilience or health or dominance perspective in what 0:09:15.080 --> 0:09:17.280 you have in Silicon Valley. There is a lot of 0:09:17.400 --> 0:09:22.400 uniqueness to those types of names. But the closest corollary 0:09:22.480 --> 0:09:24.719 that I see really is in China, where you have 0:09:24.800 --> 0:09:28.880 some of these similar types of companies with really healthy 0:09:28.960 --> 0:09:33.160 balance sheet. So I think that this is the competitive trade. 0:09:33.480 --> 0:09:35.599 But of course they have, you know, concerns around the 0:09:35.640 --> 0:09:39.120 regulatory environment, there are geopolitical risks, there are a number 0:09:39.160 --> 0:09:41.440 of other things that kind of spoil the apple cart 0:09:41.520 --> 0:09:44.920 a little bit there. But from an asset perspective, they're 0:09:44.960 --> 0:09:45.800 pretty competitive. 0:09:46.600 --> 0:09:49.679 I just want to double click on that in terms 0:09:49.679 --> 0:09:54.839 of regulatory concerns, because they're actually geopolitical regulatory concerns as well. 0:09:54.880 --> 0:09:58.480 With China pushing back against the video chips, that's benefited 0:09:58.800 --> 0:10:01.200 Chinese chip makers today. We've got to talk about it 0:10:01.440 --> 0:10:03.600 much more in a moment, Marta. But how much are 0:10:03.600 --> 0:10:07.040 you factoring in for your investors the idea that China 0:10:07.160 --> 0:10:09.080 US tensions will continue. 0:10:09.480 --> 0:10:11.880 I mean, I think that is one of the kind 0:10:11.920 --> 0:10:15.600 of exaginous events that's out there and affects a course tech, 0:10:15.880 --> 0:10:18.320 but it also affects the broader market. And you know, 0:10:18.360 --> 0:10:20.240 we have talks of tariffs and the like as well, 0:10:20.320 --> 0:10:22.760 so there's a lot of questions around kind of the 0:10:22.800 --> 0:10:26.480 cooperation of different countries and how they'll play well. And 0:10:26.520 --> 0:10:28.920 then something like AI and thinking about kind of the 0:10:28.960 --> 0:10:31.920 security risk how that factors into things. So I think 0:10:31.960 --> 0:10:35.040 there is you know, something of a when folks are 0:10:35.080 --> 0:10:37.560 thinking about these assets to think about the valuation and 0:10:37.600 --> 0:10:40.080 whether it's accounting for that type of risk. And as 0:10:40.120 --> 0:10:42.360 we're taking a look at big tech today, even post 0:10:42.440 --> 0:10:45.679 summer storm, I'd argue that valuations are a bit high 0:10:45.720 --> 0:10:48.160 and they're not really taking into account some of these 0:10:48.200 --> 0:10:50.840 outside events that could be problematic for. 0:10:50.880 --> 0:10:51.720 Some of these companies. 0:10:52.200 --> 0:10:55.600 Empower's chief investment strategist Martin Norton. Great to get your take. 0:10:55.679 --> 0:10:56.079 Thank you. 0:10:56.640 --> 0:10:59.160 Now let's turn our attention to US and China. Now, 0:10:59.160 --> 0:11:01.800 Bloomberg has learned that Beijing is stepping up pressure on 0:11:01.840 --> 0:11:05.000 domestic companies to ditch in Vidia processes for lo called 0:11:05.040 --> 0:11:08.559 alternatives that are cent shares of China chip maker camanicn 0:11:08.640 --> 0:11:12.080 technology is absolutely soaring today. Let's discuss more with bluemg's 0:11:12.120 --> 0:11:15.199 Mackenzie Hawkins, who help break this story on Friday evening 0:11:15.720 --> 0:11:19.800 around the pushback against Nvidia. This is today's market reaction. 0:11:20.280 --> 0:11:23.760 Mackenzie just remind us as to why they are trying 0:11:23.760 --> 0:11:27.079 to curtail these not the most powerful chips from video, 0:11:27.120 --> 0:11:27.680 that's for sure. 0:11:29.240 --> 0:11:32.880 So Beijing for years has been aiming for self sufficiency 0:11:33.040 --> 0:11:36.280 in semi conductors, which are the critical electronic building blocks 0:11:36.280 --> 0:11:41.120 of every advanced technology, including artificial intelligence, and Chinese chip 0:11:41.120 --> 0:11:43.679 makers have been trying to make strides against their foreign 0:11:43.800 --> 0:11:46.600 rivals but have struggled to keep up. And videos chips 0:11:46.600 --> 0:11:49.920 are still the gold standard, even the slightly less powerful 0:11:50.000 --> 0:11:51.960 ones that the company is allowed to sell to China 0:11:52.080 --> 0:11:55.400 under US restrictions. So Beijing, on the one hand, wants 0:11:55.440 --> 0:11:59.040 to prop up these domestic companies and encourage Chinese AI 0:11:59.120 --> 0:12:02.679 developers to use Chinese chips. On the other hand, they 0:12:02.679 --> 0:12:05.400 don't want to handicap these Chinese AI startups, so they're 0:12:05.400 --> 0:12:07.720 not fully banning them from buying the best chips on 0:12:07.760 --> 0:12:10.040 the market, which are in Vidias, but saying if you 0:12:10.080 --> 0:12:11.240 can please buy local. 0:12:12.040 --> 0:12:14.640 Interestingly, I think a quote on camera was Jensen Hwang 0:12:14.720 --> 0:12:18.840 on Friday as well in Washington. He's doing all he can, 0:12:18.920 --> 0:12:22.400 he says, to support sales in China. 0:12:22.559 --> 0:12:26.760 China is an incredibly important market market for Nvidia and 0:12:26.840 --> 0:12:30.760 pretty much every other chip maker. The US restricted sales 0:12:30.760 --> 0:12:33.920 of advanced ships made with any type of American technology 0:12:33.920 --> 0:12:36.600 to China in twenty twenty two and has been increasingly 0:12:36.600 --> 0:12:39.760 cracking down on those sales over the past couple of years. 0:12:40.160 --> 0:12:42.960 But in Nvidia and other companies responded by trying to 0:12:42.960 --> 0:12:45.400 design new chips for the Chinese market, which the US 0:12:45.400 --> 0:12:48.680 Commerce Department then cracked down on those, and Nvidia designed 0:12:48.720 --> 0:12:50.800 even less powerful chips. And this is still a huge 0:12:50.840 --> 0:12:54.440 electronics market. Obviously, an enormous amount of manufacturing happens there, 0:12:54.520 --> 0:12:58.640 and companies are trying to bide buy restrictions from Washington 0:12:58.720 --> 0:13:00.920 while maintaining access to a critical customer base. 0:13:01.360 --> 0:13:03.400 Mackenzie Hawkins, thanks so much. 0:13:03.720 --> 0:13:07.920 Meanwhile, sticking with China manufacturers, there selling the fewest electric 0:13:08.000 --> 0:13:11.319 cars in eighteen months to customers across Europe, registration is 0:13:11.320 --> 0:13:13.920 actually falling by nearly half in August from a year earlier. 0:13:14.040 --> 0:13:17.040 Pett the most credudel here for us from London. This 0:13:17.120 --> 0:13:18.319 is a continuing theme, Craig. 0:13:18.600 --> 0:13:19.240 Yeah, that's right. 0:13:19.440 --> 0:13:21.760 I think this is a case where we still have 0:13:21.920 --> 0:13:26.359 yet to see tariffs come into place and actually be implemented. 0:13:27.240 --> 0:13:31.440 You know, there's been a provisional additional charge put on vehicles, 0:13:31.679 --> 0:13:35.840 but it won't actually be charged until November, so you know, 0:13:35.880 --> 0:13:38.520 this is maybe a little bit of an early taste 0:13:38.600 --> 0:13:42.120 of the impact that these additional tariffs could have on 0:13:42.240 --> 0:13:46.640 Chinese manufacturers and you know, international car companies like Tesla 0:13:46.679 --> 0:13:49.640 that are facing you know, additional tariffs as a result 0:13:49.679 --> 0:13:52.280 of the fact that the EU is concerned about you know, 0:13:52.360 --> 0:13:55.160 just how much lower costs are in China and how 0:13:55.240 --> 0:13:59.200 much you know, companies exporting out of China maybe have 0:13:59.240 --> 0:14:02.160 a leg up over local manufacturers. 0:14:01.880 --> 0:14:04.720 MG and Brown that had a lot of success that's 0:14:05.160 --> 0:14:08.040 feeling the heat byd as well. We're currently looking at 0:14:08.040 --> 0:14:11.400 some American auto companies as well, though, because all of 0:14:11.400 --> 0:14:14.360 this comes in the context Craig of a very tough 0:14:14.480 --> 0:14:16.280 environment for automakers. 0:14:16.559 --> 0:14:17.839 Still Antos the latest. 0:14:17.600 --> 0:14:21.920 Today, Yeah, that's right, and stillentis. The profit warning today 0:14:22.000 --> 0:14:24.760 was really dramatic. They went from seeing a more than 0:14:25.120 --> 0:14:28.560 ten percent profit margin for the year to five to 0:14:29.000 --> 0:14:33.840 seven and a half percent margin for them to lower 0:14:33.880 --> 0:14:38.160 that and also really dramatically reduce their expectation for free 0:14:38.200 --> 0:14:41.880 cash flow. Initially they were seeing that to be positive. 0:14:41.920 --> 0:14:44.960 Now they're saying a negative five billion to negative ten billion. 0:14:45.640 --> 0:14:48.800 That is really something that has caught the market off guard. 0:14:48.840 --> 0:14:51.960 I think it was well understood that this company was 0:14:52.000 --> 0:14:56.000 having some real issues and particularly with their inventory getting 0:14:56.040 --> 0:14:58.080 a bit out of whack in North America. They've been 0:14:58.080 --> 0:15:00.760 making way more cars than they have man for. But 0:15:01.160 --> 0:15:03.640 for them to come out and really have this sort 0:15:03.680 --> 0:15:07.320 of clearing event and you know, worn in a very 0:15:07.360 --> 0:15:11.520 dramatic way, I think has really alarmed investors and analysts 0:15:11.520 --> 0:15:12.720 today the context. 0:15:12.880 --> 0:15:16.360 Thank you from Craig Rudell. Meanwhile, coming up, we're going 0:15:16.400 --> 0:15:19.640 to be joined by orchestro CEO Neil Lustig for his 0:15:19.720 --> 0:15:22.840 insights on the potential East Coast port strikes, what the 0:15:22.880 --> 0:15:25.640 impact is likely to be on the supply chain. More broadly, 0:15:26.240 --> 0:15:42.120 we'll bring you that next. This is buly Meg Technology. 0:15:49.000 --> 0:15:52.560 I urge us MX and the ILA to come in 0:15:52.560 --> 0:15:56.640 an agreement. It respects workers, that ensures the flow of 0:15:56.680 --> 0:16:00.840 commerce through our ports, and the stake are very high. 0:16:01.400 --> 0:16:04.720 The potential for disruption is significant. 0:16:06.000 --> 0:16:09.280 New York Governor Kathy Hokeel earlier this hour union workers 0:16:09.360 --> 0:16:12.560 along the East Coast and Gulf Coast ports threatening strike 0:16:12.760 --> 0:16:16.200 tomorrow over a new contract. Bloomberg's Danny Berger joins us 0:16:16.200 --> 0:16:19.520 now from right outside Newark Shipping Port and New Jersey 0:16:19.600 --> 0:16:21.840 on the latest, And Danny, we're hearing actually in a 0:16:21.840 --> 0:16:25.200 Facebook post from the ISLA that USMX continues to block 0:16:25.240 --> 0:16:26.720 the path forward to a settlement. 0:16:26.840 --> 0:16:28.720 They currently are saying, and this. 0:16:28.800 --> 0:16:31.520 Coming from the International Longshoreman's Association, it feels like a 0:16:31.600 --> 0:16:33.120 deal is not near done. 0:16:33.360 --> 0:16:36.400 No, they are still a long ways away. And given 0:16:36.400 --> 0:16:38.600 that post, it seems like the strike will likely be 0:16:38.760 --> 0:16:42.760 on twelve am, one minute past midnight on Tuesday is 0:16:42.800 --> 0:16:45.360 when the contract expires and when a strike will happen. 0:16:45.400 --> 0:16:48.360 Forty five thousand members to this union. That is some 0:16:48.440 --> 0:16:51.600 thirty six ports. It's about half of the goods imported 0:16:51.640 --> 0:16:55.440 into the US. The sticking points are two very big ones. Caroline, 0:16:55.480 --> 0:16:57.960 it is one pay. They want a some eighty percent 0:16:58.000 --> 0:17:00.800 pay rise over the next six years. Say the current 0:17:00.880 --> 0:17:04.080 offer that they are being given is quote stingy. They 0:17:04.119 --> 0:17:07.520 also want language drafted into the contract that prevents more 0:17:07.600 --> 0:17:10.480 automation on these sports. Automation I should say that is 0:17:10.640 --> 0:17:13.479 very prevalent elsewhere. It is in Asia, it is in 0:17:13.520 --> 0:17:16.080 places like Amsterdam. But they don't want that over fear 0:17:16.280 --> 0:17:19.200 of losing their job. So the head of the Longshoremen's Association, 0:17:19.280 --> 0:17:22.639 the union representing them, saying that come Tuesday morning, they 0:17:22.680 --> 0:17:26.119 are ready to in his words, awaken a sleeping giant. 0:17:26.400 --> 0:17:29.320 And we saw that awakened on the West coast, but 0:17:29.400 --> 0:17:31.480 a year or so ago, Danny, and a lot of 0:17:31.520 --> 0:17:34.680 that came down to technology, to innovation, as we say, 0:17:35.240 --> 0:17:38.680 alliance and container Carries, direct Employers and Port Association basically 0:17:38.760 --> 0:17:41.840 the United States Maritime Alliances who they're up against anything 0:17:41.880 --> 0:17:45.040 from that side in terms of their talks with the ISLA. 0:17:45.080 --> 0:17:47.440 Well, I mean this is a problem that we've heard 0:17:47.480 --> 0:17:49.280 from many unions. I mean, you can even refer to 0:17:49.320 --> 0:17:51.960 what's happening, what happened in the Hollywood strike over fear 0:17:52.040 --> 0:17:54.560 of technology. And when it comes to the West Coast, 0:17:54.600 --> 0:17:58.200 it is a separate union, so these talks are different. 0:17:58.440 --> 0:17:59.840 Now you could look at the West Coast and say 0:18:00.000 --> 0:18:02.280 if this is a model for how talks can go 0:18:02.359 --> 0:18:05.840 and even abroad of how talks can go to incorporate automation. Essentially, 0:18:06.240 --> 0:18:10.800 they want guarantees put in that workers will be protected. 0:18:10.840 --> 0:18:13.040 That's the kind of language they want it. More automation 0:18:13.520 --> 0:18:16.159 does come. Now, there has been some hope that maybe 0:18:16.200 --> 0:18:18.479 if goods can't come through the East Coast, they can 0:18:18.480 --> 0:18:21.399 come through. The West Coast is still open. Unfortunately, the 0:18:21.440 --> 0:18:23.359 capacity there is not enough, and the head of the 0:18:23.680 --> 0:18:25.440 unions on the East Coast has said that there's been 0:18:25.480 --> 0:18:28.200 solidarity and that some of the workers there won't accept 0:18:28.200 --> 0:18:30.960 the shipments coming in. So, yes, it is that sticking 0:18:31.000 --> 0:18:33.680 point of technology. But many people say, look, this is 0:18:33.720 --> 0:18:36.399 a tide that cannot be stopped. It is automation that 0:18:36.480 --> 0:18:39.280 is necessary. It makes a job easier, quicker, and yes 0:18:39.320 --> 0:18:42.000 some jobs will be lost, but it's not reskilling. That's 0:18:42.040 --> 0:18:44.520 really necessary to make sure that that doesn't happen and 0:18:44.560 --> 0:18:46.680 people stay employed even if there is automation. 0:18:47.200 --> 0:18:49.679 Dotty Baga live from York. We thank you. 0:18:49.800 --> 0:18:54.000 Meanwhile, let's talk more ultimation technology helping us in this 0:18:54.119 --> 0:18:56.119 current supply chain issue. 0:18:56.320 --> 0:19:00.240 Neil Lusting joins us. He's the CEO of kestro so predict. 0:19:00.160 --> 0:19:03.920 Procurement platform powered by AI gain theory, which helps companies 0:19:03.960 --> 0:19:08.600 proactively reroot those shipments and secure alternative supplies before well, 0:19:08.640 --> 0:19:09.840 perhaps these disruptions are. 0:19:09.760 --> 0:19:10.359 Going to be felt. 0:19:10.440 --> 0:19:13.720 I have a feeling you're getting a few calls. 0:19:13.000 --> 0:19:16.080 It's a tough time to be a supply chain executive 0:19:16.119 --> 0:19:18.800 this week, and I think most of our customers right 0:19:18.840 --> 0:19:23.920 now are focused on alternatives. Right there where you find 0:19:24.119 --> 0:19:26.359 new routes, how we're going to move things through air. 0:19:26.600 --> 0:19:28.800 This is something they would have been focused on for 0:19:29.200 --> 0:19:32.359 a few days already at this point. If you haven't 0:19:32.359 --> 0:19:35.800 figured this out, you're a bit late, and longer term, 0:19:36.000 --> 0:19:37.960 your job is to figure out how to make yourself 0:19:37.960 --> 0:19:42.959 more resilient. Software like Orchestro can't predict black swan events 0:19:43.000 --> 0:19:47.200 like this, but they can't help you become more adaptable 0:19:47.560 --> 0:19:51.159 respond much faster. So our customers can reach out to 0:19:51.520 --> 0:19:57.600 hundreds and thousands of contractors suppliers in order of magnitude faster, 0:19:57.920 --> 0:20:00.320 And really, this is what this is about, is from 0:20:00.480 --> 0:20:04.680 our customer's perspective, is adapting to the issue. Our customers 0:20:04.680 --> 0:20:07.199 aren't going to be involved in the labor discussions. But 0:20:07.440 --> 0:20:10.960 how do you adapt and adjust quicker than you did 0:20:10.960 --> 0:20:13.480 in the past, and more importantly, quicker than your competitors. 0:20:13.640 --> 0:20:17.280 Will they likely though, be feeling money lost. We're expecting 0:20:17.440 --> 0:20:18.840 a big economic impact from this. 0:20:19.640 --> 0:20:22.920 Absolutely, there's no question this is going to be damaging 0:20:23.040 --> 0:20:26.840 to everyone. There is enough alternative There are enough alternative 0:20:26.840 --> 0:20:30.600 suppliers or alternative channels. This is not the capacity. So 0:20:30.840 --> 0:20:33.120 this makes it twice as important for you to be 0:20:33.240 --> 0:20:36.320