WEBVTT - UPS and the Fed and Wind 'Turbinegeddon' 0:00:01.280 --> 0:00:05.119 You're listening to the Bloomberg Opinion podcast. Catch us Saturdays 0:00:05.120 --> 0:00:08.280 at one in seven pm Eastern on Bloomberg dot Com, 0:00:08.320 --> 0:00:11.479 the iHeartRadio app and the Bloomberg Business App, or listen 0:00:11.520 --> 0:00:13.760 on demand wherever you get your podcasts. 0:00:15.920 --> 0:00:19.760 Welcome to Bloomberg Opinion. I Maymy Morris. This week we 0:00:19.800 --> 0:00:22.759 look at the cost of decades of climate in action 0:00:23.239 --> 0:00:27.040 and why a German industrial giant is paying the multi 0:00:27.120 --> 0:00:31.600 billion dollar price. Is the era of the musclecar over? 0:00:32.040 --> 0:00:35.800 Is it possible to have an electric muscle car? And 0:00:35.880 --> 0:00:39.839 we'll consider the very wealthy who are also financially stressed 0:00:40.320 --> 0:00:43.519 and what that might mean for the economy. But we 0:00:43.600 --> 0:00:47.560 begin with ups drivers. Labor action for the United Parcel 0:00:47.600 --> 0:00:52.360 Service Workers helped drivers land new contracts, more benefits, even 0:00:52.400 --> 0:00:56.720 air conditioning in those familiar brown trucks. Teamster's Union president 0:00:56.760 --> 0:00:59.640 Sean O'Brien says the company was making a lot of 0:00:59.680 --> 0:01:03.240 money while the drivers kept those packages coming. 0:01:03.400 --> 0:01:04.959 They can set the tone on how it is to 0:01:05.000 --> 0:01:07.959 reward their employees who have made them the success that 0:01:08.000 --> 0:01:10.600 they are. I mean, they made one hundred billion with 0:01:10.680 --> 0:01:13.840 a bee and our members deserve to reap those benefits 0:01:13.880 --> 0:01:14.240 as well. 0:01:14.520 --> 0:01:17.720 And in late July they were able to strike a deal. 0:01:17.800 --> 0:01:20.240 Well, I think it's a great victory for the labor 0:01:20.319 --> 0:01:21.080 movement in general. 0:01:21.120 --> 0:01:22.960 We actually took on Corporate America one. 0:01:23.080 --> 0:01:26.000 The end result a deal for UPS drivers and a 0:01:26.040 --> 0:01:29.360 message for a FED chair J Powell as policymakers way 0:01:29.760 --> 0:01:33.119 whether they've raised interest rates enough to bring inflation down 0:01:33.120 --> 0:01:35.600 to their two percent target? Want to bring in Bloomberg 0:01:35.600 --> 0:01:40.440 opinion columnist Connor Sen, the founder of Peachtree Creek Investments, Connor, 0:01:40.600 --> 0:01:43.440 always a pleasure, thanks for joining us. What is the 0:01:43.480 --> 0:01:46.440 message that this labor deal has for a FED chair pal? 0:01:46.959 --> 0:01:49.400 So there's a lot of optimism that the slowdown we've 0:01:49.440 --> 0:01:52.320 seen in growth and inflation will lead to a return 0:01:52.360 --> 0:01:54.720 to two percent inflation, which is what the FED wants. 0:01:55.000 --> 0:01:57.320 And if you look at some of the things that 0:01:57.440 --> 0:02:00.360 have normalized and have in worker pay and indus trees 0:02:00.440 --> 0:02:04.040 like truck driving and manufacturing and construction are still running 0:02:04.040 --> 0:02:06.120 well ahead of where they were in the twenty tens 0:02:06.240 --> 0:02:08.880 and so, and then you're seeing things like the UPS deal. 0:02:09.440 --> 0:02:12.680 The UAW is looking for pretty aggressive deal as well. 0:02:13.160 --> 0:02:15.240 And while it's great news for those workers, they can 0:02:15.280 --> 0:02:18.639 get big hay increases I am skeptical that that's consistent 0:02:18.680 --> 0:02:19.640 with two percent inflation. 0:02:20.440 --> 0:02:22.440 Well, in fact, I wanted to get into that with 0:02:22.480 --> 0:02:24.600 you because you also mentioned that this is sort of 0:02:24.639 --> 0:02:28.840 pulling against a stoft landing for the economy, this labor action, 0:02:29.160 --> 0:02:31.440 and it's not just ups. There are a lot of 0:02:31.520 --> 0:02:35.240 labor actions ongoing. At first, I thought a rising tide 0:02:35.240 --> 0:02:38.079 would lift all boats, but your argument is that this 0:02:38.120 --> 0:02:39.359 is going to make it harder for. 0:02:39.320 --> 0:02:41.560 The fed, right, And so right now, the reason we're 0:02:41.600 --> 0:02:43.959 seeing a lot of progress on inflation is over the 0:02:44.000 --> 0:02:46.040 past year, we've seen a lot of things like freight 0:02:46.080 --> 0:02:49.360 prices and energy prices, used car prices are coming down, 0:02:49.960 --> 0:02:52.520 rents are coming down, and so that's all really helpful, 0:02:52.639 --> 0:02:56.119 but that's all more like normalization last year and sort 0:02:56.120 --> 0:02:58.680 of supply chain improvements that we've seen, and that doesn't 0:02:58.680 --> 0:03:01.760 really address the underlying Demain story, which is that we're 0:03:01.800 --> 0:03:04.720 still seeing ro bus pay increases for blue collar workers, 0:03:04.800 --> 0:03:07.760 which is arguably policy and that's a good thing. But 0:03:08.120 --> 0:03:11.240 as those wage increases get absorbed, ultimately it's going to 0:03:11.240 --> 0:03:13.480 start to compress margins again for companies, and they're going 0:03:13.560 --> 0:03:14.960 to be looking to pass that on in the form 0:03:14.960 --> 0:03:15.880 of higher prices. 0:03:16.280 --> 0:03:18.440 So the way you describe it, it sounds like this 0:03:18.480 --> 0:03:20.720 is sort of a cycle and that it's not going 0:03:20.760 --> 0:03:22.800 to just be resolved in the next few months. This 0:03:22.919 --> 0:03:24.280 sounds years long. 0:03:25.280 --> 0:03:26.960 Yeah, And I think we kind of all knew this 0:03:27.040 --> 0:03:29.240 was coming because we all know that truck drivers and 0:03:29.320 --> 0:03:32.040 construction workers and autoworkers have been underpaid for a while, 0:03:32.200 --> 0:03:34.040 and we were wondering what would be the impetus to 0:03:34.120 --> 0:03:36.800 change that. And I think just the structural labor storage 0:03:36.800 --> 0:03:39.800 for workers in those industries, combined with policy to do 0:03:39.880 --> 0:03:43.400 things like you know, the inflation direction acts and building 0:03:43.400 --> 0:03:46.360 out sort of green enjury transition, all of that is 0:03:46.440 --> 0:03:48.720 very labor intensive for the kinds of workers we don't 0:03:48.720 --> 0:03:50.960 have a lot of, and that's going to drive inflation 0:03:51.080 --> 0:03:51.840 over the next few years. 0:03:51.880 --> 0:03:52.200 Anyway. 0:03:52.960 --> 0:03:55.520 Now, in your column, you tell the story about how 0:03:55.640 --> 0:03:58.640 in two thousand and eight, the union accepted a pay 0:03:58.680 --> 0:04:00.440 package that they weren't one hundred percent and in love 0:04:00.480 --> 0:04:03.640 with because they didn't want the company to fold. They 0:04:03.640 --> 0:04:06.840 wanted to protect the overall company and therefore the workers 0:04:06.880 --> 0:04:10.720 as well. But that's not necessarily the case these days. 0:04:10.960 --> 0:04:13.040 Help us square that circle, tell us about. 0:04:12.760 --> 0:04:16.279 That, right, So, two thousand and eight, the auto industry 0:04:16.320 --> 0:04:18.240 was on the verbs of collapse. The government kind of 0:04:18.240 --> 0:04:20.599 stepped in to make sure that didn't happen, and unions, 0:04:20.600 --> 0:04:23.280 which understand you can't have your employer go out of business, 0:04:23.560 --> 0:04:25.520 said we're going to take this not so great deal 0:04:25.600 --> 0:04:28.280 now to survive and we'll we'll get it back later. 0:04:28.839 --> 0:04:30.440 And that's the kind of thing that doesn't necessarily show 0:04:30.520 --> 0:04:32.719 up in the data where you now have union leaders 0:04:32.880 --> 0:04:36.280 and union members with long memories and they say, we 0:04:36.320 --> 0:04:38.360 took care of you guys in your time of crisis. 0:04:38.400 --> 0:04:41.360 Now it's our turn. You've got high profits, you need us. 0:04:41.480 --> 0:04:43.359 We know it's a great label market, and we're not 0:04:43.400 --> 0:04:45.360 willing to accept that kind of subpar deal the way 0:04:45.400 --> 0:04:46.360 we work fifteen years ago. 0:04:47.040 --> 0:04:50.279 Okay, So this isn't necessarily an entire shift in how 0:04:50.320 --> 0:04:53.960 they think or their ideology or philosophy. This is simply, hey, 0:04:54.000 --> 0:04:57.520 we scratched your back ten years ago or fifteen years ago. 0:04:57.600 --> 0:04:58.920 Now you can scratch. 0:04:58.560 --> 0:05:02.320 Ours exactly, and they have the leverage to do it 0:05:02.360 --> 0:05:04.440 when the unemploymentge three and a half percent. And if 0:05:04.440 --> 0:05:06.680 you're not working for a car company, you can go 0:05:06.680 --> 0:05:08.760 build out a factory, go be a driver or go 0:05:08.800 --> 0:05:10.240 work in construction, and. 0:05:10.240 --> 0:05:13.160 We are talking with Bloomberg opinion columnist Connor sent about 0:05:13.360 --> 0:05:16.760 what the FED can learn from the UPS labor talks 0:05:16.760 --> 0:05:19.520 and what it may mean as the FEDA tries to 0:05:19.560 --> 0:05:23.279 reach that two percent inflation rate goal. Connor, how do 0:05:23.320 --> 0:05:26.440 you see these types of labor actions continuing, because, as 0:05:26.480 --> 0:05:28.839 we said, it's not just UPS. 0:05:28.440 --> 0:05:31.160 Right, And actually the UPS one was interesting because on 0:05:31.200 --> 0:05:33.760 the after that headline came out that full time UPS 0:05:33.839 --> 0:05:36.400 drivers will make in paying benefits over the course of 0:05:36.440 --> 0:05:39.040 the deal, on average one hundred and seventy thousand dollars, 0:05:39.440 --> 0:05:41.320 there was a fifty percent increase in the number of 0:05:41.320 --> 0:05:43.360 people applying to work for EPs. And so if you're 0:05:43.360 --> 0:05:45.640 applying to work for YOUPS, you're not applying to work 0:05:45.680 --> 0:05:48.280 for another company or another industry that's looking for those 0:05:48.320 --> 0:05:50.839 types of workers. And so sort of a win in 0:05:50.880 --> 0:05:53.400 one industry or one company can have ripple effects to 0:05:53.640 --> 0:05:56.000 other employers who are all competing for the same labor pool. 0:05:56.720 --> 0:05:59.280 There's also the flip side of that agreement. Though they 0:05:59.320 --> 0:06:02.400 also got the promise that they could have air conditioning 0:06:02.440 --> 0:06:06.760 in those iconic BROWND trucks, those delivery vehicles. It seems 0:06:06.760 --> 0:06:08.719 like there's a flip side to that coin that perhaps 0:06:08.760 --> 0:06:10.479 it's not really the sexiest job ever. 0:06:11.200 --> 0:06:14.000 Yeah, this is a very physically grueling job. I personally 0:06:14.000 --> 0:06:16.200 wouldn't want to have to haul packages ten twelve hours 0:06:16.240 --> 0:06:18.000 a day. And so, by no means am I saying 0:06:18.080 --> 0:06:21.599 this is an unearned or unmerited hey, increase it. Just 0:06:21.640 --> 0:06:24.359 that if you're looking for two percent inflation, this is 0:06:24.400 --> 0:06:26.920 making it difficult in the short term. And I think 0:06:26.960 --> 0:06:29.960 the goal is, or the hope is that over coming years, 0:06:30.080 --> 0:06:33.400 things like productivity improvements and ups talked about sort of 0:06:33.440 --> 0:06:36.960 productivity and investments in their warehouses to automate things there 0:06:37.480 --> 0:06:40.400 and just sort of paying benefits and job conditions getting 0:06:40.440 --> 0:06:42.080 to a place where they should have been all along 0:06:42.600 --> 0:06:44.160 will be enough where we can kind of reach an 0:06:44.200 --> 0:06:45.680 equilibrium that everyone's happy with. 0:06:45.680 --> 0:06:45.760 It. 0:06:45.880 --> 0:06:47.960 Just that we're currently in the midst of an adjustment. 0:06:48.279 --> 0:06:50.840 That's exactly what I wanted to ask about. You talk 0:06:50.880 --> 0:06:54.440 about bringing those wage wages and wage growth back to 0:06:54.680 --> 0:06:58.640 acceptable levels. And my question for you is acceptable to whom? 0:06:58.680 --> 0:07:01.159 To everyone? Like, they have to find this happy medium 0:07:01.200 --> 0:07:03.960 where everywhere it fits everybody where the bed's not too 0:07:04.000 --> 0:07:06.440 soft and it's not too hard, it's just right. 0:07:07.640 --> 0:07:09.960 And that's sort of the dance of capitalism right where 0:07:09.960 --> 0:07:12.320 you have. This is a job that needs to be done. 0:07:12.440 --> 0:07:15.440 We all want our package deliveries, but there's not a 0:07:15.480 --> 0:07:16.880 lot of people who want to do these jobs at 0:07:16.880 --> 0:07:19.120 the conditions and pay that they've been offered at. And 0:07:19.160 --> 0:07:21.600 so pay and benefits have to go up. That means 0:07:21.640 --> 0:07:24.760 shipping prices have to go up. And as Amazon consumers 0:07:24.840 --> 0:07:26.920 or anybody else, we have to be willing to accept that, 0:07:27.040 --> 0:07:28.679 and the company as well has to find a profit 0:07:28.720 --> 0:07:30.840 margin that works for them. And so this is just 0:07:30.920 --> 0:07:33.600 an adjustment period to figuring out what works for everybody. 0:07:33.760 --> 0:07:36.480 I'm still fascinated with the idea that there are more 0:07:36.560 --> 0:07:40.840 labor actions ongoing this year than we've seen in quite 0:07:40.880 --> 0:07:45.720 some time. Do you anticipate there being more because of 0:07:46.080 --> 0:07:49.920 those bringing the wage growth back to acceptable levels or 0:07:49.920 --> 0:07:52.920 whatever the X factor may be for that particular industry. 0:07:53.200 --> 0:07:56.680 Do you see these types of labor actions continuing beyond 0:07:56.960 --> 0:08:00.400 just the team stairs and ups and UAW I. 0:08:00.360 --> 0:08:02.680 Tend to think so. And again, the uneployment rate is 0:08:02.720 --> 0:08:04.440 a big part of this because it shows that the 0:08:04.480 --> 0:08:07.000 labor market is tight, and there's also kind of a 0:08:07.040 --> 0:08:11.040 nebulous expectations game where if you're the UAW and you 0:08:11.080 --> 0:08:13.520 see that the UPS teamsters just want a great deal, 0:08:13.800 --> 0:08:16.000 you think we can too. And if you're looking to 0:08:16.080 --> 0:08:18.480 unionize or or push for a bold deal at another 0:08:18.480 --> 0:08:20.960 company the other in industry, you see these wins and 0:08:20.960 --> 0:08:22.800 you see that it's detainable, and so that does just 0:08:22.840 --> 0:08:24.920 kind of shift the playing field in terms of who 0:08:24.920 --> 0:08:27.320 thinks they have the bargaining power in these negotiations. 0:08:27.760 --> 0:08:30.160 And now the really important part is whether the FED 0:08:30.480 --> 0:08:32.559 is listening, are they getting the message. 0:08:33.040 --> 0:08:34.920 It's interesting because in the short term we do have 0:08:34.960 --> 0:08:37.680 softer inflation data because used car prices are coming down 0:08:37.760 --> 0:08:40.839 as auto production picks up and supply chains normalize and 0:08:41.200 --> 0:08:43.840 shelter and rents are coming down as sort of the 0:08:43.880 --> 0:08:46.440 pandemic normal is that craziness goes away and things are normalized, 0:08:46.440 --> 0:08:48.800 and so we have probably six to nine months where 0:08:48.840 --> 0:08:51.080 the inflation data iso going to look pretty good. But 0:08:51.120 --> 0:08:52.720 the question is, again on the other side of this, 0:08:52.920 --> 0:08:55.440 if UPS rates have to go up, if auto prices 0:08:55.480 --> 0:08:57.200 have to go up to account for these labor deals, 0:08:57.600 --> 0:08:59.560 will that push inflation in the back half of twenty 0:08:59.600 --> 0:09:01.560 four and it's going to be a while until we know. 0:09:01.679 --> 0:09:04.920 So it's this interesting time where you have arguably signs 0:09:04.920 --> 0:09:07.360 of hotter inflation in the future, while the actual inflation 0:09:07.440 --> 0:09:08.640 data that we get is soft. 0:09:09.240 --> 0:09:11.559 It sounds like the way you're describing it is. Again, 0:09:11.880 --> 0:09:14.840 as we mentioned before, this is going to take months, years, 0:09:15.440 --> 0:09:18.880 but that bringing wage growth back to acceptable levels where 0:09:18.920 --> 0:09:22.520 it's acceptable for all parties. It's also going to have 0:09:22.640 --> 0:09:26.199 to take the FED into consideration. Once that wage growth 0:09:26.280 --> 0:09:29.160 is balanced, then the FED can find some balance too 0:09:29.440 --> 0:09:32.319 Or am I oversimplifying it, reading too much into it. 0:09:32.920 --> 0:09:33.640 I think that's right. 0:09:33.720 --> 0:09:36.600 And you just can't get sort of seven percent consistent 0:09:36.600 --> 0:09:38.640 wage growth in these types of industries and think that 0:09:38.640 --> 0:09:40.400 you're going to get to two percent inflation for the 0:09:40.440 --> 0:09:41.280 economy as a whole. 0:09:41.760 --> 0:09:42.720 And again I. 0:09:42.720 --> 0:09:45.840 Think eventually, maybe you know, the UAW gets their contract 0:09:45.880 --> 0:09:48.280 that they feel they've earned for the past fifteen years, 0:09:48.320 --> 0:09:51.160 and then in a couple of years things kind of normalize. 0:09:51.200 --> 0:09:54.040 But right now we still have that pretty tense upward 0:09:54.040 --> 0:09:55.559 wage pressure that's going to drive inflation. 0:09:56.720 --> 0:09:58.839 I don't want to ask about the pendulum swinging back 0:09:58.880 --> 0:10:00.840 the other way, because the whole point of this is 0:10:00.960 --> 0:10:03.960 not to swing the pendulum, but define the balance. But 0:10:04.000 --> 0:10:07.600 the balance won't last forever, Like that's a temporary balance. 0:10:07.640 --> 0:10:11.880 But what are we talking in terms of years? How 0:10:11.920 --> 0:10:12.960 long will this last? 0:10:14.120 --> 0:10:16.440 Well, these union contracts typically are I think the UPS 0:10:16.480 --> 0:10:19.120 won us for four years, and so I would imagine 0:10:19.120 --> 0:10:21.720 this is going to be the big catch up union contract. 0:10:22.200 --> 0:10:24.079 And it's pretty hard to see what things can look 0:10:24.120 --> 0:10:26.640 like four years from now, because things like spending in 0:10:26.679 --> 0:10:29.080 the Investment Reduction Inflation Reduction Act peak I think in 0:10:29.120 --> 0:10:31.719 twenty twenty six, and so it's possible that when we 0:10:31.760 --> 0:10:34.440 get to the next negotiation in twenty twenty seven or whatever, 0:10:34.800 --> 0:10:37.560 that things have normalized and we're not talking about this anymore. 0:10:37.600 --> 0:10:40.280 Just right now, I think there just shouldn't be any 0:10:40.320 --> 0:10:42.920 confidence that we've totally liftd inflation, because we still see 0:10:42.920 --> 0:10:44.360 these pretty intense wage pressures. 0:10:44.760 --> 0:10:48.360 Connerson is a Bloomberg Opinion columnist and founder of Peachtree 0:10:48.480 --> 0:10:53.520 Creek Investments and coming up a troubling climate omen problems 0:10:53.679 --> 0:10:56.920 with wind turbines that pretend to slower and more expensive 0:10:57.080 --> 0:11:00.000 energy transition. We're going to check it out. Just ahead. 0:11:00.200 --> 0:11:02.000 You're listening to Bloomberg Opinion. 0:11:11.400 --> 0:11:15.400 You're listening to the Bloomberg Opinion podcast Contest Saturdays at 0:11:15.400 --> 0:11:18.520 one and seven pm Eastern on Bloomberg dot Com, the 0:11:18.600 --> 0:11:21.720 iHeartRadio app and the Bloomberg Business App, or listen on 0:11:21.800 --> 0:11:23.880 demand wherever you get your podcasts. 0:11:25.800 --> 0:11:29.800 You're listening to Bloomberg Opinion I Namy Morris. Just last month, 0:11:29.880 --> 0:11:33.640 President Biden toured a wind turbine factory in New Mexico 0:11:34.000 --> 0:11:38.000 to tout his economic agenda and new kinds of jobs 0:11:38.240 --> 0:11:40.960 under the Inflation Reduction Act and the Chips Act. 0:11:41.000 --> 0:11:43.040 Now they're tired to hear me say this, but where's 0:11:43.080 --> 0:11:47.479 it written that America can't lead the world again to manufacture, 0:11:47.520 --> 0:11:51.439 because we're going to do just that the leading manufacturer 0:11:51.440 --> 0:11:51.959 in the world. 0:11:52.360 --> 0:11:55.160 Well, it may take longer and cost more to transition 0:11:55.240 --> 0:11:59.520 to wind energy. It's been stymied by red tape, structural issues, 0:11:59.800 --> 0:12:04.079 and material and logistics costs. But wind energy seems to 0:12:04.160 --> 0:12:06.440 have a lot to offer. The question now, is is 0:12:06.480 --> 0:12:09.120 it all worth it? We are talking with Bloomberg Opinion 0:12:09.160 --> 0:12:13.520 columnist Chris Bryant. He covers industrial companies in Europe. Chris, 0:12:13.640 --> 0:12:15.720 always a pleasure. Thank you for taking the time with 0:12:15.800 --> 0:12:18.560 us and in your column on the Bloomberg terminal. You 0:12:18.720 --> 0:12:22.280 frame all of this with Siemens Energies wind turbine project 0:12:22.320 --> 0:12:26.360 and struggling with those abnormal vibrations that they found, but 0:12:26.400 --> 0:12:28.800 they only found it in about four percent of their fleet. 0:12:29.160 --> 0:12:31.560 Why is that a problem? This four percent? 0:12:32.080 --> 0:12:35.160 Very simply, if you do have a problem with a 0:12:35.200 --> 0:12:38.800 wind turbine, then repairing it can be extremely expensive. You've 0:12:38.800 --> 0:12:43.400 got to imagine this is hugely heavy equipment installed high 0:12:43.440 --> 0:12:45.920 above the ground, so the last thing you want is 0:12:45.960 --> 0:12:48.880 anything going wrong, and unfortunately that's been the case here 0:12:48.920 --> 0:12:54.680 with Semens Energies wind unit. It forecasts recently a four 0:12:54.720 --> 0:12:57.680 and a half billion europe and you're lost. 0:12:57.760 --> 0:12:57.920 Now. 0:12:58.000 --> 0:13:00.760 To be clear, that's not all down to the fact 0:13:00.800 --> 0:13:05.520 that due to these problems with the onshore wind turbines, 0:13:05.559 --> 0:13:08.280 it's having other issues too, some of which you mentioned 0:13:08.320 --> 0:13:10.240 at the start. But it all adds up. And as 0:13:10.240 --> 0:13:12.480 I said, you know, a four and a half billion 0:13:12.559 --> 0:13:15.200 euro loss at the time when the world needs more 0:13:16.040 --> 0:13:19.480 wind power and demand is actually very high, is extraordinary 0:13:19.520 --> 0:13:21.280 and it takes some explaining, I think, because I think 0:13:21.320 --> 0:13:25.360 many people outside not familiar with the companies in this 0:13:25.440 --> 0:13:27.600 sector would assume that they're all doing very well. But 0:13:27.640 --> 0:13:28.960 the opposite is the case. 0:13:29.240 --> 0:13:32.120 Well, let's talk about that, because in your column you 0:13:32.200 --> 0:13:35.000 also talk about how this can be laid at the 0:13:35.040 --> 0:13:38.760 doorstep of climate and action, and now there's this rush 0:13:38.800 --> 0:13:41.400 to catch up, bring us up to speed. What did 0:13:41.400 --> 0:13:41.920 you mean by. 0:13:41.840 --> 0:13:44.800 That, Well, of course, you know, we've had an enormous 0:13:45.040 --> 0:13:48.600 step forward in the wind industry over the last decade, 0:13:48.640 --> 0:13:51.240 and the machinery has been getting larger and larger and 0:13:51.280 --> 0:13:54.160 more powerful, and that's a very good thing from the 0:13:54.160 --> 0:13:57.040 perspective of climate. It means we can generate more clean 0:13:57.080 --> 0:14:00.840 electricity and so forth. The problem has been as intense 0:14:00.880 --> 0:14:04.280 competition to get this deployed in the field, intense competition 0:14:04.400 --> 0:14:07.480 to develop ever more powerful turbines. The danger of the 0:14:07.520 --> 0:14:11.760 courses in producing that technology that you know, you cut corners, 0:14:11.800 --> 0:14:14.240 you rush too much, you brush problems under the carpet. 0:14:14.600 --> 0:14:19.440 That's what seems to happen at Semen's Energies GMESSA wind unit, 0:14:20.320 --> 0:14:23.360 where these problems have only sort of dripped out gradually 0:14:23.520 --> 0:14:27.680 and they'll finally hopefully acknowledged the full extent of them recently, 0:14:28.200 --> 0:14:31.560 and of course once that happens, then you know fixing them. 0:14:31.680 --> 0:14:34.640 As we discussed is very expensive. But you know, this 0:14:34.800 --> 0:14:37.360 all resulted from the fact that the company was determined 0:14:37.440 --> 0:14:40.400 to produce the you know, these very large, very powerful turbines. 0:14:40.480 --> 0:14:42.200 Of course they bid offer a little more than they 0:14:42.200 --> 0:14:42.600 could chew. 0:14:42.600 --> 0:14:45.360 In this case, some of the issues that you talk 0:14:45.400 --> 0:14:48.800 about in the column, the red tape, the material costs, 0:14:48.960 --> 0:14:54.960 inflation impacting those costs, are those at all or entirely 0:14:55.560 --> 0:14:58.880 impacted by the pandemic. Is this sort of a leftover 0:14:59.400 --> 0:15:02.400 residual effect of what we went through in twenty twenty 0:15:02.440 --> 0:15:04.600 and twenty one, or is there more to it than 0:15:04.680 --> 0:15:05.000 just that. 0:15:06.280 --> 0:15:09.640 Well, there's certainly the case that besides these these warranty 0:15:09.760 --> 0:15:12.440 repair issues that the wind turb i makers have been having, 0:15:12.480 --> 0:15:15.120 they've been hit by a really sort of perfect storm. 0:15:15.160 --> 0:15:19.400 If they excuse the pun of problems in their supply chain, 0:15:19.440 --> 0:15:22.560 as you say, if you think about logistics, you know, 0:15:22.640 --> 0:15:24.680 if you produce a wind turn and as I say, 0:15:24.840 --> 0:15:27.760 enormous blades of machinery, they have to be transported, you 0:15:27.760 --> 0:15:30.360 could have imagined that suddenly the cost of delivering those 0:15:30.800 --> 0:15:34.480 that equipment got extremely expensive. And of course, yes, the 0:15:34.560 --> 0:15:37.880 components and that make up a wind turber and all 0:15:37.920 --> 0:15:39.720 of those went up in costs as well, and that 0:15:39.760 --> 0:15:42.800 created a bit of problem because it's often the case 0:15:42.840 --> 0:15:46.160 that these companies have sort of fixed time contracts that 0:15:46.280 --> 0:15:49.640 did not adjust for inflation, and so they ended up 0:15:49.680 --> 0:15:52.280 having to delivered this equipment what they promised, and of 0:15:52.320 --> 0:15:55.320 course it wasn't profitable. Then is it hoped and so forth. 0:15:55.720 --> 0:15:58.000 I think there's a lot of big learning curve that's happened. 0:15:58.040 --> 0:16:02.320 There now, lots of contracts being now rewritten to allow 0:16:02.360 --> 0:16:06.000 for sort of inflation adjustment and so forth. But the 0:16:06.040 --> 0:16:08.960 sad reality is, of course, therefore we had this, you know, 0:16:09.040 --> 0:16:13.880 for years, a declining trend in the cost of wind turbines. 0:16:14.520 --> 0:16:16.240 The price is now having to go up again to 0:16:16.600 --> 0:16:20.280 accommodate some of these inflated costs. 0:16:20.880 --> 0:16:24.000 We are talking with Bloomberg opinion columnist Chris Bryant about 0:16:24.040 --> 0:16:27.280 an energy transition to wind power and some of the 0:16:27.360 --> 0:16:30.240 hiccups that we're finding along the way. More than just hiccups, 0:16:30.920 --> 0:16:34.760 and Chris, the wind energy or the wind energy industry 0:16:35.920 --> 0:16:38.400 seems to have a lot to offer. There seems to 0:16:38.400 --> 0:16:40.880 be a lot of promise there and as you said, 0:16:41.080 --> 0:16:44.560 there is a tremendous demand for these turbines. What's the 0:16:44.720 --> 0:16:47.680 hang up are these growing pains. We've never been here before, 0:16:47.680 --> 0:16:49.080 and we're just learning as we go. 0:16:51.000 --> 0:16:53.600 There is certainly an element of growing pains, and of 0:16:53.640 --> 0:16:58.080 course so this is always the case with large projects 0:16:58.120 --> 0:17:00.440 of any client. If you look at the new power 0:17:00.440 --> 0:17:03.520 industry for example, you know, we've seen in in Europe, 0:17:03.600 --> 0:17:06.960 you know, companies trying to build new nuclear power stations 0:17:06.960 --> 0:17:09.399 across of those ends up going through the roof. This 0:17:09.520 --> 0:17:12.520 simply is is very hard to do this kind of stuff, 0:17:12.520 --> 0:17:14.879 and we can be proud, I think in Europe and 0:17:14.920 --> 0:17:17.679 also in the United States for general electric perhap some 0:17:17.880 --> 0:17:21.479 very very you know, accomplished wind companies, but unfortunately, as 0:17:21.480 --> 0:17:24.600 I say, they really have had a torrid time with 0:17:24.760 --> 0:17:27.520 you know, conditions going against them and pricing not helping 0:17:27.560 --> 0:17:30.240 them are so and some home made mistakes as well, 0:17:31.040 --> 0:17:33.800 and particularly offshore. Now we're seeing that the costs of 0:17:33.800 --> 0:17:36.080 offshore wind have gone up a lot projects there are 0:17:36.119 --> 0:17:38.320 being canceled, which is of course again the last thing 0:17:38.359 --> 0:17:40.359 you want to see at a time like this. I 0:17:40.400 --> 0:17:42.880 still think that you know, wind power has still got 0:17:43.000 --> 0:17:46.199 you know, very rosy years ahead of it. Nevertheless, to 0:17:46.200 --> 0:17:47.840 get from a stage where these come some of these 0:17:47.840 --> 0:17:50.680 companies have not been making money to one where they're 0:17:50.680 --> 0:17:52.960 making healthy profits. It's going to be difficult, it's going 0:17:53.000 --> 0:17:53.760 to take time. 0:17:54.560 --> 0:17:57.520 Are there any best practices or any other lessons to 0:17:57.600 --> 0:18:00.960 be learned from semens for other men of factorers who 0:18:01.000 --> 0:18:03.960 are launching into this or getting into this or I 0:18:04.200 --> 0:18:07.040 already eyeball deep into it, and they want to make 0:18:07.119 --> 0:18:10.280 sure that they do the best that they can and 0:18:10.440 --> 0:18:12.200 not make some of the same mistakes we've seen. 0:18:13.160 --> 0:18:14.600 Well, I think there's a couple of things to get 0:18:14.640 --> 0:18:17.159 to keep an eye on. One, as we've seen in 0:18:17.160 --> 0:18:20.320 so many industries, is that the rising threat of Chinese competition. 0:18:21.200 --> 0:18:23.560 Chinese wind market is sort of an island to itself 0:18:23.600 --> 0:18:27.159 in some instances. Chinese companies are dominating there, but they 0:18:27.200 --> 0:18:29.280 are starting to push overseas and the fear I think 0:18:29.520 --> 0:18:32.560 on the part of European wind manufacturers in particular, is 0:18:32.600 --> 0:18:34.960 that they'll see more competition, which of course wouldn't be 0:18:35.000 --> 0:18:37.240 helpful as they try to get their finances in the 0:18:37.320 --> 0:18:40.200 right order. The other thing I flag is is permitting, 0:18:40.240 --> 0:18:43.879 and that's something that governments can help with wind projects. 0:18:43.960 --> 0:18:47.240 Unfortunately here are constantly delayed in sty meat by there's 0:18:47.320 --> 0:18:50.560 an element of nimbiaism, an element of just huge amounts 0:18:50.600 --> 0:18:53.760 of paperwork required to get these projects up and launch, 0:18:53.840 --> 0:18:56.000 so you know it can take years, and of course 0:18:56.080 --> 0:18:59.320 it's time that we don't have this efforts underway to 0:18:59.359 --> 0:19:02.200 simplify permitting. But I think a lot more improvements could 0:19:02.200 --> 0:19:05.360 be made there, because even if the wind turbine manufacturers 0:19:05.359 --> 0:19:08.439 finally get their technical and cost problems under control, they 0:19:08.480 --> 0:19:10.800 still face this headwind from permitting at the time when 0:19:10.800 --> 0:19:12.440 we need to speed up, not slow down. 0:19:13.040 --> 0:19:15.919 Well, this type of setback that we saw at Semens 0:19:16.119 --> 0:19:19.359 and other issues that are plaguing the industry, is that 0:19:19.440 --> 0:19:21.800 going to have a chilling effect on the future of 0:19:21.800 --> 0:19:22.480