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Speaker 2: Welcome to Bloomberg Opinion. I Maymy Morris. This week we
Speaker 2: look at the cost of decades of climate in action
Speaker 2: and why a German industrial giant is paying the multi
Speaker 2: billion dollar price. Is the era of the musclecar over?
Speaker 2: Is it possible to have an electric muscle car? And
Speaker 2: we'll consider the very wealthy who are also financially stressed
Speaker 2: and what that might mean for the economy. But we
Speaker 2: begin with ups drivers. Labor action for the United Parcel
Speaker 2: Service Workers helped drivers land new contracts, more benefits, even
Speaker 2: air conditioning in those familiar brown trucks. Teamster's Union president
Speaker 2: Sean O'Brien says the company was making a lot of
Speaker 2: money while the drivers kept those packages coming.
Speaker 3: They can set the tone on how it is to
Speaker 3: reward their employees who have made them the success that
Speaker 3: they are. I mean, they made one hundred billion with
Speaker 3: a bee and our members deserve to reap those benefits
Speaker 3: as well.
Speaker 2: And in late July they were able to strike a deal.
Speaker 4: Well, I think it's a great victory for the labor
Speaker 4: movement in general.
Speaker 5: We actually took on Corporate America one.
Speaker 2: The end result a deal for UPS drivers and a
Speaker 2: message for a FED chair J Powell as policymakers way
Speaker 2: whether they've raised interest rates enough to bring inflation down
Speaker 2: to their two percent target? Want to bring in Bloomberg
Speaker 2: opinion columnist Connor Sen, the founder of Peachtree Creek Investments, Connor,
Speaker 2: always a pleasure, thanks for joining us. What is the
Speaker 2: message that this labor deal has for a FED chair pal?
Speaker 6: So there's a lot of optimism that the slowdown we've
Speaker 6: seen in growth and inflation will lead to a return
Speaker 6: to two percent inflation, which is what the FED wants.
Speaker 6: And if you look at some of the things that
Speaker 6: have normalized and have in worker pay and indus trees
Speaker 6: like truck driving and manufacturing and construction are still running
Speaker 6: well ahead of where they were in the twenty tens
Speaker 6: and so, and then you're seeing things like the UPS deal.
Speaker 6: The UAW is looking for pretty aggressive deal as well.
Speaker 6: And while it's great news for those workers, they can
Speaker 6: get big hay increases I am skeptical that that's consistent
Speaker 6: with two percent inflation.
Speaker 2: Well, in fact, I wanted to get into that with
Speaker 2: you because you also mentioned that this is sort of
Speaker 2: pulling against a stoft landing for the economy, this labor action,
Speaker 2: and it's not just ups. There are a lot of
Speaker 2: labor actions ongoing. At first, I thought a rising tide
Speaker 2: would lift all boats, but your argument is that this
Speaker 2: is going to make it harder for.
Speaker 6: The fed, right, And so right now, the reason we're
Speaker 6: seeing a lot of progress on inflation is over the
Speaker 6: past year, we've seen a lot of things like freight
Speaker 6: prices and energy prices, used car prices are coming down,
Speaker 6: rents are coming down, and so that's all really helpful,
Speaker 6: but that's all more like normalization last year and sort
Speaker 6: of supply chain improvements that we've seen, and that doesn't
Speaker 6: really address the underlying Demain story, which is that we're
Speaker 6: still seeing ro bus pay increases for blue collar workers,
Speaker 6: which is arguably policy and that's a good thing. But
Speaker 6: as those wage increases get absorbed, ultimately it's going to
Speaker 6: start to compress margins again for companies, and they're going
Speaker 6: to be looking to pass that on in the form
Speaker 6: of higher prices.
Speaker 2: So the way you describe it, it sounds like this
Speaker 2: is sort of a cycle and that it's not going
Speaker 2: to just be resolved in the next few months. This
Speaker 2: sounds years long.
Speaker 6: Yeah, And I think we kind of all knew this
Speaker 6: was coming because we all know that truck drivers and
Speaker 6: construction workers and autoworkers have been underpaid for a while,
Speaker 6: and we were wondering what would be the impetus to
Speaker 6: change that. And I think just the structural labor storage
Speaker 6: for workers in those industries, combined with policy to do
Speaker 6: things like you know, the inflation direction acts and building
Speaker 6: out sort of green enjury transition, all of that is
Speaker 6: very labor intensive for the kinds of workers we don't
Speaker 6: have a lot of, and that's going to drive inflation
Speaker 6: over the next few years.
Speaker 7: Anyway.
Speaker 2: Now, in your column, you tell the story about how
Speaker 2: in two thousand and eight, the union accepted a pay
Speaker 2: package that they weren't one hundred percent and in love
Speaker 2: with because they didn't want the company to fold. They
Speaker 2: wanted to protect the overall company and therefore the workers
Speaker 2: as well. But that's not necessarily the case these days.
Speaker 2: Help us square that circle, tell us about.
Speaker 6: That, right, So, two thousand and eight, the auto industry
Speaker 6: was on the verbs of collapse. The government kind of
Speaker 6: stepped in to make sure that didn't happen, and unions,
Speaker 6: which understand you can't have your employer go out of business,
Speaker 6: said we're going to take this not so great deal
Speaker 6: now to survive and we'll we'll get it back later.
Speaker 6: And that's the kind of thing that doesn't necessarily show
Speaker 6: up in the data where you now have union leaders
Speaker 6: and union members with long memories and they say, we
Speaker 6: took care of you guys in your time of crisis.
Speaker 6: Now it's our turn. You've got high profits, you need us.
Speaker 6: We know it's a great label market, and we're not
Speaker 6: willing to accept that kind of subpar deal the way
Speaker 6: we work fifteen years ago.
Speaker 2: Okay, So this isn't necessarily an entire shift in how
Speaker 2: they think or their ideology or philosophy. This is simply, hey,
Speaker 2: we scratched your back ten years ago or fifteen years ago.
Speaker 2: Now you can scratch.
Speaker 6: Ours exactly, and they have the leverage to do it
Speaker 6: when the unemploymentge three and a half percent. And if
Speaker 6: you're not working for a car company, you can go
Speaker 6: build out a factory, go be a driver or go
Speaker 6: work in construction, and.
Speaker 2: We are talking with Bloomberg opinion columnist Connor sent about
Speaker 2: what the FED can learn from the UPS labor talks
Speaker 2: and what it may mean as the FEDA tries to
Speaker 2: reach that two percent inflation rate goal. Connor, how do
Speaker 2: you see these types of labor actions continuing, because, as
Speaker 2: we said, it's not just UPS.
Speaker 6: Right, And actually the UPS one was interesting because on
Speaker 6: the after that headline came out that full time UPS
Speaker 6: drivers will make in paying benefits over the course of
Speaker 6: the deal, on average one hundred and seventy thousand dollars,
Speaker 6: there was a fifty percent increase in the number of
Speaker 6: people applying to work for EPs. And so if you're
Speaker 6: applying to work for YOUPS, you're not applying to work
Speaker 6: for another company or another industry that's looking for those
Speaker 6: types of workers. And so sort of a win in
Speaker 6: one industry or one company can have ripple effects to
Speaker 6: other employers who are all competing for the same labor pool.
Speaker 2: There's also the flip side of that agreement. Though they
Speaker 2: also got the promise that they could have air conditioning
Speaker 2: in those iconic BROWND trucks, those delivery vehicles. It seems
Speaker 2: like there's a flip side to that coin that perhaps
Speaker 2: it's not really the sexiest job ever.
Speaker 6: Yeah, this is a very physically grueling job. I personally
Speaker 6: wouldn't want to have to haul packages ten twelve hours
Speaker 6: a day. And so, by no means am I saying
Speaker 6: this is an unearned or unmerited hey, increase it. Just
Speaker 6: that if you're looking for two percent inflation, this is
Speaker 6: making it difficult in the short term. And I think
Speaker 6: the goal is, or the hope is that over coming years,
Speaker 6: things like productivity improvements and ups talked about sort of
Speaker 6: productivity and investments in their warehouses to automate things there
Speaker 6: and just sort of paying benefits and job conditions getting
Speaker 6: to a place where they should have been all along
Speaker 6: will be enough where we can kind of reach an
Speaker 6: equilibrium that everyone's happy with.
Speaker 7: It.
Speaker 6: Just that we're currently in the midst of an adjustment.
Speaker 2: That's exactly what I wanted to ask about. You talk
Speaker 2: about bringing those wage wages and wage growth back to
Speaker 2: acceptable levels. And my question for you is acceptable to whom?
Speaker 2: To everyone? Like, they have to find this happy medium
Speaker 2: where everywhere it fits everybody where the bed's not too
Speaker 2: soft and it's not too hard, it's just right.
Speaker 6: And that's sort of the dance of capitalism right where
Speaker 6: you have. This is a job that needs to be done.
Speaker 6: We all want our package deliveries, but there's not a
Speaker 6: lot of people who want to do these jobs at
Speaker 6: the conditions and pay that they've been offered at. And
Speaker 6: so pay and benefits have to go up. That means
Speaker 6: shipping prices have to go up. And as Amazon consumers
Speaker 6: or anybody else, we have to be willing to accept that,
Speaker 6: and the company as well has to find a profit
Speaker 6: margin that works for them. And so this is just
Speaker 6: an adjustment period to figuring out what works for everybody.
Speaker 2: I'm still fascinated with the idea that there are more
Speaker 2: labor actions ongoing this year than we've seen in quite
Speaker 2: some time. Do you anticipate there being more because of
Speaker 2: those bringing the wage growth back to acceptable levels or
Speaker 2: whatever the X factor may be for that particular industry.
Speaker 2: Do you see these types of labor actions continuing beyond
Speaker 2: just the team stairs and ups and UAW I.
Speaker 6: Tend to think so. And again, the uneployment rate is
Speaker 6: a big part of this because it shows that the
Speaker 6: labor market is tight, and there's also kind of a
Speaker 6: nebulous expectations game where if you're the UAW and you
Speaker 6: see that the UPS teamsters just want a great deal,
Speaker 6: you think we can too. And if you're looking to
Speaker 6: unionize or or push for a bold deal at another
Speaker 6: company the other in industry, you see these wins and
Speaker 6: you see that it's detainable, and so that does just
Speaker 6: kind of shift the playing field in terms of who
Speaker 6: thinks they have the bargaining power in these negotiations.
Speaker 2: And now the really important part is whether the FED
Speaker 2: is listening, are they getting the message.
Speaker 6: It's interesting because in the short term we do have
Speaker 6: softer inflation data because used car prices are coming down
Speaker 6: as auto production picks up and supply chains normalize and
Speaker 6: shelter and rents are coming down as sort of the
Speaker 6: pandemic normal is that craziness goes away and things are normalized,
Speaker 6: and so we have probably six to nine months where
Speaker 6: the inflation data iso going to look pretty good. But
Speaker 6: the question is, again on the other side of this,
Speaker 6: if UPS rates have to go up, if auto prices
Speaker 6: have to go up to account for these labor deals,
Speaker 6: will that push inflation in the back half of twenty
Speaker 6: four and it's going to be a while until we know.
Speaker 6: So it's this interesting time where you have arguably signs
Speaker 6: of hotter inflation in the future, while the actual inflation
Speaker 6: data that we get is soft.
Speaker 2: It sounds like the way you're describing it is. Again,
Speaker 2: as we mentioned before, this is going to take months, years,
Speaker 2: but that bringing wage growth back to acceptable levels where
Speaker 2: it's acceptable for all parties. It's also going to have
Speaker 2: to take the FED into consideration. Once that wage growth
Speaker 2: is balanced, then the FED can find some balance too
Speaker 2: Or am I oversimplifying it, reading too much into it.
Speaker 7: I think that's right.
Speaker 6: And you just can't get sort of seven percent consistent
Speaker 6: wage growth in these types of industries and think that
Speaker 6: you're going to get to two percent inflation for the
Speaker 6: economy as a whole.
Speaker 7: And again I.
Speaker 6: Think eventually, maybe you know, the UAW gets their contract
Speaker 6: that they feel they've earned for the past fifteen years,
Speaker 6: and then in a couple of years things kind of normalize.
Speaker 6: But right now we still have that pretty tense upward
Speaker 6: wage pressure that's going to drive inflation.
Speaker 2: I don't want to ask about the pendulum swinging back
Speaker 2: the other way, because the whole point of this is
Speaker 2: not to swing the pendulum, but define the balance. But
Speaker 2: the balance won't last forever, Like that's a temporary balance.
Speaker 2: But what are we talking in terms of years? How
Speaker 2: long will this last?
Speaker 6: Well, these union contracts typically are I think the UPS
Speaker 6: won us for four years, and so I would imagine
Speaker 6: this is going to be the big catch up union contract.
Speaker 6: And it's pretty hard to see what things can look
Speaker 6: like four years from now, because things like spending in
Speaker 6: the Investment Reduction Inflation Reduction Act peak I think in
Speaker 6: twenty twenty six, and so it's possible that when we
Speaker 6: get to the next negotiation in twenty twenty seven or whatever,
Speaker 6: that things have normalized and we're not talking about this anymore.
Speaker 6: Just right now, I think there just shouldn't be any
Speaker 6: confidence that we've totally liftd inflation, because we still see
Speaker 6: these pretty intense wage pressures.
Speaker 2: Connerson is a Bloomberg Opinion columnist and founder of Peachtree
Speaker 2: Creek Investments and coming up a troubling climate omen problems
Speaker 2: with wind turbines that pretend to slower and more expensive
Speaker 2: energy transition. We're going to check it out. Just ahead.
Speaker 2: You're listening to Bloomberg Opinion.
Speaker 1: You're listening to the Bloomberg Opinion podcast Contest Saturdays at
Speaker 1: one and seven pm Eastern on Bloomberg dot Com, the
Speaker 1: iHeartRadio app and the Bloomberg Business App, or listen on
Speaker 1: demand wherever you get your podcasts.
Speaker 2: You're listening to Bloomberg Opinion I Namy Morris. Just last month,
Speaker 2: President Biden toured a wind turbine factory in New Mexico
Speaker 2: to tout his economic agenda and new kinds of jobs
Speaker 2: under the Inflation Reduction Act and the Chips Act.
Speaker 4: Now they're tired to hear me say this, but where's
Speaker 4: it written that America can't lead the world again to manufacture,
Speaker 4: because we're going to do just that the leading manufacturer
Speaker 4: in the world.
Speaker 2: Well, it may take longer and cost more to transition
Speaker 2: to wind energy. It's been stymied by red tape, structural issues,
Speaker 2: and material and logistics costs. But wind energy seems to
Speaker 2: have a lot to offer. The question now, is is
Speaker 2: it all worth it? We are talking with Bloomberg Opinion
Speaker 2: columnist Chris Bryant. He covers industrial companies in Europe. Chris,
Speaker 2: always a pleasure. Thank you for taking the time with
Speaker 2: us and in your column on the Bloomberg terminal. You
Speaker 2: frame all of this with Siemens Energies wind turbine project
Speaker 2: and struggling with those abnormal vibrations that they found, but
Speaker 2: they only found it in about four percent of their fleet.
Speaker 2: Why is that a problem? This four percent?
Speaker 8: Very simply, if you do have a problem with a
Speaker 8: wind turbine, then repairing it can be extremely expensive. You've
Speaker 8: got to imagine this is hugely heavy equipment installed high
Speaker 8: above the ground, so the last thing you want is
Speaker 8: anything going wrong, and unfortunately that's been the case here
Speaker 8: with Semens Energies wind unit. It forecasts recently a four
Speaker 8: and a half billion europe and you're lost.
Speaker 7: Now.
Speaker 8: To be clear, that's not all down to the fact
Speaker 8: that due to these problems with the onshore wind turbines,
Speaker 8: it's having other issues too, some of which you mentioned
Speaker 8: at the start. But it all adds up. And as
Speaker 8: I said, you know, a four and a half billion
Speaker 8: euro loss at the time when the world needs more
Speaker 8: wind power and demand is actually very high, is extraordinary
Speaker 8: and it takes some explaining, I think, because I think
Speaker 8: many people outside not familiar with the companies in this
Speaker 8: sector would assume that they're all doing very well. But
Speaker 8: the opposite is the case.
Speaker 2: Well, let's talk about that, because in your column you
Speaker 2: also talk about how this can be laid at the
Speaker 2: doorstep of climate and action, and now there's this rush
Speaker 2: to catch up, bring us up to speed. What did
Speaker 2: you mean by.
Speaker 8: That, Well, of course, you know, we've had an enormous
Speaker 8: step forward in the wind industry over the last decade,
Speaker 8: and the machinery has been getting larger and larger and
Speaker 8: more powerful, and that's a very good thing from the
Speaker 8: perspective of climate. It means we can generate more clean
Speaker 8: electricity and so forth. The problem has been as intense
Speaker 8: competition to get this deployed in the field, intense competition
Speaker 8: to develop ever more powerful turbines. The danger of the
Speaker 8: courses in producing that technology that you know, you cut corners,
Speaker 8: you rush too much, you brush problems under the carpet.
Speaker 8: That's what seems to happen at Semen's Energies GMESSA wind unit,
Speaker 8: where these problems have only sort of dripped out gradually
Speaker 8: and they'll finally hopefully acknowledged the full extent of them recently,
Speaker 8: and of course once that happens, then you know fixing them.
Speaker 8: As we discussed is very expensive. But you know, this
Speaker 8: all resulted from the fact that the company was determined
Speaker 8: to produce the you know, these very large, very powerful turbines.
Speaker 8: Of course they bid offer a little more than they
Speaker 8: could chew.
Speaker 2: In this case, some of the issues that you talk
Speaker 2: about in the column, the red tape, the material costs,
Speaker 2: inflation impacting those costs, are those at all or entirely
Speaker 2: impacted by the pandemic. Is this sort of a leftover
Speaker 2: residual effect of what we went through in twenty twenty
Speaker 2: and twenty one, or is there more to it than
Speaker 2: just that.
Speaker 8: Well, there's certainly the case that besides these these warranty
Speaker 8: repair issues that the wind turb i makers have been having,
Speaker 8: they've been hit by a really sort of perfect storm.
Speaker 8: If they excuse the pun of problems in their supply chain,
Speaker 8: as you say, if you think about logistics, you know,
Speaker 8: if you produce a wind turn and as I say,
Speaker 8: enormous blades of machinery, they have to be transported, you
Speaker 8: could have imagined that suddenly the cost of delivering those
Speaker 8: that equipment got extremely expensive. And of course, yes, the
Speaker 8: components and that make up a wind turber and all
Speaker 8: of those went up in costs as well, and that
Speaker 8: created a bit of problem because it's often the case
Speaker 8: that these companies have sort of fixed time contracts that
Speaker 8: did not adjust for inflation, and so they ended up
Speaker 8: having to delivered this equipment what they promised, and of
Speaker 8: course it wasn't profitable. Then is it hoped and so forth.
Speaker 8: I think there's a lot of big learning curve that's happened.
Speaker 8: There now, lots of contracts being now rewritten to allow
Speaker 8: for sort of inflation adjustment and so forth. But the
Speaker 8: sad reality is, of course, therefore we had this, you know,
Speaker 8: for years, a declining trend in the cost of wind turbines.
Speaker 8: The price is now having to go up again to
Speaker 8: accommodate some of these inflated costs.
Speaker 2: We are talking with Bloomberg opinion columnist Chris Bryant about
Speaker 2: an energy transition to wind power and some of the
Speaker 2: hiccups that we're finding along the way. More than just hiccups,
Speaker 2: and Chris, the wind energy or the wind energy industry
Speaker 2: seems to have a lot to offer. There seems to
Speaker 2: be a lot of promise there and as you said,
Speaker 2: there is a tremendous demand for these turbines. What's the
Speaker 2: hang up are these growing pains. We've never been here before,
Speaker 2: and we're just learning as we go.
Speaker 8: There is certainly an element of growing pains, and of
Speaker 8: course so this is always the case with large projects
Speaker 8: of any client. If you look at the new power
Speaker 8: industry for example, you know, we've seen in in Europe,
Speaker 8: you know, companies trying to build new nuclear power stations
Speaker 8: across of those ends up going through the roof. This
Speaker 8: simply is is very hard to do this kind of stuff,
Speaker 8: and we can be proud, I think in Europe and
Speaker 8: also in the United States for general electric perhap some
Speaker 8: very very you know, accomplished wind companies, but unfortunately, as
Speaker 8: I say, they really have had a torrid time with
Speaker 8: you know, conditions going against them and pricing not helping
Speaker 8: them are so and some home made mistakes as well,
Speaker 8: and particularly offshore. Now we're seeing that the costs of
Speaker 8: offshore wind have gone up a lot projects there are
Speaker 8: being canceled, which is of course again the last thing
Speaker 8: you want to see at a time like this. I
Speaker 8: still think that you know, wind power has still got
Speaker 8: you know, very rosy years ahead of it. Nevertheless, to
Speaker 8: get from a stage where these come some of these
Speaker 8: companies have not been making money to one where they're
Speaker 8: making healthy profits. It's going to be difficult, it's going
Speaker 8: to take time.
Speaker 2: Are there any best practices or any other lessons to
Speaker 2: be learned from semens for other men of factorers who
Speaker 2: are launching into this or getting into this or I
Speaker 2: already eyeball deep into it, and they want to make
Speaker 2: sure that they do the best that they can and
Speaker 2: not make some of the same mistakes we've seen.
Speaker 8: Well, I think there's a couple of things to get
Speaker 8: to keep an eye on. One, as we've seen in
Speaker 8: so many industries, is that the rising threat of Chinese competition.
Speaker 8: Chinese wind market is sort of an island to itself
Speaker 8: in some instances. Chinese companies are dominating there, but they
Speaker 8: are starting to push overseas and the fear I think
Speaker 8: on the part of European wind manufacturers in particular, is
Speaker 8: that they'll see more competition, which of course wouldn't be
Speaker 8: helpful as they try to get their finances in the
Speaker 8: right order. The other thing I flag is is permitting,
Speaker 8: and that's something that governments can help with wind projects.
Speaker 8: Unfortunately here are constantly delayed in sty meat by there's
Speaker 8: an element of nimbiaism, an element of just huge amounts
Speaker 8: of paperwork required to get these projects up and launch,
Speaker 8: so you know it can take years, and of course
Speaker 8: it's time that we don't have this efforts underway to
Speaker 8: simplify permitting. But I think a lot more improvements could
Speaker 8: be made there, because even if the wind turbine manufacturers
Speaker 8: finally get their technical and cost problems under control, they
Speaker 8: still face this headwind from permitting at the time when
Speaker 8: we need to speed up, not slow down.
Speaker 2: Well, this type of setback that we saw at Semens
Speaker 2: and other issues that are plaguing the industry, is that
Speaker 2: going to have a chilling effect on the future of
Speaker 2: this industry.
Speaker 8: I think it's certainly made investors cautious and it would
Speaker 8: not be helpful if the cost of capital of some
Speaker 8: of these companies starts to rise again. You've seen a
Speaker 8: massive sell off in the Semens energy stock. You lost
Speaker 8: billions of euros at market value. A isn't helpful if
Speaker 8: one day it needs to grace capital. Now for now
Speaker 8: it does not need to. But nevertheless, I think for
Speaker 8: now these wind cup companies is definitely under pressure to
Speaker 8: show investors, prove to investors that their technology is reliable,
Speaker 8: and there aren't any more skeletons in the closet because
Speaker 8: I think, you know, there is a nervousness out there
Speaker 8: that more problems could emerge as these these these turbines
Speaker 8: are installed and you know to feet the new equipment.
Speaker 8: If that proves not to be the case, I think
Speaker 8: there'll be a lot of relief out there. But yes,
Speaker 8: a lot to prove on the part of these companies.
Speaker 2: Thank you so much, Chris. Chris Bryant is a Bloomberg
Speaker 2: opinion columnist covering industrial companies in Europe. And don't forget
Speaker 2: We're available as a podcast on Apple, Spotify or your
Speaker 2: favorite podcast platform. Get your motoron, head out on the highways. Yes,
Speaker 2: I know Steppenwolf is singing here about motorcycles. This is
Speaker 2: from the movie Easy Writer. I know that, but it
Speaker 2: also seemed to be a good fit for talking about
Speaker 2: our next segment, muscle cars. Muscle cars, the Charger, the Mustang,
Speaker 2: the Camaro, the Pontiac Gto They're retired, retiring, facing retirement,
Speaker 2: and it's not hard to see why, starting with new
Speaker 2: emission standards back in the nineteen seventies, plus the spike
Speaker 2: in the price of gasoline. But now there's the electric vehicle.
Speaker 2: Is it possible to have a muscle car that is
Speaker 2: also electric? No one better to talk about this than
Speaker 2: Bobby Gogi is a Bloomberg opinion columnists covering foreign affairs
Speaker 2: and joins me, Now, Bobby, is the era of the
Speaker 2: muscle car over?
Speaker 9: Well, certainly one era is over. People who follow this
Speaker 9: closely are calling it the second Golden era of muscle cars.
Speaker 9: You alluded to the first, which was in the sixties
Speaker 9: and seventies, when you had these massive engines that made
Speaker 9: a great amount of noise and drank gas as if
Speaker 9: it was going out of fashion, and then emission standards
Speaker 9: imposed in the seventies and the increase in prices of
Speaker 9: gas because of the oil shock, the Arab embargo.
Speaker 7: Remember, muscle cars went away.
Speaker 9: They came back in about fifteen years ago when technology
Speaker 9: allowed for a new generation of muscle cars that were
Speaker 9: not as that met the emission standards off the time,
Speaker 9: and we're actually giving pretty decent mileage and at the
Speaker 9: same time preserving the things about muscle cars that we like,
Speaker 9: which is the noise, the roar of the engine, the
Speaker 9: sort of brute force of.
Speaker 7: The big v eight, the speed, the torque.
Speaker 9: But again, emission standards have now risen again and car
Speaker 9: companies are recognizing that no matter how hard they try,
Speaker 9: they simply are not going to be able to keep
Speaker 9: those cars on the road anymore, and so they're pulling
Speaker 9: away this year. By the end of this year, three
Speaker 9: great names in muscle car history, the Camorow, the Charger,
Speaker 9: and the Challenger, will all go out of production. The
Speaker 9: gasoline versions. The companies are saying that they will introduce
Speaker 9: EV versions in time, but those are not expected to
Speaker 9: hit the market for at least another year, maybe longer.
Speaker 2: Okay, let's talk about those EV versions. I want you
Speaker 2: to go over again. What makes a muscle car? You
Speaker 2: ticked off a few boxes, and let's compare and contrast.
Speaker 2: If there is the possibility that an EV version could
Speaker 2: meet those standards, is there something that the EV could
Speaker 2: offer that maybe a traditional combustion engine cannot do? Now,
Speaker 2: I know, I just asked you a lot of questions
Speaker 2: in one quick little segment, But let's just start with
Speaker 2: the boxes that have to be ticked so that it
Speaker 2: is an actual muscle car.
Speaker 7: Yeah, so what makes a muscle car? If you ask
Speaker 7: five people, you will get.
Speaker 9: Six opinions, but generally people will agree on a few things.
Speaker 9: One is that they've got to be big. You know,
Speaker 9: they're not sleek sports cars like the like the Italians
Speaker 9: make them the Ferraris or even like Corvette and not
Speaker 9: Muscle cars have to be big, boxy, bulky.
Speaker 7: They have to go fast.
Speaker 2: A version, Wait, a Corvette's not a muscle car.
Speaker 9: No, Corvette's technically a sports cars. There is a distinction there.
Speaker 9: Covettes are not designed in the same way as muscle
Speaker 9: cars are. Puscle cars are a lot cheaper. Covetes are
Speaker 9: very expensive. Buscle cars are meant to be affordable to
Speaker 9: the average American. We can debate about whether that's true
Speaker 9: or not. So puzzle cars have to be big, they
Speaker 9: have to be fast. They have to have a lot
Speaker 9: of talk, which means when you hit the gas you
Speaker 9: should be pushed back in your in your seat. As
Speaker 9: a driver, they have to make noise that That is
Speaker 9: the key to a muscle car, the rumble of that engine,
Speaker 9: the roar as you accelerate, and then beyond that, other
Speaker 9: definitions are are more technical. Can you replicate all of
Speaker 9: that in an EV Well, you can replicate somethings. I mean,
Speaker 9: you can make a big boxy EV. Many of the
Speaker 9: evs are big in boxing. You can certainly delivered pork.
Speaker 9: In fact, electric vehicles have an advantage over gasoline engines
Speaker 9: in that respect. You know when that that feeling what
Speaker 9: we ordinary sort of non technical people call a fast
Speaker 9: pickup for a car. Evs have a much faster pickup.
Speaker 9: They get off the blocks much faster than gasoline engines.
Speaker 9: But they do not make any noise. That's the whole
Speaker 9: point of an EV. And can you have a muscle
Speaker 9: car that doesn't make noise. Some companies are trying to
Speaker 9: figure out ways to introduce noise artificially. There are two
Speaker 9: ways to do that. Either you introduce a noise inside
Speaker 9: the car so the driver can hear it. You do
Speaker 9: that by piping artificial noise through the car stereo system,
Speaker 9: or you create a Dodge particularly is working on this.
Speaker 9: They're going to install an exhaust. Now, normal evs don't
Speaker 9: need exhaust, they don't produce any gas, but they're going
Speaker 9: to introduce an exhaust with the car, which will make
Speaker 9: the noise, which means people outside the car can hear
Speaker 9: the noise.
Speaker 2: But these artificial noise, so it won't be air pollution
Speaker 2: as much as it'll be no I don't want to
Speaker 2: say noise pollution because to many the sound of muscle
Speaker 2: car is a beautiful sound. But it'll be noise instead
Speaker 2: of what see a carbon monoxide correct.
Speaker 9: I mean, I have no problems calling it noise pollution,
Speaker 9: But as you say it, in the right circumstances, in
Speaker 9: the right context, that can be a beautiful thing. But
Speaker 9: you will always know in an ivy, even in an
Speaker 9: iv that makes noise, you will know that it's not
Speaker 9: real that it's piped music really after a fashion, So
Speaker 9: will will drivers get over that is the question. And
Speaker 9: of course then there's a bigger problem with all of
Speaker 9: these muscle or not, which is range. Muscle cars are
Speaker 9: gasoline engine. Muscle cars can go as far as the
Speaker 9: tank full tank will take them, which is hundreds of miles,
Speaker 9: whereas an EV especially if you are sort of really
Speaker 9: sort of pushing your pedal to the metal, will not
Speaker 9: get you very far. I mean, the best case is
Speaker 9: a couple of hundred miles, But if you're really accelerating
Speaker 9: and really sort of hitting the tarmac, you're lucky if
Speaker 9: you'll get one hundred miles at that speed.
Speaker 2: I love how you call it a tarmac, like it's
Speaker 2: launching like an airplane, because it's kind of a proper analogy.
Speaker 2: It strikes me that there is so much appeal of
Speaker 2: a muscle car that there are those who would seriously
Speaker 2: consider piping in the sound to make it feel more authentic,
Speaker 2: or even creating an exhaust for just the sound. Again,
Speaker 2: for the authenticity. What is the appeal? Bring me up
Speaker 2: to speed. Talk to me like I'm five, Why is
Speaker 2: this such a special thing?
Speaker 7: Well, if you were five, you would be much closer
Speaker 7: to the appeal.
Speaker 2: You're absolutely right.
Speaker 9: But what it is is it's you know, it's the
Speaker 9: bad boy thing, right, It's a bad boy or bad
Speaker 9: girl thing with there's always there will always be a
Speaker 9: part of us that wants to rebel. It wants to
Speaker 9: push against the ordinary. And with the passing of time
Speaker 9: or regular sedan cars have become so boring.
Speaker 7: They all look.
Speaker 9: The same, they have the same performance stats, they have
Speaker 9: the same give or take more or less, the same interior.
Speaker 7: They're all the same shape in their dull and.
Speaker 2: Walk into any grocery store parking lot, any workplace parking lot,
Speaker 2: go downstairs here at Bloomberg and look at the parking lot.
Speaker 2: It's all SUVs and they're all the same shape, code
Speaker 2: and color.
Speaker 9: Yeah, so there will always be a proportion of people
Speaker 9: who want to rebel against that, and the muscle car
Speaker 9: is nothing If it's.
Speaker 7: Not an act of rebellion.
Speaker 9: It signals that you are different, that you don't follow
Speaker 9: the rules. There will always be an appeal. Now, if
Speaker 9: you can afford it, you will buy an old one,
Speaker 9: you will restore the engine, you'll pay the high insurance
Speaker 9: that comes with that. Because your passion basically pushes you
Speaker 9: to do those things. You know, until the end of
Speaker 9: this year, you'll still be able to buy a few
Speaker 9: muscle cars that are coming off the regular production line
Speaker 9: with the security of knowing it's a new car.
Speaker 7: It'll last you certain.
Speaker 9: Number of years. It comes with some warranties that will
Speaker 9: go away in January of twenty twenty four until the
Speaker 9: new evs turn up. And then you have a question,
Speaker 9: is that new EV a muscle car? Now we already
Speaker 9: know a little bit of what that might feel like.
Speaker 9: Mustang launched its first EV model, but it's not even
Speaker 9: a car. It's an suv, And you know purists I
Speaker 9: count myself among them, will argue that an EV is
Speaker 9: not a muscle car. It may be a muscle ev someday,
Speaker 9: if you can imagine such a thing, but it's not
Speaker 9: a muscle car. And it feels very strange to me
Speaker 9: to see that iconic Mustang badge on a suburban vehicle.
Speaker 7: It just feels very very strange.
Speaker 2: Bloomberg Opinion columnist Body Goes also covers foreign affairs. Bloomberg
Speaker 2: Opinion continues with the bit a puzzle. Economic trends are improving,
Speaker 2: but our economic anxiety is getting worse. This is Bloomberg.
Speaker 1: You're listening to the Bloomberg Opinion podcast Counts Saturdays at
Speaker 1: one in seven pm Eastern on Bloomberg dot Com, the
Speaker 1: iHeartRadio app, and the Bloomberg Business App, or listen on
Speaker 1: demand wherever you get your podcasts.
Speaker 2: You're listening to Bloomberg Opinion. I'm Amy Morris. As America's
Speaker 2: economic trends are improving, our economic anxieties are actually getting worse.
Speaker 2: But this is more than just your typical middle to
Speaker 2: lower income family struggling to make ends meet. Higher income
Speaker 2: earners are also feeling financially stretched. Let's now break in
Speaker 2: Bloomberg opinion columnist Alison Schreeger, she covers economics. She joins me, now, Alison,
Speaker 2: you actually address this in your column. It's kind of
Speaker 2: hard to stir up simple for the very very wealthy
Speaker 2: who are feeling a financial pinch. But you say there's
Speaker 2: a reason we need to pay attention to this particular
Speaker 2: demographic in what's going on.
Speaker 5: Yeah, I mean, they as much as you know, it's
Speaker 5: hard to have sympathy for them, although you know, I
Speaker 5: think we can all recognize ourselves in some of the
Speaker 5: bad financial choices they're making. We all do you know,
Speaker 5: they are legitimately stretched. I looked at some data from
Speaker 5: the Survey Consumer Finances, this SPED survey, and you do
Speaker 5: see sort of upper middle class people. You do see
Speaker 5: that their savings, particularly their liquid non retirement savings, have
Speaker 5: been falling over the years, even when the stock market
Speaker 5: was way up. So they do have less money than
Speaker 5: they used to. And I think it's largely because of
Speaker 5: service thing like service costs, things like cost of education, housing.
Speaker 5: You know, we should all worry about this, maybe not
Speaker 5: as much as said, as you know, people were really
Speaker 5: really struggling, but still because this could have impacts for
Speaker 5: the wider macroeconomy because we are very consumption based and
Speaker 5: this is a growing demographic and they consume a lot,
Speaker 5: and they also cut back the most when there's a recession,
Speaker 5: which could make them worse.
Speaker 2: Do you anticipate than cutting back to make up for
Speaker 2: these higher costs of services.
Speaker 5: Well, what we're.
Speaker 9: Seeing is is ay it.
Speaker 5: They have a much betner financial cushion than they used
Speaker 5: to be. So if there's economic stress going on, if
Speaker 5: they're job loss or they just are worried about their jobs,
Speaker 5: and we're going to see them, they have a big
Speaker 5: part of their spending is discretionary spending, like the things
Speaker 5: we make fun of. It feels like a couple times
Speaker 5: a year we get these articles about someone who makes
Speaker 5: five hundred thousand dollars a year and they lived in
Speaker 5: New York and we see this like list of their
Speaker 5: spending and we're supposed to feel bad for them, and
Speaker 5: no one does. But a lot of those things on
Speaker 5: that list, you know, they'll drop once the economy turns.
Speaker 5: And if everyone does this at the same time, then
Speaker 5: we actually end up with a more volatile economy for everyone.
Speaker 2: Is it just our human nature? We're so much more
Speaker 2: eager to spend and then save. I mean, I remember
Speaker 2: having it beaten into my head when I was a kid,
Speaker 2: you have to save so much for a month so
Speaker 2: that you'll have something in case of already day fund
Speaker 2: or in case of an emergency. But it doesn't seem
Speaker 2: like that's really the message that's getting out anymore, or
Speaker 2: is it just not being heard.
Speaker 5: I think it's largely cultural. I mean, you were raised
Speaker 5: with those values, but you know, maybe they were raised
Speaker 5: by people who didn't make savings to priority. Isaiy, Like
Speaker 5: the twenty fifth percentile of wealth for people who make
Speaker 5: I think it was between one hundred and fifteen three
Speaker 5: hundred thousand dollars a year is thirty grands, which is,
Speaker 5: you know, not bad. But like if you're making three
Speaker 5: hundred thousand dollars a year in your entire like non
Speaker 5: retirement assets are thirty thousand dollars and you lose a job,
Speaker 5: or you have a divorce, or you have a health event,
Speaker 5: that's actually not that much money. So I mean, I
Speaker 5: think people aren't making saving as much as a priority,
Speaker 5: And you know, I think that's largely a cultural shift
Speaker 5: or just values.
Speaker 2: Yeah, the childcare costs are going up, Fueling costs are
Speaker 2: going up, mortgage rates, rent, and the student loans are
Speaker 2: have to be paid back soon. And some of those
Speaker 2: folks who are making a half million dollars a year,
Speaker 2: they did have student loans in their back pocket, a
Speaker 2: lot of them.
Speaker 4: Actually.
Speaker 5: There's a high correlation with student loan balances and income,
Speaker 5: so they're likely to as well have the bigger payments
Speaker 5: which they're about to start up again.
Speaker 2: So how do we address this? What do we do well?
Speaker 5: I mean, you know, we'd like to have a cultural
Speaker 5: shift back to savings, but I think we could, in
Speaker 5: the short term think more about tax policy. We could
Speaker 5: think about taxes and high end consumption. And maybe you know,
Speaker 5: one of the things that has lowered liquid saving is
Speaker 5: people are saving more for retirement, which is great. I mean,
Speaker 5: I think people were diverting more of their savings into retirement,
Speaker 5: which means they're in good shape for that, but also
Speaker 5: means it's coming across the liquid savings. Maybe we should
Speaker 5: have more tax preferences for more liquid emergency savings too.
Speaker 2: Thank you so much, Bloomberg Opinion columnist Alison Schreeger. That
Speaker 2: does it. For this week's Bloomberg opinion. We are produced
Speaker 2: by Eric Molow, and you can find all of these
Speaker 2: columns on the Bloomberg terminal. We're also available a podcast
Speaker 2: on Apple, Spotify, or your favorite podcast platform. And stay
Speaker 2: with us. Today's top stories and global business headlines are
Speaker 2: coming up. I'm Amy Morris. This is Bloomberg