Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. You're listening to Bloomberg
Speaker 1: Business Week with Carol mess Here and Tim Steneveek on
Speaker 1: Bloomberg Radio. On the economic data front, we got data
Speaker 1: today that showed US labor costs jumped the most in
Speaker 1: a year as productivity gains slowed, adding risks to inflation
Speaker 1: that it's going to remain elevated. It comes after the
Speaker 1: loud and clear message from Jay Powell yesterday that rates
Speaker 1: will indeed be higher for longer. What do things look
Speaker 1: like though, on the ground for America's businesses? Tell us
Speaker 1: answer that question. We've got back with us Sharon Miller,
Speaker 1: President of Business Banking over at Bank of America. The
Speaker 1: bank out with an update to its annual Business Owner Report.
Speaker 1: It's a survey of fourteen hundred at business owners, including
Speaker 1: businesses of one hundred thousand dollars through up to fifty
Speaker 1: million dollars in revenue. Sharon, welcome back. Taking a look
Speaker 1: at the report, I got to tell you, certainly there's
Speaker 1: some concerns here inflation, geopolitics, but I got to tell
Speaker 1: you it looks like overall things are going pretty well
Speaker 1: for these business owners. They're optimistic they.
Speaker 2: Are and thanks for having me back. I appreciate the
Speaker 2: time today. And we did find that as we surveyed
Speaker 2: clients that their revenue expectations, at least for the next
Speaker 2: twelve months, you know, sixty five percent of business owners
Speaker 2: told us that they expect their revenues to increase. So
Speaker 2: an overall optimistic tone coming from the small business community,
Speaker 2: I would say.
Speaker 3: Is this pretty much across all industries. I'm not quite
Speaker 3: sure how you disin slice the data, I'm Sharon, but
Speaker 3: is it kind of everybody?
Speaker 4: It is?
Speaker 2: I mean, we hear from our clients and certainly we
Speaker 2: talk to clients every single day, and what we're hearing,
Speaker 2: you know, there are some concerns certainly, you know, the
Speaker 2: political environment. We're operating in inflation. I heard that as
Speaker 2: we were leading up to this segment. But all in all,
Speaker 2: business owners, and especially smaller business owners, they really have
Speaker 2: control over their business in spite of what's going on
Speaker 2: around them, and so they have confidence that whatever the
Speaker 2: you know, economic environment is, they will over And so
Speaker 2: that's what we heard in the survey result and that's
Speaker 2: what we're hearing every single day across the desk.
Speaker 3: Well, that's interesting because and listen. Sixty five percent business
Speaker 3: owners expect their revenues to grow this year. Fifty five
Speaker 3: percent report they've made more money in twenty twenty three
Speaker 3: than in twenty twenty two. Good numbers, strong percentages. But
Speaker 3: did seventy percent of business owners last time the survey
Speaker 3: was done expected, you know, the revenues to grow this year.
Speaker 3: Give us like I'm always I'm always curious. I know
Speaker 3: tim is too in terms of trend lines and how
Speaker 3: this difference is maybe from the last data set, So
Speaker 3: is it improving? Is it the same?
Speaker 2: It stayed steady, So it was steady from our last
Speaker 2: report twelve months ago, and so it's right in line.
Speaker 2: So we haven't seen a dramatic increase nor a big decrease.
Speaker 2: And I will tell you what's interesting as the segment
Speaker 2: from twenty to fifty million, so.
Speaker 4: The mid size businesses, they.
Speaker 2: Were eighty percent plus saying that their revenue was going
Speaker 2: to increase over the next twelve months, which to me,
Speaker 2: that is something that is very good for the economy.
Speaker 2: Normally we see the inverse where the smaller businesses are
Speaker 2: more optimistic versus the mid size and this time we
Speaker 2: saw exactly the opposite. I mean, they're both very optimistic.
Speaker 2: But I would say the twenty to fifty million dollar
Speaker 2: businesses in the mid size category, we're eighty plus percent
Speaker 2: told us that, you know, I expect my revenue to
Speaker 2: increase over the next twelve months, and I expect to
Speaker 2: start accessing some capital, which we haven't seen quite as
Speaker 2: much of in that segment.
Speaker 1: Okay, how are they going to access this capital? Because
Speaker 1: this is something we talk about all the time when
Speaker 1: it comes to private credit, when it comes to rates.
Speaker 1: What are you seeing as the source for capital for
Speaker 1: these businesses right now?
Speaker 2: Well, I mean you have your traditional bank loans, lines
Speaker 2: of credit. Certainly we're seeing in the smaller segment where
Speaker 2: business owners are accessing credit cards, and you know, with
Speaker 2: that credit card, when we look at our data here
Speaker 2: at Bank of America, we see that it's on par
Speaker 2: with two thousand nine nineteen. We have seen an increase
Speaker 2: in the amount of credit card balances. But what I
Speaker 2: would say is when you adjust that for inflation, we're
Speaker 2: right on par with twenty nineteen. So I do feel
Speaker 2: go ahead.
Speaker 1: Well just going anything concerning to you about that about
Speaker 1: the mix of financing right now?
Speaker 2: No, I mean I feel that you know, we're in
Speaker 2: a very strong position with our clients, and certainly, you know,
Speaker 2: when you see that people are starting to access their
Speaker 2: lines of credit, they're feeling better. We've seen, you know,
Speaker 2: that that trend line be sort of stable, where we
Speaker 2: weren't seeing as much coming through in the mid sized segment.
Speaker 2: And I do think that based on this survey and
Speaker 2: what we're hearing from clients, there's a tone of optimism
Speaker 2: out there that they're ready to get out there, they're
Speaker 2: ready to expand or you know, take on an acquisition,
Speaker 2: and certainly some activity going on in the business in
Speaker 2: business lands.
Speaker 3: What color can you give us in terms of default
Speaker 3: rates on either their business credit cards, personal credit cards
Speaker 3: or anything that kind of ties back to it? Sounds
Speaker 3: like you sound very optimistic on many levels, So I'm
Speaker 3: just curious what are you seeing in terms of default
Speaker 3: rates or any signs of stress and for some of those.
Speaker 2: Businesses, Yeah, I would say within within our portfolio at least.
Speaker 4: I mean, we're very you know, we work with every.
Speaker 2: Client and we certainly are very strong on our clients
Speaker 2: selection and making sure that it makes sense for the loan,
Speaker 2: and so we are at historically low levels on you
Speaker 2: know our credit losses, and so I do feel good
Speaker 2: about our portfolio and what's happening with the health of
Speaker 2: our business.
Speaker 1: Again, I kind of go back to this idea that
Speaker 1: you know, the data in this are so good in
Speaker 1: this report, I was I was struck by that. But
Speaker 1: we do hear over and over again surveys of folks
Speaker 1: and look, this is limited. You're talking to business owners
Speaker 1: here about how how well things are going, but we
Speaker 1: hear from folks out there, especially ahead of the election,
Speaker 1: that they are dissatisfied with parts of the economy. And
Speaker 1: I'm wondering if you can help explain, not politically or anything,
Speaker 1: but the disconnect between what you see in the survey
Speaker 1: and what you see in the other types of surveys.
Speaker 1: When you know voters are asked ahead of elections about how.
Speaker 2: They're feeling, right, and I think you know even in
Speaker 2: this survey, and I've I've been in President of Small
Speaker 2: Business for seven years and we've been doing the survey
Speaker 2: before I even got your ten years in the making
Speaker 2: for this survey. So we've got a long track record
Speaker 2: of history and going through election cycles.
Speaker 4: And what we find is that you'll see.
Speaker 2: A dip in the in the confidence because of you know,
Speaker 2: what's happening in the political.
Speaker 4: Landscape and that and the headlines.
Speaker 2: But what happens following that election is that there's certainty
Speaker 2: and so there's you know, whether it's a Democrat or
Speaker 2: Republican doesn't really matter. There's certainty in what's going to
Speaker 2: happen going forward, and so you do see the economy
Speaker 2: start to move again. So you know, it's it's a
Speaker 2: typical cycle that we do see as we look back
Speaker 2: at our data, and you'll you know, it's it's it's
Speaker 2: kind of going through it again right now we're in
Speaker 2: the election year. And so i'd also say that, you know,
Speaker 2: business owners where we surveyed are more optimistic about their
Speaker 2: own business and their revenue prospects versus the national or
Speaker 2: the local economy.
Speaker 4: And so I think that has a lot to do
Speaker 4: with especially.
Speaker 2: In the smaller businesses, they have control over their business
Speaker 2: in spite of what's going on around them. They can
Speaker 2: control their activity, they can control what they're doing, and
Speaker 2: they can tip it because they're small.
Speaker 3: Sharon, what's the demographics the diversity of these statistics. I'm
Speaker 3: wondering if you can break it down, because BFA did
Speaker 3: a survey. I guess this was back in October. About
Speaker 3: forty four percent of black owners have had challenges accessing capital,
Speaker 3: according to a survey done by b of A last fall,
Speaker 3: with more than a third of those respondents saying they
Speaker 3: didn't have a relationship with a lender. Some thirty five
Speaker 3: percent said they don't think they will ever have equal
Speaker 3: access to capital. And this is a story that Bloomberg
Speaker 3: has out today about, you know, after the pandemic, and
Speaker 3: they were so much entrepreneurial spirit and businesses, including black
Speaker 3: owned businesses, being created, and yet now here we are
Speaker 3: in twenty twenty three and just thirty two percent of
Speaker 3: black owners were fully approved for a loner line of
Speaker 3: credit compared to fifty six percent of white entrepreneurs. This
Speaker 3: was a March report from the twelve Regional Fed Bank.
Speaker 3: So I'm just curious, what color can you give us
Speaker 3: in terms of the diversity or the demographics of some
Speaker 3: of this data.
Speaker 2: Well, this business owner report was from all different demographics,
Speaker 2: and we do release a survey on women owned businesses,
Speaker 2: Black owned businesses, Hispanic owned businesses, So we do have
Speaker 2: other reports that follow this. One was very broad in
Speaker 2: nature and so we didn't dive into specific races or
Speaker 2: age demographics. This is across the board, and we do
Speaker 2: put out other surveys like that, and I'll tell you
Speaker 2: we find the same results in women owned businesses and
Speaker 2: Hispanic owned businesses. And those are all the things that
Speaker 2: we are doing here at the bank to make sure
Speaker 2: that people understand how to access capital, how to have
Speaker 2: those conversations before you need capital, so that you can
Speaker 2: prepare and get ready.
Speaker 4: So absolutely, those.
Speaker 2: Are reports we put out and those are concerned that
Speaker 2: we want to address every single day.
Speaker 4: Absolutely.
Speaker 3: Sharon Miller, President of Business Banking at Bank of America,
Speaker 3: joining us from San Antonio, Texas.
Speaker 1: Okay, this was news to me, Carol.
Speaker 5: Yes.
Speaker 1: Last year, GM decided it would ditch support for Apple's
Speaker 1: enfotainment hub Applecarplay, which by the way, you can get
Speaker 1: Bloomberg BusinessWeek from Applecarplay and Android Auto and it's new
Speaker 1: evs so it could bolster GM's in house platform, it's
Speaker 1: called Ultify. Perhaps not that surprising to those who followed
Speaker 1: consumer tech over the last decade or so. Doing something
Speaker 1: like that is easier said than done. Is the role
Speaker 1: out of the new software has been well flawed. Austin
Speaker 1: kr and David Welch right about it in the forthcoming
Speaker 1: issue of BusinessWeek magazine. You can read it now on
Speaker 1: the Bloomberg and at Bloomberg dot com slash BusinessWeek. Austin
Speaker 1: is Bloomberg News technology reporter. He joins us from our
Speaker 1: Boston bureau. I gotta say, Austin, I had no idea
Speaker 1: that GM made this move until I read this, and
Speaker 1: my first reaction was, why would the company do something
Speaker 1: like this? I mean, CarPlay is seamless. I think a
Speaker 1: lot of people would argue that it's really easy to use,
Speaker 1: and when it comes to consumer tech, I mean, I
Speaker 1: think it's fair to say that nobody really does it
Speaker 1: better than Apple. But then I started reading your story.
Speaker 1: It turns out that car companies give up a lot
Speaker 1: when they give up that dashboard space.
Speaker 5: Yeah, I mean, that's totally right. In addition to being
Speaker 5: totally seamless, Apple car Play is also super popular, and
Speaker 5: you can imagine the more popular it grows, the more data,
Speaker 5: the more controls that Apple wants access to, the more
Speaker 5: unlikely it is that they're going to use GMS software
Speaker 5: to use GM's infotainment apps or to interact with their
Speaker 5: digital hub and how it controls the car or interacts
Speaker 5: with their EV batteries, and this became a sort of
Speaker 5: a major concern for General motors in recent years, especially
Speaker 5: as Apple signaled that they want to expand with the
Speaker 5: next version of CarPlay into way more screens in the
Speaker 5: car to control everything from this phenometer to fuel levels
Speaker 5: to basically how you interact with the vehicle. And so
Speaker 5: GM basically decided last year that enough is enough. They
Speaker 5: wanted it not to be. They wanted to be a
Speaker 5: GM car, not an iPhone that you're driving, is one
Speaker 5: GEM executive put it to me.
Speaker 3: So wait, how deep was Apple already going in terms
Speaker 3: of its access to information about our cars?
Speaker 5: So right now, if you have CarPlay, if you get
Speaker 5: in a Ford or sort of any major automaker's car,
Speaker 5: it's a plug and play process. So they project it
Speaker 5: onto the screen. It's just sort of an overlay on
Speaker 5: top of the infotainment hub that you have in the
Speaker 5: vehicle already. So it's a version of the iPhone interface
Speaker 5: that you have that's modified for a car. But Apple
Speaker 5: announced in mid twenty twenty two that it wants to
Speaker 5: branch out into a lot more features of the vehicle
Speaker 5: and regardless of whether it's tapping into those data sources
Speaker 5: or just syncing with them. It's essentially taking over the
Speaker 5: interface of the vehicle from not just the console center screen,
Speaker 5: but all the gauge clusters that you have behind the
Speaker 5: the steering wheel. So that's sort of what you know.
Speaker 5: These car companies like GM consider miss mission critical components,
Speaker 5: and they were getting really wary of how deep that
Speaker 5: Apple was expressing its interest in reaching its tentacles into
Speaker 5: the car. And so that's why you see GM and
Speaker 5: Mercedes sort of dripped away from this.
Speaker 1: Okay, so you say, Carol says, she gets it. At
Speaker 1: the same time, though, Austin, as you point out in
Speaker 1: your story, and look, you got to look at where
Speaker 1: the data is coming from. It turns out that, at
Speaker 1: least according to Apple, people take very seriously whether or
Speaker 1: not the car has Apple car Play when they're thinking
Speaker 1: about purchasing it.
Speaker 5: Yeah, according to Apple's research, about seventy nine percent of
Speaker 5: US car buyers will only consider a car that's cart Play.
Speaker 1: Compatible, again from Apple.
Speaker 5: From Apple, but they also say, according to Apple's research,
Speaker 5: it's also ninety eight percent of all new new cars
Speaker 5: in the US come with car Play. So that's sort
Speaker 5: of an addiction. You cannot escape that habit forming just
Speaker 5: with you know, the few cars that are not CarPlay compatible,
Speaker 5: which is Tesla and Rivian, and that's about it. Every
Speaker 5: other car that's on the road that's new is CarPlay compatible.
Speaker 5: And GM said, we're going to take that risk because
Speaker 5: we believe in our own software and we're going to
Speaker 5: invest in our own native platform to try to get
Speaker 5: people to use GM software rather than Apples.
Speaker 3: Well, I mean, how does GM internals. I mean, obviously
Speaker 3: we know what Mary Barr and team feel like, but
Speaker 3: I mean, do they all think that this is the
Speaker 3: right move. That Apple can do things very well? And
Speaker 3: as you write about Michael Waldron who got a new
Speaker 3: Chevy Blazer, but he wasn't so happy about not having
Speaker 3: car Play.
Speaker 5: Yeah, we talked to a bunch of the first car
Speaker 5: that's being rolled out with this new embedded software platform
Speaker 5: that's completely CarPlay free, is called the Chevy Blazer EV
Speaker 5: and it rolled out last year. We talked to a
Speaker 5: bunch of owners, including iPhone users, who tried to adopt
Speaker 5: adapt to this car, and they had a lot of trouble.
Speaker 5: In fact, the software and displays ran into so many
Speaker 5: glitches that a lot of these systems became rick. They
Speaker 5: just blacked out altogether. They wouldn't work to turn on, apps,
Speaker 5: kept crashing, screens, kept flickering, to the point that GM
Speaker 5: actually had to issue a stop sale and a recall
Speaker 5: in late December to fix all these software. So far
Speaker 5: from a great rollout, not a very Apple like sort
Speaker 5: of onboarding process. But then again, some of the customers
Speaker 5: that we have talked to said, once they got used
Speaker 5: to it and sort of got over that habit and
Speaker 5: ripped the band aid, they actually kind of like GMS software.
Speaker 5: And I can walk you through some of the seatures,
Speaker 5: but please do are upsides to those? Yeah? I mean,
Speaker 5: just as an example, so if you enter an address
Speaker 5: right now on the Chevy Blazer, because it's integrated with
Speaker 5: the hardware components in the car, which is something that
Speaker 5: Apple Car Play cannot do. So if I enter an
Speaker 5: address in this ev it can automatically predict battery capacity
Speaker 5: along their way of that route and suggest charging stations accordingly.
Speaker 5: So if I'm I'm plotting a trip from from Boston
Speaker 5: to New York from where I am to you guys,
Speaker 5: it can suggest charging stations along the way automatically, whereas
Speaker 5: Applecarplay would have no idea what the battery life in
Speaker 5: your car is. So that's just one example of the
Speaker 5: type of embedded native software integration can sort of benefit
Speaker 5: consumers who just are used to getting a projection interface
Speaker 5: from Apple right now and not realizing there are better
Speaker 5: options out there.
Speaker 1: When it works, Austin, when it works, yes, that is key.
Speaker 1: This is a great story, Austin. I couldn't put it
Speaker 1: down once I started reading it. Austin car Bloomberg News
Speaker 1: technology reporter joining us from our Boston bureau. Check out
Speaker 1: Austin Carr story. He wrote it along with David Welch
Speaker 1: in the forthcoming issue of BusinessWeek magazine. It's on the
Speaker 1: Bloomberg terminal. It's at Bloomberg dot com slash BusinessWeek