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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moven news.

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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.

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Speaker 1: All Right, the big thing for me, I think this

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Speaker 1: is this weekly. I mean, there's a lot of ego

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Speaker 1: data coming down, But are we going to have a

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Speaker 1: strike in the auto industry? I mean, it kind of

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Speaker 1: feels like it and.

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Speaker 2: That could push, by the way, not only the state

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Speaker 2: of Michigan into a recession, but if it goes on

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Speaker 2: for a long time, it could be bad for the

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Speaker 2: growth trajectory of the US economy and for the inflation

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Speaker 2: underlying inflation.

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Speaker 1: Yep, it's big, So hopefully they can get something done.

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Speaker 1: Joe Levington joins us here. He's a director credit research

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Speaker 1: for Bloomberg Intelligence. In his day job, he covers kind

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Speaker 1: of the industrial companies, including the auto companies. Joins us

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Speaker 1: here in our Bloomberg Interactive Brokers studio. So, Joe, what's

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Speaker 1: your sense here. You know these companies for a long time.

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Speaker 1: Does this feel like they're going to go on strike?

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Speaker 1: The union will go on strike Thursday at midnight.

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Speaker 3: Yeah, no, definitely, Paul, it does feel like a strike

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Speaker 3: is coming. You know, even when you see Bloomberg reporting

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Speaker 3: that the UAW has offered some concessions, going from forty

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Speaker 3: percent growth to thirty six percent growth, is still a

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Speaker 3: huge difference between the fourteen and a half percent that

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Speaker 3: the auto companies seem to be giving.

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Speaker 2: So let's look at the let's get the hard numbers

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Speaker 2: behind that. This is what they want in terms of

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Speaker 2: an increase for salary and benefits Rachel, So what does

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Speaker 2: it boil down to in terms of the cost for

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Speaker 2: the automakers to get an hour of work from a

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Speaker 2: union member.

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Speaker 4: Yeah, no, you're totally right.

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Speaker 3: The way that I've looked at it is really in

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Speaker 3: terms of EBIT for twenty twenty four, in terms of

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Speaker 3: profitability for in the best case scenario, at twenty percent,

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Speaker 3: you'd have something like Stilantis being about two percent impacted,

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Speaker 3: So really not that much before you consider some of

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Speaker 3: the things that they could do.

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Speaker 4: For Ford, which.

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Speaker 3: Has a bigger unionized auto group, it could be as

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Speaker 3: much as ten percent of twenty twenty five or EBIT. Now,

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Speaker 3: I do think there are ways that they can offset it,

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Speaker 3: And going to your point about inflation price is the

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Speaker 3: number one tool that they have to use is to

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Speaker 3: increase prices and pass it on to consumers. Of course,

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Speaker 3: that leads to different challenges and different.

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Speaker 2: Ways, also done numerous times over the past couple of years.

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Speaker 4: That's exactly right.

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Speaker 2: When I priced my Dodge Challenger RT scat pack.

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Speaker 1: Wide body, which is still not in delivery, which.

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Speaker 2: Still has not been delivered, and I hear, by the

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Speaker 2: way from inside the company they're like, yeah, you know what,

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Speaker 2: I think it's going to be delivered September fifteenth, and

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Speaker 2: now that's just three days away, and I've gotten bup

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Speaker 2: kissed in terms of anyway. The bottom line is when

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Speaker 2: I ordered it in you know, a year ago, it's

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Speaker 2: the price has already been increased like two or three times,

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Speaker 2: and I'm wondering, do I have to then pay that price?

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Speaker 2: But when they finally deliver.

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Speaker 4: It, I don't know that works. No, In fact, you

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Speaker 4: don't have to pay that price.

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Speaker 3: But that's where some of the EV companies are getting

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Speaker 3: hit materially, like a riythean or a Lucid, which made

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Speaker 3: deals two or three years ago, and now they're, you know,

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Speaker 3: like offering these cars up at thirty percent less than

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Speaker 3: worth the prices today and they're taking that loss and

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Speaker 3: gross profit and really killing their liquidity. So to your point,

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Speaker 3: you won't have to get hit with that, Matt, but

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Speaker 3: you did have to wait.

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Speaker 2: And I bet you the dealer is gonna try. I'll

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Speaker 2: bet the dealer tries.

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Speaker 4: But you're savvy, old of guy.

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Speaker 2: You're not well now because Joel told me that, you know,

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Speaker 2: I would say, I have documentation, I know the only

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Speaker 2: day I ordered.

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Speaker 1: I know the owner of Stillantis, the CEO of Stalantis.

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Speaker 2: All right, So it doesn't help A dealer does not care.

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Speaker 1: That doesn't care.

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Speaker 2: Okay, I've interviewed Carlos Tavaris. That doesn't help me when

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Speaker 2: I go into the dealership.

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Speaker 5: All right.

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Speaker 1: So Joel, if you're these big auto companies, you don't

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Speaker 1: want to go on strike, but you feel like you

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Speaker 1: can't pay thirty or forty percent increase in So where

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Speaker 1: do you think this shakes out?

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Speaker 3: I mean, yeah, I think you probably get to a

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Speaker 3: midpoint of maybe about twenty five percent over four years Now,

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Speaker 3: the offsets to that is, you know, if you increase

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Speaker 3: pricing one percent, that a huge chunk of that increase away,

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Speaker 3: And then you start thinking about costs and where you

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Speaker 3: can do that. One of the things I always think

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Speaker 3: about is bringing in products that you have gotten from supplier,

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Speaker 3: so insourcing some componentry. If you do that, that means

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Speaker 3: you might be saving money. That might be a pressure

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Speaker 3: point for a lot of the auto suppliers and how

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Speaker 3: they're gonna get hit. Obviously, if you're going for pricing,

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Speaker 3: that's positive for the dealers and what that means for them, well.

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Speaker 2: If they can move the metal. Because consider that these

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Speaker 2: increases are only gonna hit GM, Forward and Stilantis. So

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Speaker 2: if you're cross shopping, say the new newest GM electric

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Speaker 2: vehicle on a Tesla, and Tesla has to pay its

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Speaker 2: employees like a third of what GM pays their employees,

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Speaker 2: you're gonna find a better price over at elon Musk's company.

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Speaker 4: I think you're totally right, Matt.

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Speaker 3: I Also, I wrote about this a couple of weeks ago,

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Speaker 3: how Tesla might actually be the biggest winner. Now, I'm sure, folks,

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Speaker 3: is Tesla's plants see a let's say twenty five percent increase,

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Speaker 3: and they're gonna be asking for something too, But my

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Speaker 3: guess is it's incremental or modest relative to what the

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Speaker 3: UAW is gonna get. So on a relative basis, Tesla's

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Speaker 3: gonna win on that. And as you've seen, what they've

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Speaker 3: done this year is they've used that price to cut

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Speaker 3: their prices or take a relative price cut and draw

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Speaker 3: demand off of it, which I think means that Tesla

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Speaker 3: will be, you know, like the eventual winner out of

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Speaker 3: the out of this game with the auto companies.

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Speaker 2: And the others who produce here that don't have union labor, right,

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Speaker 2: which is like a ton of Asian and European automakers.

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Speaker 1: So like the BMW plants in Tennessee or wherever they

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Speaker 1: put them South Carolina, South Carolina are they're not unionized.

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Speaker 3: They're not And so you know, like there is going

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Speaker 3: to be a relative trade here in terms of how

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Speaker 3: much you can go. And it's one of the reasons

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Speaker 3: why the auto companies are pushing back so hard because

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Speaker 3: they play in a global market space.

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Speaker 2: I don't know, so all right, from that, you've got

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Speaker 2: to decide as a worker, Paul, do you want to

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Speaker 2: live in Spartanburg. Do you want to live in Austin?

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Speaker 2: Do you want to live in Motown?

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Speaker 5: Spartan Burs?

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Speaker 4: Looking pretty good?

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Speaker 6: Yeah?

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Speaker 5: All right.

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Speaker 1: So from the balance sheet perspective, jol, do any of

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Speaker 1: these Ford GM stialantas do they have a balance sheet

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Speaker 1: that you're nervous about should a long strike take place.

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Speaker 3: Well, the thing that I look at the most, and

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Speaker 3: this is really a Ford and GM issue more than

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Speaker 3: a Stalantis issue, is that the way that they get

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Speaker 3: paid is that they get paid when they sell the

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Speaker 3: car to the dealer, right, but they don't pay their

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Speaker 3: suppliers until your typical forty five or sixty days afterwards.

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Speaker 3: What that means is that they have a huge amount

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Speaker 3: of payables that are lined up and very little receivables.

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Speaker 3: When you have a stoppage of work, there's no receivable

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Speaker 3: of money coming in, but there's a huge amount of

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Speaker 3: payables to the tune of maybe like five billion dollars

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Speaker 3: a quarter. So you have to have massive amounts of

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Speaker 3: liquidity to handle kind of such a situation, which is

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Speaker 3: really what Ford and GM have. I think Ford has

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Speaker 3: something like fifty billion of liquidity available.

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Speaker 4: GM has about forty five billion.

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Speaker 3: Dollars of liquidity available, so they can handle a near

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Speaker 3: term impact, but it has.

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Speaker 5: A huge.

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Speaker 3: View in terms of free cap flow for a year,

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Speaker 3: in terms of the liquidity on their balance sheet.

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Speaker 1: They got a lot of leverage here. I'm looking at GM.

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Speaker 1: I mean they got to that the IBATA. I mean

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Speaker 1: that's there's a lot.

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Speaker 3: There there there is, But keep in mind that that

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Speaker 3: includes the finance company.

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Speaker 4: When you start that out.

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Speaker 3: If the leverage at GM and Ford is actually relatively modest,

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Speaker 3: maybe more like one to one and a half turnska,

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Speaker 3: it's really that they have finance companies, which is kind

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Speaker 3: of hard to see, uh sometimes just because it's blended

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Speaker 3: all together under their under their primary.

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Speaker 2: Now, I will say everyone we talked to from we

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Speaker 2: talked to Seth Harris yesterday Northeastern, who used to be

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Speaker 2: an advisor to President Biden and deputy director of the

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Speaker 2: White House's National Economic Council, and Cloudy Assam, she of

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Speaker 2: the SOM rule. They all say, look, the union took

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Speaker 2: bad deals for the workers at the end of the

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Speaker 2: financial crisis, and the carmakers have raked it in since then.

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Speaker 2: Surely they've been setting aside billions because they knew these

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Speaker 2: negotiations were coming right surely.

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Speaker 1: But you're right. I mean they kind of they got

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Speaker 1: a certain deal to certain pay increases, and then this

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Speaker 1: inflation came along, which nobody saw, and then boom, and

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Speaker 1: now they feel like they need to get back. It's

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Speaker 1: gonna be interesting, it feels, it feels contentious. Hopefully they

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Speaker 1: can get something done by midnight Thursday night.

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Speaker 2: Especially if they haven't produced my challenger I know, I mean,

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Speaker 2: I need them to make that instead it here.

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Speaker 4: It'll be the priority of the Nego.

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Speaker 1: She's the whole thing. We got to get that thing

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Speaker 1: off the line. Joe Levington, he's director of Credit Research

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Speaker 1: for Bloomberg Intelligence, senior auto and industrial credit analyst as well,

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Speaker 1: so we appreciate getting some of his thoughts here. Again,

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Speaker 1: Big big issues for the auto manufacturers coming up, big labor,

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Speaker 1: big auto. We've got strikes seemingly in a number of

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Speaker 1: industries across this country.

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Speaker 7: You're listening to the Team Ken's are Live program Bloomberg

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Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com,

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Speaker 7: the iHeartRadio app, and the Bloomberg Business App, or listen

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Speaker 7: on demand wherever you get your podcasts.

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Speaker 1: Monica Defend joins us. She's a head and chief strategy

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Speaker 1: just at a Munday Institute that's Europe's largest asset manager.

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Speaker 1: She joined us here in Bloomberg Interactive Brokers studio. I

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Speaker 1: love to have her in studio here. So Monica talked

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Speaker 1: to us about kind of the European economy. I know

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Speaker 1: we can't talk about it as a whole because you

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Speaker 1: have so many different countries. But my concern, I think

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Speaker 1: my understanding is if Germany is in trouble, Europe's in trouble,

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Speaker 1: talk to us about how you guys view the European economies.

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Speaker 8: Well, short term, we are really relying on Americans taking

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Speaker 8: over and during the summer, so probably we can have

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Speaker 8: some lift on the quarterly GDP sequencing. But as you

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Speaker 8: were rightly pointing out, on an aggregate, europe euraline is

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Speaker 8: not doing bad. If you look at at the Commission

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Speaker 8: at you Commission projection released yesterday, there is no recession

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Speaker 8: but latisha growth. It is true that if you open

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Speaker 8: the box, there are different countries within the same region.

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Speaker 8: With Germany that is running into our session for different reasons.

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Speaker 8: It's started with a manufacturing sector paint at all of

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Speaker 8: the industrial policy and of an economy centered on energy dependence,

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Speaker 8: but now it's moving into the service sector. Industrial data

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Speaker 8: and that's production data were soft last week. But it

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Speaker 8: goes without saying that if Germany is in trouble, this

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Speaker 8: is going to be difficult for the entire region. Ivy

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Speaker 8: said that we have some other countries, France, for example,

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Speaker 8: where we see the political willingness to continue to run

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Speaker 8: physical support for the country, and France is an important economy.

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Speaker 8: Spain again has been supported by subsidies on the energy

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Speaker 8: sector and this has been supporting consumption. It is going

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Speaker 8: to fade away, and but at least Italy, where again

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Speaker 8: the construction boomb is over. So it is true that

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Speaker 8: on aggregate the situation is manageable. Probably at country level

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Speaker 8: there are several issues that needs to be tackled.

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Speaker 2: But not a super attractive place to invest right. I mean,

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Speaker 2: Germany's manufacturing sector is going to be hit hard by

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Speaker 2: problems in China, failures there and threats from companies like Tesla,

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Speaker 2: who seem to be able to do Volkswagen's work far better.

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Speaker 2: You know, the French have luxury goods that again won't

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Speaker 2: be purchased by rich Chinese people anytime soon. The Italians

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Speaker 2: have democratic disaster, you know, like a constant for the

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Speaker 2: last what fifty sixty seventy years, and the Spanish are

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Speaker 2: just supported by the rest of the continent. Plus Britain

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Speaker 2: shoots itself in the foot any chance it gets. I mean,

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Speaker 2: where would you invest if you wanted to go to Europe?

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Speaker 8: Well, nice to see these from American perspective, it is

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Speaker 8: not that bad.

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Speaker 4: You are are European.

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Speaker 8: But Evan said that first of all, in engaging the

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Speaker 8: green transition bottom up level, there are some nice evidence.

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Speaker 8: It is true that China slow down is not that

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Speaker 8: it is negative for for the region, but we need

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Speaker 8: to resize starting from Germany, the dependence UH to uh

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Speaker 8: TO to China when it goes to to Treda and

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Speaker 8: exportation because a lot is done within the region starting

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Speaker 8: from uh from Germany, which is an important an important

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Speaker 8: take if you ask me. Long term, probably as Europeans

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Speaker 8: we should think more on an industrial and on our

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Speaker 8: industrial policy. But this is what we are discussing. When

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Speaker 8: it goes to EarthCare, when it goes to pharma, it's

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Speaker 8: going beyond the semiconductor story. And I think we are

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Speaker 8: moving slowly, but we're active on that front.

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Speaker 1: So at the MOUNDI were you guys in terms of

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Speaker 1: your asset allocation these days and maybe maybe how it's

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Speaker 1: changed over the last several years.

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Speaker 8: Well, it has been given the macro uncertainty and uncertainty

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Speaker 8: on the monetary policy framework, it has been difficult really

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Speaker 8: to pencil midium to long term strategy. We've been quite

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Speaker 8: a jilt, for example on the durrection positioning with a

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Speaker 8: preference for US longer and that you neutral position. But

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Speaker 8: again it has been the time for agile, tactical relative positioning.

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Speaker 8: When it goes to the risk asset, we've been progressively

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Speaker 8: reducing the exposure to to credit it notably the.

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Speaker 1: High healed So reducing exposure to high credit is that

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Speaker 1: that you guys are just generally more conservative on your

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Speaker 1: economic outlook and industry policies.

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Speaker 8: It was also going into the US, I have to say,

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Speaker 8: so it's really when you need to balance the risk

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Speaker 8: return opportunity. Probably repositioning on govin and equity on the

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Speaker 8: traditional was for US more appealing equity wise, while maintaining

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Speaker 8: cocial stunts. We do like the US value and on

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Speaker 8: the emerging market we have been repositioning moving to neutral

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Speaker 8: into Chinese equity, but be more active in the emerging

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Speaker 8: market region, notably Brazil, India, for example, Indonesia. So these

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Speaker 8: are all countries that for different reasons, are getting track.

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Speaker 2: But you are looking in the US value. Are you

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Speaker 2: concerned that we do eventually have a recession here? The

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Speaker 2: consumers looking pretty stretched. We're going to get some data

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Speaker 2: I know out on Thursday retail spending, and it looks

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Speaker 2: much worse than the last month's data we got. We're

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Speaker 2: going to get inflation data out tomorrow that looks worse

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Speaker 2: than last month's data that we got. Is the situation

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Speaker 2: you're getting worse.

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Speaker 8: So when it goes to the recession call, we do

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Speaker 8: belie if there will be a shallow session, this will materialize,

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Speaker 8: likely in the first half of twenty twenty four. For

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Speaker 8: the reason you were mentioning the labor market is eventually cooling,

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Speaker 8: Excess savings have been reducing remarkably over time, and probably

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Speaker 8: also the physcal diviidenomics and impulse to the investments business investments,

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Speaker 8: I won't be there for longer. When it goes to

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Speaker 8: CPI inflation, we think it is normalizing, it will normalize.

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Speaker 8: It probably not in a linear way energy prices. Recent

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Speaker 8: prints on oil will have a positive contribution to headline

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Speaker 8: and the core will prove to be sticky. But as

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Speaker 8: I was saying, overall, we expect this nonlinear and volatile

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Speaker 8: and probably less rapid than expected downward driven inflation to

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Speaker 8: to continue. And this ands with the cold that we

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Speaker 8: were making on the Fed where we expect them to

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Speaker 8: orkish post posts.

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Speaker 1: I'm down with that, all right. So you spend half

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Speaker 1: your time in Paris, half your time in Milan area?

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Speaker 1: How was like Como this summer? I have yet to

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Speaker 1: go too, but it's.

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Speaker 2: On my bull. You mean you yet to go to

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Speaker 2: Lake Como ever?

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Speaker 5: Ever?

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Speaker 1: And I pend up on land like a dozen times.

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Speaker 2: Why would you spend so much time in boring Milan

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Speaker 2: and get up to lake where the money is.

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Speaker 1: That's where the money managers are, all right?

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Speaker 8: So I was in Internobio early in September where all

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Speaker 8: we are having these think tank meeting and the people

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Speaker 8: out there were saying, we have been taken over by Americans,

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Speaker 8: and we do think.

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Speaker 2: George Clooney, George, you must be happy to.

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Speaker 8: Have us, you know, honestly, being an Italian, I don't

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Speaker 8: know why you guys are going to the Lake of

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Speaker 8: Como and not to the seaside in Sicilia. Probably is

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Speaker 8: the weather, but definitely there there are a lot of tourists.

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Speaker 8: We are really seeing this renaissance in Milan itself.

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Speaker 4: Nice.

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Speaker 1: I love them a lot.

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Speaker 2: It's great, I love but they're taking down I spent

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Speaker 2: in Sicily.

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Speaker 1: I know.

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Speaker 2: I've been in Bari, been in Venice a number of times.

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Speaker 2: I've been in Florence. I got I got done cycling

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Speaker 2: trips around the country. I've done cooking trips in the country.

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Speaker 2: I've been to the horse.

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Speaker 1: I had to work. I had to work for a living.

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Speaker 1: Monica Defen thanks for joining us. She's head and chief

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Speaker 1: strategists at a Mundi Institute.

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Speaker 7: You're listening to the tape Can's are Live program Bloomberg

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Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

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Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

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Speaker 7: You can also listen live on Amazon Alexa from our

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Speaker 7: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

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Speaker 1: All right, we had an M and a trade in

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Speaker 1: like I don't know the packaging industry. Smurfit Kappa Group.

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Speaker 1: It's Irish. It doesn't sound it, but it's Irish. I

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Speaker 1: agreed to acquire west Rock, an eleven point two billion

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Speaker 1: dollar deal that creates a package industry powerhouse domiciled in

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Speaker 1: my home land of Ireland. Pretty cool stuff. And we

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Speaker 1: actually have an analyst who knows this business. Believe it

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Speaker 1: or not. Richard Burke joins us. He's a senior Aronalds.

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Speaker 1: The Bloomberg Intelligence covered all the basic materials. I want

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Speaker 1: to talk about this deal. I want to talk to you

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Speaker 1: about the potential auto strike, what that means for steal.

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Speaker 1: Lots of stuff to talk to you about today, Richard,

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Speaker 1: what's going on here with this deal. It's a big deal.

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Speaker 1: I guess we need more heft in the packaging industry.

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Speaker 9: Well, what it is is, if you look at the

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Speaker 9: two players. West Rock is undergoing what they call strategic transformation.

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Speaker 9: They're trying to, you know, boost their margins versus their peers,

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Speaker 9: their trail. They trail their margin, their margins trail their peers.

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Speaker 9: They undertook a transformation program and it may be going

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Speaker 9: a little bit slower than they want to. Smurf Kappa

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Speaker 9: doesn't have a presence in the US. This gives them

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Speaker 9: a large presence in the US. Smurf Kappa's margins are

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Speaker 9: about three hundred basis points higher than West Rocks. So

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Speaker 9: and they undertook their journey about seven years ago. They

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Speaker 9: started a capital improvement program and now they're at the

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Speaker 9: end of it. And you know, from what the executives

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Speaker 9: laid out on this morning's call was, you know, we

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Speaker 9: think we can help west Rock on their journey and

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Speaker 9: combine the company companies going forward and boost west Rock's margins,

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Speaker 9: bring them more in line to what where what Smurfit

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Speaker 9: Kampa is.

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Speaker 2: One of these companies I never heard of before West Rock.

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Speaker 2: The other one I never knew what they did, Smurfed Kappa.

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Speaker 2: Now they're going to have a combined annual revenue of

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Speaker 2: thirty four billion dollars. What do they make?

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Speaker 9: They make basically pretty much predominantly just cardboard boxes.

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Speaker 1: See I told you it's a cardboard box company.

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Speaker 2: I mean yeah, but like so iPhone.

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Speaker 9: Boxes, uh, you know, the Gamut, the Gammon boxes, the

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Speaker 9: Gamut from you know.

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Speaker 2: The regular U haul boxes like U haul the Gamut.

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Speaker 9: They go all the way across the universe to the

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Speaker 9: cardboard box that Amazon puts on your well, probably the

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Speaker 9: three cardboard boxes the Amazon puts on your doorsteps, the

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Speaker 9: big one to protect everything, and then the smaller ones

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Speaker 9: in and they also make all the way down to

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Speaker 9: those very more brand where retailers are trying to get

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Speaker 9: more brand experience. The other big thing that's driving this

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Speaker 9: is especially more so in Europe, is the way away

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Speaker 9: from plastic packaging. So, for example, one of the big

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Speaker 9: products that West Rocks just really introduced was a thing

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Speaker 9: to do way remember when you used to buy a

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Speaker 9: six pack of beer and the plastic rains. They have

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Speaker 9: a product that does away with the plastic.

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Speaker 1: Grains and I use that and that is a great

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Speaker 1: product because it's so much easier to get the cans

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Speaker 1: out of there. So that was weir.

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Speaker 10: What what do you mean the black plastic caps that

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Speaker 10: go on top of like, but you buy a six

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Speaker 10: pack of soda instead of having a little plastic grains ahold,

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Speaker 10: this is like a little cardboard top that just kind

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Speaker 10: of hold them all together.

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Speaker 1: And it's just very easy to take the can out

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Speaker 1: of the little cardboard top or take the whole carver

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Speaker 1: top off. Genius whatever thought it, and.

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Speaker 2: Less likely to strangle fish exactly right, which I've been

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Speaker 2: cutting those up since I was a little kid.

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Speaker 1: You know, the little things good for you. So I

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Speaker 1: tell you I do my party care. The packing business,

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Speaker 1: I mean the talk to us just about the cargated

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Speaker 1: box business. There's pre pandemic, there's huge demand, but then

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Speaker 1: the pandemic hit. Then everybody that got stuff delivered. Talk

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Speaker 1: to us about the last three four, five years in

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Speaker 1: that business.

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Speaker 9: Well, we've gone from pre pandemic where you know, historically

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Speaker 9: the packaging business kind of GDP GDP growth. Okay, pandemic hits,

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Speaker 9: everybody's at home, nobody can spend money on restaurants or

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Speaker 9: food or travel. Well, you got to spend money somehow,

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Speaker 9: so you ordered goods over the air and neet yeap

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Speaker 9: then came to these boxes. So the box over a

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Speaker 9: two year period went from GDP type growth to about

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Speaker 9: eight to nine growth. Then what happened, and it totally

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Speaker 9: reversed because everybody after a pandemic over everybody had what

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Speaker 9: they call what revenge travel, everything, and we've been in

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Speaker 9: a downfall. In fact, we're actually back to almost pre

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Speaker 9: pandemic levels.

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Speaker 1: Okay, so there's been.

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Speaker 9: But the bigger push longer term is again back to sustainability.

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Speaker 9: Can we can we replace past plastic packaging car?

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Speaker 1: You know what, back way back in the day, I

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Speaker 1: had a investment in a box company like just this

440
00:22:33,040 --> 00:22:37,400
Speaker 1: Southeastern US. Never made a dime on it, and then

441
00:22:37,880 --> 00:22:40,840
Speaker 1: the whole and I sold back my steak. Then this

442
00:22:40,960 --> 00:22:44,800
Speaker 1: company named Amazon came out. I was like, oh, I

443
00:22:44,840 --> 00:22:46,879
Speaker 1: missed it and bought them or what. No, it just

444
00:22:46,960 --> 00:22:48,320
Speaker 1: just kind of came out and said we're gonna started

445
00:22:48,320 --> 00:22:51,040
Speaker 1: shipping everything to you. And of course then this company's

446
00:22:51,080 --> 00:22:53,840
Speaker 1: value went through the roof. All right, we got potential

447
00:22:53,880 --> 00:22:56,960
Speaker 1: strike coming out of the auto business. If they're not

448
00:22:57,080 --> 00:22:59,639
Speaker 1: making cars, does that mean they don't need steel, in

449
00:22:59,680 --> 00:23:02,879
Speaker 1: which we're gonna have some issues with steel talks about

450
00:23:02,880 --> 00:23:03,800
Speaker 1: how that might impact steel.

451
00:23:04,160 --> 00:23:04,560
Speaker 4: Correct.

452
00:23:04,840 --> 00:23:07,040
Speaker 9: If you look at the auto market for the steel

453
00:23:07,080 --> 00:23:10,320
Speaker 9: sucker or auto demand or the auto end market is

454
00:23:10,320 --> 00:23:12,960
Speaker 9: about twenty five percent of the steel market. Okay, So

455
00:23:13,040 --> 00:23:15,159
Speaker 9: if we see that and you know, not only do

456
00:23:15,240 --> 00:23:18,320
Speaker 9: you have you kin'd have a ripple effect. Not only

457
00:23:18,359 --> 00:23:21,240
Speaker 9: do the big car makers stop making cars, but everybody

458
00:23:21,240 --> 00:23:23,600
Speaker 9: who makes the parts, you know, the tier one, the

459
00:23:23,680 --> 00:23:26,920
Speaker 9: Tier two, the Tier three suppliers stop making their parts too,

460
00:23:27,520 --> 00:23:31,280
Speaker 9: and you know, in the last the difference between this

461
00:23:31,400 --> 00:23:35,080
Speaker 9: strike possibly and the last strike is normally the UAW

462
00:23:35,200 --> 00:23:39,200
Speaker 9: you would only target one auto maker. This time they're

463
00:23:39,240 --> 00:23:43,000
Speaker 9: talking about maybe targeting all three. So we'll see if

464
00:23:43,080 --> 00:23:46,800
Speaker 9: the rhetoric, the rhetoric is definitely ramped up, and we'll

465
00:23:46,800 --> 00:23:47,480
Speaker 9: see what happened.

466
00:23:47,680 --> 00:23:50,480
Speaker 1: What are the steel makers themselves saying or they just

467
00:23:50,560 --> 00:23:51,960
Speaker 1: kind of staying out of it, and we'll say, well,

468
00:23:52,160 --> 00:23:52,440
Speaker 1: you know.

469
00:23:52,720 --> 00:23:56,720
Speaker 9: They've been quiet. The thing that was interesting, I thought

470
00:23:56,920 --> 00:23:59,720
Speaker 9: the second quarter on their earnings call, a few of

471
00:23:59,720 --> 00:24:04,520
Speaker 9: them mentioned that they had and totally ship more in

472
00:24:04,520 --> 00:24:08,280
Speaker 9: the second quarter than they were expecting to the automakers,

473
00:24:07,880 --> 00:24:11,600
Speaker 9: which exactly tells me the automakers were like, Okay, well

474
00:24:11,880 --> 00:24:15,440
Speaker 9: maybe we need to wrap up production and things like that,

475
00:24:15,520 --> 00:24:18,560
Speaker 9: and and honestly, you're not going to see if they

476
00:24:18,600 --> 00:24:22,600
Speaker 9: do strike their schedule. The contract expires this Thursday night

477
00:24:22,720 --> 00:24:26,760
Speaker 9: at eleven fifty nine pm. You know, we're already halfway through,

478
00:24:27,080 --> 00:24:30,240
Speaker 9: you know, halfway through the month, but you're almost you're

479
00:24:30,280 --> 00:24:32,320
Speaker 9: only two weeks from a course, so you may not

480
00:24:32,440 --> 00:24:35,560
Speaker 9: see that big of effect on this quarter on the

481
00:24:35,600 --> 00:24:38,520
Speaker 9: steel makers. It would probably be next more next quarter

482
00:24:38,560 --> 00:24:42,840
Speaker 9: of things also the steel makers normally take some downtime

483
00:24:43,520 --> 00:24:46,200
Speaker 9: and they kind of rejiggered their downtime to kind of.

484
00:24:46,240 --> 00:24:48,480
Speaker 5: Be see going forward.

485
00:24:48,600 --> 00:24:51,800
Speaker 9: So if there is a hit that they're not as

486
00:24:51,840 --> 00:24:53,560
Speaker 9: impacted as they might have been.

487
00:24:53,880 --> 00:24:56,159
Speaker 1: Interesting, I mean, did the auto guys did they did?

488
00:24:56,320 --> 00:24:58,640
Speaker 1: Are they like a justin time with their steel? It's

489
00:24:58,640 --> 00:25:01,280
Speaker 1: like I place my steel orders because I'm gonnaut. I'm

490
00:25:01,280 --> 00:25:03,600
Speaker 1: gonna start bending it like tomorrow or next week or something.

491
00:25:04,359 --> 00:25:08,879
Speaker 9: Most of it all depends on where you're at. Like

492
00:25:08,920 --> 00:25:11,919
Speaker 9: the Oheit, the big three are definitely probably more just

493
00:25:11,960 --> 00:25:12,280
Speaker 9: in time.

494
00:25:12,440 --> 00:25:13,480
Speaker 5: Okay, where the.

495
00:25:13,800 --> 00:25:16,520
Speaker 9: Maybe there's some of the spliers Tier one, Tier two,

496
00:25:16,560 --> 00:25:20,440
Speaker 9: Tier three are is you know, everybody's trying to be

497
00:25:20,640 --> 00:25:23,879
Speaker 9: just in time, but they probably do hold more.

498
00:25:23,960 --> 00:25:26,960
Speaker 1: All right, So boom, we knocked out cargated boxes and

499
00:25:27,040 --> 00:25:29,399
Speaker 1: steal in one segment. How good is that you can

500
00:25:29,440 --> 00:25:32,240
Speaker 1: do that with Rich Burke? Why he gets a bachelor's

501
00:25:32,240 --> 00:25:35,360
Speaker 1: degree in engineering from Illinois. Then he goes and gets

502
00:25:35,400 --> 00:25:37,919
Speaker 1: some masters in engineering electrical engineering, and then he goes

503
00:25:37,960 --> 00:25:40,480
Speaker 1: against an NBA from Chicago. You can't get the guy

504
00:25:40,520 --> 00:25:43,120
Speaker 1: out of the out of Illinois. All right, good stuff, Rich,

505
00:25:43,160 --> 00:25:44,720
Speaker 1: We appreciate it. From Bloomberg Intelligence.

506
00:25:45,680 --> 00:25:49,080
Speaker 7: You're listening to the Team Ken's are Live program Bloomberg

507
00:25:49,119 --> 00:25:52,480
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com,

508
00:25:52,560 --> 00:25:55,720
Speaker 7: the iHeartRadio app and the Bloomberg Business App, or listen

509
00:25:55,800 --> 00:25:57,920
Speaker 7: on demand wherever you get your podcasts.

510
00:26:00,119 --> 00:26:03,159
Speaker 1: Let's talk about shipping boxes. We talked that we had

511
00:26:03,160 --> 00:26:06,200
Speaker 1: an M and a trade in the carrogated box business.

512
00:26:06,800 --> 00:26:09,520
Speaker 1: Who what a thunk it is Murphy Kappa buy yep

513
00:26:09,840 --> 00:26:13,119
Speaker 1: eleven billion, so eleven large there, So kind of staying

514
00:26:13,160 --> 00:26:15,359
Speaker 1: on a kind of the box thing and kind of

515
00:26:15,359 --> 00:26:17,960
Speaker 1: moving boxes around. We have Mike Para. Mike joins us.

516
00:26:18,000 --> 00:26:20,440
Speaker 1: He is the CEO for the Americas for d h

517
00:26:20,680 --> 00:26:23,040
Speaker 1: L Express. He joins us live here in our Bloomberg

518
00:26:23,040 --> 00:26:26,919
Speaker 1: Interactive Brooker Studio. So Mike, I don't know, do you

519
00:26:26,960 --> 00:26:29,320
Speaker 1: care where the boxes come from? It's your just job

520
00:26:29,520 --> 00:26:30,119
Speaker 1: just to move.

521
00:26:30,000 --> 00:26:33,359
Speaker 11: Them, right, absolutely, But we would I would say, we

522
00:26:33,400 --> 00:26:36,320
Speaker 11: would like to see less air inside those boxes. So

523
00:26:36,680 --> 00:26:39,280
Speaker 11: that was a great that was a great interview. And

524
00:26:39,320 --> 00:26:41,480
Speaker 11: I am in so less air in the boxes, less

525
00:26:41,480 --> 00:26:42,240
Speaker 11: air in the boxes?

526
00:26:42,280 --> 00:26:42,920
Speaker 1: What does that mean?

527
00:26:43,040 --> 00:26:46,399
Speaker 11: Well, I mean remember air takes up space, right and

528
00:26:46,440 --> 00:26:48,320
Speaker 11: then also when you got more air in boxes, you

529
00:26:48,359 --> 00:26:51,200
Speaker 11: have a greater propensity to have damage. Okay as well,

530
00:26:51,280 --> 00:26:54,399
Speaker 11: so less air less damage, less air means we can

531
00:26:54,440 --> 00:26:56,160
Speaker 11: put more boxes into our aircraft.

532
00:26:56,480 --> 00:27:01,119
Speaker 1: Are what percent of your aircraft? I guess what percent

533
00:27:01,200 --> 00:27:03,120
Speaker 1: is full? Do they fly when they actually take off?

534
00:27:03,320 --> 00:27:06,600
Speaker 11: Oh, well, you're gonna fly. You're gonna fly. It's not

535
00:27:06,640 --> 00:27:08,960
Speaker 11: gonna be at full weight because that would that would

536
00:27:08,960 --> 00:27:10,920
Speaker 11: be ideal by the way that that means you're moving

537
00:27:11,000 --> 00:27:14,720
Speaker 11: water right as an example, But on average, our weightload

538
00:27:14,760 --> 00:27:18,880
Speaker 11: factor is somewhere between eighty and ninety percent. Is where

539
00:27:18,880 --> 00:27:21,120
Speaker 11: we're at from a weightload factor on an aircraft.

540
00:27:21,720 --> 00:27:25,399
Speaker 2: So how does it look to you right now? Because

541
00:27:25,440 --> 00:27:29,800
Speaker 2: you have a great position in terms of judging the

542
00:27:29,920 --> 00:27:33,119
Speaker 2: US economy, right are we still buying and shipping just

543
00:27:33,160 --> 00:27:35,119
Speaker 2: as much stuff as we were last quarter or the

544
00:27:35,119 --> 00:27:36,240
Speaker 2: same quarter last year.

545
00:27:36,600 --> 00:27:36,800
Speaker 5: Yeah.

546
00:27:36,840 --> 00:27:38,639
Speaker 11: One of the great things that we're seeing as a

547
00:27:38,680 --> 00:27:42,200
Speaker 11: result of what's going on globally in this move away

548
00:27:42,240 --> 00:27:45,639
Speaker 11: from China. We're never gonna decouple ourselves from China, but

549
00:27:45,720 --> 00:27:48,200
Speaker 11: we are seeing you know, friend shoring, near shoring, omni

550
00:27:48,280 --> 00:27:51,560
Speaker 11: shoring that's taking place, and we're seeing a lot more

551
00:27:51,720 --> 00:27:55,840
Speaker 11: outbound from the US, which is encouraging. It's encouraging for us,

552
00:27:55,840 --> 00:27:58,200
Speaker 11: but we're seeing it predominantly in the space.

553
00:27:57,920 --> 00:27:58,680
Speaker 4: Of e commerce.

554
00:27:58,880 --> 00:28:01,840
Speaker 11: Okay, So that's what we're seeing, which is fantastic. But

555
00:28:01,920 --> 00:28:04,560
Speaker 11: what we have seen is we're starting to see that

556
00:28:04,720 --> 00:28:08,360
Speaker 11: China plus one really starting to happen. As an example,

557
00:28:08,680 --> 00:28:10,800
Speaker 11: near and dear to me because it's within my region

558
00:28:10,880 --> 00:28:13,440
Speaker 11: is Mexico, and you're starting to hear this term made

559
00:28:13,440 --> 00:28:16,320
Speaker 11: in Mexico. We're starting to see that in the northern

560
00:28:16,359 --> 00:28:21,840
Speaker 11: part of Mexico, so Guadalajara. So that's what is those

561
00:28:22,160 --> 00:28:25,920
Speaker 11: markets were starting to see an explosion raw goods coming

562
00:28:25,920 --> 00:28:29,480
Speaker 11: in being assembled and then exported out of Mexico, either

563
00:28:29,520 --> 00:28:32,240
Speaker 11: back to the US, to Canada or throughout the rest

564
00:28:32,280 --> 00:28:32,640
Speaker 11: of the world.

565
00:28:32,720 --> 00:28:34,920
Speaker 1: Where does DHL Americas fly to.

566
00:28:35,119 --> 00:28:37,960
Speaker 11: What are your planes going across the entire Americas? So

567
00:28:38,040 --> 00:28:40,920
Speaker 11: we fly intro America, okay, and then out of the

568
00:28:40,960 --> 00:28:44,200
Speaker 11: Americas to Europe, Asia, the Middle East, and Africa.

569
00:28:44,280 --> 00:28:46,280
Speaker 1: Are there certain airports that are hubs for you guys.

570
00:28:46,400 --> 00:28:46,920
Speaker 11: Absolutely.

571
00:28:47,000 --> 00:28:47,160
Speaker 5: Yeah.

572
00:28:47,240 --> 00:28:49,600
Speaker 11: A big air hub for the Americas is in northern

573
00:28:49,640 --> 00:28:53,960
Speaker 11: Kentucky and Cincinnati. We're doing ninety departures in and ninety

574
00:28:54,040 --> 00:28:55,800
Speaker 11: arrivals in on a daily basis.

575
00:28:56,280 --> 00:28:58,760
Speaker 2: How do you compete with I mean, when you talk

576
00:28:58,800 --> 00:29:01,960
Speaker 2: shipping in this country, everybody knows I just moved here

577
00:29:01,960 --> 00:29:04,000
Speaker 2: by the way from Germany, so no problem for me.

578
00:29:04,160 --> 00:29:06,800
Speaker 2: DHL was on my doorstep every single day. But now

579
00:29:07,160 --> 00:29:11,600
Speaker 2: you know it's ups FedEx Amazon.

580
00:29:12,400 --> 00:29:14,360
Speaker 11: How do you compete with those big guys. Yeah, we're

581
00:29:14,440 --> 00:29:17,240
Speaker 11: We're not competing in the space of intra US. So

582
00:29:17,320 --> 00:29:19,720
Speaker 11: we got out of the US Book of Business back

583
00:29:19,760 --> 00:29:22,160
Speaker 11: in two thousand and seven going into two thousand and

584
00:29:22,200 --> 00:29:25,719
Speaker 11: eight because we wanted to focus focus on our core competency,

585
00:29:26,000 --> 00:29:29,320
Speaker 11: and our core competency is international, so the world into

586
00:29:29,400 --> 00:29:32,960
Speaker 11: the US, the US to the world. So that's our focus.

587
00:29:32,760 --> 00:29:34,800
Speaker 11: That's what that's the lane that we play in, and

588
00:29:35,000 --> 00:29:36,640
Speaker 11: we have been extremely successful.

589
00:29:36,760 --> 00:29:40,640
Speaker 2: Is it getting harder or easier in terms I actually

590
00:29:40,640 --> 00:29:42,520
Speaker 2: have a lot of experience with those kinds of shipping

591
00:29:42,520 --> 00:29:45,280
Speaker 2: as well, and I'm constantly trying to get you know,

592
00:29:46,400 --> 00:29:50,320
Speaker 2: a set of triple trees from Italy to here, or

593
00:29:50,360 --> 00:29:54,720
Speaker 2: shipping Olan sporks back to Sweden for something. So it's

594
00:29:54,800 --> 00:29:58,120
Speaker 2: difficult to deal with customs, all the different regulations. Is

595
00:29:58,160 --> 00:30:00,000
Speaker 2: that getting easier or is that getting hard?

596
00:30:00,880 --> 00:30:04,320
Speaker 11: In reality, it's been the same. What is getting easier

597
00:30:04,560 --> 00:30:09,040
Speaker 11: is through automation and digitalization. We clear ninety two percent

598
00:30:09,080 --> 00:30:11,360
Speaker 11: of our shipments are cleared in the air, so they

599
00:30:11,400 --> 00:30:13,640
Speaker 11: don't they're cleared by customs in the air, and then

600
00:30:13,680 --> 00:30:17,160
Speaker 11: they're only really looking at somewhere in the range of

601
00:30:17,720 --> 00:30:21,240
Speaker 11: seven to eight percent is what they're looking at. They're

602
00:30:21,240 --> 00:30:25,240
Speaker 11: targeting those specifically. Now you get that through having a

603
00:30:25,280 --> 00:30:28,600
Speaker 11: great relationship and a consistent relationship that spans over a

604
00:30:28,600 --> 00:30:32,160
Speaker 11: long period of time with customs, where the reliability of

605
00:30:32,240 --> 00:30:36,080
Speaker 11: the information the contents that we're moving line up with

606
00:30:36,160 --> 00:30:39,800
Speaker 11: the manifest that we're submitting to them electronically. So that

607
00:30:39,840 --> 00:30:43,440
Speaker 11: part is getting easier. Where it gets difficult is when

608
00:30:43,440 --> 00:30:46,120
Speaker 11: you have someone who refuses to give you the right

609
00:30:46,200 --> 00:30:50,400
Speaker 11: level of information, an EI number, the HTS code for

610
00:30:50,480 --> 00:30:53,160
Speaker 11: clearance is wrong. Those type of things is where a

611
00:30:53,240 --> 00:30:56,200
Speaker 11: shipment gets delayed. But ninety to ninety two percent of

612
00:30:56,240 --> 00:30:58,440
Speaker 11: our goods are cleared in the air, so that makes

613
00:30:58,480 --> 00:31:01,719
Speaker 11: it easier. Whereas before would have gone twenty I started

614
00:31:01,720 --> 00:31:04,720
Speaker 11: thirty seven years ago in this industry was much harder.

615
00:31:04,840 --> 00:31:07,680
Speaker 11: It was much more of a manual process, much more

616
00:31:07,720 --> 00:31:10,520
Speaker 11: of an opener ship and look and see today it's

617
00:31:10,600 --> 00:31:12,160
Speaker 11: much easier from that perspective.

618
00:31:12,280 --> 00:31:15,760
Speaker 1: All right, so you ship from the Americas out to

619
00:31:15,800 --> 00:31:19,239
Speaker 1: the rest of the world and back. Yes, where are

620
00:31:19,280 --> 00:31:22,800
Speaker 1: the growth areas versus maybe the not so growth areas well.

621
00:31:23,040 --> 00:31:26,400
Speaker 11: We're seeing growth out of Canada, so in what we're

622
00:31:26,400 --> 00:31:29,120
Speaker 11: calling Friendshory Canada, the US, and Mexico, we're seeing a

623
00:31:29,160 --> 00:31:32,080
Speaker 11: lot of growth from that perspective, we're seeing growth in

624
00:31:32,160 --> 00:31:35,000
Speaker 11: parts of Central and South America. As a matter of fact,

625
00:31:35,000 --> 00:31:37,960
Speaker 11: we just launched our own dedicated flight now to Argentina,

626
00:31:38,040 --> 00:31:40,760
Speaker 11: so we're starting to see growth and it goes it

627
00:31:40,800 --> 00:31:45,200
Speaker 11: goes Miami, Argentina, Argentina, Chile, back to Central America and

628
00:31:45,240 --> 00:31:47,600
Speaker 11: then back up to the States. So we're seeing growth

629
00:31:47,640 --> 00:31:49,680
Speaker 11: in those markets as well. Every time we have a

630
00:31:49,680 --> 00:31:52,760
Speaker 11: growth market, we'll pull we'll come off a commercial airline

631
00:31:52,760 --> 00:31:54,280
Speaker 11: and we'll put our own aircraft in place.

632
00:31:54,480 --> 00:31:56,920
Speaker 1: So what does that mean. You'll take oh, you'll take

633
00:31:56,960 --> 00:31:58,440
Speaker 1: some of your packages.

634
00:31:58,240 --> 00:32:01,200
Speaker 11: Off commercial airline where we were by belly space before,

635
00:32:01,240 --> 00:32:02,680
Speaker 11: and then we'll put it out about.

636
00:32:02,480 --> 00:32:05,720
Speaker 1: That business, which I never really understand. So what percentage

637
00:32:05,760 --> 00:32:08,560
Speaker 1: of your business goes on an airline and what goes

638
00:32:08,600 --> 00:32:10,360
Speaker 1: on your plane and how do you make that decision?

639
00:32:10,840 --> 00:32:12,960
Speaker 11: Met Well, okay, so thank you for asking that question.

640
00:32:13,000 --> 00:32:17,080
Speaker 11: By the way, we're the largest commercial airline purchaser of

641
00:32:17,120 --> 00:32:20,000
Speaker 11: belly space in the world, Okay, through all of our entities.

642
00:32:20,120 --> 00:32:23,920
Speaker 11: From a DHL Group perspective, the decision is made once

643
00:32:24,000 --> 00:32:26,640
Speaker 11: you have greater than fifty percent way load factor that

644
00:32:26,680 --> 00:32:28,600
Speaker 11: you can put on your own plane, where you can

645
00:32:28,640 --> 00:32:31,440
Speaker 11: start to pay for the physical asset up and down

646
00:32:31,680 --> 00:32:33,760
Speaker 11: and the fuel that you have going into that plane.

647
00:32:33,760 --> 00:32:36,600
Speaker 11: So the cost of operating an aircraft.

648
00:32:36,480 --> 00:32:39,880
Speaker 2: And fuel costs, I mean, right now, the outlook isn't

649
00:32:39,880 --> 00:32:43,200
Speaker 2: great with we're reporting that there's going to be a

650
00:32:43,240 --> 00:32:46,600
Speaker 2: three million barrel a day shortfall in the next quarter

651
00:32:46,720 --> 00:32:48,680
Speaker 2: because of the output cuts from OPEC.

652
00:32:48,760 --> 00:32:51,880
Speaker 11: Plus yeah, fuel costs is interesting up and down, right,

653
00:32:51,920 --> 00:32:54,840
Speaker 11: So fuel is always somewhere between seventy and one hundred

654
00:32:54,880 --> 00:32:56,840
Speaker 11: and we almost think that there's a reason for that.

655
00:32:57,320 --> 00:32:59,880
Speaker 11: The interesting part about that is we have what's called

656
00:32:59,880 --> 00:33:02,160
Speaker 11: the Fuels our Charge, and that's where we take those

657
00:33:02,240 --> 00:33:05,440
Speaker 11: expenses and we pass on the least amount that we

658
00:33:05,520 --> 00:33:07,920
Speaker 11: have to to our customers associated with it. But that's

659
00:33:07,920 --> 00:33:10,600
Speaker 11: how we protect ourselves and it either goes up or

660
00:33:10,720 --> 00:33:13,080
Speaker 11: comes down and wet. We protect the customer on the

661
00:33:13,080 --> 00:33:13,400
Speaker 11: way down.

662
00:33:13,520 --> 00:33:15,520
Speaker 2: The other big cost is labor. How's that looking.

663
00:33:15,720 --> 00:33:19,200
Speaker 11: Yeah, Okay, we're fine because it was tough. It was

664
00:33:19,280 --> 00:33:21,960
Speaker 11: tough for a while. The good thing about now is

665
00:33:22,000 --> 00:33:25,040
Speaker 11: we're replacing roles, we're hiring roles where we need to,

666
00:33:25,120 --> 00:33:27,240
Speaker 11: which is a good thing, and we're getting ready for

667
00:33:27,360 --> 00:33:30,320
Speaker 11: peak season, which is, by the way, in our opinion,

668
00:33:30,440 --> 00:33:33,080
Speaker 11: is going to be a soft peak season. The uncertainty remains.

669
00:33:33,800 --> 00:33:35,600
Speaker 11: It is going to be a soft peak season. It's

670
00:33:35,640 --> 00:33:38,040
Speaker 11: going to be in line with what we saw last year.

671
00:33:39,240 --> 00:33:41,480
Speaker 11: But really the next couple of weeks are going to

672
00:33:41,480 --> 00:33:43,640
Speaker 11: be very telling. The end of this month, the beginning

673
00:33:43,640 --> 00:33:45,880
Speaker 11: of October are going to be very telling to see

674
00:33:45,880 --> 00:33:48,240
Speaker 11: what's going to happen in peak season, because really what

675
00:33:48,360 --> 00:33:50,800
Speaker 11: starts to happen is people start to order in advance

676
00:33:50,840 --> 00:33:54,000
Speaker 11: of Black Friday, Cyber Monday, and the lead up to

677
00:33:54,120 --> 00:33:57,280
Speaker 11: the Christmas holidays. So we're keeping a close eye as

678
00:33:57,280 --> 00:33:58,760
Speaker 11: to what's going to happen here over the next couple

679
00:33:58,800 --> 00:33:59,080
Speaker 11: of weeks.

680
00:33:59,360 --> 00:34:01,920
Speaker 1: Twenty seconds, what kind of aircraft do you flying? Can

681
00:34:01,960 --> 00:34:02,440
Speaker 1: you get them?

682
00:34:03,160 --> 00:34:06,600
Speaker 11: So we're flying triple sevens, we're flying seven six sevens,

683
00:34:07,480 --> 00:34:10,600
Speaker 11: seven three sevens, and then we still have a couple

684
00:34:10,719 --> 00:34:13,520
Speaker 11: seven four sevens that are out there eight hundreds. Can

685
00:34:13,560 --> 00:34:16,280
Speaker 11: we get them? Yeah, there's a lot of there's aircraft

686
00:34:16,320 --> 00:34:19,440
Speaker 11: today that are available. Much more aircraft today available based

687
00:34:19,440 --> 00:34:21,600
Speaker 11: on the shortfall and volume that was out there in

688
00:34:21,640 --> 00:34:25,120
Speaker 11: people standing down planes and right sizing their network. We

689
00:34:25,200 --> 00:34:28,160
Speaker 11: right sized our network eighteen months ago. We're constantly right

690
00:34:28,239 --> 00:34:31,040
Speaker 11: sizing our network. So it's not a new initiative for

691
00:34:31,160 --> 00:34:31,960
Speaker 11: us at DHL.

692
00:34:32,360 --> 00:34:34,960
Speaker 1: Fascinating. I can talk about this stuff all day. Mike Parat,

693
00:34:34,960 --> 00:34:37,080
Speaker 1: thanks so much for joining us. He's the CEO of

694
00:34:37,120 --> 00:34:40,920
Speaker 1: the Americas for d h L Express. Kind of getting

695
00:34:40,920 --> 00:34:43,480
Speaker 1: a good view on kind of the economy and we're

696
00:34:43,800 --> 00:34:46,800
Speaker 1: we're seeing some growth and not so much growth.

697
00:34:47,400 --> 00:34:50,480
Speaker 7: You're listening to the tape. Can's our live program Bloomberg

698
00:34:50,600 --> 00:34:54,200
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the

699
00:34:54,239 --> 00:34:57,479
Speaker 7: tune in app, Bloomberg dot Com, and the Bloomberg Business app.

700
00:34:57,520 --> 00:35:00,359
Speaker 7: You can also listen live on Amazon Alexa from our

701
00:35:00,360 --> 00:35:04,720
Speaker 7: flagship New York station, just Say Alexa playing Bloomberg eleven thirty.

702
00:35:06,520 --> 00:35:06,640
Speaker 10: Well.

703
00:35:06,680 --> 00:35:08,840
Speaker 1: We also like is commercial real estate because I have

704
00:35:09,320 --> 00:35:12,040
Speaker 1: no idea how this business is going to shake out.

705
00:35:12,040 --> 00:35:15,120
Speaker 1: So we're glad that we have an informed guest joining us.

706
00:35:15,160 --> 00:35:19,120
Speaker 1: Barry de Ramondo, founder and CEO steel Wave. He joins

707
00:35:19,200 --> 00:35:22,320
Speaker 1: us live here in our Bloomberg Interactive Broker's studio. Barry,

708
00:35:22,360 --> 00:35:25,719
Speaker 1: thanks so much for joining us here. What what steel Wave?

709
00:35:25,760 --> 00:35:28,960
Speaker 1: What kind of real estate do you guys plan? And

710
00:35:29,040 --> 00:35:30,600
Speaker 1: where we'll start there?

711
00:35:30,840 --> 00:35:33,680
Speaker 12: Well, we're West Coast based, okay, right, and the triangle

712
00:35:33,760 --> 00:35:37,080
Speaker 12: is really San Diego south up to Seattle, to the

713
00:35:37,120 --> 00:35:38,120
Speaker 12: north out to Austin.

714
00:35:38,400 --> 00:35:39,920
Speaker 1: It's all the tech hubs, okay.

715
00:35:40,080 --> 00:35:43,080
Speaker 12: And it's office, it's life science, and it's it's industrial

716
00:35:43,640 --> 00:35:44,000
Speaker 12: all right.

717
00:35:44,080 --> 00:35:47,240
Speaker 2: So office, well, you can't paint it with a broad brush,

718
00:35:47,360 --> 00:35:50,160
Speaker 2: right you When you say office, you're talking about Third

719
00:35:50,160 --> 00:35:50,920
Speaker 2: Avenue here.

720
00:35:50,960 --> 00:35:53,840
Speaker 1: I was. We talked about Third Avenue and so now

721
00:35:53,920 --> 00:35:56,520
Speaker 1: I understand that he's like in the real world, Yes, Austin,

722
00:35:57,040 --> 00:36:00,120
Speaker 1: San Diego, stuff like that. How is office space in

723
00:36:00,160 --> 00:36:02,399
Speaker 1: the real world outside in New York City.

724
00:36:03,320 --> 00:36:05,520
Speaker 12: Well, it's got its challenges, sure, I mean, look, you've

725
00:36:05,520 --> 00:36:07,960
Speaker 12: got the capital markets issues with high interest rates and

726
00:36:07,960 --> 00:36:10,160
Speaker 12: cap rates and you know all the stuff that that brings.

727
00:36:10,480 --> 00:36:13,600
Speaker 12: But you've got that with multifamily or industrial. You know,

728
00:36:13,800 --> 00:36:18,160
Speaker 12: what you don't have in multifamily and industrial is the

729
00:36:18,239 --> 00:36:21,480
Speaker 12: supplied demand headwinds that you have in office. You know,

730
00:36:21,640 --> 00:36:25,239
Speaker 12: and you're still dealing with work from home. So you've

731
00:36:25,280 --> 00:36:28,040
Speaker 12: got all that stuff going on on the office sector

732
00:36:28,080 --> 00:36:33,400
Speaker 12: that you know is candidly created an enormous dislocation you know,

733
00:36:33,440 --> 00:36:34,080
Speaker 12: in that market.

734
00:36:34,400 --> 00:36:37,640
Speaker 2: So is office space. I mean when you say life

735
00:36:37,640 --> 00:36:41,960
Speaker 2: science is in tech, I'm thinking about chip fabs and laboratories,

736
00:36:41,960 --> 00:36:46,120
Speaker 2: but you're talking about actual office office where the same

737
00:36:46,120 --> 00:36:47,239
Speaker 2: thing could be done from home.

738
00:36:48,680 --> 00:36:51,160
Speaker 12: Yes, yeah, I mean, look on some level, you're competing

739
00:36:51,200 --> 00:36:54,200
Speaker 12: with someone's couch. Yeah, all right, right for office space.

740
00:36:54,320 --> 00:36:58,440
Speaker 12: And in order to bring people back into the office,

741
00:36:58,480 --> 00:37:00,400
Speaker 12: you've got to create environments that people want to come

742
00:37:00,400 --> 00:37:03,600
Speaker 12: to work in. And this isn't you know, post COVID,

743
00:37:03,640 --> 00:37:07,200
Speaker 12: This this has been happening for We started seeing the

744
00:37:07,239 --> 00:37:09,880
Speaker 12: trends really in the early two thousands and it's just

745
00:37:10,000 --> 00:37:14,440
Speaker 12: magnified over time. But you've got to create a work

746
00:37:14,560 --> 00:37:19,040
Speaker 12: environment that's highly amenditized, where people actually want to come

747
00:37:19,040 --> 00:37:20,719
Speaker 12: to work and it doesn't feel like you're at work

748
00:37:20,760 --> 00:37:21,480
Speaker 12: when you're at work.

749
00:37:22,120 --> 00:37:24,799
Speaker 1: So have you done that? With your properties and what

750
00:37:24,920 --> 00:37:26,800
Speaker 1: have you done, how have you done and has it worked?

751
00:37:27,440 --> 00:37:29,759
Speaker 12: Yeah, I mean that's that's kind of our design theme.

752
00:37:30,000 --> 00:37:32,840
Speaker 12: You know, we're very much of a design driven group.

753
00:37:33,520 --> 00:37:37,600
Speaker 12: And it's it's it's adding hospitality, it's adding residential elements

754
00:37:37,640 --> 00:37:40,040
Speaker 12: to it so it doesn't feel like an office building candidly,

755
00:37:40,560 --> 00:37:43,239
Speaker 12: you know, it's you know, we tend to cater to

756
00:37:43,440 --> 00:37:47,719
Speaker 12: the innovation workforce. It's all tech, media, tech, traditional tech, biotech,

757
00:37:47,760 --> 00:37:50,719
Speaker 12: you know, go down the list. So we're trying to

758
00:37:50,760 --> 00:37:55,839
Speaker 12: attract the innovation workforce back to the office. And you

759
00:37:56,040 --> 00:37:59,879
Speaker 12: have to create amenities such that people don't think they're

760
00:38:00,080 --> 00:38:00,399
Speaker 12: the office.

761
00:38:00,600 --> 00:38:03,960
Speaker 2: So when you say amenities, I mean to think about Google,

762
00:38:04,200 --> 00:38:06,960
Speaker 2: ping pong, table and snacks, right, but you're talking I

763
00:38:06,960 --> 00:38:15,000
Speaker 2: would guess more about fitness, you know, gyms, maybe restaurants, daycares,

764
00:38:15,560 --> 00:38:16,000
Speaker 2: all of.

765
00:38:15,880 --> 00:38:19,160
Speaker 12: That, right, you know. Cool, And it's not just the

766
00:38:19,239 --> 00:38:22,920
Speaker 12: run of the mill stuff. It's creating kind of differentiated

767
00:38:23,000 --> 00:38:25,200
Speaker 12: you know, food and beverage, you know options, you know,

768
00:38:25,360 --> 00:38:28,319
Speaker 12: full health centers, you know, for people to take advantage of.

769
00:38:28,840 --> 00:38:31,040
Speaker 12: What you're trying to do is bring people together. That's

770
00:38:31,080 --> 00:38:34,080
Speaker 12: really what you're doing. So it if you just create

771
00:38:34,120 --> 00:38:37,560
Speaker 12: a gym and stick it off in the corner that

772
00:38:37,560 --> 00:38:40,920
Speaker 12: that's not collaborative. What you got to do is amendetize

773
00:38:41,000 --> 00:38:43,400
Speaker 12: the gym, and you got yoga classes, you got stretch

774
00:38:43,560 --> 00:38:44,960
Speaker 12: where people actually get together.

775
00:38:45,400 --> 00:38:47,560
Speaker 1: Do you have any evidence that if you do that,

776
00:38:47,680 --> 00:38:51,600
Speaker 1: if you make that investment which impacts your returns, if

777
00:38:51,640 --> 00:38:53,319
Speaker 1: you do make that investment, does it work?

778
00:38:53,880 --> 00:38:54,640
Speaker 4: Not equivocally.

779
00:38:55,040 --> 00:38:58,239
Speaker 12: Look, we're at a point in the market where if

780
00:38:58,239 --> 00:39:01,000
Speaker 12: you don't make that investment there's no rent that will

781
00:39:01,040 --> 00:39:02,080
Speaker 12: clear for a car.

782
00:39:02,760 --> 00:39:03,879
Speaker 1: I something like that.

783
00:39:04,000 --> 00:39:05,480
Speaker 2: I like it. I like it because I want to

784
00:39:05,520 --> 00:39:07,920
Speaker 2: work in your office. I hear about office.

785
00:39:08,000 --> 00:39:10,640
Speaker 1: We got fish, we got food, we got flowers, we

786
00:39:10,719 --> 00:39:12,080
Speaker 1: got I mean, look at this office.

787
00:39:12,160 --> 00:39:14,280
Speaker 2: Well we have a pretty great office.

788
00:39:14,400 --> 00:39:17,560
Speaker 1: We got the best, I think, but out there. But

789
00:39:17,640 --> 00:39:19,640
Speaker 1: I just think about driving out there in real America,

790
00:39:19,680 --> 00:39:23,479
Speaker 1: which I do occasionally get off this island, and there's

791
00:39:23,480 --> 00:39:27,120
Speaker 1: so many office buildings and every single one has of

792
00:39:27,560 --> 00:39:30,640
Speaker 1: you know, announcing how much space they have available there.

793
00:39:31,120 --> 00:39:33,480
Speaker 12: And all you gotta do is look at the parking lot.

794
00:39:33,680 --> 00:39:34,879
Speaker 1: Yeah, yeah, that's right.

795
00:39:35,080 --> 00:39:37,520
Speaker 12: That's your biggest indicator. If there's no cars, guess what,

796
00:39:38,120 --> 00:39:39,360
Speaker 12: there's no bodies.

797
00:39:39,239 --> 00:39:41,399
Speaker 1: So how how do you guys in that office reels,

798
00:39:41,560 --> 00:39:43,480
Speaker 1: I mean, how do you think about your business? Do

799
00:39:43,520 --> 00:39:46,800
Speaker 1: you have you taken your return parameters down dramatically because

800
00:39:47,160 --> 00:39:51,000
Speaker 1: at the time you've got your properties, I'm guessing have

801
00:39:51,080 --> 00:39:54,080
Speaker 1: higher occupancies than pre pandemic, and your cost of capital

802
00:39:54,120 --> 00:39:54,520
Speaker 1: is higher.

803
00:39:56,760 --> 00:39:58,720
Speaker 12: I think that's right, I mean the cost of capitals.

804
00:39:58,920 --> 00:40:00,520
Speaker 12: I mean at the moment you got to I understand,

805
00:40:00,520 --> 00:40:03,640
Speaker 12: today is a dislocated market, so it's kind of upside down.

806
00:40:03,680 --> 00:40:06,359
Speaker 12: So you can't look at what's happening at this very

807
00:40:06,440 --> 00:40:10,040
Speaker 12: moment as a barometer to you know, the market in general.

808
00:40:11,640 --> 00:40:15,160
Speaker 12: You know, I would say a commodity office building, whether

809
00:40:15,200 --> 00:40:17,440
Speaker 12: it's New York or San Francisco today, if it had

810
00:40:17,480 --> 00:40:21,279
Speaker 12: to trade compared to say eighteen twenty four months ago,

811
00:40:22,080 --> 00:40:25,960
Speaker 12: is trading at forty to thirty percent of what it

812
00:40:26,000 --> 00:40:28,880
Speaker 12: would have traded for, not forty to thirty percent off

813
00:40:29,520 --> 00:40:32,000
Speaker 12: talking you know, sixty to seventy percent off.

814
00:40:32,200 --> 00:40:34,120
Speaker 1: Oh man, And I don't know how.

815
00:40:34,160 --> 00:40:36,239
Speaker 2: I don't know if that's a commodity office building, but

816
00:40:36,320 --> 00:40:38,759
Speaker 2: what you do is different. And also the rents that

817
00:40:38,800 --> 00:40:41,080
Speaker 2: you get are higher, I imagine because if you create

818
00:40:41,160 --> 00:40:44,919
Speaker 2: the kind of space that you're talking about. People will

819
00:40:44,920 --> 00:40:49,440
Speaker 2: be bidding on that space and willing to and trying

820
00:40:49,440 --> 00:40:50,440
Speaker 2: to outbid competitors.

821
00:40:50,520 --> 00:40:50,719
Speaker 5: Right.

822
00:40:51,000 --> 00:40:54,839
Speaker 12: Well, more importantly, there's a rent thatal clear, and if

823
00:40:54,840 --> 00:40:57,239
Speaker 12: you're a commodity there is no rent total clear. I

824
00:40:57,239 --> 00:40:59,920
Speaker 12: mean there's people think, well, I just lower the rent

825
00:41:00,719 --> 00:41:03,240
Speaker 12: and my occupancy is going to go up. That actually

826
00:41:03,280 --> 00:41:06,880
Speaker 12: doesn't work in office for commodity office. You know, for

827
00:41:07,160 --> 00:41:09,920
Speaker 12: if it's apartments, you lower your rents, your occupancy goes up.

828
00:41:10,000 --> 00:41:13,600
Speaker 12: For office, depending on what kind office you have, there

829
00:41:13,600 --> 00:41:15,920
Speaker 12: may not be a rent that clears. And you know,

830
00:41:16,000 --> 00:41:20,080
Speaker 12: it's a very bifurcated market. Excuse me. I mean if

831
00:41:20,080 --> 00:41:24,799
Speaker 12: you look at Hudson Yards, you know they're pushing rents up. Yeah, right,

832
00:41:24,880 --> 00:41:26,840
Speaker 12: But if you look at sort of mid block third

833
00:41:26,880 --> 00:41:29,719
Speaker 12: Avenue here, I'm not sure there's a rental clear.

834
00:41:30,040 --> 00:41:30,279
Speaker 7: Wow.

835
00:41:30,360 --> 00:41:32,920
Speaker 1: See that's that's kind of where I think the market is.

836
00:41:32,960 --> 00:41:35,680
Speaker 1: And that is brutal. Did they start knocking down office

837
00:41:35,680 --> 00:41:36,680
Speaker 1: buildings around the country.

838
00:41:36,680 --> 00:41:39,200
Speaker 2: I would want to work in Hudson Yards, yep. And

839
00:41:39,239 --> 00:41:40,759
Speaker 2: I would not want to work on that.

840
00:41:41,160 --> 00:41:41,440
Speaker 5: See that.

841
00:41:41,560 --> 00:41:41,799
Speaker 10: I know.

842
00:41:41,920 --> 00:41:43,759
Speaker 1: I guess before I would tell you, I don't care

843
00:41:43,800 --> 00:41:46,640
Speaker 1: what you want but now I have to care, right,

844
00:41:46,840 --> 00:41:49,480
Speaker 1: I have to care again. You're another guy who could

845
00:41:49,480 --> 00:41:52,000
Speaker 1: talk go all day long on this stuff. Barry di Rimondo,

846
00:41:52,280 --> 00:41:55,000
Speaker 1: Founder and CEO Steelwave, based on the West Coast. Whenever

847
00:41:55,040 --> 00:41:57,640
Speaker 1: you're back in New York, let us know you're listening.

848
00:41:57,239 --> 00:42:00,759
Speaker 7: To the tape catcher line program Bloomberg Market. It's weekdays

849
00:42:00,760 --> 00:42:04,000
Speaker 7: at ten am Eastern on Bloomberg Radio, the tune in app,

850
00:42:04,040 --> 00:42:06,880
Speaker 7: Bloomberg dot Com, and the Bloomberg Business App. You can

851
00:42:06,920 --> 00:42:10,160
Speaker 7: also listen live on Amazon Alexa from our flagship New

852
00:42:10,239 --> 00:42:14,560
Speaker 7: York station. Just say Alexa play Bloomberg eleven thirty.

853
00:42:15,760 --> 00:42:17,520
Speaker 1: I'm gonna put this on the bucket list. I have

854
00:42:17,600 --> 00:42:18,919
Speaker 1: to go on a cruise. Yeah you do.

855
00:42:19,040 --> 00:42:19,480
Speaker 2: You have to.

856
00:42:19,520 --> 00:42:21,680
Speaker 1: You just have to tie me one thing. You got

857
00:42:21,719 --> 00:42:25,359
Speaker 1: to be curious. I'm curious. I'm curious, So I'll put

858
00:42:25,360 --> 00:42:26,600
Speaker 1: that on the bucket list. But you know how I

859
00:42:26,600 --> 00:42:29,560
Speaker 1: love the cruise business. I think it's a fascinating business

860
00:42:29,560 --> 00:42:32,560
Speaker 1: business model. And we've got a great person to talk

861
00:42:32,600 --> 00:42:35,320
Speaker 1: to you about that. That's tors Hoggen, CEO and chairman

862
00:42:35,440 --> 00:42:39,480
Speaker 1: of Viking Cruises Tours. Thanks so much for joining us here.

863
00:42:39,480 --> 00:42:41,759
Speaker 1: I got a million questions here, But I'd love to

864
00:42:41,840 --> 00:42:44,640
Speaker 1: just get a real thirty thousand foot view from you

865
00:42:44,719 --> 00:42:49,759
Speaker 1: about how is the cruise business today versus pre pandemic.

866
00:42:51,080 --> 00:42:53,160
Speaker 1: Just it was just no industry in my mind or

867
00:42:53,160 --> 00:42:55,719
Speaker 1: what You're one of the industries that really got impacted

868
00:42:55,760 --> 00:42:59,000
Speaker 1: the most immediate and most directly. How is your industry changed?

869
00:43:00,160 --> 00:43:03,440
Speaker 6: Well, I can't speak so much about the industry, but

870
00:43:03,520 --> 00:43:06,560
Speaker 6: I can speak well about ourselves, and you can say

871
00:43:06,680 --> 00:43:11,000
Speaker 6: we are now back to a higher level of demand

872
00:43:11,040 --> 00:43:15,480
Speaker 6: than we had before the pandemic. I've never seen anything

873
00:43:15,560 --> 00:43:18,000
Speaker 6: like this in my life. So our ships this here

874
00:43:18,080 --> 00:43:21,760
Speaker 6: have been full and we are heading into twenty twenty

875
00:43:21,760 --> 00:43:25,120
Speaker 6: four with the I think it's seventy percent of our

876
00:43:25,160 --> 00:43:28,440
Speaker 6: capacity sold on the ocean business and sixty percent of

877
00:43:28,520 --> 00:43:29,560
Speaker 6: the river business.

878
00:43:31,280 --> 00:43:34,200
Speaker 5: So it's it's rebounded very nicely.

879
00:43:34,520 --> 00:43:37,759
Speaker 6: Now, in your introduction, we meant that you're curious, and

880
00:43:37,760 --> 00:43:39,919
Speaker 6: I think that's one of the reasons we're doing so well,

881
00:43:39,960 --> 00:43:41,319
Speaker 6: because our guests.

882
00:43:41,040 --> 00:43:42,719
Speaker 5: Are curious travelers.

883
00:43:43,239 --> 00:43:45,600
Speaker 6: They don't go on a cruise to sit by the

884
00:43:45,640 --> 00:43:49,759
Speaker 6: pool and get some tanned and so forth. They go

885
00:43:49,960 --> 00:43:54,680
Speaker 6: places to experience and to relive history and so forth.

886
00:43:54,840 --> 00:43:57,520
Speaker 6: And of course Europe is a very big destination for us,

887
00:43:58,160 --> 00:44:02,399
Speaker 6: so we hit it quite well. And we are kind

888
00:44:02,440 --> 00:44:06,080
Speaker 6: of contrarian. So during the pandemic, we took delivery over

889
00:44:06,120 --> 00:44:09,360
Speaker 6: I think was sixteen new ships and people said, you

890
00:44:09,400 --> 00:44:10,919
Speaker 6: must be nuts, what are you want to do when

891
00:44:10,960 --> 00:44:11,520
Speaker 6: this is over?

892
00:44:12,160 --> 00:44:14,640
Speaker 5: And this year we're filling it entirely.

893
00:44:15,360 --> 00:44:19,120
Speaker 2: So Viking Cruises is very different from the you know,

894
00:44:19,320 --> 00:44:24,000
Speaker 2: Royal Caribbean kind of Disney. It's not as you say,

895
00:44:24,080 --> 00:44:28,360
Speaker 2: tours about you know, drinking a pina klada by the

896
00:44:28,400 --> 00:44:30,120
Speaker 2: pool and it doesn't matter where you.

897
00:44:30,080 --> 00:44:32,719
Speaker 6: Are, don't object to drink a pino konada. But that's

898
00:44:32,760 --> 00:44:35,120
Speaker 6: not why our guests got no.

899
00:44:36,000 --> 00:44:38,720
Speaker 2: I just look at the destinations and it's more about

900
00:44:39,120 --> 00:44:43,239
Speaker 2: exploration for for a Viking cruises more about adventures.

901
00:44:43,320 --> 00:44:47,480
Speaker 6: It's exploration in the widest sense because you know, exploration

902
00:44:47,600 --> 00:44:50,600
Speaker 6: is seeing places you know. It's also I call it

903
00:44:50,640 --> 00:44:55,839
Speaker 6: the mental exploration because our guests are material travelers. They're

904
00:44:55,840 --> 00:44:58,720
Speaker 6: seeing most things in life, but now here's a chance

905
00:44:58,719 --> 00:45:02,320
Speaker 6: of sort of reliving things they'd only read about before.

906
00:45:02,880 --> 00:45:05,000
Speaker 6: So it's it's a it's a great thing to do

907
00:45:05,320 --> 00:45:09,080
Speaker 6: to do, and we are different. We are so different

908
00:45:09,400 --> 00:45:12,680
Speaker 6: from the others that that. A couple of years ago

909
00:45:12,719 --> 00:45:15,640
Speaker 6: we even dropped cruises from our name, so we are

910
00:45:15,680 --> 00:45:17,520
Speaker 6: now just playing Viking.

911
00:45:18,200 --> 00:45:22,000
Speaker 1: So you know what, what I understand about your business

912
00:45:22,080 --> 00:45:23,960
Speaker 1: that you know is different from some of the others,

913
00:45:24,080 --> 00:45:26,880
Speaker 1: is you're not just ocean. You're in you have a

914
00:45:26,960 --> 00:45:29,520
Speaker 1: river cruise line and expedition well, and.

915
00:45:29,480 --> 00:45:31,760
Speaker 2: I would imagine necessarily the focus is right.

916
00:45:31,640 --> 00:45:34,160
Speaker 5: Because yeah, the two, the two, the two are about

917
00:45:34,160 --> 00:45:34,960
Speaker 5: our equal size.

918
00:45:35,000 --> 00:45:37,799
Speaker 6: We started as a river company in Russia, of all

919
00:45:37,840 --> 00:45:43,400
Speaker 6: places that that we we we are now about fifty

920
00:45:43,440 --> 00:45:48,359
Speaker 6: to fifty. We're an ocean and the expedition business is very,

921
00:45:48,480 --> 00:45:52,560
Speaker 6: very nice too. I took my first vacation twenty five

922
00:45:52,640 --> 00:45:57,480
Speaker 6: years over Christmas and I went to Antarctica and somebody asked.

923
00:45:57,280 --> 00:45:59,839
Speaker 5: Me where we did like to go next? I really

924
00:45:59,840 --> 00:46:02,120
Speaker 5: like to go back. It was a phenomenal experience.

925
00:46:04,560 --> 00:46:08,239
Speaker 1: Talk to me about the labor because so many industries

926
00:46:08,280 --> 00:46:11,120
Speaker 1: have suggested that that labor is one of the real

927
00:46:11,360 --> 00:46:14,720
Speaker 1: challenges they face. Is that also the case with your company?

928
00:46:14,719 --> 00:46:16,560
Speaker 1: And if so, how do you deal with it?

929
00:46:17,640 --> 00:46:20,239
Speaker 6: You know, if I say no, that's a little bit

930
00:46:21,680 --> 00:46:26,600
Speaker 6: strong maybe, But the point is that during pandemic we

931
00:46:26,640 --> 00:46:30,160
Speaker 6: took care our staff. We didn't do like the others

932
00:46:30,200 --> 00:46:32,000
Speaker 6: and sent them all home. We took care of our

933
00:46:32,000 --> 00:46:39,440
Speaker 6: staff greatly, so we didn't have any problems starting up people.

934
00:46:39,680 --> 00:46:44,239
Speaker 6: Other travel companies have had big issues getting restarted, and

935
00:46:44,280 --> 00:46:46,880
Speaker 6: we didn't have that quite frankly, so I think we

936
00:46:47,600 --> 00:46:49,879
Speaker 6: are we are. We're quite different, you know, we are.

937
00:46:50,440 --> 00:46:53,040
Speaker 6: I can call it family control company, but we have

938
00:46:53,160 --> 00:46:55,319
Speaker 6: to financial shoulders too.

939
00:46:55,840 --> 00:46:58,320
Speaker 5: But but you can say we are not a conglomerates.

940
00:46:58,360 --> 00:47:02,640
Speaker 6: We're not part of a conglomerate, and we can generally

941
00:47:02,680 --> 00:47:06,719
Speaker 6: say that we you know, customers do come first. And

942
00:47:06,760 --> 00:47:09,200
Speaker 6: when I said customers come first, maybe I should even

943
00:47:09,200 --> 00:47:13,239
Speaker 6: say our staff come first. So we we we have

944
00:47:14,239 --> 00:47:16,440
Speaker 6: very good ratings by our guests.

945
00:47:16,800 --> 00:47:19,680
Speaker 5: They love our staff. Ships is one thing.

946
00:47:19,680 --> 00:47:22,080
Speaker 6: But the way we deal with the staff and the

947
00:47:22,080 --> 00:47:24,880
Speaker 6: way our staff deals with I guess the second or none,

948
00:47:26,200 --> 00:47:27,000
Speaker 6: it's very different.

949
00:47:27,239 --> 00:47:29,440
Speaker 2: I wonder a little bit about you and how this

950
00:47:29,640 --> 00:47:33,920
Speaker 2: company started. You briefly alluded to the fact that I

951
00:47:33,960 --> 00:47:38,680
Speaker 2: guess what your first cruise was river cruise in Saint Petersburg, Russia,

952
00:47:38,800 --> 00:47:42,600
Speaker 2: or at least the business started there. And now your

953
00:47:42,640 --> 00:47:47,319
Speaker 2: headquarters I believe, are in Basel, but you're clearly Norwegian.

954
00:47:47,440 --> 00:47:49,360
Speaker 2: So how does this all work out? How did it

955
00:47:49,400 --> 00:47:50,040
Speaker 2: all work out?

956
00:47:51,160 --> 00:47:54,359
Speaker 6: Yeah, Well, I've had a long life in the cruise

957
00:47:54,400 --> 00:47:57,320
Speaker 6: industry and I've done a lot of things in my life,

958
00:47:57,840 --> 00:48:03,880
Speaker 6: but my heart had always been and with cruises. I

959
00:48:04,000 --> 00:48:06,880
Speaker 6: ran a company called Royal Viking Line once upon a time,

960
00:48:07,440 --> 00:48:09,400
Speaker 6: and I thought it'd be nice if we could recreate

961
00:48:09,520 --> 00:48:12,600
Speaker 6: something something like it. It was the cruise line of

962
00:48:12,640 --> 00:48:16,239
Speaker 6: the times in the eighties, but somebody went ahead bought

963
00:48:16,280 --> 00:48:17,480
Speaker 6: it and destroyed it.

964
00:48:17,560 --> 00:48:19,520
Speaker 5: So I said, maybe I could have a chance of

965
00:48:19,560 --> 00:48:20,279
Speaker 5: recreating it.

966
00:48:20,600 --> 00:48:22,239
Speaker 6: But I've had a life, you know, full of ups

967
00:48:22,280 --> 00:48:26,200
Speaker 6: and downs, and that's called life in my vocabulary.

968
00:48:26,840 --> 00:48:28,600
Speaker 5: And we're very pleaseful where we are now.

969
00:48:28,600 --> 00:48:32,160
Speaker 6: Of course, it's been a phenomenal success, and we're doing

970
00:48:32,160 --> 00:48:36,160
Speaker 6: it because there's some things that make us stand out.

971
00:48:37,280 --> 00:48:40,360
Speaker 6: We have one brand, not part of a conglomerate. We

972
00:48:41,560 --> 00:48:47,120
Speaker 6: have no children on board, no casinos, no Nicholin diming,

973
00:48:47,800 --> 00:48:50,640
Speaker 6: and then there's only one language on board our ships,

974
00:48:50,800 --> 00:48:53,960
Speaker 6: so it's not this mixture of everything.

975
00:48:54,320 --> 00:48:56,239
Speaker 5: We are very clear as to what we do.

976
00:48:56,800 --> 00:49:01,360
Speaker 1: So what are some of the popular destinations right now.

977
00:49:01,280 --> 00:49:09,239
Speaker 6: Towards I say Europe remains popular and we have a

978
00:49:09,440 --> 00:49:13,920
Speaker 6: very more than half our cruises involved Europe, and you

979
00:49:13,960 --> 00:49:17,240
Speaker 6: can see even Europe in the winter is quite okay.

980
00:49:17,760 --> 00:49:19,759
Speaker 6: Now we have you can go to Norway and see

981
00:49:19,800 --> 00:49:22,440
Speaker 6: the Northern lights. The weather can be a little bit rough,

982
00:49:22,760 --> 00:49:25,160
Speaker 6: but you know, to see the Northern lights from a

983
00:49:25,239 --> 00:49:26,719
Speaker 6: ship in Norway is fantastic.

984
00:49:29,000 --> 00:49:32,400
Speaker 5: Of course. The other thing we have is we have

985
00:49:32,880 --> 00:49:34,480
Speaker 5: started an operation in Egypt.

986
00:49:35,320 --> 00:49:37,560
Speaker 6: We were there now and a couple of months ago

987
00:49:37,640 --> 00:49:40,879
Speaker 6: to take delivery of new ships. We have by far

988
00:49:41,000 --> 00:49:43,200
Speaker 6: the greatest ships on the Nile River. I think we

989
00:49:43,280 --> 00:49:48,640
Speaker 6: have four now and we have another for cooming. So

990
00:49:48,960 --> 00:49:51,760
Speaker 6: the Nile is extremely popular. As a matter of fact,

991
00:49:51,800 --> 00:49:57,160
Speaker 6: it's virtually sold out for next year twenty four, and

992
00:49:57,200 --> 00:49:59,960
Speaker 6: it's pretty much sold out for much sold out for

993
00:50:00,040 --> 00:50:00,919
Speaker 6: twenty twenty five.

994
00:50:00,960 --> 00:50:03,720
Speaker 5: Even so we have now had to open twenty twenty six.

995
00:50:05,040 --> 00:50:07,360
Speaker 2: That's it's an amazing.

996
00:50:09,160 --> 00:50:09,839
Speaker 1: Up and down the Nile.

997
00:50:09,840 --> 00:50:12,040
Speaker 2: It's the only place I've ever gone on a cruise.

998
00:50:12,400 --> 00:50:12,839
Speaker 5: I was there.

999
00:50:12,880 --> 00:50:15,520
Speaker 6: It was forty two degrees centigrade and that's a FO

1000
00:50:15,520 --> 00:50:17,360
Speaker 6: one hundred and four far a night or something. It

1001
00:50:17,800 --> 00:50:22,680
Speaker 6: sounds terrible, but the heat is dry and to be

1002
00:50:22,800 --> 00:50:26,320
Speaker 6: on the Nile and have the wind, the breeze in

1003
00:50:26,400 --> 00:50:27,640
Speaker 6: your in your face.

1004
00:50:27,719 --> 00:50:30,560
Speaker 5: It's it's so we decided, hey, we can do this

1005
00:50:30,680 --> 00:50:31,160
Speaker 5: in August.

1006
00:50:32,000 --> 00:50:36,400
Speaker 2: How has the Russian invasion of Ukraine at all impacted

1007
00:50:36,440 --> 00:50:37,000
Speaker 2: your business?

1008
00:50:37,719 --> 00:50:40,920
Speaker 5: Yeah, we have. As I said, we start our business

1009
00:50:40,960 --> 00:50:44,640
Speaker 5: in Russia, so we still have five ships there. They're

1010
00:50:44,719 --> 00:50:45,240
Speaker 5: doing nothing.

1011
00:50:45,960 --> 00:50:48,240
Speaker 6: Of course, we have to take care of our staff

1012
00:50:48,719 --> 00:50:52,800
Speaker 6: so that so that when this will reopen, whenever that

1013
00:50:52,960 --> 00:50:55,520
Speaker 6: will be, they'll be ready to go. Of course they

1014
00:50:55,600 --> 00:50:59,640
Speaker 6: need they need to feed their families too, So it's

1015
00:51:00,080 --> 00:51:04,759
Speaker 6: have five ships doing nothing is not fun. It it's

1016
00:51:04,840 --> 00:51:08,960
Speaker 6: not such a large part of our business anymore. And

1017
00:51:09,080 --> 00:51:11,800
Speaker 6: we have one ship in Ukraine. It has been in Odessa.

1018
00:51:13,040 --> 00:51:17,479
Speaker 6: It has still is there at least the last things

1019
00:51:17,520 --> 00:51:18,840
Speaker 6: I saw on television.

1020
00:51:20,160 --> 00:51:24,360
Speaker 5: But who knows. It's a terrible situation for everybody involved.

1021
00:51:25,320 --> 00:51:27,719
Speaker 2: What about the China situation? Have you got I know

1022
00:51:27,800 --> 00:51:30,920
Speaker 2: you have Chinese flags over some of your ships. Are

1023
00:51:30,960 --> 00:51:31,560
Speaker 2: they cruising?

1024
00:51:32,960 --> 00:51:37,759
Speaker 6: Yes, we started in twenty nineteen or a couple of

1025
00:51:37,840 --> 00:51:43,239
Speaker 6: years before that. In twenty nineteen we had four river

1026
00:51:43,360 --> 00:51:50,600
Speaker 6: ships in Europe with Chinese staff, Chinese food and Chinese

1027
00:51:51,000 --> 00:51:55,440
Speaker 6: sign it and the guests are all one language. That's

1028
00:51:55,480 --> 00:51:58,279
Speaker 6: all the mantra we have when we do something. It's

1029
00:51:58,360 --> 00:52:01,840
Speaker 6: important that people travel like the people. Then we have

1030
00:52:01,960 --> 00:52:04,680
Speaker 6: had one of our ocean hips that have been part

1031
00:52:04,719 --> 00:52:07,800
Speaker 6: of become part of a joint venture with China Emergence

1032
00:52:09,239 --> 00:52:15,759
Speaker 6: that is now operating between between Shanghai and Japan, and

1033
00:52:15,920 --> 00:52:20,800
Speaker 6: we'll be going between chen Chin and Vietnam. But you

1034
00:52:20,880 --> 00:52:24,920
Speaker 6: can say the startup after Code and China as being

1035
00:52:24,960 --> 00:52:27,759
Speaker 6: a bit slow, but of course when you look at

1036
00:52:28,120 --> 00:52:32,160
Speaker 6: the potential for the Chinese market, it's huge. We have

1037
00:52:32,320 --> 00:52:37,360
Speaker 6: had we have had the consulting firms assessed what is

1038
00:52:37,480 --> 00:52:40,920
Speaker 6: huge mean, and when we look at it, it's huge.

1039
00:52:41,400 --> 00:52:43,719
Speaker 6: So it's just a matter of being prepared to take

1040
00:52:43,760 --> 00:52:46,319
Speaker 6: some losses for a couple of years and then we'll

1041
00:52:46,360 --> 00:52:47,240
Speaker 6: be all through the races.

1042
00:52:47,320 --> 00:52:48,799
Speaker 1: All right, tours, We're gonna have to leave it there.

1043
00:52:48,840 --> 00:52:51,319
Speaker 1: But thank you so much. We really appreciate getting your time.

1044
00:52:51,719 --> 00:52:56,719
Speaker 1: Fascinating discussion towards Hagen, CEO and Chairman of Viking. It's

1045
00:52:56,800 --> 00:52:58,719
Speaker 1: not Viking cruises, it's Viking, so we're going to go

1046
00:52:58,800 --> 00:53:01,360
Speaker 1: with that. That makes a lot of it's a fascinating discussion.

1047
00:53:01,360 --> 00:53:03,600
Speaker 1: We appreciate getting some of towards his time.

1048
00:53:04,040 --> 00:53:07,120
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can

1049
00:53:07,160 --> 00:53:10,880
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1050
00:53:11,040 --> 00:53:14,640
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

1051
00:53:14,960 --> 00:53:16,839
Speaker 2: at Matt Miller nineteen seventy three.

1052
00:53:17,320 --> 00:53:19,680
Speaker 1: And I'm Fall Sweeney. I'm on Twitter at pt Sweeney.

1053
00:53:19,840 --> 00:53:22,480
Speaker 1: Before the podcast, you can always catch us worldwide at

1054
00:53:22,520 --> 00:53:23,239
Speaker 1: Bloomberg Radio