Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moven news.
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Speaker 1: All Right, the big thing for me, I think this
Speaker 1: is this weekly. I mean, there's a lot of ego
Speaker 1: data coming down, But are we going to have a
Speaker 1: strike in the auto industry? I mean, it kind of
Speaker 1: feels like it and.
Speaker 2: That could push, by the way, not only the state
Speaker 2: of Michigan into a recession, but if it goes on
Speaker 2: for a long time, it could be bad for the
Speaker 2: growth trajectory of the US economy and for the inflation
Speaker 2: underlying inflation.
Speaker 1: Yep, it's big, So hopefully they can get something done.
Speaker 1: Joe Levington joins us here. He's a director credit research
Speaker 1: for Bloomberg Intelligence. In his day job, he covers kind
Speaker 1: of the industrial companies, including the auto companies. Joins us
Speaker 1: here in our Bloomberg Interactive Brokers studio. So, Joe, what's
Speaker 1: your sense here. You know these companies for a long time.
Speaker 1: Does this feel like they're going to go on strike?
Speaker 1: The union will go on strike Thursday at midnight.
Speaker 3: Yeah, no, definitely, Paul, it does feel like a strike
Speaker 3: is coming. You know, even when you see Bloomberg reporting
Speaker 3: that the UAW has offered some concessions, going from forty
Speaker 3: percent growth to thirty six percent growth, is still a
Speaker 3: huge difference between the fourteen and a half percent that
Speaker 3: the auto companies seem to be giving.
Speaker 2: So let's look at the let's get the hard numbers
Speaker 2: behind that. This is what they want in terms of
Speaker 2: an increase for salary and benefits Rachel, So what does
Speaker 2: it boil down to in terms of the cost for
Speaker 2: the automakers to get an hour of work from a
Speaker 2: union member.
Speaker 4: Yeah, no, you're totally right.
Speaker 3: The way that I've looked at it is really in
Speaker 3: terms of EBIT for twenty twenty four, in terms of
Speaker 3: profitability for in the best case scenario, at twenty percent,
Speaker 3: you'd have something like Stilantis being about two percent impacted,
Speaker 3: So really not that much before you consider some of
Speaker 3: the things that they could do.
Speaker 4: For Ford, which.
Speaker 3: Has a bigger unionized auto group, it could be as
Speaker 3: much as ten percent of twenty twenty five or EBIT. Now,
Speaker 3: I do think there are ways that they can offset it,
Speaker 3: And going to your point about inflation price is the
Speaker 3: number one tool that they have to use is to
Speaker 3: increase prices and pass it on to consumers. Of course,
Speaker 3: that leads to different challenges and different.
Speaker 2: Ways, also done numerous times over the past couple of years.
Speaker 4: That's exactly right.
Speaker 2: When I priced my Dodge Challenger RT scat pack.
Speaker 1: Wide body, which is still not in delivery, which.
Speaker 2: Still has not been delivered, and I hear, by the
Speaker 2: way from inside the company they're like, yeah, you know what,
Speaker 2: I think it's going to be delivered September fifteenth, and
Speaker 2: now that's just three days away, and I've gotten bup
Speaker 2: kissed in terms of anyway. The bottom line is when
Speaker 2: I ordered it in you know, a year ago, it's
Speaker 2: the price has already been increased like two or three times,
Speaker 2: and I'm wondering, do I have to then pay that price?
Speaker 2: But when they finally deliver.
Speaker 4: It, I don't know that works. No, In fact, you
Speaker 4: don't have to pay that price.
Speaker 3: But that's where some of the EV companies are getting
Speaker 3: hit materially, like a riythean or a Lucid, which made
Speaker 3: deals two or three years ago, and now they're, you know,
Speaker 3: like offering these cars up at thirty percent less than
Speaker 3: worth the prices today and they're taking that loss and
Speaker 3: gross profit and really killing their liquidity. So to your point,
Speaker 3: you won't have to get hit with that, Matt, but
Speaker 3: you did have to wait.
Speaker 2: And I bet you the dealer is gonna try. I'll
Speaker 2: bet the dealer tries.
Speaker 4: But you're savvy, old of guy.
Speaker 2: You're not well now because Joel told me that, you know,
Speaker 2: I would say, I have documentation, I know the only
Speaker 2: day I ordered.
Speaker 1: I know the owner of Stillantis, the CEO of Stalantis.
Speaker 2: All right, So it doesn't help A dealer does not care.
Speaker 1: That doesn't care.
Speaker 2: Okay, I've interviewed Carlos Tavaris. That doesn't help me when
Speaker 2: I go into the dealership.
Speaker 5: All right.
Speaker 1: So Joel, if you're these big auto companies, you don't
Speaker 1: want to go on strike, but you feel like you
Speaker 1: can't pay thirty or forty percent increase in So where
Speaker 1: do you think this shakes out?
Speaker 3: I mean, yeah, I think you probably get to a
Speaker 3: midpoint of maybe about twenty five percent over four years Now,
Speaker 3: the offsets to that is, you know, if you increase
Speaker 3: pricing one percent, that a huge chunk of that increase away,
Speaker 3: And then you start thinking about costs and where you
Speaker 3: can do that. One of the things I always think
Speaker 3: about is bringing in products that you have gotten from supplier,
Speaker 3: so insourcing some componentry. If you do that, that means
Speaker 3: you might be saving money. That might be a pressure
Speaker 3: point for a lot of the auto suppliers and how
Speaker 3: they're gonna get hit. Obviously, if you're going for pricing,
Speaker 3: that's positive for the dealers and what that means for them, well.
Speaker 2: If they can move the metal. Because consider that these
Speaker 2: increases are only gonna hit GM, Forward and Stilantis. So
Speaker 2: if you're cross shopping, say the new newest GM electric
Speaker 2: vehicle on a Tesla, and Tesla has to pay its
Speaker 2: employees like a third of what GM pays their employees,
Speaker 2: you're gonna find a better price over at elon Musk's company.
Speaker 4: I think you're totally right, Matt.
Speaker 3: I Also, I wrote about this a couple of weeks ago,
Speaker 3: how Tesla might actually be the biggest winner. Now, I'm sure, folks,
Speaker 3: is Tesla's plants see a let's say twenty five percent increase,
Speaker 3: and they're gonna be asking for something too, But my
Speaker 3: guess is it's incremental or modest relative to what the
Speaker 3: UAW is gonna get. So on a relative basis, Tesla's
Speaker 3: gonna win on that. And as you've seen, what they've
Speaker 3: done this year is they've used that price to cut
Speaker 3: their prices or take a relative price cut and draw
Speaker 3: demand off of it, which I think means that Tesla
Speaker 3: will be, you know, like the eventual winner out of
Speaker 3: the out of this game with the auto companies.
Speaker 2: And the others who produce here that don't have union labor, right,
Speaker 2: which is like a ton of Asian and European automakers.
Speaker 1: So like the BMW plants in Tennessee or wherever they
Speaker 1: put them South Carolina, South Carolina are they're not unionized.
Speaker 3: They're not And so you know, like there is going
Speaker 3: to be a relative trade here in terms of how
Speaker 3: much you can go. And it's one of the reasons
Speaker 3: why the auto companies are pushing back so hard because
Speaker 3: they play in a global market space.
Speaker 2: I don't know, so all right, from that, you've got
Speaker 2: to decide as a worker, Paul, do you want to
Speaker 2: live in Spartanburg. Do you want to live in Austin?
Speaker 2: Do you want to live in Motown?
Speaker 5: Spartan Burs?
Speaker 4: Looking pretty good?
Speaker 6: Yeah?
Speaker 5: All right.
Speaker 1: So from the balance sheet perspective, jol, do any of
Speaker 1: these Ford GM stialantas do they have a balance sheet
Speaker 1: that you're nervous about should a long strike take place.
Speaker 3: Well, the thing that I look at the most, and
Speaker 3: this is really a Ford and GM issue more than
Speaker 3: a Stalantis issue, is that the way that they get
Speaker 3: paid is that they get paid when they sell the
Speaker 3: car to the dealer, right, but they don't pay their
Speaker 3: suppliers until your typical forty five or sixty days afterwards.
Speaker 3: What that means is that they have a huge amount
Speaker 3: of payables that are lined up and very little receivables.
Speaker 3: When you have a stoppage of work, there's no receivable
Speaker 3: of money coming in, but there's a huge amount of
Speaker 3: payables to the tune of maybe like five billion dollars
Speaker 3: a quarter. So you have to have massive amounts of
Speaker 3: liquidity to handle kind of such a situation, which is
Speaker 3: really what Ford and GM have. I think Ford has
Speaker 3: something like fifty billion of liquidity available.
Speaker 4: GM has about forty five billion.
Speaker 3: Dollars of liquidity available, so they can handle a near
Speaker 3: term impact, but it has.
Speaker 5: A huge.
Speaker 3: View in terms of free cap flow for a year,
Speaker 3: in terms of the liquidity on their balance sheet.
Speaker 1: They got a lot of leverage here. I'm looking at GM.
Speaker 1: I mean they got to that the IBATA. I mean
Speaker 1: that's there's a lot.
Speaker 3: There there there is, But keep in mind that that
Speaker 3: includes the finance company.
Speaker 4: When you start that out.
Speaker 3: If the leverage at GM and Ford is actually relatively modest,
Speaker 3: maybe more like one to one and a half turnska,
Speaker 3: it's really that they have finance companies, which is kind
Speaker 3: of hard to see, uh sometimes just because it's blended
Speaker 3: all together under their under their primary.
Speaker 2: Now, I will say everyone we talked to from we
Speaker 2: talked to Seth Harris yesterday Northeastern, who used to be
Speaker 2: an advisor to President Biden and deputy director of the
Speaker 2: White House's National Economic Council, and Cloudy Assam, she of
Speaker 2: the SOM rule. They all say, look, the union took
Speaker 2: bad deals for the workers at the end of the
Speaker 2: financial crisis, and the carmakers have raked it in since then.
Speaker 2: Surely they've been setting aside billions because they knew these
Speaker 2: negotiations were coming right surely.
Speaker 1: But you're right. I mean they kind of they got
Speaker 1: a certain deal to certain pay increases, and then this
Speaker 1: inflation came along, which nobody saw, and then boom, and
Speaker 1: now they feel like they need to get back. It's
Speaker 1: gonna be interesting, it feels, it feels contentious. Hopefully they
Speaker 1: can get something done by midnight Thursday night.
Speaker 2: Especially if they haven't produced my challenger I know, I mean,
Speaker 2: I need them to make that instead it here.
Speaker 4: It'll be the priority of the Nego.
Speaker 1: She's the whole thing. We got to get that thing
Speaker 1: off the line. Joe Levington, he's director of Credit Research
Speaker 1: for Bloomberg Intelligence, senior auto and industrial credit analyst as well,
Speaker 1: so we appreciate getting some of his thoughts here. Again,
Speaker 1: Big big issues for the auto manufacturers coming up, big labor,
Speaker 1: big auto. We've got strikes seemingly in a number of
Speaker 1: industries across this country.
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Speaker 1: Monica Defend joins us. She's a head and chief strategy
Speaker 1: just at a Munday Institute that's Europe's largest asset manager.
Speaker 1: She joined us here in Bloomberg Interactive Brokers studio. I
Speaker 1: love to have her in studio here. So Monica talked
Speaker 1: to us about kind of the European economy. I know
Speaker 1: we can't talk about it as a whole because you
Speaker 1: have so many different countries. But my concern, I think
Speaker 1: my understanding is if Germany is in trouble, Europe's in trouble,
Speaker 1: talk to us about how you guys view the European economies.
Speaker 8: Well, short term, we are really relying on Americans taking
Speaker 8: over and during the summer, so probably we can have
Speaker 8: some lift on the quarterly GDP sequencing. But as you
Speaker 8: were rightly pointing out, on an aggregate, europe euraline is
Speaker 8: not doing bad. If you look at at the Commission
Speaker 8: at you Commission projection released yesterday, there is no recession
Speaker 8: but latisha growth. It is true that if you open
Speaker 8: the box, there are different countries within the same region.
Speaker 8: With Germany that is running into our session for different reasons.
Speaker 8: It's started with a manufacturing sector paint at all of
Speaker 8: the industrial policy and of an economy centered on energy dependence,
Speaker 8: but now it's moving into the service sector. Industrial data
Speaker 8: and that's production data were soft last week. But it
Speaker 8: goes without saying that if Germany is in trouble, this
Speaker 8: is going to be difficult for the entire region. Ivy
Speaker 8: said that we have some other countries, France, for example,
Speaker 8: where we see the political willingness to continue to run
Speaker 8: physical support for the country, and France is an important economy.
Speaker 8: Spain again has been supported by subsidies on the energy
Speaker 8: sector and this has been supporting consumption. It is going
Speaker 8: to fade away, and but at least Italy, where again
Speaker 8: the construction boomb is over. So it is true that
Speaker 8: on aggregate the situation is manageable. Probably at country level
Speaker 8: there are several issues that needs to be tackled.
Speaker 2: But not a super attractive place to invest right. I mean,
Speaker 2: Germany's manufacturing sector is going to be hit hard by
Speaker 2: problems in China, failures there and threats from companies like Tesla,
Speaker 2: who seem to be able to do Volkswagen's work far better.
Speaker 2: You know, the French have luxury goods that again won't
Speaker 2: be purchased by rich Chinese people anytime soon. The Italians
Speaker 2: have democratic disaster, you know, like a constant for the
Speaker 2: last what fifty sixty seventy years, and the Spanish are
Speaker 2: just supported by the rest of the continent. Plus Britain
Speaker 2: shoots itself in the foot any chance it gets. I mean,
Speaker 2: where would you invest if you wanted to go to Europe?
Speaker 8: Well, nice to see these from American perspective, it is
Speaker 8: not that bad.
Speaker 4: You are are European.
Speaker 8: But Evan said that first of all, in engaging the
Speaker 8: green transition bottom up level, there are some nice evidence.
Speaker 8: It is true that China slow down is not that
Speaker 8: it is negative for for the region, but we need
Speaker 8: to resize starting from Germany, the dependence UH to uh
Speaker 8: TO to China when it goes to to Treda and
Speaker 8: exportation because a lot is done within the region starting
Speaker 8: from uh from Germany, which is an important an important
Speaker 8: take if you ask me. Long term, probably as Europeans
Speaker 8: we should think more on an industrial and on our
Speaker 8: industrial policy. But this is what we are discussing. When
Speaker 8: it goes to EarthCare, when it goes to pharma, it's
Speaker 8: going beyond the semiconductor story. And I think we are
Speaker 8: moving slowly, but we're active on that front.
Speaker 1: So at the MOUNDI were you guys in terms of
Speaker 1: your asset allocation these days and maybe maybe how it's
Speaker 1: changed over the last several years.
Speaker 8: Well, it has been given the macro uncertainty and uncertainty
Speaker 8: on the monetary policy framework, it has been difficult really
Speaker 8: to pencil midium to long term strategy. We've been quite
Speaker 8: a jilt, for example on the durrection positioning with a
Speaker 8: preference for US longer and that you neutral position. But
Speaker 8: again it has been the time for agile, tactical relative positioning.
Speaker 8: When it goes to the risk asset, we've been progressively
Speaker 8: reducing the exposure to to credit it notably the.
Speaker 1: High healed So reducing exposure to high credit is that
Speaker 1: that you guys are just generally more conservative on your
Speaker 1: economic outlook and industry policies.
Speaker 8: It was also going into the US, I have to say,
Speaker 8: so it's really when you need to balance the risk
Speaker 8: return opportunity. Probably repositioning on govin and equity on the
Speaker 8: traditional was for US more appealing equity wise, while maintaining
Speaker 8: cocial stunts. We do like the US value and on
Speaker 8: the emerging market we have been repositioning moving to neutral
Speaker 8: into Chinese equity, but be more active in the emerging
Speaker 8: market region, notably Brazil, India, for example, Indonesia. So these
Speaker 8: are all countries that for different reasons, are getting track.
Speaker 2: But you are looking in the US value. Are you
Speaker 2: concerned that we do eventually have a recession here? The
Speaker 2: consumers looking pretty stretched. We're going to get some data
Speaker 2: I know out on Thursday retail spending, and it looks
Speaker 2: much worse than the last month's data we got. We're
Speaker 2: going to get inflation data out tomorrow that looks worse
Speaker 2: than last month's data that we got. Is the situation
Speaker 2: you're getting worse.
Speaker 8: So when it goes to the recession call, we do
Speaker 8: belie if there will be a shallow session, this will materialize,
Speaker 8: likely in the first half of twenty twenty four. For
Speaker 8: the reason you were mentioning the labor market is eventually cooling,
Speaker 8: Excess savings have been reducing remarkably over time, and probably
Speaker 8: also the physcal diviidenomics and impulse to the investments business investments,
Speaker 8: I won't be there for longer. When it goes to
Speaker 8: CPI inflation, we think it is normalizing, it will normalize.
Speaker 8: It probably not in a linear way energy prices. Recent
Speaker 8: prints on oil will have a positive contribution to headline
Speaker 8: and the core will prove to be sticky. But as
Speaker 8: I was saying, overall, we expect this nonlinear and volatile
Speaker 8: and probably less rapid than expected downward driven inflation to
Speaker 8: to continue. And this ands with the cold that we
Speaker 8: were making on the Fed where we expect them to
Speaker 8: orkish post posts.
Speaker 1: I'm down with that, all right. So you spend half
Speaker 1: your time in Paris, half your time in Milan area?
Speaker 1: How was like Como this summer? I have yet to
Speaker 1: go too, but it's.
Speaker 2: On my bull. You mean you yet to go to
Speaker 2: Lake Como ever?
Speaker 5: Ever?
Speaker 1: And I pend up on land like a dozen times.
Speaker 2: Why would you spend so much time in boring Milan
Speaker 2: and get up to lake where the money is.
Speaker 1: That's where the money managers are, all right?
Speaker 8: So I was in Internobio early in September where all
Speaker 8: we are having these think tank meeting and the people
Speaker 8: out there were saying, we have been taken over by Americans,
Speaker 8: and we do think.
Speaker 2: George Clooney, George, you must be happy to.
Speaker 8: Have us, you know, honestly, being an Italian, I don't
Speaker 8: know why you guys are going to the Lake of
Speaker 8: Como and not to the seaside in Sicilia. Probably is
Speaker 8: the weather, but definitely there there are a lot of tourists.
Speaker 8: We are really seeing this renaissance in Milan itself.
Speaker 4: Nice.
Speaker 1: I love them a lot.
Speaker 2: It's great, I love but they're taking down I spent
Speaker 2: in Sicily.
Speaker 1: I know.
Speaker 2: I've been in Bari, been in Venice a number of times.
Speaker 2: I've been in Florence. I got I got done cycling
Speaker 2: trips around the country. I've done cooking trips in the country.
Speaker 2: I've been to the horse.
Speaker 1: I had to work. I had to work for a living.
Speaker 1: Monica Defen thanks for joining us. She's head and chief
Speaker 1: strategists at a Mundi Institute.
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Speaker 7: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
Speaker 1: All right, we had an M and a trade in
Speaker 1: like I don't know the packaging industry. Smurfit Kappa Group.
Speaker 1: It's Irish. It doesn't sound it, but it's Irish. I
Speaker 1: agreed to acquire west Rock, an eleven point two billion
Speaker 1: dollar deal that creates a package industry powerhouse domiciled in
Speaker 1: my home land of Ireland. Pretty cool stuff. And we
Speaker 1: actually have an analyst who knows this business. Believe it
Speaker 1: or not. Richard Burke joins us. He's a senior Aronalds.
Speaker 1: The Bloomberg Intelligence covered all the basic materials. I want
Speaker 1: to talk about this deal. I want to talk to you
Speaker 1: about the potential auto strike, what that means for steal.
Speaker 1: Lots of stuff to talk to you about today, Richard,
Speaker 1: what's going on here with this deal. It's a big deal.
Speaker 1: I guess we need more heft in the packaging industry.
Speaker 9: Well, what it is is, if you look at the
Speaker 9: two players. West Rock is undergoing what they call strategic transformation.
Speaker 9: They're trying to, you know, boost their margins versus their peers,
Speaker 9: their trail. They trail their margin, their margins trail their peers.
Speaker 9: They undertook a transformation program and it may be going
Speaker 9: a little bit slower than they want to. Smurf Kappa
Speaker 9: doesn't have a presence in the US. This gives them
Speaker 9: a large presence in the US. Smurf Kappa's margins are
Speaker 9: about three hundred basis points higher than West Rocks. So
Speaker 9: and they undertook their journey about seven years ago. They
Speaker 9: started a capital improvement program and now they're at the
Speaker 9: end of it. And you know, from what the executives
Speaker 9: laid out on this morning's call was, you know, we
Speaker 9: think we can help west Rock on their journey and
Speaker 9: combine the company companies going forward and boost west Rock's margins,
Speaker 9: bring them more in line to what where what Smurfit
Speaker 9: Kampa is.
Speaker 2: One of these companies I never heard of before West Rock.
Speaker 2: The other one I never knew what they did, Smurfed Kappa.
Speaker 2: Now they're going to have a combined annual revenue of
Speaker 2: thirty four billion dollars. What do they make?
Speaker 9: They make basically pretty much predominantly just cardboard boxes.
Speaker 1: See I told you it's a cardboard box company.
Speaker 2: I mean yeah, but like so iPhone.
Speaker 9: Boxes, uh, you know, the Gamut, the Gammon boxes, the
Speaker 9: Gamut from you know.
Speaker 2: The regular U haul boxes like U haul the Gamut.
Speaker 9: They go all the way across the universe to the
Speaker 9: cardboard box that Amazon puts on your well, probably the
Speaker 9: three cardboard boxes the Amazon puts on your doorsteps, the
Speaker 9: big one to protect everything, and then the smaller ones
Speaker 9: in and they also make all the way down to
Speaker 9: those very more brand where retailers are trying to get
Speaker 9: more brand experience. The other big thing that's driving this
Speaker 9: is especially more so in Europe, is the way away
Speaker 9: from plastic packaging. So, for example, one of the big
Speaker 9: products that West Rocks just really introduced was a thing
Speaker 9: to do way remember when you used to buy a
Speaker 9: six pack of beer and the plastic rains. They have
Speaker 9: a product that does away with the plastic.
Speaker 1: Grains and I use that and that is a great
Speaker 1: product because it's so much easier to get the cans
Speaker 1: out of there. So that was weir.
Speaker 10: What what do you mean the black plastic caps that
Speaker 10: go on top of like, but you buy a six
Speaker 10: pack of soda instead of having a little plastic grains ahold,
Speaker 10: this is like a little cardboard top that just kind
Speaker 10: of hold them all together.
Speaker 1: And it's just very easy to take the can out
Speaker 1: of the little cardboard top or take the whole carver
Speaker 1: top off. Genius whatever thought it, and.
Speaker 2: Less likely to strangle fish exactly right, which I've been
Speaker 2: cutting those up since I was a little kid.
Speaker 1: You know, the little things good for you. So I
Speaker 1: tell you I do my party care. The packing business,
Speaker 1: I mean the talk to us just about the cargated
Speaker 1: box business. There's pre pandemic, there's huge demand, but then
Speaker 1: the pandemic hit. Then everybody that got stuff delivered. Talk
Speaker 1: to us about the last three four, five years in
Speaker 1: that business.
Speaker 9: Well, we've gone from pre pandemic where you know, historically
Speaker 9: the packaging business kind of GDP GDP growth. Okay, pandemic hits,
Speaker 9: everybody's at home, nobody can spend money on restaurants or
Speaker 9: food or travel. Well, you got to spend money somehow,
Speaker 9: so you ordered goods over the air and neet yeap
Speaker 9: then came to these boxes. So the box over a
Speaker 9: two year period went from GDP type growth to about
Speaker 9: eight to nine growth. Then what happened, and it totally
Speaker 9: reversed because everybody after a pandemic over everybody had what
Speaker 9: they call what revenge travel, everything, and we've been in
Speaker 9: a downfall. In fact, we're actually back to almost pre
Speaker 9: pandemic levels.
Speaker 1: Okay, so there's been.
Speaker 9: But the bigger push longer term is again back to sustainability.
Speaker 9: Can we can we replace past plastic packaging car?
Speaker 1: You know what, back way back in the day, I
Speaker 1: had a investment in a box company like just this
Speaker 1: Southeastern US. Never made a dime on it, and then
Speaker 1: the whole and I sold back my steak. Then this
Speaker 1: company named Amazon came out. I was like, oh, I
Speaker 1: missed it and bought them or what. No, it just
Speaker 1: just kind of came out and said we're gonna started
Speaker 1: shipping everything to you. And of course then this company's
Speaker 1: value went through the roof. All right, we got potential
Speaker 1: strike coming out of the auto business. If they're not
Speaker 1: making cars, does that mean they don't need steel, in
Speaker 1: which we're gonna have some issues with steel talks about
Speaker 1: how that might impact steel.
Speaker 4: Correct.
Speaker 9: If you look at the auto market for the steel
Speaker 9: sucker or auto demand or the auto end market is
Speaker 9: about twenty five percent of the steel market. Okay, So
Speaker 9: if we see that and you know, not only do
Speaker 9: you have you kin'd have a ripple effect. Not only
Speaker 9: do the big car makers stop making cars, but everybody
Speaker 9: who makes the parts, you know, the tier one, the
Speaker 9: Tier two, the Tier three suppliers stop making their parts too,
Speaker 9: and you know, in the last the difference between this
Speaker 9: strike possibly and the last strike is normally the UAW
Speaker 9: you would only target one auto maker. This time they're
Speaker 9: talking about maybe targeting all three. So we'll see if
Speaker 9: the rhetoric, the rhetoric is definitely ramped up, and we'll
Speaker 9: see what happened.
Speaker 1: What are the steel makers themselves saying or they just
Speaker 1: kind of staying out of it, and we'll say, well,
Speaker 1: you know.
Speaker 9: They've been quiet. The thing that was interesting, I thought
Speaker 9: the second quarter on their earnings call, a few of
Speaker 9: them mentioned that they had and totally ship more in
Speaker 9: the second quarter than they were expecting to the automakers,
Speaker 9: which exactly tells me the automakers were like, Okay, well
Speaker 9: maybe we need to wrap up production and things like that,
Speaker 9: and and honestly, you're not going to see if they
Speaker 9: do strike their schedule. The contract expires this Thursday night
Speaker 9: at eleven fifty nine pm. You know, we're already halfway through,
Speaker 9: you know, halfway through the month, but you're almost you're
Speaker 9: only two weeks from a course, so you may not
Speaker 9: see that big of effect on this quarter on the
Speaker 9: steel makers. It would probably be next more next quarter
Speaker 9: of things also the steel makers normally take some downtime
Speaker 9: and they kind of rejiggered their downtime to kind of.
Speaker 5: Be see going forward.
Speaker 9: So if there is a hit that they're not as
Speaker 9: impacted as they might have been.
Speaker 1: Interesting, I mean, did the auto guys did they did?
Speaker 1: Are they like a justin time with their steel? It's
Speaker 1: like I place my steel orders because I'm gonnaut. I'm
Speaker 1: gonna start bending it like tomorrow or next week or something.
Speaker 9: Most of it all depends on where you're at. Like
Speaker 9: the Oheit, the big three are definitely probably more just
Speaker 9: in time.
Speaker 5: Okay, where the.
Speaker 9: Maybe there's some of the spliers Tier one, Tier two,
Speaker 9: Tier three are is you know, everybody's trying to be
Speaker 9: just in time, but they probably do hold more.
Speaker 1: All right, So boom, we knocked out cargated boxes and
Speaker 1: steal in one segment. How good is that you can
Speaker 1: do that with Rich Burke? Why he gets a bachelor's
Speaker 1: degree in engineering from Illinois. Then he goes and gets
Speaker 1: some masters in engineering electrical engineering, and then he goes
Speaker 1: against an NBA from Chicago. You can't get the guy
Speaker 1: out of the out of Illinois. All right, good stuff, Rich,
Speaker 1: We appreciate it. From Bloomberg Intelligence.
Speaker 7: You're listening to the Team Ken's are Live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg dot Com,
Speaker 7: the iHeartRadio app and the Bloomberg Business App, or listen
Speaker 7: on demand wherever you get your podcasts.
Speaker 1: Let's talk about shipping boxes. We talked that we had
Speaker 1: an M and a trade in the carrogated box business.
Speaker 1: Who what a thunk it is Murphy Kappa buy yep
Speaker 1: eleven billion, so eleven large there, So kind of staying
Speaker 1: on a kind of the box thing and kind of
Speaker 1: moving boxes around. We have Mike Para. Mike joins us.
Speaker 1: He is the CEO for the Americas for d h
Speaker 1: L Express. He joins us live here in our Bloomberg
Speaker 1: Interactive Brooker Studio. So Mike, I don't know, do you
Speaker 1: care where the boxes come from? It's your just job
Speaker 1: just to move.
Speaker 11: Them, right, absolutely, But we would I would say, we
Speaker 11: would like to see less air inside those boxes. So
Speaker 11: that was a great that was a great interview. And
Speaker 11: I am in so less air in the boxes, less
Speaker 11: air in the boxes?
Speaker 1: What does that mean?
Speaker 11: Well, I mean remember air takes up space, right and
Speaker 11: then also when you got more air in boxes, you
Speaker 11: have a greater propensity to have damage. Okay as well,
Speaker 11: so less air less damage, less air means we can
Speaker 11: put more boxes into our aircraft.
Speaker 1: Are what percent of your aircraft? I guess what percent
Speaker 1: is full? Do they fly when they actually take off?
Speaker 11: Oh, well, you're gonna fly. You're gonna fly. It's not
Speaker 11: gonna be at full weight because that would that would
Speaker 11: be ideal by the way that that means you're moving
Speaker 11: water right as an example, But on average, our weightload
Speaker 11: factor is somewhere between eighty and ninety percent. Is where
Speaker 11: we're at from a weightload factor on an aircraft.
Speaker 2: So how does it look to you right now? Because
Speaker 2: you have a great position in terms of judging the
Speaker 2: US economy, right are we still buying and shipping just
Speaker 2: as much stuff as we were last quarter or the
Speaker 2: same quarter last year.
Speaker 5: Yeah.
Speaker 11: One of the great things that we're seeing as a
Speaker 11: result of what's going on globally in this move away
Speaker 11: from China. We're never gonna decouple ourselves from China, but
Speaker 11: we are seeing you know, friend shoring, near shoring, omni
Speaker 11: shoring that's taking place, and we're seeing a lot more
Speaker 11: outbound from the US, which is encouraging. It's encouraging for us,
Speaker 11: but we're seeing it predominantly in the space.
Speaker 4: Of e commerce.
Speaker 11: Okay, So that's what we're seeing, which is fantastic. But
Speaker 11: what we have seen is we're starting to see that
Speaker 11: China plus one really starting to happen. As an example,
Speaker 11: near and dear to me because it's within my region
Speaker 11: is Mexico, and you're starting to hear this term made
Speaker 11: in Mexico. We're starting to see that in the northern
Speaker 11: part of Mexico, so Guadalajara. So that's what is those
Speaker 11: markets were starting to see an explosion raw goods coming
Speaker 11: in being assembled and then exported out of Mexico, either
Speaker 11: back to the US, to Canada or throughout the rest
Speaker 11: of the world.
Speaker 1: Where does DHL Americas fly to.
Speaker 11: What are your planes going across the entire Americas? So
Speaker 11: we fly intro America, okay, and then out of the
Speaker 11: Americas to Europe, Asia, the Middle East, and Africa.
Speaker 1: Are there certain airports that are hubs for you guys.
Speaker 11: Absolutely.
Speaker 5: Yeah.
Speaker 11: A big air hub for the Americas is in northern
Speaker 11: Kentucky and Cincinnati. We're doing ninety departures in and ninety
Speaker 11: arrivals in on a daily basis.
Speaker 2: How do you compete with I mean, when you talk
Speaker 2: shipping in this country, everybody knows I just moved here
Speaker 2: by the way from Germany, so no problem for me.
Speaker 2: DHL was on my doorstep every single day. But now
Speaker 2: you know it's ups FedEx Amazon.
Speaker 11: How do you compete with those big guys. Yeah, we're
Speaker 11: We're not competing in the space of intra US. So
Speaker 11: we got out of the US Book of Business back
Speaker 11: in two thousand and seven going into two thousand and
Speaker 11: eight because we wanted to focus focus on our core competency,
Speaker 11: and our core competency is international, so the world into
Speaker 11: the US, the US to the world. So that's our focus.
Speaker 11: That's what that's the lane that we play in, and
Speaker 11: we have been extremely successful.
Speaker 2: Is it getting harder or easier in terms I actually
Speaker 2: have a lot of experience with those kinds of shipping
Speaker 2: as well, and I'm constantly trying to get you know,
Speaker 2: a set of triple trees from Italy to here, or
Speaker 2: shipping Olan sporks back to Sweden for something. So it's
Speaker 2: difficult to deal with customs, all the different regulations. Is
Speaker 2: that getting easier or is that getting hard?
Speaker 11: In reality, it's been the same. What is getting easier
Speaker 11: is through automation and digitalization. We clear ninety two percent
Speaker 11: of our shipments are cleared in the air, so they
Speaker 11: don't they're cleared by customs in the air, and then
Speaker 11: they're only really looking at somewhere in the range of
Speaker 11: seven to eight percent is what they're looking at. They're
Speaker 11: targeting those specifically. Now you get that through having a
Speaker 11: great relationship and a consistent relationship that spans over a
Speaker 11: long period of time with customs, where the reliability of
Speaker 11: the information the contents that we're moving line up with
Speaker 11: the manifest that we're submitting to them electronically. So that
Speaker 11: part is getting easier. Where it gets difficult is when
Speaker 11: you have someone who refuses to give you the right
Speaker 11: level of information, an EI number, the HTS code for
Speaker 11: clearance is wrong. Those type of things is where a
Speaker 11: shipment gets delayed. But ninety to ninety two percent of
Speaker 11: our goods are cleared in the air, so that makes
Speaker 11: it easier. Whereas before would have gone twenty I started
Speaker 11: thirty seven years ago in this industry was much harder.
Speaker 11: It was much more of a manual process, much more
Speaker 11: of an opener ship and look and see today it's
Speaker 11: much easier from that perspective.
Speaker 1: All right, so you ship from the Americas out to
Speaker 1: the rest of the world and back. Yes, where are
Speaker 1: the growth areas versus maybe the not so growth areas well.
Speaker 11: We're seeing growth out of Canada, so in what we're
Speaker 11: calling Friendshory Canada, the US, and Mexico, we're seeing a
Speaker 11: lot of growth from that perspective, we're seeing growth in
Speaker 11: parts of Central and South America. As a matter of fact,
Speaker 11: we just launched our own dedicated flight now to Argentina,
Speaker 11: so we're starting to see growth and it goes it
Speaker 11: goes Miami, Argentina, Argentina, Chile, back to Central America and
Speaker 11: then back up to the States. So we're seeing growth
Speaker 11: in those markets as well. Every time we have a
Speaker 11: growth market, we'll pull we'll come off a commercial airline
Speaker 11: and we'll put our own aircraft in place.
Speaker 1: So what does that mean. You'll take oh, you'll take
Speaker 1: some of your packages.
Speaker 11: Off commercial airline where we were by belly space before,
Speaker 11: and then we'll put it out about.
Speaker 1: That business, which I never really understand. So what percentage
Speaker 1: of your business goes on an airline and what goes
Speaker 1: on your plane and how do you make that decision?
Speaker 11: Met Well, okay, so thank you for asking that question.
Speaker 11: By the way, we're the largest commercial airline purchaser of
Speaker 11: belly space in the world, Okay, through all of our entities.
Speaker 11: From a DHL Group perspective, the decision is made once
Speaker 11: you have greater than fifty percent way load factor that
Speaker 11: you can put on your own plane, where you can
Speaker 11: start to pay for the physical asset up and down
Speaker 11: and the fuel that you have going into that plane.
Speaker 11: So the cost of operating an aircraft.
Speaker 2: And fuel costs, I mean, right now, the outlook isn't
Speaker 2: great with we're reporting that there's going to be a
Speaker 2: three million barrel a day shortfall in the next quarter
Speaker 2: because of the output cuts from OPEC.
Speaker 11: Plus yeah, fuel costs is interesting up and down, right,
Speaker 11: So fuel is always somewhere between seventy and one hundred
Speaker 11: and we almost think that there's a reason for that.
Speaker 11: The interesting part about that is we have what's called
Speaker 11: the Fuels our Charge, and that's where we take those
Speaker 11: expenses and we pass on the least amount that we
Speaker 11: have to to our customers associated with it. But that's
Speaker 11: how we protect ourselves and it either goes up or
Speaker 11: comes down and wet. We protect the customer on the
Speaker 11: way down.
Speaker 2: The other big cost is labor. How's that looking.
Speaker 11: Yeah, Okay, we're fine because it was tough. It was
Speaker 11: tough for a while. The good thing about now is
Speaker 11: we're replacing roles, we're hiring roles where we need to,
Speaker 11: which is a good thing, and we're getting ready for
Speaker 11: peak season, which is, by the way, in our opinion,
Speaker 11: is going to be a soft peak season. The uncertainty remains.
Speaker 11: It is going to be a soft peak season. It's
Speaker 11: going to be in line with what we saw last year.
Speaker 11: But really the next couple of weeks are going to
Speaker 11: be very telling. The end of this month, the beginning
Speaker 11: of October are going to be very telling to see
Speaker 11: what's going to happen in peak season, because really what
Speaker 11: starts to happen is people start to order in advance
Speaker 11: of Black Friday, Cyber Monday, and the lead up to
Speaker 11: the Christmas holidays. So we're keeping a close eye as
Speaker 11: to what's going to happen here over the next couple
Speaker 11: of weeks.
Speaker 1: Twenty seconds, what kind of aircraft do you flying? Can
Speaker 1: you get them?
Speaker 11: So we're flying triple sevens, we're flying seven six sevens,
Speaker 11: seven three sevens, and then we still have a couple
Speaker 11: seven four sevens that are out there eight hundreds. Can
Speaker 11: we get them? Yeah, there's a lot of there's aircraft
Speaker 11: today that are available. Much more aircraft today available based
Speaker 11: on the shortfall and volume that was out there in
Speaker 11: people standing down planes and right sizing their network. We
Speaker 11: right sized our network eighteen months ago. We're constantly right
Speaker 11: sizing our network. So it's not a new initiative for
Speaker 11: us at DHL.
Speaker 1: Fascinating. I can talk about this stuff all day. Mike Parat,
Speaker 1: thanks so much for joining us. He's the CEO of
Speaker 1: the Americas for d h L Express. Kind of getting
Speaker 1: a good view on kind of the economy and we're
Speaker 1: we're seeing some growth and not so much growth.
Speaker 7: You're listening to the tape. Can's our live program Bloomberg
Speaker 7: Markets weekdays at ten am Eastern on Bloomberg Radio, the
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Speaker 10: Well.
Speaker 1: We also like is commercial real estate because I have
Speaker 1: no idea how this business is going to shake out.
Speaker 1: So we're glad that we have an informed guest joining us.
Speaker 1: Barry de Ramondo, founder and CEO steel Wave. He joins
Speaker 1: us live here in our Bloomberg Interactive Broker's studio. Barry,
Speaker 1: thanks so much for joining us here. What what steel Wave?
Speaker 1: What kind of real estate do you guys plan? And
Speaker 1: where we'll start there?
Speaker 12: Well, we're West Coast based, okay, right, and the triangle
Speaker 12: is really San Diego south up to Seattle, to the
Speaker 12: north out to Austin.
Speaker 1: It's all the tech hubs, okay.
Speaker 12: And it's office, it's life science, and it's it's industrial
Speaker 12: all right.
Speaker 2: So office, well, you can't paint it with a broad brush,
Speaker 2: right you When you say office, you're talking about Third
Speaker 2: Avenue here.
Speaker 1: I was. We talked about Third Avenue and so now
Speaker 1: I understand that he's like in the real world, Yes, Austin,
Speaker 1: San Diego, stuff like that. How is office space in
Speaker 1: the real world outside in New York City.
Speaker 12: Well, it's got its challenges, sure, I mean, look, you've
Speaker 12: got the capital markets issues with high interest rates and
Speaker 12: cap rates and you know all the stuff that that brings.
Speaker 12: But you've got that with multifamily or industrial. You know,
Speaker 12: what you don't have in multifamily and industrial is the
Speaker 12: supplied demand headwinds that you have in office. You know,
Speaker 12: and you're still dealing with work from home. So you've
Speaker 12: got all that stuff going on on the office sector
Speaker 12: that you know is candidly created an enormous dislocation you know,
Speaker 12: in that market.
Speaker 2: So is office space. I mean when you say life
Speaker 2: science is in tech, I'm thinking about chip fabs and laboratories,
Speaker 2: but you're talking about actual office office where the same
Speaker 2: thing could be done from home.
Speaker 12: Yes, yeah, I mean, look on some level, you're competing
Speaker 12: with someone's couch. Yeah, all right, right for office space.
Speaker 12: And in order to bring people back into the office,
Speaker 12: you've got to create environments that people want to come
Speaker 12: to work in. And this isn't you know, post COVID,
Speaker 12: This this has been happening for We started seeing the
Speaker 12: trends really in the early two thousands and it's just
Speaker 12: magnified over time. But you've got to create a work
Speaker 12: environment that's highly amenditized, where people actually want to come
Speaker 12: to work and it doesn't feel like you're at work
Speaker 12: when you're at work.
Speaker 1: So have you done that? With your properties and what
Speaker 1: have you done, how have you done and has it worked?
Speaker 12: Yeah, I mean that's that's kind of our design theme.
Speaker 12: You know, we're very much of a design driven group.
Speaker 12: And it's it's it's adding hospitality, it's adding residential elements
Speaker 12: to it so it doesn't feel like an office building candidly,
Speaker 12: you know, it's you know, we tend to cater to
Speaker 12: the innovation workforce. It's all tech, media, tech, traditional tech, biotech,
Speaker 12: you know, go down the list. So we're trying to
Speaker 12: attract the innovation workforce back to the office. And you
Speaker 12: have to create amenities such that people don't think they're
Speaker 12: the office.
Speaker 2: So when you say amenities, I mean to think about Google,
Speaker 2: ping pong, table and snacks, right, but you're talking I
Speaker 2: would guess more about fitness, you know, gyms, maybe restaurants, daycares,
Speaker 2: all of.
Speaker 12: That, right, you know. Cool, And it's not just the
Speaker 12: run of the mill stuff. It's creating kind of differentiated
Speaker 12: you know, food and beverage, you know options, you know,
Speaker 12: full health centers, you know, for people to take advantage of.
Speaker 12: What you're trying to do is bring people together. That's
Speaker 12: really what you're doing. So it if you just create
Speaker 12: a gym and stick it off in the corner that
Speaker 12: that's not collaborative. What you got to do is amendetize
Speaker 12: the gym, and you got yoga classes, you got stretch
Speaker 12: where people actually get together.
Speaker 1: Do you have any evidence that if you do that,
Speaker 1: if you make that investment which impacts your returns, if
Speaker 1: you do make that investment, does it work?
Speaker 4: Not equivocally.
Speaker 12: Look, we're at a point in the market where if
Speaker 12: you don't make that investment there's no rent that will
Speaker 12: clear for a car.
Speaker 1: I something like that.
Speaker 2: I like it. I like it because I want to
Speaker 2: work in your office. I hear about office.
Speaker 1: We got fish, we got food, we got flowers, we
Speaker 1: got I mean, look at this office.
Speaker 2: Well we have a pretty great office.
Speaker 1: We got the best, I think, but out there. But
Speaker 1: I just think about driving out there in real America,
Speaker 1: which I do occasionally get off this island, and there's
Speaker 1: so many office buildings and every single one has of
Speaker 1: you know, announcing how much space they have available there.
Speaker 12: And all you gotta do is look at the parking lot.
Speaker 1: Yeah, yeah, that's right.
Speaker 12: That's your biggest indicator. If there's no cars, guess what,
Speaker 12: there's no bodies.
Speaker 1: So how how do you guys in that office reels,
Speaker 1: I mean, how do you think about your business? Do
Speaker 1: you have you taken your return parameters down dramatically because
Speaker 1: at the time you've got your properties, I'm guessing have
Speaker 1: higher occupancies than pre pandemic, and your cost of capital
Speaker 1: is higher.
Speaker 12: I think that's right, I mean the cost of capitals.
Speaker 12: I mean at the moment you got to I understand,
Speaker 12: today is a dislocated market, so it's kind of upside down.
Speaker 12: So you can't look at what's happening at this very
Speaker 12: moment as a barometer to you know, the market in general.
Speaker 12: You know, I would say a commodity office building, whether
Speaker 12: it's New York or San Francisco today, if it had
Speaker 12: to trade compared to say eighteen twenty four months ago,
Speaker 12: is trading at forty to thirty percent of what it
Speaker 12: would have traded for, not forty to thirty percent off
Speaker 12: talking you know, sixty to seventy percent off.
Speaker 1: Oh man, And I don't know how.
Speaker 2: I don't know if that's a commodity office building, but
Speaker 2: what you do is different. And also the rents that
Speaker 2: you get are higher, I imagine because if you create
Speaker 2: the kind of space that you're talking about. People will
Speaker 2: be bidding on that space and willing to and trying
Speaker 2: to outbid competitors.
Speaker 5: Right.
Speaker 12: Well, more importantly, there's a rent thatal clear, and if
Speaker 12: you're a commodity there is no rent total clear. I
Speaker 12: mean there's people think, well, I just lower the rent
Speaker 12: and my occupancy is going to go up. That actually
Speaker 12: doesn't work in office for commodity office. You know, for
Speaker 12: if it's apartments, you lower your rents, your occupancy goes up.
Speaker 12: For office, depending on what kind office you have, there
Speaker 12: may not be a rent that clears. And you know,
Speaker 12: it's a very bifurcated market. Excuse me. I mean if
Speaker 12: you look at Hudson Yards, you know they're pushing rents up. Yeah, right,
Speaker 12: But if you look at sort of mid block third
Speaker 12: Avenue here, I'm not sure there's a rental clear.
Speaker 7: Wow.
Speaker 1: See that's that's kind of where I think the market is.
Speaker 1: And that is brutal. Did they start knocking down office
Speaker 1: buildings around the country.
Speaker 2: I would want to work in Hudson Yards, yep. And
Speaker 2: I would not want to work on that.
Speaker 5: See that.
Speaker 10: I know.
Speaker 1: I guess before I would tell you, I don't care
Speaker 1: what you want but now I have to care, right,
Speaker 1: I have to care again. You're another guy who could
Speaker 1: talk go all day long on this stuff. Barry di Rimondo,
Speaker 1: Founder and CEO Steelwave, based on the West Coast. Whenever
Speaker 1: you're back in New York, let us know you're listening.
Speaker 7: To the tape catcher line program Bloomberg Market. It's weekdays
Speaker 7: at ten am Eastern on Bloomberg Radio, the tune in app,
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Speaker 7: York station. Just say Alexa play Bloomberg eleven thirty.
Speaker 1: I'm gonna put this on the bucket list. I have
Speaker 1: to go on a cruise. Yeah you do.
Speaker 2: You have to.
Speaker 1: You just have to tie me one thing. You got
Speaker 1: to be curious. I'm curious. I'm curious, So I'll put
Speaker 1: that on the bucket list. But you know how I
Speaker 1: love the cruise business. I think it's a fascinating business
Speaker 1: business model. And we've got a great person to talk
Speaker 1: to you about that. That's tors Hoggen, CEO and chairman
Speaker 1: of Viking Cruises Tours. Thanks so much for joining us here.
Speaker 1: I got a million questions here, But I'd love to
Speaker 1: just get a real thirty thousand foot view from you
Speaker 1: about how is the cruise business today versus pre pandemic.
Speaker 1: Just it was just no industry in my mind or
Speaker 1: what You're one of the industries that really got impacted
Speaker 1: the most immediate and most directly. How is your industry changed?
Speaker 6: Well, I can't speak so much about the industry, but
Speaker 6: I can speak well about ourselves, and you can say
Speaker 6: we are now back to a higher level of demand
Speaker 6: than we had before the pandemic. I've never seen anything
Speaker 6: like this in my life. So our ships this here
Speaker 6: have been full and we are heading into twenty twenty
Speaker 6: four with the I think it's seventy percent of our
Speaker 6: capacity sold on the ocean business and sixty percent of
Speaker 6: the river business.
Speaker 5: So it's it's rebounded very nicely.
Speaker 6: Now, in your introduction, we meant that you're curious, and
Speaker 6: I think that's one of the reasons we're doing so well,
Speaker 6: because our guests.
Speaker 5: Are curious travelers.
Speaker 6: They don't go on a cruise to sit by the
Speaker 6: pool and get some tanned and so forth. They go
Speaker 6: places to experience and to relive history and so forth.
Speaker 6: And of course Europe is a very big destination for us,
Speaker 6: so we hit it quite well. And we are kind
Speaker 6: of contrarian. So during the pandemic, we took delivery over
Speaker 6: I think was sixteen new ships and people said, you
Speaker 6: must be nuts, what are you want to do when
Speaker 6: this is over?
Speaker 5: And this year we're filling it entirely.
Speaker 2: So Viking Cruises is very different from the you know,
Speaker 2: Royal Caribbean kind of Disney. It's not as you say,
Speaker 2: tours about you know, drinking a pina klada by the
Speaker 2: pool and it doesn't matter where you.
Speaker 6: Are, don't object to drink a pino konada. But that's
Speaker 6: not why our guests got no.
Speaker 2: I just look at the destinations and it's more about
Speaker 2: exploration for for a Viking cruises more about adventures.
Speaker 6: It's exploration in the widest sense because you know, exploration
Speaker 6: is seeing places you know. It's also I call it
Speaker 6: the mental exploration because our guests are material travelers. They're
Speaker 6: seeing most things in life, but now here's a chance
Speaker 6: of sort of reliving things they'd only read about before.
Speaker 6: So it's it's a it's a great thing to do
Speaker 6: to do, and we are different. We are so different
Speaker 6: from the others that that. A couple of years ago
Speaker 6: we even dropped cruises from our name, so we are
Speaker 6: now just playing Viking.
Speaker 1: So you know what, what I understand about your business
Speaker 1: that you know is different from some of the others,
Speaker 1: is you're not just ocean. You're in you have a
Speaker 1: river cruise line and expedition well, and.
Speaker 2: I would imagine necessarily the focus is right.
Speaker 5: Because yeah, the two, the two, the two are about
Speaker 5: our equal size.
Speaker 6: We started as a river company in Russia, of all
Speaker 6: places that that we we we are now about fifty
Speaker 6: to fifty. We're an ocean and the expedition business is very,
Speaker 6: very nice too. I took my first vacation twenty five
Speaker 6: years over Christmas and I went to Antarctica and somebody asked.
Speaker 5: Me where we did like to go next? I really
Speaker 5: like to go back. It was a phenomenal experience.
Speaker 1: Talk to me about the labor because so many industries
Speaker 1: have suggested that that labor is one of the real
Speaker 1: challenges they face. Is that also the case with your company?
Speaker 1: And if so, how do you deal with it?
Speaker 6: You know, if I say no, that's a little bit
Speaker 6: strong maybe, But the point is that during pandemic we
Speaker 6: took care our staff. We didn't do like the others
Speaker 6: and sent them all home. We took care of our
Speaker 6: staff greatly, so we didn't have any problems starting up people.
Speaker 6: Other travel companies have had big issues getting restarted, and
Speaker 6: we didn't have that quite frankly, so I think we
Speaker 6: are we are. We're quite different, you know, we are.
Speaker 6: I can call it family control company, but we have
Speaker 6: to financial shoulders too.
Speaker 5: But but you can say we are not a conglomerates.
Speaker 6: We're not part of a conglomerate, and we can generally
Speaker 6: say that we you know, customers do come first. And
Speaker 6: when I said customers come first, maybe I should even
Speaker 6: say our staff come first. So we we we have
Speaker 6: very good ratings by our guests.
Speaker 5: They love our staff. Ships is one thing.
Speaker 6: But the way we deal with the staff and the
Speaker 6: way our staff deals with I guess the second or none,
Speaker 6: it's very different.
Speaker 2: I wonder a little bit about you and how this
Speaker 2: company started. You briefly alluded to the fact that I
Speaker 2: guess what your first cruise was river cruise in Saint Petersburg, Russia,
Speaker 2: or at least the business started there. And now your
Speaker 2: headquarters I believe, are in Basel, but you're clearly Norwegian.
Speaker 2: So how does this all work out? How did it
Speaker 2: all work out?
Speaker 6: Yeah, Well, I've had a long life in the cruise
Speaker 6: industry and I've done a lot of things in my life,
Speaker 6: but my heart had always been and with cruises. I
Speaker 6: ran a company called Royal Viking Line once upon a time,
Speaker 6: and I thought it'd be nice if we could recreate
Speaker 6: something something like it. It was the cruise line of
Speaker 6: the times in the eighties, but somebody went ahead bought
Speaker 6: it and destroyed it.
Speaker 5: So I said, maybe I could have a chance of
Speaker 5: recreating it.
Speaker 6: But I've had a life, you know, full of ups
Speaker 6: and downs, and that's called life in my vocabulary.
Speaker 5: And we're very pleaseful where we are now.
Speaker 6: Of course, it's been a phenomenal success, and we're doing
Speaker 6: it because there's some things that make us stand out.
Speaker 6: We have one brand, not part of a conglomerate. We
Speaker 6: have no children on board, no casinos, no Nicholin diming,
Speaker 6: and then there's only one language on board our ships,
Speaker 6: so it's not this mixture of everything.
Speaker 5: We are very clear as to what we do.
Speaker 1: So what are some of the popular destinations right now.
Speaker 6: Towards I say Europe remains popular and we have a
Speaker 6: very more than half our cruises involved Europe, and you
Speaker 6: can see even Europe in the winter is quite okay.
Speaker 6: Now we have you can go to Norway and see
Speaker 6: the Northern lights. The weather can be a little bit rough,
Speaker 6: but you know, to see the Northern lights from a
Speaker 6: ship in Norway is fantastic.
Speaker 5: Of course. The other thing we have is we have
Speaker 5: started an operation in Egypt.
Speaker 6: We were there now and a couple of months ago
Speaker 6: to take delivery of new ships. We have by far
Speaker 6: the greatest ships on the Nile River. I think we
Speaker 6: have four now and we have another for cooming. So
Speaker 6: the Nile is extremely popular. As a matter of fact,
Speaker 6: it's virtually sold out for next year twenty four, and
Speaker 6: it's pretty much sold out for much sold out for
Speaker 6: twenty twenty five.
Speaker 5: Even so we have now had to open twenty twenty six.
Speaker 2: That's it's an amazing.
Speaker 1: Up and down the Nile.
Speaker 2: It's the only place I've ever gone on a cruise.
Speaker 5: I was there.
Speaker 6: It was forty two degrees centigrade and that's a FO
Speaker 6: one hundred and four far a night or something. It
Speaker 6: sounds terrible, but the heat is dry and to be
Speaker 6: on the Nile and have the wind, the breeze in
Speaker 6: your in your face.
Speaker 5: It's it's so we decided, hey, we can do this
Speaker 5: in August.
Speaker 2: How has the Russian invasion of Ukraine at all impacted
Speaker 2: your business?
Speaker 5: Yeah, we have. As I said, we start our business
Speaker 5: in Russia, so we still have five ships there. They're
Speaker 5: doing nothing.
Speaker 6: Of course, we have to take care of our staff
Speaker 6: so that so that when this will reopen, whenever that
Speaker 6: will be, they'll be ready to go. Of course they
Speaker 6: need they need to feed their families too, So it's
Speaker 6: have five ships doing nothing is not fun. It it's
Speaker 6: not such a large part of our business anymore. And
Speaker 6: we have one ship in Ukraine. It has been in Odessa.
Speaker 6: It has still is there at least the last things
Speaker 6: I saw on television.
Speaker 5: But who knows. It's a terrible situation for everybody involved.
Speaker 2: What about the China situation? Have you got I know
Speaker 2: you have Chinese flags over some of your ships. Are
Speaker 2: they cruising?
Speaker 6: Yes, we started in twenty nineteen or a couple of
Speaker 6: years before that. In twenty nineteen we had four river
Speaker 6: ships in Europe with Chinese staff, Chinese food and Chinese
Speaker 6: sign it and the guests are all one language. That's
Speaker 6: all the mantra we have when we do something. It's
Speaker 6: important that people travel like the people. Then we have
Speaker 6: had one of our ocean hips that have been part
Speaker 6: of become part of a joint venture with China Emergence
Speaker 6: that is now operating between between Shanghai and Japan, and
Speaker 6: we'll be going between chen Chin and Vietnam. But you
Speaker 6: can say the startup after Code and China as being
Speaker 6: a bit slow, but of course when you look at
Speaker 6: the potential for the Chinese market, it's huge. We have
Speaker 6: had we have had the consulting firms assessed what is
Speaker 6: huge mean, and when we look at it, it's huge.
Speaker 6: So it's just a matter of being prepared to take
Speaker 6: some losses for a couple of years and then we'll
Speaker 6: be all through the races.
Speaker 1: All right, tours, We're gonna have to leave it there.
Speaker 1: But thank you so much. We really appreciate getting your time.
Speaker 1: Fascinating discussion towards Hagen, CEO and Chairman of Viking. It's
Speaker 1: not Viking cruises, it's Viking, so we're going to go
Speaker 1: with that. That makes a lot of it's a fascinating discussion.
Speaker 1: We appreciate getting some of towards his time.
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
Speaker 2: at Matt Miller nineteen seventy three.
Speaker 1: And I'm Fall Sweeney. I'm on Twitter at pt Sweeney.
Speaker 1: Before the podcast, you can always catch us worldwide at
Speaker 1: Bloomberg Radio