WEBVTT - FAA Chief Says Boeing’s Repeat Lapses Led to Tighter Oversight 0:00:01.360 --> 0:00:05.720 This is Bloomberg business Week Inside from the reporters and 0:00:05.880 --> 0:00:09.440 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business, finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:18.760 Podcast with Carol Messer and Tim Stenebek from Bloomberg Radio. 0:00:19.760 --> 0:00:21.800 It's another big Dame which we find Boeing once again 0:00:21.840 --> 0:00:24.959 in the spotlight, this time up on Capitol Hill, the 0:00:24.960 --> 0:00:29.560 Federal Aviation Administration's top official pledging to hold Boeing accountable 0:00:29.800 --> 0:00:32.479 for any quality lapses as the agency examines the US 0:00:32.560 --> 0:00:36.479 plane makers manufacturing processes following a near disaster on an 0:00:36.479 --> 0:00:40.800 Alaska Airlines flight last month. Here's FA Administrator Mike Whittaker 0:00:40.840 --> 0:00:42.800 before US lawmakers earlier today. 0:00:43.600 --> 0:00:47.640 The events of January fifth, it really created two issues 0:00:47.680 --> 0:00:51.400 for us, what's wrong with this airplane? But two what's 0:00:51.400 --> 0:00:54.320 going on with the production at Boeing. And there have 0:00:54.440 --> 0:00:57.120 been issues in the past and they don't seem to 0:00:57.120 --> 0:00:59.840 be getting resolved, so we feel like we need to 0:00:59.880 --> 0:01:01.520 have of a heightened level of oversight. 0:01:02.000 --> 0:01:06.040 That's FAA Administrator Mike Whitaker before US lawmakers earlier today. 0:01:06.280 --> 0:01:08.640 Boeing shares they are up now, but are down nearly 0:01:08.680 --> 0:01:12.160 sixteen percent since news of the incident. Meantime, another new 0:01:12.240 --> 0:01:15.120 risk looms, a labor rift ten years in the making, 0:01:15.560 --> 0:01:19.319 and also yesterday news on some misdrilled holes on the 0:01:19.360 --> 0:01:21.600 seven thirty seven. Carol, let's get to the interview. 0:01:21.680 --> 0:01:24.880 Let's do it with us George Ferguson Bloomberg Intelligence senior Aerospace, 0:01:24.920 --> 0:01:28.240 Defense and Airlines analysts out there in OURBI headquarters in Princeton, 0:01:28.240 --> 0:01:31.039 New Jersey. Also back with us Bloomberg News Projects and 0:01:31.080 --> 0:01:34.760 Investigations reporter Peter Robinson. He's also author of Flying Blind, 0:01:34.840 --> 0:01:37.000 the seven thirty seven Max tragedy in the. 0:01:36.920 --> 0:01:37.600 Fall of Boeing. 0:01:37.680 --> 0:01:42.039 He's on Zoom out there in Seattle. All right, FA oversite, 0:01:42.040 --> 0:01:44.240 what more are we learning? And George, let's start with 0:01:44.240 --> 0:01:46.520 you about the tone and tenor of the FAA when 0:01:46.560 --> 0:01:47.480 it comes to Boeing. 0:01:49.000 --> 0:01:50.560 I mean, I think what we heard today was the 0:01:50.560 --> 0:01:54.680 administrator told us that until now it's been largely auditing 0:01:55.080 --> 0:01:59.320 and not a physical presence at Boeing, and now they're 0:01:59.320 --> 0:02:02.160 going to have an he's presence or physical presence at Boeing, 0:02:02.680 --> 0:02:05.720 and it's spirit Arrow systems. I think there's there's still 0:02:05.720 --> 0:02:07.760 a lot more to be learned here, right, there in 0:02:07.760 --> 0:02:12.400 the middle of conducting some surveys and such that I 0:02:12.400 --> 0:02:15.960 think are going to guide what level of oversight they're 0:02:16.000 --> 0:02:19.040 actually physically going to have on the ground. But there's 0:02:19.160 --> 0:02:21.120 absolutely going to be a presence of the FAA again 0:02:21.160 --> 0:02:22.120 at Spirit and Bowing. 0:02:22.639 --> 0:02:24.760 I want to bring in Peter Robinson, the author of 0:02:24.800 --> 0:02:27.120 Flying Blind, the seven thirty seven Max tragedy in the 0:02:27.120 --> 0:02:30.480 fall of Boeing. He joins us on Zoom from Seattle. Hey, Peter, 0:02:30.800 --> 0:02:32.680 just a headline crossing in the last few minutes that 0:02:32.800 --> 0:02:36.400 Boeing's key seven thirty seven supplier, that's Spirit Ero Systems 0:02:36.440 --> 0:02:39.520 to tie CEO pay closer to quality. There's a long 0:02:39.680 --> 0:02:43.480 history of Spirit Aerosystems and Boeing going back many many years. 0:02:43.600 --> 0:02:46.959 Ultimately it was spun off just about twenty years ago, 0:02:47.520 --> 0:02:49.480 close to twenty years ago. At this point, I should say, 0:02:50.040 --> 0:02:54.520 does tying executive pay to quality? Is that the type 0:02:54.520 --> 0:02:56.399 of thing that will move the needle here? 0:02:58.040 --> 0:03:01.600 I mean, it's certainly something that you would hope does 0:03:02.120 --> 0:03:06.560 change CEO behavior. As you pointed out, this is a 0:03:06.600 --> 0:03:10.320 problem that's been many, many years in the making, where 0:03:10.320 --> 0:03:13.800 many of these seven thirty seven production problems are happening 0:03:13.919 --> 0:03:18.600 is at a separate company called Spirit, which Boeing used 0:03:18.639 --> 0:03:22.760 to own, and it was Boeing Wichita and since then, 0:03:22.880 --> 0:03:27.839 Spirit has had a very difficult time keeping costs low 0:03:27.960 --> 0:03:31.919 enough and meeting the pressure to keep costs low as 0:03:32.000 --> 0:03:35.520 part of as it's positioned in a different part of 0:03:35.520 --> 0:03:36.840 the production system. 0:03:37.240 --> 0:03:39.760 Right, we do have another headline from the Spirit Aero 0:03:39.760 --> 0:03:42.120 CEO now behaving as if we were part of Boeing. 0:03:42.280 --> 0:03:45.800 Also that Boeing seven thirty seven MAX nine accident report 0:03:45.840 --> 0:03:47.840 released by US investigators, so we'll look for some more 0:03:47.840 --> 0:03:51.920 headlines on that. Having said that, Peter, this seven thirty 0:03:51.920 --> 0:03:55.160 seven MAX program, why are there so many ongoing issues? 0:03:55.200 --> 0:03:57.680 It's just because it's the dominant program for Boeing right now, 0:03:57.720 --> 0:04:00.400 or what is it? 0:04:00.760 --> 0:04:03.840 I think it does go back all those decades. It's 0:04:03.920 --> 0:04:08.240 Boeing's attempt to change its entire production system and it 0:04:08.280 --> 0:04:13.080 really lost control of the production system. This incredibly important 0:04:13.120 --> 0:04:16.480 part of Boeing that makes the fuselage was no longer 0:04:16.520 --> 0:04:19.760 part of Boeing. So when you're dealing with a different company, 0:04:20.200 --> 0:04:22.920 you have an extra layer of overhead, you have an 0:04:22.960 --> 0:04:28.160 extra layer of management, you have a lot of wrinkles 0:04:28.160 --> 0:04:31.480 in the process. That were there before, And as that 0:04:31.800 --> 0:04:36.920 headline suggests, if this company were part of Boeing, some 0:04:36.960 --> 0:04:39.320 of these issues may not have happened. You had a 0:04:39.320 --> 0:04:43.600 lot of rework happening, arguments over the rework. It created 0:04:44.120 --> 0:04:47.040 a lot of difficult coordination issues that both companies are 0:04:47.080 --> 0:04:47.880 still wrestling with. 0:04:48.160 --> 0:04:51.400 Peter, does it call into question Boeing suppliers with other 0:04:51.440 --> 0:04:54.080 relationships as well, and sort of the whole structure of 0:04:54.120 --> 0:04:56.960 the way that a plane is put together. It's the 0:04:57.000 --> 0:04:59.800 sum of its parts, and Boeing is doing the ultimate manufacturing. 0:05:00.480 --> 0:05:03.479 These parts come from all over the world. 0:05:04.880 --> 0:05:05.240 It does. 0:05:05.320 --> 0:05:07.720 And just referring to another one of those headlines, which 0:05:08.000 --> 0:05:12.520 is a story by my colleage Julie Johnson, where the 0:05:12.560 --> 0:05:15.920 machinists are asking for a forty percent raise in their 0:05:15.920 --> 0:05:20.560 next contract. That's really a result of Boeing squeezing them 0:05:20.640 --> 0:05:23.320 very hard the last time this contract was negotiated in 0:05:23.360 --> 0:05:26.840 twenty fourteen, where those workers had to take a four 0:05:26.880 --> 0:05:31.440 percent increase in pay over essentially a decade. And many 0:05:31.480 --> 0:05:35.799 studies have shown that the experience of your labor workforce 0:05:35.880 --> 0:05:41.160 in aerospace directly affects productivity and there's a strong correlation 0:05:41.320 --> 0:05:46.440 there and at Spirit, especially after the pandemic, they've lost 0:05:46.480 --> 0:05:51.039 a number of workers trying to retrain new workers and 0:05:50.400 --> 0:05:53.719 that's very costly and difficult, and it leads to a 0:05:53.760 --> 0:05:56.440 lot of work being done out of sequence, which increases 0:05:56.480 --> 0:05:58.080 the risk of quality problems. 0:05:58.240 --> 0:06:00.160 All right, we fixed our technical glitch that we had 0:06:00.240 --> 0:06:03.040 with our George Ferguson. Obviously, glitches are much easier sometimes 0:06:03.040 --> 0:06:05.120 for us to fix than Boeing. We understand that there 0:06:05.120 --> 0:06:07.520 are a lot of moving parts and a lot at play. George, 0:06:07.520 --> 0:06:10.880 of course, Bloomberg Intelligence senior Aerospace, Defense and Airlines analysts 0:06:10.880 --> 0:06:14.640 out there at OURBI headquarters in Princeton. You've been listening 0:06:14.640 --> 0:06:17.839 to the conversation here. You do wonder, you know, and 0:06:17.880 --> 0:06:21.400 we've talked with you before, George, and I just want 0:06:21.440 --> 0:06:24.279 to mention NTSB. Now a headline says Alaska Air Bowing 0:06:24.320 --> 0:06:27.520 Max nine door plug was missing the bolts. So obviously 0:06:27.640 --> 0:06:29.479 we're just going to continue to get some headlines here. 0:06:30.200 --> 0:06:34.159 When you think about this program this way forward for Boeing, 0:06:35.440 --> 0:06:38.360 it's so important, you know obviously that they get it right. 0:06:38.640 --> 0:06:40.800 But I also think about the importance as being the 0:06:40.880 --> 0:06:44.000 largest US exporter right of the United you know, how 0:06:44.040 --> 0:06:46.360 important it is for the US as a country, as 0:06:46.360 --> 0:06:48.320 a government that Boeing kind of gets it back together 0:06:48.400 --> 0:06:48.760 as well. 0:06:50.360 --> 0:06:54.240 Yeah, I think it's critically important they are aerospace champion. 0:06:55.040 --> 0:06:59.120 We want to be a competitor in commercial aerospace, commercial 0:06:59.160 --> 0:07:02.480 aircraft manufacturing. There's lots of countries around the world that 0:07:02.520 --> 0:07:05.040 want to be in this business as well. You know, 0:07:05.160 --> 0:07:07.080 the Chinese want to be in the business with Comac. 0:07:07.600 --> 0:07:10.040 They're working on coming up the curve in the business. 0:07:10.400 --> 0:07:14.640 The Japanese do a lot of subcontracting to Boeing. I think, 0:07:15.000 --> 0:07:16.760 you know, they have one of their own airplanes they 0:07:16.800 --> 0:07:19.320 were trying to develop a couple of years ago. They'd 0:07:19.360 --> 0:07:21.480 like to be in the business. The Brazilians have their 0:07:21.920 --> 0:07:25.920 their aircraft. Everybody knows that it's high value manufacturing. It's 0:07:25.960 --> 0:07:29.400 good paying jobs. I think it's good for the you know, 0:07:29.440 --> 0:07:32.920 the economy of these countries build strength in their engineering 0:07:33.000 --> 0:07:35.560 talent pool, and so I think it's critical that the 0:07:35.680 --> 0:07:39.000 US maintains a lead in this business. It's a strong 0:07:39.040 --> 0:07:41.080 source of economic activity. 0:07:41.240 --> 0:07:42.960 George, help me understand a little perspective. 0:07:42.960 --> 0:07:45.360 We're good about doing that here at Bloomberg in terms 0:07:45.400 --> 0:07:47.280 of context, and I think about my dad, who is 0:07:47.320 --> 0:07:50.040 an engineer aerospace, you know, said it's probably safer to 0:07:50.040 --> 0:07:51.320 get in a plane than it is to get in 0:07:51.360 --> 0:07:51.680 your car. 0:07:51.800 --> 0:07:52.680 Having said that. 0:07:52.600 --> 0:07:56.760 When there's an accident, it really and rightfully so gets 0:07:56.800 --> 0:07:58.920 a lot of attention. I mean, how do you think 0:07:58.920 --> 0:08:02.320 about what's happening with Boeing against kind of the broader 0:08:02.880 --> 0:08:04.200 plane industry. 0:08:04.640 --> 0:08:07.000 I mean, is it like, how do you kind of 0:08:07.000 --> 0:08:09.880 put it in its place? If you will so. 0:08:09.840 --> 0:08:11.800 I mean, if you think about sort of the broader 0:08:12.040 --> 0:08:15.880 manufacturing industry. One of the ways I think about about 0:08:15.920 --> 0:08:17.640 Boeing is that, you know, I think going back to 0:08:18.360 --> 0:08:21.920 you know the speaker too, it's you know, it's this 0:08:22.000 --> 0:08:24.760 is one of those industries where people really really matter. 0:08:25.800 --> 0:08:28.440 It's not a it's you know, in the US, I 0:08:28.480 --> 0:08:31.120 think a lot of times we like to build jigs 0:08:31.200 --> 0:08:34.880 or we use capital equipment, you know, tools that help 0:08:34.960 --> 0:08:38.000 the worker build a product and help control the quality 0:08:38.120 --> 0:08:41.040 as they as we make that product. And that works 0:08:41.080 --> 0:08:44.280 really well for things like auto manufacturing, where you're putting 0:08:44.280 --> 0:08:46.880 four hundred thousand units through a factory in a year. 0:08:47.440 --> 0:08:50.480 These are not factories that are that high a volume, 0:08:50.960 --> 0:08:54.520 so it's hard to get you know, machine tools customized 0:08:54.600 --> 0:08:57.640 machine tools to pay for themselves. And sometimes a lot 0:08:57.679 --> 0:09:01.120 of the curves and situation as you're manufacturing and are 0:09:01.200 --> 0:09:03.920 really hard you know, to get access to. So it's 0:09:03.920 --> 0:09:06.600 hard for a machine tool there too. Actually, you know, 0:09:06.679 --> 0:09:10.079 the Spirit CEO talked about that today on the call. 0:09:10.800 --> 0:09:13.640 So it comes down to having really skilled people on 0:09:13.800 --> 0:09:17.320 the line that can do the job, and that means 0:09:17.320 --> 0:09:18.920 you have to build into them, you have to train them. 0:09:19.320 --> 0:09:22.080 You also have to make sure they're strong supervision of them. 0:09:22.280 --> 0:09:25.719 And I think before the pandemic we had enough of 0:09:25.760 --> 0:09:30.520 the older talent pool in aerospace manufacturing that we maybe 0:09:30.559 --> 0:09:33.760 we didn't need as much supervision, Maybe we didn't need 0:09:33.800 --> 0:09:36.400 as much training because they've been there for years and 0:09:36.480 --> 0:09:39.120 years and years. That's turned over since then, and so 0:09:39.200 --> 0:09:43.120 now that old playbook doesn't work anymore. Plus a lot 0:09:43.120 --> 0:09:46.679 more of this supply chain is going international, and now 0:09:47.120 --> 0:09:49.320 you know, these companies have to control for what's coming 0:09:49.360 --> 0:09:52.640 out of out of factories in Malaysia and in Korea 0:09:52.720 --> 0:09:53.360 and in Japan. 0:09:54.320 --> 0:09:56.200 Come a lot more complex. Yeah, it is a lot 0:09:56.200 --> 0:09:57.960 more complex. It's something that we've spoken a lot about, 0:09:58.040 --> 0:10:00.880 especially now that these engineers. If you're interested in this 0:10:00.920 --> 0:10:02.640 type of thing. You're not just going to go look 0:10:02.679 --> 0:10:04.599 at Boeing as a place to work after college. You 0:10:04.640 --> 0:10:06.800 could go work for SpaceX, you could go work for 0:10:06.840 --> 0:10:08.959 Blue Origin, you could go work for many of the 0:10:09.080 --> 0:10:11.560 number of companies down in southern California that are doing 0:10:11.679 --> 0:10:15.319 really interesting stuff. Boeing has a lot of competition for talent. Hey, Peter, 0:10:15.400 --> 0:10:17.079 I want to bring you back in here and just 0:10:17.120 --> 0:10:19.240 talk a little bit about the defense portion of Boeing 0:10:19.320 --> 0:10:22.040 and how that kind of changes the story. Last year, 0:10:22.240 --> 0:10:26.520 Boeing brought in twenty five billion dollars in revenue from defense, 0:10:26.600 --> 0:10:31.000 space and security. It's an absolutely huge government contractor how 0:10:31.000 --> 0:10:33.199 does that change the story about the way lawmakers are 0:10:33.240 --> 0:10:35.320 thinking about Boeing and what it needs to do to 0:10:35.360 --> 0:10:36.480 dig itself out of this hole. 0:10:38.640 --> 0:10:40.280 Well, I mean, you could make an argument that it's 0:10:40.280 --> 0:10:44.520 too big to fail. It's so critical to the military 0:10:44.760 --> 0:10:47.319 and to you know, as George was saying to the 0:10:48.600 --> 0:10:53.200 industrial base of the country, that there needs to be 0:10:53.240 --> 0:10:57.280 a solution of some kind worked out. And it's especially 0:10:57.400 --> 0:11:02.000 telling that Boeing moved its headquarters to Arlington, Virginia, which 0:11:02.080 --> 0:11:05.120 which perhaps shows where it expects to be spending a 0:11:05.160 --> 0:11:07.640 lot of its time and resources in coming years. 0:11:07.880 --> 0:11:10.000 All right, So then the story on the Bloomberg about 0:11:10.040 --> 0:11:11.760 you know kind of one of the next risks for 0:11:12.000 --> 0:11:16.600 Boeing specifically is a fight with its largest union, you know, 0:11:16.720 --> 0:11:18.960 long in the making. So George, you know, they're looking 0:11:19.000 --> 0:11:22.480 for forty percent pay raises. They're willing it sounds like 0:11:22.559 --> 0:11:24.959 to go on strike. They don't want to do it. 0:11:25.240 --> 0:11:28.240 But are they right in these pay demands? And how 0:11:28.240 --> 0:11:30.480 does that kind of squeeze Boeing even more? 0:11:31.679 --> 0:11:34.599 I mean, look, labor is getting these kind of increases, 0:11:34.800 --> 0:11:38.480 you know, at other places besides Boeing, Spirit Aerosystems. Labor 0:11:38.480 --> 0:11:40.960 already got their increase as well. They live in an 0:11:41.040 --> 0:11:44.160 environment that was much more inflationary. They've gone through a 0:11:44.160 --> 0:11:47.160 patch of inflation that's raised prices, you know, compared to 0:11:47.240 --> 0:11:50.440 pre pandemic, and so I do think they deserve it. 0:11:50.720 --> 0:11:53.880 And you know, these contracts only come up every so often. 0:11:53.920 --> 0:11:55.760 Like you said, it's been a decade in the making. 0:11:56.320 --> 0:11:59.800 So their union leaders aren't going to walk away from 0:12:00.200 --> 0:12:03.000 an increase here just because Boeing is having some challenges. 0:12:03.280 --> 0:12:05.400 Those workers can go other places, like you said, there's 0:12:05.400 --> 0:12:09.960 other aerospace manufacturers they can go to there's tech companies 0:12:10.040 --> 0:12:12.800 up in the in the Northwest. You know, those workers 0:12:13.000 --> 0:12:15.400 need to get paid what the you know, what the 0:12:15.400 --> 0:12:18.000 prevailing rate is, and yeah, they deserve it and they're 0:12:18.040 --> 0:12:19.000 they're probably going to get it. 0:12:19.040 --> 0:12:20.960 Peter, come on in on the labor issue and what 0:12:21.040 --> 0:12:23.320 you think that might mean for Boeing going forward. 0:12:25.080 --> 0:12:28.800 You could argue that the leverage is in the union's hands. 0:12:28.800 --> 0:12:32.000 This time in twenty fourteen, it was very low inflation. 0:12:32.559 --> 0:12:36.400 Boeing had the work for the Triple seven X which 0:12:36.440 --> 0:12:38.920 it was threatening to move out of state, and that 0:12:39.120 --> 0:12:41.680 was seen as a real serious risk to many people 0:12:41.720 --> 0:12:44.200 in the union, so they, you know, sort of grudgingly 0:12:44.240 --> 0:12:47.600 went along with the package. Now, you know, Boeing critically 0:12:47.640 --> 0:12:50.280 needs these workers to dig itself out of this hole. 0:12:50.480 --> 0:12:54.000 So it's it's it's hard to see this not leading 0:12:54.080 --> 0:12:56.200 to the union having a lot of leverage in these talks. 0:12:56.240 --> 0:12:58.280 Hey guys, one last question, just got about forty five 0:12:58.320 --> 0:13:01.160 to fifty seconds left here, George, overhang of this when 0:13:02.120 --> 0:13:03.559 I don't know, how are you looking at it? Is 0:13:03.600 --> 0:13:05.320 this going to be six months from now we're still 0:13:05.360 --> 0:13:07.320 talking about this or six months do you think Boeing 0:13:07.360 --> 0:13:08.720 will have turned the corner just quickly. 0:13:09.400 --> 0:13:10.959 Well, I think the costs are going to last for 0:13:11.000 --> 0:13:13.600 a while, and you know, the quality needs to be 0:13:13.640 --> 0:13:16.040 fixed long term. So we'll be talking about this in 0:13:16.080 --> 0:13:17.000 six months, Peter. 0:13:16.880 --> 0:13:18.200 Come on in on that as well. 0:13:20.160 --> 0:13:22.040 I also expect to be talking about this in six 0:13:22.080 --> 0:13:24.959 months that the union contract expires in September. 0:13:25.360 --> 0:13:26.839 Peter, I think there's a second book here. 0:13:26.880 --> 0:13:30.400 I'm just going to say, guys, certainly a story that 0:13:30.559 --> 0:13:32.319 is an important one and one that we continue to 0:13:32.360 --> 0:13:36.160 really appreciate your input. Bloomberg Intelligence Senior Airpit, Space, Events 0:13:36.200 --> 0:13:40.080 and Airlines analyst, George Ferguson out there on BI headquarters 0:13:40.120 --> 0:13:44.640 in Princeton. Peter Robison, Robinson, excuse me, Bloomberg News Projects 0:13:44.640 --> 0:13:47.000 and Investigations reporter, author of Flying Blind. 0:13:47.320 --> 0:13:49.200 And if you are just joining us, we should not 0:13:49.240 --> 0:13:52.079 a headline just crossing the Bloomberg terminal. The Boeing seven 0:13:52.200 --> 0:13:55.240 thirty seven Max in Alaska air accident back on January 0:13:55.240 --> 0:13:58.240 fifth was missing bolts. For bolts that acted as a 0:13:58.280 --> 0:14:01.320 fail safe mechanism to hold a paine in place weren't 0:14:01.360 --> 0:14:03.800 installed on the Boeing seven thirty seven Max nine jet. 0:14:04.040 --> 0:14:07.439 That's according to a preliminary report from the National Transportation 0:14:07.600 --> 0:14:08.280 Safety Board. 0:14:09.040 --> 0:14:12.600 You're listening to the Bloomberg Business Week podcast. Catch us 0:14:12.640 --> 0:14:15.880 Live weekday afternoons from two to five pm Eastern Listen 0:14:15.920 --> 0:14:18.080 on Apple car Play and then brout Auto with a 0:14:18.080 --> 0:14:28.440 Bloomberg Business app or want us Live on YouTube. 0:14:29.640 --> 0:14:32.840 Well, small businesses the backbone of the US economy. Government 0:14:32.880 --> 0:14:35.680 data shows that these companies account for two of every 0:14:35.880 --> 0:14:38.640 three jobs that have been added in the past twenty 0:14:38.640 --> 0:14:39.040 five years. 0:14:39.080 --> 0:14:41.240 Yeah, it's important and the most reading or the most 0:14:41.240 --> 0:14:43.360 recent reading, I should say, on the small business community. 0:14:43.360 --> 0:14:45.920 It found that US small business optimism ticked up to 0:14:45.960 --> 0:14:49.720 a five month high in December, largely reflecting less pessimism 0:14:49.760 --> 0:14:53.760 around sales, earnings trends and economic expectations. That reading just 0:14:53.880 --> 0:14:55.680 about one month ago. We're going to get another read 0:14:55.880 --> 0:14:59.080 a US small business optimism about one week from today. 0:14:59.080 --> 0:15:00.560 But we actually are going to get one in just 0:15:00.600 --> 0:15:01.720 about five seconds. 0:15:02.040 --> 0:15:03.760 That's because our next guest is a member of that 0:15:03.800 --> 0:15:06.160 all important engine of the US economy. Very pleased to 0:15:06.160 --> 0:15:08.480 have back with us, Christina Stemble. She's founder of farm 0:15:08.520 --> 0:15:11.480 Girl Flowers. It's a business that if you're a listener 0:15:11.520 --> 0:15:13.680 of viewer of the program, you certainly know it. Well, 0:15:13.840 --> 0:15:16.240 it's also a business that she bootstrapped some twelve years 0:15:16.280 --> 0:15:19.120 ago and is built into a thirty million dollar business. 0:15:19.120 --> 0:15:22.240 She's joining us here in the Bloomberg Interactive Brokers studio. Christina, 0:15:22.320 --> 0:15:23.400 Welcome back to New York. 0:15:23.480 --> 0:15:25.640 Thanks thanks for having me. I love talking about business, 0:15:25.680 --> 0:15:26.640 the business of flowers. 0:15:26.760 --> 0:15:28.920 Well, how is he here? How is the business of flowers? 0:15:28.920 --> 0:15:29.960 How is your world right now? 0:15:30.080 --> 0:15:30.240 Yeah? 0:15:30.280 --> 0:15:32.040 I mean we're gearing up for Valentine's Day, which is 0:15:32.040 --> 0:15:35.440 always a lot of pressure. You know, it's the second 0:15:35.520 --> 0:15:37.320 largest holiday of the year for us, so there's a 0:15:37.360 --> 0:15:38.160 lot of anticipation. 0:15:38.360 --> 0:15:40.480 Remind us what percentage of your revenue comes from just 0:15:40.560 --> 0:15:41.240 Valentine's Day. 0:15:41.320 --> 0:15:43.440 It's lower than you think. It's about fifteen percent, but 0:15:43.600 --> 0:15:45.200 Mother's Day goes up to about twenty percent. 0:15:45.280 --> 0:15:47.880 Okay, so that's five thirty five percent of all of 0:15:47.920 --> 0:15:49.360 your revenue from two different days. 0:15:49.320 --> 0:15:50.120 Yes, in two weeks. 0:15:50.160 --> 0:15:52.280 Basically are those the two biggest holidays? 0:15:52.360 --> 0:15:52.560 Yes? 0:15:52.880 --> 0:15:53.480 Absolutely? 0:15:53.600 --> 0:15:56.840 All right, So okay, a favor like back out the 0:15:56.880 --> 0:15:59.120 holiday stuff because right, there's expectations around that. 0:15:59.240 --> 0:16:01.640 But in general, when you look at the US. 0:16:01.400 --> 0:16:04.640 Consumer, how have they been ordering just kind of on 0:16:04.760 --> 0:16:06.880 every other day or just normal days, if you will. 0:16:06.960 --> 0:16:09.720 Normal days are down. I wish I had the optimism 0:16:09.800 --> 0:16:11.880 that the reports are showing right now and that I think. 0:16:12.240 --> 0:16:15.520 I think I'm optimistic about next year, So I think 0:16:15.600 --> 0:16:18.160 maybe that's where something's coming from. Like you know, after COVID, 0:16:18.240 --> 0:16:21.800 post COVID, I think that there's been so much change constantly, 0:16:21.840 --> 0:16:23.520 and like, you know, where are we going to settle out? 0:16:23.880 --> 0:16:25.600 And I think, you know the economy right now, we're 0:16:25.600 --> 0:16:29.160 in a gifting market, so the gifting holidays are especially 0:16:29.240 --> 0:16:31.440 important for us. We have to do really well in 0:16:31.440 --> 0:16:35.160 those gifting holidays because the everyday consumer isn't isn't consuming 0:16:35.200 --> 0:16:38.040 as much, they aren't sending as many gifts since we're 0:16:38.080 --> 0:16:38.840 in the gifting space. 0:16:38.960 --> 0:16:40.480 When did you notice this change? 0:16:41.440 --> 0:16:43.200 I mean twenty twenty one. I mean we've been going 0:16:43.200 --> 0:16:45.080 since twenty twenty one on this, so you know we were. 0:16:45.120 --> 0:16:47.320 Jumping the size finding since twenty twenty. 0:16:47.040 --> 0:16:49.880 One, Yes we have, but intentionally so we could still 0:16:50.280 --> 0:16:51.960 mean intentional intentionally we're focusing. 0:16:51.960 --> 0:16:52.960 You know, I'm really. 0:16:52.760 --> 0:16:56.000 Excited to see the market change a bit from growth 0:16:56.040 --> 0:16:58.560 at all costs, you know, all like small businesses, startups, 0:16:58.560 --> 0:17:00.600 everything they ay was all about growth at all costs. 0:17:00.640 --> 0:17:03.720 Just have those top line revenue numbers grow exceedingly fast. 0:17:04.000 --> 0:17:06.440 And now we're focused on profitability. So and I feel 0:17:06.440 --> 0:17:08.280 like everybody has kind of changed their ways a little 0:17:08.280 --> 0:17:09.280 bit since we're bootstrapped. 0:17:09.280 --> 0:17:09.560 What is it? 0:17:09.600 --> 0:17:09.760 Wait? 0:17:09.840 --> 0:17:12.120 What is it that Zuckerberg says? The Year of efficiency? 0:17:12.240 --> 0:17:15.719 Yeah, but I mean it's carrying, it's bleeding into this 0:17:15.800 --> 0:17:18.159 definitely with layoffs you see still happening, you know, at 0:17:18.160 --> 0:17:21.560 a pretty rapid rate. People are you know, it's it's 0:17:22.119 --> 0:17:23.600 you have to be efficient. You have to run very 0:17:23.600 --> 0:17:25.960 efficiently to make you know, make any profit this year. 0:17:26.040 --> 0:17:29.760 Remind us about your staffing and your supply chain, Like, 0:17:29.760 --> 0:17:31.240 give us an idea of what that picture is. 0:17:31.280 --> 0:17:34.240 Our supply chain has changed four times since twenty twenty, 0:17:34.520 --> 0:17:37.280 so we are constantly changing it to adapt with what 0:17:37.320 --> 0:17:41.199 the market demands are and supply chain availability is. So 0:17:41.560 --> 0:17:43.400 twenty twenty we had a boom. You know, we're over 0:17:43.440 --> 0:17:45.400 sixty million and twenty twenty is you know. 0:17:45.359 --> 0:17:47.720 I said flowers during the pandemic. Yes, yea, yeah, and 0:17:47.760 --> 0:17:49.919 we all probably did. And people to send I know, 0:17:50.080 --> 0:17:54.560 I know you can send flower bread, wait, bake bread. 0:17:54.359 --> 0:17:57.560 Baked bread, drink wine, send flowers. 0:17:57.200 --> 0:18:00.320 Wine, souredough and flowers, sotead of this. That was the year, right, 0:18:00.400 --> 0:18:02.399 So I think you know there was that, but supply 0:18:02.480 --> 0:18:04.040 chain was really hard, so then you have to shift 0:18:04.080 --> 0:18:05.960 and go closer to the flowers. We're buying a lot 0:18:05.960 --> 0:18:08.880 more in North America at that time. Now we still 0:18:08.920 --> 0:18:11.520 are buying more North America closer to home. 0:18:11.760 --> 0:18:14.639 Was that because planes weren't coming so sore they're not. 0:18:14.680 --> 0:18:17.040 These are not planes that are exclusively filled with flowers. 0:18:17.040 --> 0:18:19.480 These are planes that sometimes have people on them, yes, 0:18:19.920 --> 0:18:22.240 And it's hard to shift this stuff if those planes 0:18:22.240 --> 0:18:22.760 aren't flying. 0:18:22.800 --> 0:18:25.480 Absolutely, So unless you're going to charter a plane from Europe, 0:18:25.800 --> 0:18:27.760 you know, when there weren't as many planes going twenty twenty, 0:18:27.800 --> 0:18:29.520 you would have to figure out other ways to get flowers, 0:18:29.680 --> 0:18:31.720 you know too, So we were literally in box trucks 0:18:31.720 --> 0:18:34.200 picking up flowers that time, you know. And then you 0:18:34.240 --> 0:18:37.040 know things have shifted. Supply chain's gotten better, but everything's 0:18:37.040 --> 0:18:40.200 gotten more expensive. So then you're also you know, outbound transportation, 0:18:40.480 --> 0:18:42.600 you know, went from about twenty six percent of our 0:18:42.640 --> 0:18:47.360 revenue to forty one percent, right, spike really just you know, 0:18:47.800 --> 0:18:49.879 I would let you know, I guess I don't know 0:18:49.920 --> 0:18:51.440 if I should say those, but I think it's also 0:18:51.760 --> 0:18:54.480 linked to stock prices for those companies in twenty twenty. 0:18:54.520 --> 0:18:56.280 If you look at those for you can you know. 0:18:56.200 --> 0:19:00.399 Go there, because I've stations with some publicly held companies 0:19:00.440 --> 0:19:02.880 as well, and just talking about prices like why are 0:19:02.880 --> 0:19:06.280 they still so high, and smart people scratching their head 0:19:06.280 --> 0:19:09.120 and just wondering where the folks are keeping prices high 0:19:09.119 --> 0:19:10.280 because they can. 0:19:10.680 --> 0:19:12.760 I mean, I think that things have gotten more expensive. 0:19:12.800 --> 0:19:15.159