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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is Bloomberg Intelligence with Alex Steinhl and Paul'sweeny.

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Speaker 3: The real ap performance has been in US corporate high yield.

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Speaker 4: Are the companies lean enough? Have they trimmed all the fats?

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Speaker 3: The semiconductor business is a really cyclical business.

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Speaker 2: Breaking market headlines and corporate news from across the globe.

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Speaker 4: Do investors like the M and A that we've seen?

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Speaker 3: These are two big time blue chip companies.

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Speaker 4: The window between the peak and cut changing super fast.

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Speaker 2: Bloomberg Intelligence with Alex Steinhl and Paul'sweenye on Bloomberg Radio.

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Speaker 3: On Today's Bloomberg Intelligence Show, we dig inside the big

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Speaker 3: business stories impacting Wall Street and the global markets.

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Speaker 4: Each and every week we provide in depth research and

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Speaker 4: data on some of the two thousand companies and one

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Speaker 4: hundred and thirty industries our analysts cover worldwide.

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Speaker 3: Today we'll look at why Boeing is predicting a massive

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Speaker 3: cash drain.

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Speaker 4: Plus well discuss how high power costs are impacting the

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Speaker 4: European economy.

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Speaker 3: But first we dive into consumer products and ice cream.

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Speaker 3: Oh yeah.

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Speaker 4: Earlier in the week, Unilever set of plants to separate

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Speaker 4: it's ice cream business and cut seventy five hundred jobs.

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Speaker 4: This comes as the company seeks to boost profits and

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Speaker 4: jumpstart sluggish growth in the UK.

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Speaker 3: For more at guest host Molly Smith and I were

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Speaker 3: joined by Bloomberg Intelligence analysts Deborah Aiken and Duncan Fox.

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Speaker 4: Debra senior analyst for Global Luxury Goods and Duncan Fox

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Speaker 4: is a consumer products analyst.

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Speaker 3: I first asked Duncan for more context on what's going

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Speaker 3: on with Unilever.

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Speaker 5: I think if you go back two years, they thought

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Speaker 5: about it then when they sort of pushed it into

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Speaker 5: five divisions and it was thought that they may sell

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Speaker 5: it off or ipo it. So it's really coming back

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Speaker 5: to the table. I think it was impossible back in

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Speaker 5: twenty two because you had food inflation going not for

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Speaker 5: the charts, So I don't think anybody would do it dead,

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Speaker 5: do anything with it. But it's a business thirty is

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Speaker 5: very capital intensive. They've got an excellent market share twenty percent,

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Speaker 5: so the globe leader by some way. But it's one

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Speaker 5: that I suppose if you want to refocus, you leave

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Speaker 5: as a whole. It's a low margin business. We look

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Speaker 5: at it against the HBC business so I can see

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Speaker 5: why they would consider either selling or ibo in the business.

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Speaker 6: It does make sense in deep so you've been finding

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Speaker 6: the retail space for a while. What do you make

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Speaker 6: of all this?

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Speaker 7: I think we can go back to the big offer

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Speaker 7: that you never had and the way that since then,

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Speaker 7: over the last few years, they've had a couple of

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Speaker 7: CEOs that just haven't done what the market had hoped.

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Speaker 7: It's always been a wonder over whether beauty and personal

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Speaker 7: care actually fitted with food and refreshments. And I think

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Speaker 7: the market probably expects. Duncle and I were just talking

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Speaker 7: that nutrition would be the next to go, actually, but

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Speaker 7: they can't both go at the same time. So it

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Speaker 7: really does make sense because you're left with businesses which

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Speaker 7: quickly they say end of twenty twenty five. So it's

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Speaker 7: typical a little bit slow churn from Unilever in the

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Speaker 7: way that they operate. But under the new CEO, Heinz Schumacher,

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Speaker 7: combined with trans and Nelson Pelts on the board and

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Speaker 7: the way that he turned around P and G, Mondalize

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Speaker 7: and others, that we would expect to see this business

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Speaker 7: returned to hopefully the top end of a three to

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Speaker 7: five percent organic cells growth and two high teams. Digit

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Speaker 7: are just at operate in margin, which is where they

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Speaker 7: used to focus until a few years ago, until that

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Speaker 7: inflation came in and until they just couldn't pass it

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Speaker 7: through in developed markets. They do much better in developing.

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Speaker 3: So duncan talk to us about the ice cream business.

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Speaker 3: Is it a good business?

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Speaker 5: Well, I think so. I mean you can't be to

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Speaker 5: a magnumh and you're on the way home, but'll say

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Speaker 5: it is a global leader pretty much in every geography.

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Speaker 5: I think so only number two in Latin America they

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Speaker 5: have leadership. And you said it's capital intensive because about

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Speaker 5: half of that global I think it's about an eighty

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Speaker 5: seven billion dollar business globally, and half of that is

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Speaker 5: through food service or impulse buying. So that's why you've

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Speaker 5: got to get everything right on the distribution. On my whole,

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Speaker 5: it looks like a Unilever holding or gaining market share

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Speaker 5: in most of the regions. So they're running it well.

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Speaker 5: But it does come down to innovation and actually that distribution.

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Speaker 5: We've just got to get it right making sure that

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Speaker 5: we can buy particularly impulse that product when you wanted

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Speaker 5: on the way home generally, so it can be a

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Speaker 5: bit weather dependent, and that's what makes it tricky, I

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Speaker 5: think to sell because if you're the leader, are there

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Speaker 5: to be shot at, So they've got to make sure

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Speaker 5: they keep investing. Current management team seems to be doing

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Speaker 5: that so good business. So I think an IPO seems

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Speaker 5: the most sensible way to go forward.

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Speaker 6: To be fair, I mean personally, I would say ice

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Speaker 6: cream is a twenty a year round to treat exactly.

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Speaker 5: Maybe that's just why I agree with exightly. It tends

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Speaker 5: to start at Easter, would you believe so for two

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Speaker 5: weeks time is the start of the season, So.

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Speaker 6: We're getting into high season for ice cream, I might say.

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Speaker 6: I mean the flip side of all this, though, is

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Speaker 6: the job cuts looking at about seventy five hundred, A

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Speaker 6: lot of those in middle management. I mean, how many

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Speaker 6: companies have we seen that that's really where so many

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Speaker 6: of the job cuts are targeted at. Can you tell

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Speaker 6: us a little bit about that deb and the productivity

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Speaker 6: gains that Unilever's looking to get from these job cuts.

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Speaker 8: Yeah.

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Speaker 7: I think in October Unilever did highlight that they had

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Speaker 7: a growth action plan and part of that was to

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Speaker 7: drive top line and to really look at how they

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Speaker 7: were implementing their productivity gains, so already ahead of this

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Speaker 7: announcement on ice cream, there's been a new strategic group

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Speaker 7: in place making not to change not just in ice

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Speaker 7: cream but across the four of the businesses, but particular

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Speaker 7: cularly ice cream and refreshments when they separated from three

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Speaker 7: business units over to five in twenty twenty two, ice

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Speaker 7: cream in terms of profitability, and also actually homecare, which

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Speaker 7: they have there for now in which they need to

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Speaker 7: do much with with two lowest margin areas. So in

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Speaker 7: terms of what they're doing and the way forward, I

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Speaker 7: think that we see that productivity savings. They had a

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Speaker 7: one percent savings project one percent sales as a project

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Speaker 7: cost savings project in place. They say that they will

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Speaker 7: drive eight hundred million of savings for one point two

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Speaker 7: percent productivity on the cost side of sales over three years.

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Speaker 7: I worked that out on MODL to come in and

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Speaker 7: around a zero point four billion net positive but over

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Speaker 7: a three year period. And on the back of that,

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Speaker 7: actually I think there'll be more savings to be had,

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Speaker 7: but a deeper disposal plan across the four of the

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Speaker 7: businesses too.

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Speaker 3: Are Thanks to Bloomberg Intelligence analysts Deb Achon and Duncan Fox.

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Speaker 4: We move now to weight loss drugs. It looks as

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Speaker 4: if the drug makers Novo Nordisks and Eli Lilly have

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Speaker 4: a powerful new allies. They conquered the eighty billion dollar

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Speaker 4: obesity shot market, and that ally is former Weight Watchers

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Speaker 4: spokeswoman Oprah Winfrey.

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Speaker 3: Winfrey recently appeared on ABC special with executives from Novo

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Speaker 3: Nordisk and Eli Lilly for more on what all of

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Speaker 3: this means. Guest host Molly Smith and I were joined

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Speaker 3: by Madison Muller, Bloomberg News health reporter. We first asked,

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Speaker 3: what's Oprah's role here with these drugmakers.

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Speaker 9: We're used to seeing Oprah as the face of weight

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Speaker 9: Watchers obviously for the last almost a decade, and she

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Speaker 9: said recently that she was exiting the board of Weight

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Speaker 9: Watchers and then she said that it was to avoid

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Speaker 9: potential perceptions of conflict of interest. And then she's doing

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Speaker 9: this special now which was all about weight loss.

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Speaker 3: She did special on ABC Television.

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Speaker 9: Yeah, on ABC.

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Speaker 3: Was it a paid promotion or it was not?

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Speaker 9: Novo Nordisks said that they didn't have any you know,

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Speaker 9: financial anything to do with Oprah really, and she's not

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Speaker 9: you know, two, our knowledge doesn't have a partnership with

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Speaker 9: either of the drug manufacturers. But you know, people that

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Speaker 9: were watching the show and were on Twitter sort of

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Speaker 9: reacting to it said that it watched and seemed sort

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Speaker 9: of like an infomercial for the drugs.

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Speaker 6: Yeah, tell us a little bit more about who was

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Speaker 6: on it. You were telling us that there were some doctors,

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Speaker 6: but maybe they kind of glanced over the side effects

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Speaker 6: a bit and that this was really just a big,

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Speaker 6: you know, hype up moment for these weight loss drugs.

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Speaker 9: Yeah, so they heard from patients, There were doctors, There

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Speaker 9: were executives from Nova Noordisk and Eli Lilly on the

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Speaker 9: program as well. The majority of the program was sort

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Speaker 9: of centered on patient experiences with these drugs, but it

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Speaker 9: really didn't get into details about the side effects, sort

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Speaker 9: of glossed over them, and the doctor that they had

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Speaker 9: on talking about them said that the side effects were overhyped.

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Speaker 3: Really, So again that kind of goes to the editorial

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Speaker 3: integrity of it.

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Speaker 9: I mean, I'm not a journalist, but really, yeah, I mean,

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Speaker 9: are real journalist. Yes, there was definitely I think that

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Speaker 9: it served and Oprah is on these drugs. She's had

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Speaker 9: a great experience with them, so she says, and that's

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Speaker 9: sort of what the program was centered around, and really

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Speaker 9: spoke to that positive experience on the drugs.

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Speaker 6: So what are Oprah's feelings toward weight Watchers right now?

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Speaker 6: I mean, this is, like you said, she has been

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Speaker 6: the face of that company for so many years and

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Speaker 6: now just like really seems to be doing like, you know,

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Speaker 6: a total one to eighty and that weight Watchers would

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Speaker 6: probably be on the losing end of the success of

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Speaker 6: these drugs.

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Speaker 9: Yeah, yeah, and she asked, I mean, weight Watchers CEO

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Speaker 9: was on this program, and she asked a very pointed question,

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Speaker 9: you know, what is the role and what's the point

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Speaker 9: of weight Watchers now that we have these medications, which

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Speaker 9: I think is sort of the question that the whole

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Speaker 9: industry has been asking, and the diet industry and analysts

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Speaker 9: and everyone, and you know, weight Watchers CEO said that

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Speaker 9: there is still a role for them to play in

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Speaker 9: supporting the community of sporting people's weight loss journeys. But

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Speaker 9: I guess that still sort of remains to be seen.

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Speaker 3: I really I hesitate to ask this question, but since

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Speaker 3: you reported on it, what is ozembic face.

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Speaker 9: Yes, so Ozembic face is another sort of trend that

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Speaker 9: we're seeing happen right now, especially here in New York.

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Speaker 9: People who have rapid weight loss from the weight loss

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Speaker 9: drugs are getting this hollowed out look in their cheeks,

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Speaker 9: which I mean, it happens with weight loss. It's not

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Speaker 9: just from the drugs, but it's the rapid weight loss

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Speaker 9: that sort of makes it more noticeable. So then they're

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Speaker 9: seeking out plastic surgery clinics, medspots to get botox or

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Speaker 9: facelifts and sort of help offset those effects.

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Speaker 6: Add that to the list of all the winners and

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Speaker 6: losers off what comes out of ozempic. I mean we've

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Speaker 6: I mean the original kind of knock on effect was like, oh,

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Speaker 6: you know all the potato chip companies, right, maybe not

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Speaker 6: so good for them, And now plastic surgery coming up.

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Speaker 6: So it's just like the hollowing out of your face.

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Speaker 6: You've got the saggy skin.

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Speaker 9: There and yeah, yeah, like the extra loose skin. Ab View,

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Speaker 9: which makes botox has said that this could be a potential,

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Speaker 9: you know, boon for botox sales going forward, said that

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Speaker 9: at earnings last quarter.

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Speaker 6: So it's like I can't keep up.

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Speaker 3: Yeah, So on these GLP drugs. Where are we in

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Speaker 3: terms of, let I know someone who has a prescription,

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Speaker 3: but this person cannot get it filled because there's not

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Speaker 3: enough supply where and it is not me? Where are

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Speaker 3: they not ensured?

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Speaker 8: Right?

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Speaker 3: Yeah, so that two questions, Yeah, where are we on

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Speaker 3: ramping up supply to meet demand? And then secondarily who

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Speaker 3: pays for this stuff? Yeah?

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Speaker 9: I mean the supply problem has been a huge issue

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Speaker 9: and Nova Noordas, Skinnela, Lily are investing billions of dollars

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Speaker 9: to ramp up supply to try to meet demand. But

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Speaker 9: you know, I've seen an analyst notes they're like the

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Speaker 9: demand for these products just seems like it's insatiable. And

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Speaker 9: at this point they're already coming from behind. So and

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Speaker 9: all of these investments in production capacity like take a

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Speaker 9: couple of years to come online, so we're sort of

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Speaker 9: just still racing to keep up with it. It's you know,

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Speaker 9: probably Lily said, is probably going to be you know,

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Speaker 9: not this year that they're able to meet supply, maybe

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Speaker 9: next year. So we're still still trying to ramp up

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Speaker 9: the supply there and then and in terms of paying

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Speaker 9: for it, we have like I think fifty percent of

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Speaker 9: commercial plans cover the drugs for obesity. A third of

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Speaker 9: state health plans through Medicaid cover the drugs. Medicare does

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Speaker 9: not cover weight loss drugs, so it's very patchy still

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Speaker 9: and a lot of people are paying out of pocket.

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Speaker 3: Our thanks to Madison Muller, Bloomberg News Health reporter.

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Speaker 4: All right, coming up, we're going to break down why

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Speaker 4: Boeing is predicting a massive cash strain.

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Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in

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Speaker 3: research at data on two thousand companies and one hundred

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Speaker 3: and thirty industries. You can access Bloomberg Intelligence via b

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Speaker 3: I go on the terminal. I'm Paul Sweeney, m Alex Steel, and.

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Speaker 4: This is Bloomberg.

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Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 2: weekdays at ten am Eastern on applecar Playing and Broudoto

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Speaker 2: with the Bloomberg Business app. Listen on demand We're wherever

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Speaker 2: you get your podcasts, or watch us live on YouTube.

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Speaker 4: Move next to the aerospace industry and Boeing. This week,

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Speaker 4: Boeing predicted a massive cash strain for the first quarter.

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Speaker 3: Boeing Chief financial Officer Brian West said cash out flow

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Speaker 3: will reached four billion to four and a half billion

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Speaker 3: in the first quarter. Analyst had expected five billion.

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Speaker 4: C Yelller reflects a shifting priorities over at Boeing, the

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Speaker 4: company's grappling with the aftermath of a near catastrophic fuselage

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Speaker 4: failure on a seven thirty seven Max nine aircraft earlier

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Speaker 4: this year.

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Speaker 3: For more in all of this, we were joined by

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Speaker 3: George ferguson Bloomberg Intelligence, senior Aerospace, Defense and Airlines analysts.

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Speaker 3: We first asked George for context on what's going on

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Speaker 3: at Boeing.

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Speaker 5: Well, I mean, I.

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Speaker 10: Think we heard it from Brian West, you know. Besides,

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Speaker 10: I think the cash flow guidance he provided he provided

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Speaker 10: few details about anything else. And so he describes a

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Speaker 10: lot of processes, you know, processes at the FAA to

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Speaker 10: get airplanes certified, processes and refining, the manufacturing process, curing,

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Speaker 10: you know, the excess outsourcing they've probably done over the

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Speaker 10: last couple of decades. I think what you really get

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Speaker 10: is a sense of a company that's in a state

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Speaker 10: of a lot of flucks. The market likes the fact

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Speaker 10: that he talked about casual being positive by the end

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Speaker 10: of the year, so it sounds like they've got a

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Speaker 10: pretty nice ramp up in you know, sort of resuming

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Speaker 10: build rates at their factories across the year. That was

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Speaker 10: better than what I expected. But again, the storyline inside

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Speaker 10: the company is still one that's all about flux and

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Speaker 10: not about details. So I just wonder, I think I

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Speaker 10: got a sense there's some risk in that cashalow projection.

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Speaker 3: So, George, you've covered Boeing for decades here, can you

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Speaker 3: recall a time when maybe they're they've had these quality

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Speaker 3: issues before? Is this how unprecedented is these you know,

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Speaker 3: last couple of years, Really.

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Speaker 10: I think thoroughly unprecedented. Right, So, even as I was

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Speaker 10: leaving Blackrock, you know, the during the global financial crisis,

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Speaker 10: I remember Boeing stock was down at thirty three dollars

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Speaker 10: a share, pretty cheap than what it is today. That

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Speaker 10: the discussion then was just about like a defense portfolio,

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Speaker 10: who products really weren't that modern, and angst about the

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Speaker 10: company's future, but not these kind of problems inside their

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Speaker 10: manufacturing business, which is the core business of this company. Right,

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Speaker 10: it's an engineering and manufacturing company. If you can't manufacture

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Speaker 10: things well in aerospace, that's a bad sigen. So I

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Speaker 10: don't think it's ever been this bad ever.

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Speaker 4: So just to recap at a Bank of America conference

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Speaker 4: in London, the CFO, so the cash outflow is going

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Speaker 4: to reach four to four and a half billion in

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Speaker 4: the first quarter. Analysts we're looking for maybe five billion

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Speaker 4: plus and like you said that maybe we'll get cash

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Speaker 4: flow positive by the end of the year. That was

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Speaker 4: the indication from Boeing, do we believe Okay, that's not

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Speaker 4: the right question. How did they come up with this estimate?

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Speaker 4: Like what are the factors that go into this kind

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Speaker 4: of estimate.

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Speaker 10: That's exactly we don't know, right, And so some of

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Speaker 10: you it's all about deliveries. It's all about deliveries of

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Speaker 10: commercial airplanes. I heard. What I thought was, we're going

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Speaker 10: to be at rate thirty eight by the end of

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Speaker 10: the year, which is the rate they should have probably

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Speaker 10: built out all year long, and then we'll move to

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Speaker 10: the next higher rate that's thirty eight a month, sorry

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Speaker 10: on the seven thirty seven, and we'll move to the

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Speaker 10: next higher rate when the FAA lets us. So our

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Speaker 10: view at Bloomberg Intelligence of what we think build rates were,

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Speaker 10: I can tell you we have factored in a fourth

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Speaker 10: quarter at rate thirty eight. But it sounds like quarter

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Speaker 10: one is going to be a really rough quarter, so

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Speaker 10: they'll have to pull a lot of things back together

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Speaker 10: to get rate back to thirty eight by the end

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Speaker 10: of the year.

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Speaker 4: I think it's feels like everything has to go right, yeah,

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Speaker 4: for that to happen, Paul, And as we.

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Speaker 3: Know, that never happened. Never happens. But George, you've told

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Speaker 3: us in the past, in the airspace business, there is

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Speaker 3: no hey, we did a pretty good job on this plane.

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Speaker 3: It has to be perfect every single time, otherwise it's disastrous.

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Speaker 3: And they from their customers perspective, Georgie, if I'm a

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Speaker 3: big buyer, like a Southwest or United, what am I

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Speaker 3: saying to these guys? I mean, I fly thousands of

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Speaker 3: these planes every single day in my fleet. What am

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Speaker 3: I telling the Boeing these days?

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Speaker 10: Yeah, so you're watching very very closely. Of course you're

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Speaker 10: telling Boeing the quality is job one. Safety quality is

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Speaker 10: job one. But if you're especially if you're like a

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Speaker 10: Southwest or a Ryanair where you're a pure fleet, right,

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Speaker 10: you really can't afford your most important supplier to have

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Speaker 10: problems like this. So I think you're quietly coaching them

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Speaker 10: to improve things hoping for better. But you're probably biting

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Speaker 10: your nails a little bit, right because if there's it

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Speaker 10: continues to be serious problems. You're not switching to airbus,

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Speaker 10: you know, overnight. And I don't know that those people

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Speaker 10: are considering it. I'm not saying that they are, but

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Speaker 10: you got to be concerned. You've got to be watching

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Speaker 10: very closely.

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Speaker 3: George. Let's talk about the other half of your research coverage,

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Speaker 3: which is the airlines themselves. I just flew Newark to

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Speaker 3: Salt Lake City seven thirty seven Max eight fully packed

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Speaker 3: to the gills both ways. How are the airlines doing

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Speaker 3: these days?

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Speaker 10: Yeah, so in one queue, I think a bunch of

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Speaker 10: them are going to show losses. They they're filling airplanes

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Speaker 10: because I think the revenue managers never let airplanes go

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Speaker 10: down the runway with almost, you know, being entirely full.

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Speaker 10: But everything what counts, as you know, the most, is

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Speaker 10: going to be the ticket prices. And you know, when

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Speaker 10: we looked at four Q as we closed out of

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Speaker 10: four Q, the biggest challenge to the higher revenue that

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Speaker 10: they were bringing in was all about these higher pilot salaries.

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Speaker 11: Right.

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Speaker 10: They gave a bunch away to the pilots and so

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Speaker 10: while we're all paying more for the ticket, the pilot's

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Speaker 10: getting more in the front seat. They probably deserve it.

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Speaker 10: They work pretty hardilot's so happy you do. Actually, So

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Speaker 10: profitability is still challenged compared to what we saw last decade.

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Speaker 10: I think fares would have to go even higher, and

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Speaker 10: we've seen them softening a bit. This summer. Could be

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Speaker 10: a little bit better for the airlines, if you know,

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Speaker 10: if we have a bunch of Airbus A three twenties

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Speaker 10: out of the market because of the gear turbo fan problems,

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Speaker 10: if Boeing deliveries are slowing down capacity gains in the marketplace,

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Speaker 10: it could be a little bit better. But we're not

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Speaker 10: looking at an environment where we think they're going to

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Speaker 10: see twenty nineteen levels of profitability, not twenty nineteen, you know,

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Speaker 10: even last decade levels of profitability this summer. So I'd

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Speaker 10: say profits still a little bit weak. As the airlines recover,

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Speaker 10: I think there might be just too much capacity in

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Speaker 10: the marketplace.

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Speaker 3: Our Thanks to George ferguson Bloomberg Intelligence senior aerospace, defense

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Speaker 3: and airlines analysts, we move next.

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Speaker 4: To the chip space. This week, the US Commerce Department

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Speaker 4: announced that it will award the tech company Intel eight

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Speaker 4: and a half billion dollars in grants and as much

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Speaker 4: as eleven billion dollars in loans. It's a preliminary agreement

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Speaker 4: to help fund an expansion of Intel semiconductor factories.

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Speaker 3: Intel is the first company to land a funding deal

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Speaker 3: from the twenty twenty two Chips and Science Act for

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Speaker 3: Advanced chip making facilities. The Chips Act set aside billions

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Speaker 3: in grants to persuade chip companies to build factories on

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Speaker 3: American soil.

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Speaker 4: For more on this, we were joined by Mackenzie Hawkins,

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Speaker 4: a Bloomberg News US industrial reporter, and we first asked

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Speaker 4: for some context here on the Intel story.

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Speaker 11: Biden signed the Chips Act into law in August twenty

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Speaker 11: twenty two. Companies have been waiting for you know, well

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Speaker 11: owned for a year to see those fund start flowing

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Speaker 11: out the door. They haven't actually flowed out the door yet.

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Speaker 11: Intel's awards just a preliminary agreement, and it will be

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Speaker 11: likely until the end of this year that they start

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Speaker 11: to actually see money doled out in tranches. But this

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Speaker 11: is a huge investment in you know, the real leading

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Speaker 11: American ship maker, and I mean these chips will power

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Speaker 11: you know, the AI frenzy. There are the types of

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Speaker 11: chips that go into nuclear missiles and hypersonics, and this

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Speaker 11: is a really significant investment for the company and for

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Speaker 11: the States for their building, including Arizona, Ohio, organ and

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Speaker 11: New Mexico.

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Speaker 4: So, okay, I love covering energy, so I'm really into

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Speaker 4: the IRA And like what you've seen a lot in

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Speaker 4: the IRA is everyone got super excited, but then actually

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Speaker 4: sort of putting shovels in the ground was a lot

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Speaker 4: more difficult. So there's like, yeah, yeah, we're gonna get

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Speaker 4: the money, It's gonna happen, but it's not happening quite yet.

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Speaker 4: How do we think this plays out from the chips act?

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Speaker 4: Like when does Intel put a shovel in the ground.

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Speaker 4: What other companies are trying to put their shovels in

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Speaker 4: the ground and get the funding and will it actually,

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Speaker 4: you know, happen.

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Speaker 11: So Intel's already building these facilities. They've had a twenty

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Speaker 11: billion dollar Arizona expansion underway for some time. They're building

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Speaker 11: multiple fabrication facilities there. They're making some progress in Ohio,

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Speaker 11: although there's been reporting that that's slightly delayed. We expect

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Speaker 11: that construction to finish in twenty twenty six. Intel's rivals

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Speaker 11: Taiwan Semi Conductor Manufacturing Company and Samsung out of South

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Speaker 11: Korea are also building plants in the US. Both of

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Speaker 11: their sites have seen some delays that the companies and

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Speaker 11: the Biden administration insists are in line with typical projections,

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Speaker 11: but time will tell on this one. It will be

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Speaker 11: years before these facilities are stood up. The Commerce Department

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Speaker 11: has set a goal that the US will produce twenty

439
00:21:37,520 --> 00:21:39,679
Speaker 11: percent of the world's advance logic shows by the end

440
00:21:39,680 --> 00:21:43,200
Speaker 11: of the decade. Currently we're at about zero, so that's

441
00:21:43,240 --> 00:21:44,160
Speaker 11: a lot of progress to.

442
00:21:44,119 --> 00:21:44,600
Speaker 5: Catch up on.

443
00:21:44,640 --> 00:21:47,880
Speaker 11: Most of that production's happening in East Asia. The companies

444
00:21:47,920 --> 00:21:50,600
Speaker 11: announced their projects before they got the funding from the

445
00:21:50,600 --> 00:21:53,080
Speaker 11: federal government, but it is certainly their expectation that they

446
00:21:53,119 --> 00:21:55,560
Speaker 11: will receive that funding, and they would like it to happen,

447
00:21:55,720 --> 00:21:57,080
Speaker 11: probably a little bit faster than it did.

448
00:21:57,280 --> 00:21:59,560
Speaker 3: Hem m Caasie. How secure is this funding over time,

449
00:22:00,080 --> 00:22:03,160
Speaker 3: thinking that we may have a new administration in twenty

450
00:22:03,240 --> 00:22:06,399
Speaker 3: twenty five, how secure is this funding and particularly you

451
00:22:06,400 --> 00:22:07,399
Speaker 3: know in the out years.

452
00:22:08,000 --> 00:22:11,280
Speaker 11: It's a great question. So there's a due diligence stage

453
00:22:11,359 --> 00:22:14,280
Speaker 11: and then a final term cheat between Intel and the

454
00:22:14,320 --> 00:22:17,520
Speaker 11: Commerce Department. That will likely come closer to the time

455
00:22:17,560 --> 00:22:20,720
Speaker 11: of the presidential election, and the Commerce Department is setting

456
00:22:20,800 --> 00:22:23,320
Speaker 11: all types of benchmarks that Intel must need for the

457
00:22:23,359 --> 00:22:25,399
Speaker 11: money to be doled out over time. So it's not

458
00:22:25,480 --> 00:22:27,800
Speaker 11: that they get the final agreement and then they get

459
00:22:27,920 --> 00:22:30,159
Speaker 11: eight and a half billion dollars in grants and eleven

460
00:22:30,200 --> 00:22:33,440
Speaker 11: billion dollars worth of loan guarantees. They have to meet

461
00:22:33,480 --> 00:22:36,919
Speaker 11: benchmarks related to production, related to workforce development, and there

462
00:22:36,920 --> 00:22:40,200
Speaker 11: are all types of requirements that Biden's Commerce Department might

463
00:22:40,280 --> 00:22:44,199
Speaker 11: set that a potential from Commerce Department might not be

464
00:22:44,320 --> 00:22:47,160
Speaker 11: as interested in. You've seen saying like child care facilities,

465
00:22:47,160 --> 00:22:51,040
Speaker 11: which Intel and other companies have committed to community development

466
00:22:51,080 --> 00:22:55,000
Speaker 11: agreements all those types of things. It's entirely possible that

467
00:22:55,000 --> 00:22:57,720
Speaker 11: that could shift over time. But the reality is once

468
00:22:57,720 --> 00:22:59,919
Speaker 11: they've got the equipment in the building, these are, you know,

469
00:23:00,119 --> 00:23:03,560
Speaker 11: machines that cost hundreds of millions of dollars. They're committed

470
00:23:03,560 --> 00:23:07,640
Speaker 11: to these facilities, but Intel's CEO Podcastingers said, we might

471
00:23:07,640 --> 00:23:10,000
Speaker 11: need a ship back to two point zero. These companies

472
00:23:10,000 --> 00:23:12,439
Speaker 11: are buying for a lot more money than they currently have.

473
00:23:12,520 --> 00:23:15,000
Speaker 11: The events chipmakers together asked for more than double what

474
00:23:15,000 --> 00:23:17,680
Speaker 11: the Commerce Department has available. So this isn't really something

475
00:23:17,680 --> 00:23:19,520
Speaker 11: to watch over the next couple of years and decades.

476
00:23:20,119 --> 00:23:22,200
Speaker 4: I mean, is President Trump really going to go to

477
00:23:22,240 --> 00:23:24,960
Speaker 4: Ohio and Arizona and Oregon, New Mexico and be like,

478
00:23:25,040 --> 00:23:28,199
Speaker 4: just kidding, I'm going to take this development back. I mean,

479
00:23:28,240 --> 00:23:31,320
Speaker 4: I think that's going to be a tricky proposition, since

480
00:23:31,359 --> 00:23:33,800
Speaker 4: hearing it is so much money. So I just came

481
00:23:33,800 --> 00:23:36,720
Speaker 4: back mackenzie from energy conference basically, and I was just

482
00:23:36,760 --> 00:23:40,320
Speaker 4: telling Paul that all the talk there was that tech

483
00:23:40,320 --> 00:23:42,720
Speaker 4: companies are finally getting wise to the fact that they're

484
00:23:42,720 --> 00:23:45,879
Speaker 4: going to build all this stuff they need power and

485
00:23:45,920 --> 00:23:48,040
Speaker 4: the power isn't as easy to come by as they

486
00:23:48,119 --> 00:23:50,600
Speaker 4: might have thought. Do you hear that at all on

487
00:23:50,640 --> 00:23:53,119
Speaker 4: your industrial side, Like, hey, this is great build all

488
00:23:53,119 --> 00:23:54,879
Speaker 4: these data centers Intel, but like, are you going to

489
00:23:54,920 --> 00:23:56,240
Speaker 4: get that power? What do you plug it in?

490
00:23:57,440 --> 00:24:00,520
Speaker 11: Absolutely, infrastructure is a top concern for these you know,

491
00:24:00,600 --> 00:24:03,200
Speaker 11: a big part of their ability to apply for chips

492
00:24:03,280 --> 00:24:05,880
Speaker 11: X funding is to demonstrate commercial viability and that they

493
00:24:05,920 --> 00:24:09,080
Speaker 11: have buy in from state and local officials to marshal

494
00:24:09,080 --> 00:24:12,600
Speaker 11: the resources necessary to stand up factories that cost tens

495
00:24:12,640 --> 00:24:15,880
Speaker 11: of billions of dollars to build sometimes require entire new

496
00:24:15,920 --> 00:24:20,160
Speaker 11: water pipelines or energy resources. You know, take Arizona, which

497
00:24:20,160 --> 00:24:22,960
Speaker 11: has not just this massive intel expansion but also a

498
00:24:23,080 --> 00:24:27,400
Speaker 11: huge factory to factories under construction from PSMC. Arizona does

499
00:24:27,440 --> 00:24:30,760
Speaker 11: one hundred year water planning. This is a desert and

500
00:24:30,840 --> 00:24:34,480
Speaker 11: so they've had to very carefully plan their water development,

501
00:24:34,720 --> 00:24:37,600
Speaker 11: ensure residents that their water supply is not going to

502
00:24:37,600 --> 00:24:40,879
Speaker 11: be impacted, and I mean down to the land parcels

503
00:24:40,920 --> 00:24:44,479
Speaker 11: in Arizona, they've planned these industrial parks. You see similar

504
00:24:44,520 --> 00:24:47,320
Speaker 11: things happening in Indiana, which is expected to get a

505
00:24:47,400 --> 00:24:50,680
Speaker 11: roughly fifteen billion dollar investment from Spehinex, which is one

506
00:24:50,680 --> 00:24:53,240
Speaker 11: of the main advanced packaging companies out of South Korea.

507
00:24:53,560 --> 00:24:56,840
Speaker 11: That announcement hasn't been formally announced yet on Boo Bloomberg

508
00:24:56,880 --> 00:24:59,080
Speaker 11: has reported on it. So I mean, this is a

509
00:24:59,119 --> 00:25:02,200
Speaker 11: massive infrastructure effort which, as you know, is coming alongside

510
00:25:02,480 --> 00:25:05,159
Speaker 11: a lot of other investments in other sectors coming from

511
00:25:05,200 --> 00:25:09,560
Speaker 11: the Inflation Production Acts, things like UV's batteries, hydrogen wind,

512
00:25:09,640 --> 00:25:12,800
Speaker 11: solar and sort of more traditional heart infratructure from the

513
00:25:12,840 --> 00:25:14,159
Speaker 11: Bipartisan Infrodructor Law.

514
00:25:14,080 --> 00:25:17,240
Speaker 3: Our thanks to Mackenzie Hawkins, Bloomberg News US Industrial Reporter.

515
00:25:17,480 --> 00:25:19,840
Speaker 4: Coming up on the program a conversation with Jim Fiitterling,

516
00:25:20,000 --> 00:25:22,960
Speaker 4: CEO of the Dow Chemical Company, on consumer demand and

517
00:25:22,960 --> 00:25:23,600
Speaker 4: power prices.

518
00:25:23,640 --> 00:25:26,800
Speaker 3: Over in Europe, you're listening to Bloomberg Intelligence on Bloomberg Radio,

519
00:25:26,840 --> 00:25:29,359
Speaker 3: providing in depth research and data on two thousand companies

520
00:25:29,359 --> 00:25:31,800
Speaker 3: in one hundred and thirty industries. You can access Bloomberg

521
00:25:31,800 --> 00:25:34,160
Speaker 3: Intelligence via b I go on the terminal. I'm Paul

522
00:25:34,200 --> 00:25:34,720
Speaker 3: Sweeney and.

523
00:25:34,680 --> 00:25:36,440
Speaker 4: A Malex Steele, and this is Bloomberg.

524
00:25:47,320 --> 00:25:51,200
Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live

525
00:25:51,280 --> 00:25:54,840
Speaker 2: weekdays at ten am Eastern on applecar Play and Android

526
00:25:54,840 --> 00:25:57,600
Speaker 2: Auto with the Bloomberg Business app. You can also listen

527
00:25:57,720 --> 00:26:00,840
Speaker 2: live on Amazon Alexa from our flagship New York station

528
00:26:01,200 --> 00:26:03,960
Speaker 2: Just Say Alexa playing Bloomberg eleven thirty.

529
00:26:05,359 --> 00:26:08,200
Speaker 4: We move next to social media and TikTok, and many

530
00:26:08,359 --> 00:26:10,439
Speaker 4: US citizens are questioning whether they'll be able to use

531
00:26:10,480 --> 00:26:11,439
Speaker 4: the app going forward.

532
00:26:11,680 --> 00:26:14,120
Speaker 3: A swift passage of a house built last week would

533
00:26:14,119 --> 00:26:16,359
Speaker 3: force a sale of TikTok or ban the app in

534
00:26:16,440 --> 00:26:18,760
Speaker 3: the US. The bill would next have to pass through

535
00:26:18,840 --> 00:26:19,800
Speaker 3: the US Senate.

536
00:26:19,600 --> 00:26:21,600
Speaker 4: And this comes as US officials have argued that the

537
00:26:21,680 --> 00:26:25,359
Speaker 4: Chinese government's relationship with TikTok's parent company, by Dance raises

538
00:26:25,480 --> 00:26:26,679
Speaker 4: national security risks.

539
00:26:26,760 --> 00:26:28,800
Speaker 3: Earlier in the week, guest host John Tucker and I

540
00:26:28,800 --> 00:26:32,880
Speaker 3: were joined by Matthew Shuttenhelm Bloomberg intelligence media litigation analyst.

541
00:26:33,160 --> 00:26:34,879
Speaker 3: We first asked him, what's the hold up with the

542
00:26:34,920 --> 00:26:35,879
Speaker 3: bill in the US Senate.

543
00:26:36,320 --> 00:26:40,240
Speaker 1: It's amazing to see the bipartisan support this has. You

544
00:26:40,320 --> 00:26:43,720
Speaker 1: don't see legislation move three hundred and fifty two to

545
00:26:43,800 --> 00:26:46,200
Speaker 1: sixty five like we saw last week in the House.

546
00:26:46,560 --> 00:26:50,840
Speaker 1: You've seen senators on both sides say they want this.

547
00:26:51,200 --> 00:26:54,359
Speaker 1: You've seen Chuck Schumer in the past, the Senate majority leader,

548
00:26:54,400 --> 00:26:57,399
Speaker 1: say he likes the idea of requiring a change in

549
00:26:57,520 --> 00:27:02,200
Speaker 1: ownership of TikTok, So exactly the question now. I think

550
00:27:02,240 --> 00:27:05,520
Speaker 1: the hold up though, is, look, this is an election year,

551
00:27:05,880 --> 00:27:08,399
Speaker 1: and even though you've seen President Biden say, look, get it,

552
00:27:08,480 --> 00:27:10,679
Speaker 1: you know, if it comes to my desk, I'll sign it.

553
00:27:11,280 --> 00:27:14,840
Speaker 1: He also has one hundred and fifty million Americans using

554
00:27:14,880 --> 00:27:18,320
Speaker 1: this app, many of them young people. At a time

555
00:27:18,359 --> 00:27:21,800
Speaker 1: when you have an election coming in November, when every

556
00:27:21,920 --> 00:27:26,280
Speaker 1: vote matters, in particular young people to President Biden. So

557
00:27:26,440 --> 00:27:29,920
Speaker 1: I think this legislation has a chance. I only give

558
00:27:29,920 --> 00:27:33,520
Speaker 1: it a thirty percent chance though this year, And that's

559
00:27:33,560 --> 00:27:37,080
Speaker 1: exactly because of the political risks of November, at a

560
00:27:37,119 --> 00:27:40,200
Speaker 1: time when President Biden doesn't want to risk a potential

561
00:27:40,359 --> 00:27:45,400
Speaker 1: backlash from those young voters. The Senate is controlled by Democrats.

562
00:27:45,840 --> 00:27:49,440
Speaker 1: Senator Chuck Schumer is the majority leader. He decides how

563
00:27:49,520 --> 00:27:53,159
Speaker 1: quickly this moves, and I think the looming election is

564
00:27:53,200 --> 00:27:56,639
Speaker 1: a reason to move slowly. But after that, after this

565
00:27:56,760 --> 00:27:58,879
Speaker 1: election is out of the way, I'd be a little

566
00:27:58,880 --> 00:28:00,160
Speaker 1: more nervous if I were taking.

567
00:28:00,400 --> 00:28:03,560
Speaker 3: So do we have any clear sense of what TikTok

568
00:28:03,800 --> 00:28:06,760
Speaker 3: and byteedance how they're approaching this at this point, like

569
00:28:06,800 --> 00:28:08,560
Speaker 3: what would they presumably do?

570
00:28:09,480 --> 00:28:12,720
Speaker 1: Yeah, so that's a great question. I think we've seen

571
00:28:12,800 --> 00:28:17,479
Speaker 1: indications from China that it would not be willing to

572
00:28:18,040 --> 00:28:22,800
Speaker 1: support a divestiture. Now that could be posturing on that end,

573
00:28:23,119 --> 00:28:25,760
Speaker 1: but I think there's the possibility that if the US

574
00:28:25,840 --> 00:28:29,880
Speaker 1: passes this legislation that requires a divestiture or else there's

575
00:28:30,040 --> 00:28:33,560
Speaker 1: an effective ban, there's a real possibility that China wouldn't

576
00:28:33,600 --> 00:28:37,040
Speaker 1: allow any sort of divestiture like that To happen, so

577
00:28:37,119 --> 00:28:40,400
Speaker 1: you're inevitably in the result of a band. Of course,

578
00:28:40,440 --> 00:28:43,680
Speaker 1: you're also in courts as soon as Congress passes this.

579
00:28:43,840 --> 00:28:47,480
Speaker 1: And you saw Montana pass the TikTok ban last year.

580
00:28:47,640 --> 00:28:50,680
Speaker 1: It got tripped up in court. You saw President Trump

581
00:28:50,760 --> 00:28:53,440
Speaker 1: before he was against this, he actually signed a ban

582
00:28:53,960 --> 00:28:56,600
Speaker 1: of TikTok that was tripped up in the court. So

583
00:28:57,080 --> 00:29:00,479
Speaker 1: once this passes, you still have a tough court challenge coming.

584
00:29:00,680 --> 00:29:03,440
Speaker 1: And so TikTok's first line of defense is going to

585
00:29:03,480 --> 00:29:05,200
Speaker 1: be to see you over this, all.

586
00:29:05,160 --> 00:29:09,600
Speaker 12: Right, So if this ultimately goes to the courts, you've

587
00:29:09,600 --> 00:29:13,880
Speaker 12: got to explain to me, what's the legitimate national security

588
00:29:13,920 --> 00:29:18,320
Speaker 12: threat of me going posting pictures of myself or video

589
00:29:18,320 --> 00:29:22,600
Speaker 12: of myself, you know, redoing my bathroom or Lisa putting

590
00:29:22,640 --> 00:29:23,480
Speaker 12: on her mas scare.

591
00:29:23,800 --> 00:29:26,880
Speaker 1: That's exactly the question the courts are going to be asking.

592
00:29:26,920 --> 00:29:29,640
Speaker 1: And the House went into closed session in committee when

593
00:29:29,640 --> 00:29:32,000
Speaker 1: it talked about this, so so they kind of they

594
00:29:32,000 --> 00:29:35,000
Speaker 1: were secret on the concerns that motivated this. But then

595
00:29:35,040 --> 00:29:37,160
Speaker 1: after they had that closed session, all of a sudden

596
00:29:37,240 --> 00:29:39,400
Speaker 1: it was fifty to zero voting in support. So we

597
00:29:39,400 --> 00:29:43,280
Speaker 1: don't exactly know. I think the concern is that if

598
00:29:43,280 --> 00:29:46,120
Speaker 1: this data is you know, not just you looking at

599
00:29:46,520 --> 00:29:49,080
Speaker 1: at your you know, cat videos or whatever it is,

600
00:29:49,120 --> 00:29:52,880
Speaker 1: but you know, one hundred and fifty million Americans everything

601
00:29:53,040 --> 00:29:55,760
Speaker 1: that they are looking at all of this flow of

602
00:29:55,840 --> 00:29:59,040
Speaker 1: data going to China. Let's China take a look at it.

603
00:29:59,200 --> 00:30:02,200
Speaker 1: There's also a concern on the propaganda side that if

604
00:30:02,360 --> 00:30:06,160
Speaker 1: China can impact sort of the flow of videos, can

605
00:30:06,200 --> 00:30:10,240
Speaker 1: they start to shape thinking and in particular in young people.

606
00:30:10,360 --> 00:30:13,320
Speaker 1: There's two sides of the concern here looking at the

607
00:30:14,040 --> 00:30:17,920
Speaker 1: data about how we're using it and also influencing thought

608
00:30:17,960 --> 00:30:22,760
Speaker 1: potentially by framing messages, by using an algorithm to promote

609
00:30:22,760 --> 00:30:23,880
Speaker 1: certain ideas.

610
00:30:24,160 --> 00:30:27,720
Speaker 3: Our thanks to Matt Sheltenhelm, Bloomberg Intelligence Media Litigation analysts,

611
00:30:27,880 --> 00:30:28,240
Speaker 3: So Paul.

612
00:30:28,320 --> 00:30:30,240
Speaker 4: Earlier this week, I was in Houston and I was

613
00:30:30,320 --> 00:30:33,160
Speaker 4: joined by Jim Fitterling, CEO of the Dow Chemical Company,

614
00:30:33,360 --> 00:30:35,800
Speaker 4: and he talked about consumer demand in US and Europe.

615
00:30:35,800 --> 00:30:37,760
Speaker 4: And he told me that the high price of electricity

616
00:30:37,760 --> 00:30:42,120
Speaker 4: in Europe is hurting customers, consumers, and the European economy.

617
00:30:42,280 --> 00:30:44,720
Speaker 4: In the US though very different story. And I began

618
00:30:44,800 --> 00:30:46,920
Speaker 4: this portion of our conversation by asking Jim if the

619
00:30:47,000 --> 00:30:50,040
Speaker 4: US economy actually needs the FED to cut interest rates

620
00:30:50,120 --> 00:30:50,480
Speaker 4: this year.

621
00:30:50,960 --> 00:30:53,200
Speaker 8: You know, it's starting to feel like the economy is

622
00:30:53,400 --> 00:30:55,680
Speaker 8: gaining a little bit of strength the beginning of the year.

623
00:30:55,760 --> 00:30:56,080
Speaker 8: It's not.

624
00:30:56,840 --> 00:30:57,600
Speaker 7: It's not robust.

625
00:30:57,680 --> 00:30:59,720
Speaker 8: Maybe a little bit early to tell if this is

626
00:30:59,760 --> 00:31:02,200
Speaker 8: a a long term trend, but it's been a decent

627
00:31:02,240 --> 00:31:06,040
Speaker 8: start to the year. Electronics has been a bit stronger

628
00:31:06,080 --> 00:31:08,040
Speaker 8: than last year. Last year was a kind of a

629
00:31:08,040 --> 00:31:11,160
Speaker 8: weak spot, so our outlook is good. Automotive had a

630
00:31:11,160 --> 00:31:14,120
Speaker 8: good year last year, and I think despite the discussion

631
00:31:14,120 --> 00:31:17,400
Speaker 8: around electric vehicles and some of the flat to negative

632
00:31:17,440 --> 00:31:20,320
Speaker 8: sentiment that's in the news, the reality is I think

633
00:31:20,320 --> 00:31:23,160
Speaker 8: it's going to be another good year in the automotive sector.

634
00:31:23,640 --> 00:31:26,959
Speaker 8: Housing has been the slowest start, but there's been an

635
00:31:27,040 --> 00:31:32,000
Speaker 8: uptick in single family home starts, which is good. That

636
00:31:32,120 --> 00:31:34,080
Speaker 8: usually has a ripple effect through a lot of other

637
00:31:34,160 --> 00:31:38,680
Speaker 8: durable goods manufacturing. We haven't seen that yet. So a

638
00:31:38,720 --> 00:31:41,600
Speaker 8: modest good start to the year, and we just see

639
00:31:41,640 --> 00:31:42,440
Speaker 8: how things develop.

640
00:31:42,520 --> 00:31:43,200
Speaker 3: So we're getting there.

641
00:31:43,240 --> 00:31:45,800
Speaker 4: So that begs the question that if we do, say

642
00:31:45,800 --> 00:31:47,880
Speaker 4: get two to three cuts this year, for example, from

643
00:31:47,880 --> 00:31:52,640
Speaker 4: the FED, is your expectation that we see accelerated growth,

644
00:31:52,920 --> 00:31:55,800
Speaker 4: higher infleation, does that actually start more growth?

645
00:31:56,360 --> 00:31:58,480
Speaker 8: Well, I think in the commodity space and in our

646
00:31:58,520 --> 00:32:01,440
Speaker 8: industry in particular, we tend to lead into a slowdown,

647
00:32:01,960 --> 00:32:05,040
Speaker 8: and so we started to lead into this eighteen months

648
00:32:05,760 --> 00:32:08,320
Speaker 8: middle of this year will be twenty four months ago,

649
00:32:08,480 --> 00:32:11,200
Speaker 8: and we typically tend to lead out, and so it's

650
00:32:11,240 --> 00:32:13,640
Speaker 8: too early to say we're coming out, but you can

651
00:32:13,680 --> 00:32:16,200
Speaker 8: start to see shoots that are like when we see

652
00:32:16,200 --> 00:32:19,600
Speaker 8: a recovery, and of course that demand. You know, what's

653
00:32:19,680 --> 00:32:22,320
Speaker 8: missing from the economy right now is a durable goods

654
00:32:22,360 --> 00:32:25,360
Speaker 8: demand and when that and construction demand, and when that

655
00:32:25,440 --> 00:32:28,479
Speaker 8: comes back, those are high volume applications and that demand

656
00:32:28,480 --> 00:32:31,040
Speaker 8: pool is going to mean that prices are going to

657
00:32:31,080 --> 00:32:33,160
Speaker 8: move up a bit. I don't know if I would

658
00:32:33,200 --> 00:32:37,000
Speaker 8: call that necessarily inflationary, but that's just the cycle.

659
00:32:37,640 --> 00:32:38,720
Speaker 4: What do you think it's waiting for.

660
00:32:39,640 --> 00:32:42,280
Speaker 8: I think it's waiting for rate reductions, for the mortgage

661
00:32:42,360 --> 00:32:44,960
Speaker 8: rates to come down. I think that's the next big

662
00:32:45,000 --> 00:32:48,320
Speaker 8: thing that typically triggers a kind of a shoot up

663
00:32:48,360 --> 00:32:51,440
Speaker 8: in the housing market, and then that triggers a lot

664
00:32:51,480 --> 00:32:55,160
Speaker 8: of other services and durable goods demand that comes behind it.

665
00:32:55,360 --> 00:32:58,040
Speaker 4: So we may see a second half recovery. I'm hopeful

666
00:32:58,080 --> 00:33:00,680
Speaker 4: sort of what I'm hearing from it, then hopeful? Is

667
00:33:00,680 --> 00:33:04,520
Speaker 4: it a similar picture over in Europe? So the chemical

668
00:33:04,520 --> 00:33:06,720
Speaker 4: sector in Europe is under a lot of pressure. I mean, INPO,

669
00:33:06,840 --> 00:33:10,280
Speaker 4: costs are high. The economy there is weaker in many

670
00:33:10,320 --> 00:33:11,800
Speaker 4: sense compared to the US.

671
00:33:12,000 --> 00:33:12,680
Speaker 3: What's your take?

672
00:33:13,040 --> 00:33:16,400
Speaker 8: European consumer demand is not nearly as strong as it

673
00:33:16,480 --> 00:33:19,960
Speaker 8: is here in the States, And of course the weight

674
00:33:20,320 --> 00:33:23,440
Speaker 8: of higher energy costs has hit the consumer a lot

675
00:33:23,440 --> 00:33:27,440
Speaker 8: of different ways. Now we're seeing an improvement year over year.

676
00:33:27,680 --> 00:33:31,280
Speaker 8: Obviously energy has come down, but an electricity, you know

677
00:33:31,320 --> 00:33:36,880
Speaker 8: which most consumers purchase electricity costs are double, maybe a

678
00:33:36,880 --> 00:33:39,000
Speaker 8: little bit more than what they are here in the US.

679
00:33:39,480 --> 00:33:42,080
Speaker 8: So I think, you know, there's a big question when

680
00:33:42,120 --> 00:33:45,520
Speaker 8: I look at my downstream customers in Europe, I'm always

681
00:33:45,640 --> 00:33:48,400
Speaker 8: questioning how long will they be there? And if you

682
00:33:48,400 --> 00:33:51,840
Speaker 8: don't have a domestic market to service in Europe, you

683
00:33:51,920 --> 00:33:54,280
Speaker 8: really can't afford to export from Europe. So if you

684
00:33:54,280 --> 00:33:56,760
Speaker 8: don't have a domestic market to service, you have to say,

685
00:33:57,240 --> 00:33:59,160
Speaker 8: you know, what does my footprint need to be? How

686
00:33:59,200 --> 00:34:02,360
Speaker 8: long can I be there in order to be part

687
00:34:02,400 --> 00:34:03,120
Speaker 8: of that economy?

688
00:34:03,240 --> 00:34:04,920
Speaker 4: That's a big deal. I mean that you're talking about

689
00:34:04,960 --> 00:34:08,640
Speaker 4: the automotive industry, construction industry, like, is that going to move?

690
00:34:10,120 --> 00:34:11,240
Speaker 4: What's your best sense?

691
00:34:11,560 --> 00:34:14,160
Speaker 8: A lot of technology comes out of there too, I

692
00:34:14,160 --> 00:34:16,960
Speaker 8: mean beyond just the industry. A lot of the technology

693
00:34:17,000 --> 00:34:20,040
Speaker 8: that we use around the world starts in Europe. And

694
00:34:20,080 --> 00:34:23,600
Speaker 8: so you know, exporting technology obviously is a little bit

695
00:34:23,680 --> 00:34:28,640
Speaker 8: easier than exporting product. But we're already starting to see

696
00:34:29,120 --> 00:34:33,080
Speaker 8: imports of electric vehicles from China into Europe. We're seeing

697
00:34:34,480 --> 00:34:38,440
Speaker 8: China has become a lower cost competitor than Europe in petrochemical,

698
00:34:38,520 --> 00:34:41,480
Speaker 8: so you're starting to see product move into Europe. The

699
00:34:41,480 --> 00:34:44,640
Speaker 8: Middle East obviously has been a big supplier because of

700
00:34:44,680 --> 00:34:48,279
Speaker 8: their cost position into Europe. Europe's getting a bit of

701
00:34:48,280 --> 00:34:51,239
Speaker 8: a reprieve right now because of the Suez Canal situation,

702
00:34:51,400 --> 00:34:53,960
Speaker 8: so operating rates are up a little bit, but I

703
00:34:54,000 --> 00:34:58,160
Speaker 8: think that'll once that Israel Gaza conflict has resolved, then

704
00:34:58,560 --> 00:35:00,000
Speaker 8: we'll see things go back to normal.

705
00:35:00,160 --> 00:35:02,080
Speaker 4: Is it fair to say that you wouldn't build a

706
00:35:02,120 --> 00:35:04,080
Speaker 4: new chemical plant in Europe right now?

707
00:35:04,320 --> 00:35:05,000
Speaker 7: Be very tough.

708
00:35:05,120 --> 00:35:09,000
Speaker 8: You'd have to be in a very specialized downstream market

709
00:35:09,040 --> 00:35:12,279
Speaker 8: that you knew could handle the higher input costs, but

710
00:35:12,560 --> 00:35:14,360
Speaker 8: I would say, in general, be very tough.

711
00:35:14,719 --> 00:35:16,600
Speaker 4: So for you, then let's take a look at inmpleation

712
00:35:16,719 --> 00:35:19,120
Speaker 4: for a second. Where are cost still rising and where

713
00:35:19,160 --> 00:35:19,800
Speaker 4: are they falling.

714
00:35:20,640 --> 00:35:24,120
Speaker 8: You're starting to see some costs, I mean, cost and

715
00:35:24,160 --> 00:35:27,680
Speaker 8: commodities came off pretty dramatically. I think one of the

716
00:35:27,680 --> 00:35:31,400
Speaker 8: reasons we announced our final investment decision on our project

717
00:35:31,440 --> 00:35:33,479
Speaker 8: in Canada at the end of last year was because

718
00:35:33,520 --> 00:35:36,000
Speaker 8: we were able to lock in a lot of bulk

719
00:35:36,040 --> 00:35:42,440
Speaker 8: material costs like steel, concrete, cement, all the things we

720
00:35:42,480 --> 00:35:45,719
Speaker 8: need to build a plan. So I think that's been

721
00:35:45,760 --> 00:35:49,120
Speaker 8: good now. Obviously, as some of this construction demand and

722
00:35:49,160 --> 00:35:52,240
Speaker 8: things come back, that'll tend to rise with the cycle.

723
00:35:52,880 --> 00:35:55,040
Speaker 8: But I think if you looked at the commodity portion,

724
00:35:55,520 --> 00:35:59,279
Speaker 8: a lot of inflation came out of there. If you

725
00:35:59,280 --> 00:36:02,400
Speaker 8: look at the concerns like going to the grocery store,

726
00:36:02,960 --> 00:36:05,520
Speaker 8: some of that hasn't come out yet, and so I

727
00:36:05,560 --> 00:36:08,360
Speaker 8: think we're starting to see that. With the de stalking

728
00:36:08,440 --> 00:36:13,040
Speaker 8: that happened last year, no signs of really restocking in

729
00:36:13,080 --> 00:36:15,520
Speaker 8: the value chain, I think you're going to start to

730
00:36:15,560 --> 00:36:17,840
Speaker 8: see some of that consumer inflation come out to and

731
00:36:17,880 --> 00:36:20,040
Speaker 8: I think that's a little bit what the Fed's looking at.

732
00:36:20,200 --> 00:36:23,920
Speaker 4: Are you worried about tariffs come I don't know November

733
00:36:24,360 --> 00:36:26,840
Speaker 4: January from either president.

734
00:36:27,120 --> 00:36:30,000
Speaker 8: As a global company and as a company that's been

735
00:36:30,040 --> 00:36:34,720
Speaker 8: part of global trade for many, many years, teriffs don't

736
00:36:35,040 --> 00:36:39,359
Speaker 8: stimulate demand anywhere, So I think what would happen under

737
00:36:39,400 --> 00:36:42,560
Speaker 8: a terraff regime is we might not be happy with

738
00:36:42,640 --> 00:36:46,720
Speaker 8: the demand result. Global free trade has been a better

739
00:36:46,800 --> 00:36:50,239
Speaker 8: platform for growth. It's been better for growth, not just

740
00:36:50,280 --> 00:36:53,640
Speaker 8: for the US, and we're advantaged, of course because of

741
00:36:53,719 --> 00:36:57,840
Speaker 8: energy among other things, but it's been great for other countries.

742
00:36:57,880 --> 00:37:00,480
Speaker 8: It's lifted so many people out of poverty, created a

743
00:37:00,480 --> 00:37:05,200
Speaker 8: middle class. It's allowed technology to transfer around the world.

744
00:37:05,640 --> 00:37:07,279
Speaker 4: So it also just mean that you would have to

745
00:37:07,320 --> 00:37:11,560
Speaker 4: produce and use the products in country.

746
00:37:11,640 --> 00:37:11,759
Speaker 3: Right.

747
00:37:11,800 --> 00:37:13,760
Speaker 4: You have to produce and do a crunchry be totally

748
00:37:13,800 --> 00:37:14,919
Speaker 4: separate from each other.

749
00:37:15,120 --> 00:37:18,040
Speaker 8: Right when we have a supply chain today that is

750
00:37:18,080 --> 00:37:21,759
Speaker 8: not US centric and hasn't had time to reshore, so

751
00:37:21,800 --> 00:37:25,160
Speaker 8: that would become inflationary in and of itself. So I think,

752
00:37:25,520 --> 00:37:28,360
Speaker 8: you know, the thing we're trying to fight and the

753
00:37:28,400 --> 00:37:32,200
Speaker 8: tool we're using, they both could end up being inflationary.

754
00:37:32,280 --> 00:37:34,200
Speaker 8: I don't know the tariffs is the answer.

755
00:37:34,960 --> 00:37:37,600
Speaker 4: Let's turn to if you're building a new plant today,

756
00:37:38,080 --> 00:37:40,360
Speaker 4: what are you going to power it with in the

757
00:37:40,480 --> 00:37:42,279
Speaker 4: next ten to fifteen years, Like, what's going to be

758
00:37:42,320 --> 00:37:42,640
Speaker 4: that thing?

759
00:37:42,920 --> 00:37:46,480
Speaker 8: Well, we're all building a new plant in Canada and

760
00:37:46,520 --> 00:37:48,840
Speaker 8: the purpose for going up there was to build the

761
00:37:48,840 --> 00:37:52,920
Speaker 8: world's first zero scope on and two emissions ethylene complex.

762
00:37:54,239 --> 00:37:59,400
Speaker 8: We will power it with hydrogen. It's a pretty elegant

763
00:37:59,640 --> 00:38:03,080
Speaker 8: solution because we actually take ethane and natural gas liquid,

764
00:38:03,239 --> 00:38:05,960
Speaker 8: we crack it to make ethylene and we make two

765
00:38:05,960 --> 00:38:10,040
Speaker 8: byproducts methane and hydrogen. Lindy will come in and build

766
00:38:10,040 --> 00:38:13,640
Speaker 8: an autothermal reformer that'll convert that to pure hydrogen, and

767
00:38:13,640 --> 00:38:15,840
Speaker 8: that pure hydrogen will fire the furnace. So it's a

768
00:38:15,960 --> 00:38:20,640
Speaker 8: very closed loop system that will allow us to capture

769
00:38:20,640 --> 00:38:23,680
Speaker 8: all the CO two off the autothermal reformer and sequester

770
00:38:23,800 --> 00:38:27,840
Speaker 8: that and maybe zero scope one and two ethylene and

771
00:38:27,880 --> 00:38:32,600
Speaker 8: plastics there. It'll be the biggest hydrogen carbon capture project

772
00:38:32,680 --> 00:38:35,560
Speaker 8: of its kind in the world, and it'll be the

773
00:38:35,600 --> 00:38:38,320
Speaker 8: first one. First phase will be up in twenty twenty.

774
00:38:38,080 --> 00:38:39,000
Speaker 7: Seven, all right.

775
00:38:39,000 --> 00:38:41,840
Speaker 4: Thanks to Jim Fitterling, CEO of a Dow Chemical company.

776
00:38:42,040 --> 00:38:46,520
Speaker 2: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

777
00:38:46,719 --> 00:38:50,400
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778
00:38:50,520 --> 00:38:54,000
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779
00:38:54,080 --> 00:38:57,040
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780
00:38:57,080 --> 00:39:00,279
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781
00:39:00,440 --> 00:39:01,960
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