WEBVTT - Unilever Split, Boeing Latest, Intel Grant 0:00:00.600 --> 0:00:07.280 Bloomberg Audio Studios, Podcasts, radio news. 0:00:10.600 --> 0:00:14.400 This is Bloomberg Intelligence with Alex Steinhl and Paul'sweeny. 0:00:14.520 --> 0:00:17.720 The real ap performance has been in US corporate high yield. 0:00:17.880 --> 0:00:20.280 Are the companies lean enough? Have they trimmed all the fats? 0:00:20.320 --> 0:00:23.880 The semiconductor business is a really cyclical business. 0:00:23.600 --> 0:00:27.200 Breaking market headlines and corporate news from across the globe. 0:00:27.240 --> 0:00:29.880 Do investors like the M and A that we've seen? 0:00:30.080 --> 0:00:33.159 These are two big time blue chip companies. 0:00:33.320 --> 0:00:36.920 The window between the peak and cut changing super fast. 0:00:37.080 --> 0:00:41.680 Bloomberg Intelligence with Alex Steinhl and Paul'sweenye on Bloomberg Radio. 0:00:43.440 --> 0:00:45.919 On Today's Bloomberg Intelligence Show, we dig inside the big 0:00:45.960 --> 0:00:48.400 business stories impacting Wall Street and the global markets. 0:00:48.520 --> 0:00:50.680 Each and every week we provide in depth research and 0:00:50.800 --> 0:00:52.599 data on some of the two thousand companies and one 0:00:52.640 --> 0:00:55.040 hundred and thirty industries our analysts cover worldwide. 0:00:55.320 --> 0:00:58.000 Today we'll look at why Boeing is predicting a massive 0:00:58.040 --> 0:00:58.920 cash drain. 0:00:58.960 --> 0:01:02.200 Plus well discuss how high power costs are impacting the 0:01:02.200 --> 0:01:03.080 European economy. 0:01:03.240 --> 0:01:05.880 But first we dive into consumer products and ice cream. 0:01:05.959 --> 0:01:06.559 Oh yeah. 0:01:06.640 --> 0:01:08.800 Earlier in the week, Unilever set of plants to separate 0:01:08.840 --> 0:01:11.720 it's ice cream business and cut seventy five hundred jobs. 0:01:12.000 --> 0:01:14.080 This comes as the company seeks to boost profits and 0:01:14.160 --> 0:01:15.839 jumpstart sluggish growth in the UK. 0:01:16.240 --> 0:01:17.959 For more at guest host Molly Smith and I were 0:01:18.000 --> 0:01:21.640 joined by Bloomberg Intelligence analysts Deborah Aiken and Duncan Fox. 0:01:21.840 --> 0:01:24.760 Debra senior analyst for Global Luxury Goods and Duncan Fox 0:01:24.840 --> 0:01:26.200 is a consumer products analyst. 0:01:26.280 --> 0:01:28.720 I first asked Duncan for more context on what's going 0:01:28.720 --> 0:01:29.520 on with Unilever. 0:01:29.920 --> 0:01:33.520 I think if you go back two years, they thought 0:01:33.560 --> 0:01:35.959 about it then when they sort of pushed it into 0:01:36.000 --> 0:01:39.240 five divisions and it was thought that they may sell 0:01:39.280 --> 0:01:42.639 it off or ipo it. So it's really coming back 0:01:42.840 --> 0:01:45.320 to the table. I think it was impossible back in 0:01:45.360 --> 0:01:48.280 twenty two because you had food inflation going not for 0:01:48.280 --> 0:01:52.120 the charts, So I don't think anybody would do it dead, 0:01:52.320 --> 0:01:55.080 do anything with it. But it's a business thirty is 0:01:55.800 --> 0:01:59.200 very capital intensive. They've got an excellent market share twenty percent, 0:01:59.360 --> 0:02:02.559 so the globe leader by some way. But it's one 0:02:02.600 --> 0:02:06.760 that I suppose if you want to refocus, you leave 0:02:06.840 --> 0:02:09.600 as a whole. It's a low margin business. We look 0:02:09.600 --> 0:02:13.000 at it against the HBC business so I can see 0:02:13.040 --> 0:02:17.000 why they would consider either selling or ibo in the business. 0:02:17.000 --> 0:02:19.120 It does make sense in deep so you've been finding 0:02:19.160 --> 0:02:20.919 the retail space for a while. What do you make 0:02:20.960 --> 0:02:21.400 of all this? 0:02:22.360 --> 0:02:27.000 I think we can go back to the big offer 0:02:27.160 --> 0:02:29.600 that you never had and the way that since then, 0:02:30.639 --> 0:02:32.600 over the last few years, they've had a couple of 0:02:32.720 --> 0:02:37.040 CEOs that just haven't done what the market had hoped. 0:02:37.120 --> 0:02:41.160 It's always been a wonder over whether beauty and personal 0:02:41.200 --> 0:02:45.320 care actually fitted with food and refreshments. And I think 0:02:45.400 --> 0:02:49.000 the market probably expects. Duncle and I were just talking 0:02:50.200 --> 0:02:53.040 that nutrition would be the next to go, actually, but 0:02:53.080 --> 0:02:56.080 they can't both go at the same time. So it 0:02:56.160 --> 0:03:00.600 really does make sense because you're left with businesses which 0:03:00.680 --> 0:03:03.240 quickly they say end of twenty twenty five. So it's 0:03:03.280 --> 0:03:06.760 typical a little bit slow churn from Unilever in the 0:03:06.800 --> 0:03:11.120 way that they operate. But under the new CEO, Heinz Schumacher, 0:03:11.200 --> 0:03:15.360 combined with trans and Nelson Pelts on the board and 0:03:15.400 --> 0:03:18.079 the way that he turned around P and G, Mondalize 0:03:18.120 --> 0:03:21.600 and others, that we would expect to see this business 0:03:21.760 --> 0:03:24.840 returned to hopefully the top end of a three to 0:03:24.919 --> 0:03:30.080 five percent organic cells growth and two high teams. Digit 0:03:30.520 --> 0:03:33.320 are just at operate in margin, which is where they 0:03:33.440 --> 0:03:36.640 used to focus until a few years ago, until that 0:03:36.760 --> 0:03:40.000 inflation came in and until they just couldn't pass it 0:03:40.080 --> 0:03:43.080 through in developed markets. They do much better in developing. 0:03:44.120 --> 0:03:46.680 So duncan talk to us about the ice cream business. 0:03:46.760 --> 0:03:47.720 Is it a good business? 0:03:49.920 --> 0:03:52.160 Well, I think so. I mean you can't be to 0:03:52.160 --> 0:03:55.000 a magnumh and you're on the way home, but'll say 0:03:55.000 --> 0:03:57.760 it is a global leader pretty much in every geography. 0:03:57.800 --> 0:04:01.200 I think so only number two in Latin America they 0:04:01.200 --> 0:04:05.080 have leadership. And you said it's capital intensive because about 0:04:05.200 --> 0:04:07.840 half of that global I think it's about an eighty 0:04:07.920 --> 0:04:11.720 seven billion dollar business globally, and half of that is 0:04:12.040 --> 0:04:16.320 through food service or impulse buying. So that's why you've 0:04:16.360 --> 0:04:21.000 got to get everything right on the distribution. On my whole, 0:04:21.480 --> 0:04:24.839 it looks like a Unilever holding or gaining market share 0:04:24.880 --> 0:04:28.279 in most of the regions. So they're running it well. 0:04:28.720 --> 0:04:31.560 But it does come down to innovation and actually that distribution. 0:04:31.680 --> 0:04:33.839 We've just got to get it right making sure that 0:04:33.920 --> 0:04:37.440 we can buy particularly impulse that product when you wanted 0:04:37.520 --> 0:04:40.279 on the way home generally, so it can be a 0:04:40.279 --> 0:04:42.839 bit weather dependent, and that's what makes it tricky, I 0:04:42.839 --> 0:04:45.479 think to sell because if you're the leader, are there 0:04:45.480 --> 0:04:47.880 to be shot at, So they've got to make sure 0:04:47.880 --> 0:04:51.200 they keep investing. Current management team seems to be doing 0:04:51.240 --> 0:04:54.279 that so good business. So I think an IPO seems 0:04:54.320 --> 0:04:55.679 the most sensible way to go forward. 0:04:55.720 --> 0:04:58.280 To be fair, I mean personally, I would say ice 0:04:58.320 --> 0:05:01.599 cream is a twenty a year round to treat exactly. 0:05:01.640 --> 0:05:05.240 Maybe that's just why I agree with exightly. It tends 0:05:05.240 --> 0:05:07.720 to start at Easter, would you believe so for two 0:05:07.760 --> 0:05:10.000 weeks time is the start of the season, So. 0:05:09.960 --> 0:05:13.040 We're getting into high season for ice cream, I might say. 0:05:13.920 --> 0:05:15.839 I mean the flip side of all this, though, is 0:05:16.000 --> 0:05:18.839 the job cuts looking at about seventy five hundred, A 0:05:18.880 --> 0:05:20.880 lot of those in middle management. I mean, how many 0:05:20.960 --> 0:05:23.719 companies have we seen that that's really where so many 0:05:23.800 --> 0:05:25.840 of the job cuts are targeted at. Can you tell 0:05:25.880 --> 0:05:28.640 us a little bit about that deb and the productivity 0:05:28.760 --> 0:05:31.920 gains that Unilever's looking to get from these job cuts. 0:05:33.160 --> 0:05:33.360 Yeah. 0:05:33.520 --> 0:05:38.560 I think in October Unilever did highlight that they had 0:05:38.600 --> 0:05:41.640 a growth action plan and part of that was to 0:05:41.960 --> 0:05:45.840 drive top line and to really look at how they 0:05:45.839 --> 0:05:50.479 were implementing their productivity gains, so already ahead of this 0:05:50.520 --> 0:05:53.479 announcement on ice cream, there's been a new strategic group 0:05:53.560 --> 0:05:57.000 in place making not to change not just in ice 0:05:57.040 --> 0:06:00.000 cream but across the four of the businesses, but particular 0:06:00.040 --> 0:06:03.800 cularly ice cream and refreshments when they separated from three 0:06:03.839 --> 0:06:07.600 business units over to five in twenty twenty two, ice 0:06:07.640 --> 0:06:11.640 cream in terms of profitability, and also actually homecare, which 0:06:11.640 --> 0:06:13.720 they have there for now in which they need to 0:06:13.760 --> 0:06:17.880 do much with with two lowest margin areas. So in 0:06:17.960 --> 0:06:20.760 terms of what they're doing and the way forward, I 0:06:20.800 --> 0:06:24.400 think that we see that productivity savings. They had a 0:06:24.480 --> 0:06:28.839 one percent savings project one percent sales as a project 0:06:29.279 --> 0:06:32.880 cost savings project in place. They say that they will 0:06:32.960 --> 0:06:36.560 drive eight hundred million of savings for one point two 0:06:36.600 --> 0:06:41.719 percent productivity on the cost side of sales over three years. 0:06:41.800 --> 0:06:45.120 I worked that out on MODL to come in and 0:06:45.200 --> 0:06:49.200 around a zero point four billion net positive but over 0:06:49.240 --> 0:06:51.560 a three year period. And on the back of that, 0:06:51.680 --> 0:06:54.520 actually I think there'll be more savings to be had, 0:06:55.040 --> 0:06:57.560 but a deeper disposal plan across the four of the 0:06:57.600 --> 0:06:58.440 businesses too. 0:06:58.760 --> 0:07:01.839 Are Thanks to Bloomberg Intelligence analysts Deb Achon and Duncan Fox. 0:07:02.040 --> 0:07:04.560 We move now to weight loss drugs. It looks as 0:07:04.560 --> 0:07:06.839 if the drug makers Novo Nordisks and Eli Lilly have 0:07:06.880 --> 0:07:10.320 a powerful new allies. They conquered the eighty billion dollar 0:07:10.400 --> 0:07:13.840 obesity shot market, and that ally is former Weight Watchers 0:07:13.880 --> 0:07:15.280 spokeswoman Oprah Winfrey. 0:07:15.480 --> 0:07:18.840 Winfrey recently appeared on ABC special with executives from Novo 0:07:18.920 --> 0:07:21.440 Nordisk and Eli Lilly for more on what all of 0:07:21.440 --> 0:07:23.680 this means. Guest host Molly Smith and I were joined 0:07:23.720 --> 0:07:26.960 by Madison Muller, Bloomberg News health reporter. We first asked, 0:07:27.040 --> 0:07:29.080 what's Oprah's role here with these drugmakers. 0:07:29.480 --> 0:07:31.800 We're used to seeing Oprah as the face of weight 0:07:31.840 --> 0:07:34.920 Watchers obviously for the last almost a decade, and she 0:07:35.000 --> 0:07:37.360 said recently that she was exiting the board of Weight 0:07:37.440 --> 0:07:40.600 Watchers and then she said that it was to avoid 0:07:40.680 --> 0:07:44.120 potential perceptions of conflict of interest. And then she's doing 0:07:44.120 --> 0:07:46.280 this special now which was all about weight loss. 0:07:46.480 --> 0:07:48.400 She did special on ABC Television. 0:07:48.480 --> 0:07:49.080 Yeah, on ABC. 0:07:49.400 --> 0:07:51.680 Was it a paid promotion or it was not? 0:07:52.040 --> 0:07:54.280 Novo Nordisks said that they didn't have any you know, 0:07:54.400 --> 0:07:58.080 financial anything to do with Oprah really, and she's not 0:07:58.360 --> 0:08:01.200 you know, two, our knowledge doesn't have a partnership with 0:08:01.240 --> 0:08:04.440 either of the drug manufacturers. But you know, people that 0:08:04.480 --> 0:08:07.160 were watching the show and were on Twitter sort of 0:08:07.160 --> 0:08:10.400 reacting to it said that it watched and seemed sort 0:08:10.440 --> 0:08:12.080 of like an infomercial for the drugs. 0:08:12.400 --> 0:08:14.280 Yeah, tell us a little bit more about who was 0:08:14.320 --> 0:08:16.600 on it. You were telling us that there were some doctors, 0:08:16.640 --> 0:08:18.800 but maybe they kind of glanced over the side effects 0:08:18.800 --> 0:08:20.920 a bit and that this was really just a big, 0:08:21.000 --> 0:08:23.280 you know, hype up moment for these weight loss drugs. 0:08:23.360 --> 0:08:26.280 Yeah, so they heard from patients, There were doctors, There 0:08:26.280 --> 0:08:29.400 were executives from Nova Noordisk and Eli Lilly on the 0:08:29.440 --> 0:08:32.720 program as well. The majority of the program was sort 0:08:32.720 --> 0:08:35.480 of centered on patient experiences with these drugs, but it 0:08:35.520 --> 0:08:40.080 really didn't get into details about the side effects, sort 0:08:40.080 --> 0:08:42.880 of glossed over them, and the doctor that they had 0:08:42.920 --> 0:08:45.559 on talking about them said that the side effects were overhyped. 0:08:46.480 --> 0:08:49.199 Really, So again that kind of goes to the editorial 0:08:49.240 --> 0:08:50.320 integrity of it. 0:08:50.400 --> 0:08:53.360 I mean, I'm not a journalist, but really, yeah, I mean, 0:08:53.920 --> 0:08:57.960 are real journalist. Yes, there was definitely I think that 0:08:58.520 --> 0:09:02.680 it served and Oprah is on these drugs. She's had 0:09:02.720 --> 0:09:05.760 a great experience with them, so she says, and that's 0:09:05.800 --> 0:09:09.800 sort of what the program was centered around, and really 0:09:09.840 --> 0:09:12.600 spoke to that positive experience on the drugs. 0:09:12.840 --> 0:09:15.679 So what are Oprah's feelings toward weight Watchers right now? 0:09:15.679 --> 0:09:17.280 I mean, this is, like you said, she has been 0:09:17.320 --> 0:09:20.040 the face of that company for so many years and 0:09:20.559 --> 0:09:22.920 now just like really seems to be doing like, you know, 0:09:22.960 --> 0:09:26.120 a total one to eighty and that weight Watchers would 0:09:26.120 --> 0:09:28.320 probably be on the losing end of the success of 0:09:28.360 --> 0:09:29.200 these drugs. 0:09:29.320 --> 0:09:31.920 Yeah, yeah, and she asked, I mean, weight Watchers CEO 0:09:32.200 --> 0:09:36.040 was on this program, and she asked a very pointed question, 0:09:36.240 --> 0:09:38.640 you know, what is the role and what's the point 0:09:38.679 --> 0:09:40.959 of weight Watchers now that we have these medications, which 0:09:41.000 --> 0:09:43.559 I think is sort of the question that the whole 0:09:43.600 --> 0:09:47.480 industry has been asking, and the diet industry and analysts 0:09:47.520 --> 0:09:51.040 and everyone, and you know, weight Watchers CEO said that 0:09:51.120 --> 0:09:54.160 there is still a role for them to play in 0:09:54.240 --> 0:09:57.160 supporting the community of sporting people's weight loss journeys. But 0:09:57.559 --> 0:09:59.400 I guess that still sort of remains to be seen. 0:09:59.600 --> 0:10:02.720 I really I hesitate to ask this question, but since 0:10:02.720 --> 0:10:05.319 you reported on it, what is ozembic face. 0:10:07.080 --> 0:10:10.480 Yes, so Ozembic face is another sort of trend that 0:10:10.520 --> 0:10:12.800 we're seeing happen right now, especially here in New York. 0:10:13.520 --> 0:10:16.880 People who have rapid weight loss from the weight loss 0:10:16.920 --> 0:10:19.880 drugs are getting this hollowed out look in their cheeks, 0:10:19.920 --> 0:10:21.960 which I mean, it happens with weight loss. It's not 0:10:22.120 --> 0:10:24.640 just from the drugs, but it's the rapid weight loss 0:10:24.679 --> 0:10:26.920 that sort of makes it more noticeable. So then they're 0:10:26.920 --> 0:10:31.280 seeking out plastic surgery clinics, medspots to get botox or 0:10:31.320 --> 0:10:33.920 facelifts and sort of help offset those effects. 0:10:34.040 --> 0:10:36.200 Add that to the list of all the winners and 0:10:36.280 --> 0:10:39.400 losers off what comes out of ozempic. I mean we've 0:10:39.480 --> 0:10:41.880 I mean the original kind of knock on effect was like, oh, 0:10:41.920 --> 0:10:44.160 you know all the potato chip companies, right, maybe not 0:10:44.240 --> 0:10:47.520 so good for them, And now plastic surgery coming up. 0:10:47.679 --> 0:10:49.800 So it's just like the hollowing out of your face. 0:10:49.920 --> 0:10:51.280 You've got the saggy skin. 0:10:51.120 --> 0:10:54.439 There and yeah, yeah, like the extra loose skin. Ab View, 0:10:54.480 --> 0:10:57.760 which makes botox has said that this could be a potential, 0:10:57.800 --> 0:11:00.360 you know, boon for botox sales going forward, said that 0:11:00.400 --> 0:11:01.480 at earnings last quarter. 0:11:01.559 --> 0:11:02.760 So it's like I can't keep up. 0:11:02.960 --> 0:11:06.880 Yeah, So on these GLP drugs. Where are we in 0:11:06.960 --> 0:11:09.880 terms of, let I know someone who has a prescription, 0:11:10.000 --> 0:11:11.720 but this person cannot get it filled because there's not 0:11:11.800 --> 0:11:14.360 enough supply where and it is not me? Where are 0:11:14.360 --> 0:11:15.320 they not ensured? 0:11:16.200 --> 0:11:16.400 Right? 0:11:16.640 --> 0:11:19.280 Yeah, so that two questions, Yeah, where are we on 0:11:19.520 --> 0:11:22.760 ramping up supply to meet demand? And then secondarily who 0:11:22.760 --> 0:11:23.880 pays for this stuff? Yeah? 0:11:23.880 --> 0:11:26.600 I mean the supply problem has been a huge issue 0:11:26.600 --> 0:11:29.840 and Nova Noordas, Skinnela, Lily are investing billions of dollars 0:11:29.880 --> 0:11:32.720 to ramp up supply to try to meet demand. But 0:11:33.559 --> 0:11:35.400 you know, I've seen an analyst notes they're like the 0:11:35.440 --> 0:11:38.400 demand for these products just seems like it's insatiable. And 0:11:38.480 --> 0:11:41.600 at this point they're already coming from behind. So and 0:11:41.640 --> 0:11:44.680 all of these investments in production capacity like take a 0:11:44.720 --> 0:11:46.880 couple of years to come online, so we're sort of 0:11:47.000 --> 0:11:50.080 just still racing to keep up with it. It's you know, 0:11:50.240 --> 0:11:52.800 probably Lily said, is probably going to be you know, 0:11:53.240 --> 0:11:55.520 not this year that they're able to meet supply, maybe 0:11:55.520 --> 0:11:58.520 next year. So we're still still trying to ramp up 0:11:58.559 --> 0:12:01.360 the supply there and then and in terms of paying 0:12:01.400 --> 0:12:04.720 for it, we have like I think fifty percent of 0:12:04.800 --> 0:12:09.680 commercial plans cover the drugs for obesity. A third of 0:12:10.320 --> 0:12:13.400 state health plans through Medicaid cover the drugs. Medicare does 0:12:13.440 --> 0:12:16.720 not cover weight loss drugs, so it's very patchy still 0:12:17.120 --> 0:12:18.760 and a lot of people are paying out of pocket. 0:12:19.240 --> 0:12:21.640 Our thanks to Madison Muller, Bloomberg News Health reporter. 0:12:21.800 --> 0:12:23.280 All right, coming up, we're going to break down why 0:12:23.320 --> 0:12:25.480 Boeing is predicting a massive cash strain. 0:12:25.600 --> 0:12:28.319 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:28.600 --> 0:12:30.880 research at data on two thousand companies and one hundred 0:12:30.920 --> 0:12:33.760 and thirty industries. You can access Bloomberg Intelligence via b 0:12:33.920 --> 0:12:37.040 I go on the terminal. I'm Paul Sweeney, m Alex Steel, and. 0:12:37.000 --> 0:12:37.760 This is Bloomberg. 0:12:49.960 --> 0:12:53.840 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:53.920 --> 0:12:57.240 weekdays at ten am Eastern on applecar Playing and Broudoto 0:12:57.360 --> 0:13:00.200 with the Bloomberg Business app. Listen on demand We're wherever 0:13:00.240 --> 0:13:04.040 you get your podcasts, or watch us live on YouTube. 0:13:04.640 --> 0:13:07.440 Move next to the aerospace industry and Boeing. This week, 0:13:07.480 --> 0:13:10.079 Boeing predicted a massive cash strain for the first quarter. 0:13:10.400 --> 0:13:12.880 Boeing Chief financial Officer Brian West said cash out flow 0:13:12.880 --> 0:13:14.920 will reached four billion to four and a half billion 0:13:14.960 --> 0:13:17.920 in the first quarter. Analyst had expected five billion. 0:13:18.040 --> 0:13:20.720 C Yelller reflects a shifting priorities over at Boeing, the 0:13:20.760 --> 0:13:24.520 company's grappling with the aftermath of a near catastrophic fuselage 0:13:24.520 --> 0:13:27.240 failure on a seven thirty seven Max nine aircraft earlier 0:13:27.240 --> 0:13:27.680 this year. 0:13:27.960 --> 0:13:29.559 For more in all of this, we were joined by 0:13:29.559 --> 0:13:33.559 George ferguson Bloomberg Intelligence, senior Aerospace, Defense and Airlines analysts. 0:13:33.679 --> 0:13:36.240 We first asked George for context on what's going on 0:13:36.320 --> 0:13:36.760 at Boeing. 0:13:36.960 --> 0:13:37.560 Well, I mean, I. 0:13:37.600 --> 0:13:40.240 Think we heard it from Brian West, you know. Besides, 0:13:40.280 --> 0:13:43.480 I think the cash flow guidance he provided he provided 0:13:43.559 --> 0:13:47.120 few details about anything else. And so he describes a 0:13:47.120 --> 0:13:50.440 lot of processes, you know, processes at the FAA to 0:13:50.480 --> 0:13:57.080 get airplanes certified, processes and refining, the manufacturing process, curing, 0:13:57.240 --> 0:14:00.040 you know, the excess outsourcing they've probably done over the 0:14:00.120 --> 0:14:02.880 last couple of decades. I think what you really get 0:14:02.960 --> 0:14:05.080 is a sense of a company that's in a state 0:14:05.120 --> 0:14:07.600 of a lot of flucks. The market likes the fact 0:14:07.600 --> 0:14:10.760 that he talked about casual being positive by the end 0:14:10.760 --> 0:14:12.920 of the year, so it sounds like they've got a 0:14:12.960 --> 0:14:17.559 pretty nice ramp up in you know, sort of resuming 0:14:17.600 --> 0:14:20.840 build rates at their factories across the year. That was 0:14:20.880 --> 0:14:24.360 better than what I expected. But again, the storyline inside 0:14:24.400 --> 0:14:27.280 the company is still one that's all about flux and 0:14:27.360 --> 0:14:31.560 not about details. So I just wonder, I think I 0:14:31.600 --> 0:14:34.680 got a sense there's some risk in that cashalow projection. 0:14:35.280 --> 0:14:37.920 So, George, you've covered Boeing for decades here, can you 0:14:37.920 --> 0:14:40.680 recall a time when maybe they're they've had these quality 0:14:40.760 --> 0:14:43.840 issues before? Is this how unprecedented is these you know, 0:14:43.920 --> 0:14:45.840 last couple of years, Really. 0:14:46.600 --> 0:14:50.520 I think thoroughly unprecedented. Right, So, even as I was 0:14:50.600 --> 0:14:54.520 leaving Blackrock, you know, the during the global financial crisis, 0:14:54.840 --> 0:14:57.320 I remember Boeing stock was down at thirty three dollars 0:14:57.320 --> 0:15:00.320 a share, pretty cheap than what it is today. That 0:15:00.320 --> 0:15:03.160 the discussion then was just about like a defense portfolio, 0:15:03.240 --> 0:15:07.520 who products really weren't that modern, and angst about the 0:15:07.520 --> 0:15:11.360 company's future, but not these kind of problems inside their 0:15:11.360 --> 0:15:14.240 manufacturing business, which is the core business of this company. Right, 0:15:14.240 --> 0:15:17.360 it's an engineering and manufacturing company. If you can't manufacture 0:15:17.400 --> 0:15:21.160 things well in aerospace, that's a bad sigen. So I 0:15:21.200 --> 0:15:23.400 don't think it's ever been this bad ever. 0:15:23.640 --> 0:15:25.920 So just to recap at a Bank of America conference 0:15:25.960 --> 0:15:28.080 in London, the CFO, so the cash outflow is going 0:15:28.160 --> 0:15:30.000 to reach four to four and a half billion in 0:15:30.040 --> 0:15:33.960 the first quarter. Analysts we're looking for maybe five billion 0:15:34.120 --> 0:15:36.400 plus and like you said that maybe we'll get cash 0:15:36.440 --> 0:15:38.040 flow positive by the end of the year. That was 0:15:38.080 --> 0:15:42.040 the indication from Boeing, do we believe Okay, that's not 0:15:42.040 --> 0:15:44.040 the right question. How did they come up with this estimate? 0:15:44.320 --> 0:15:45.960 Like what are the factors that go into this kind 0:15:46.000 --> 0:15:46.520 of estimate. 0:15:47.120 --> 0:15:49.640 That's exactly we don't know, right, And so some of 0:15:49.680 --> 0:15:52.720 you it's all about deliveries. It's all about deliveries of 0:15:52.720 --> 0:15:55.920 commercial airplanes. I heard. What I thought was, we're going 0:15:56.000 --> 0:15:58.560 to be at rate thirty eight by the end of 0:15:58.600 --> 0:16:00.680 the year, which is the rate they should have probably 0:16:00.720 --> 0:16:03.880 built out all year long, and then we'll move to 0:16:03.920 --> 0:16:05.920 the next higher rate that's thirty eight a month, sorry 0:16:05.920 --> 0:16:08.240 on the seven thirty seven, and we'll move to the 0:16:08.320 --> 0:16:12.600 next higher rate when the FAA lets us. So our 0:16:12.680 --> 0:16:15.800 view at Bloomberg Intelligence of what we think build rates were, 0:16:15.880 --> 0:16:18.120 I can tell you we have factored in a fourth 0:16:18.200 --> 0:16:21.880 quarter at rate thirty eight. But it sounds like quarter 0:16:21.960 --> 0:16:24.200 one is going to be a really rough quarter, so 0:16:24.240 --> 0:16:26.280 they'll have to pull a lot of things back together 0:16:26.760 --> 0:16:28.880 to get rate back to thirty eight by the end 0:16:28.880 --> 0:16:29.320 of the year. 0:16:30.080 --> 0:16:32.760 I think it's feels like everything has to go right, yeah, 0:16:33.600 --> 0:16:35.160 for that to happen, Paul, And as we. 0:16:35.120 --> 0:16:38.000 Know, that never happened. Never happens. But George, you've told 0:16:38.080 --> 0:16:40.480 us in the past, in the airspace business, there is 0:16:40.560 --> 0:16:42.640 no hey, we did a pretty good job on this plane. 0:16:42.640 --> 0:16:47.080 It has to be perfect every single time, otherwise it's disastrous. 0:16:47.120 --> 0:16:50.600 And they from their customers perspective, Georgie, if I'm a 0:16:50.600 --> 0:16:54.000 big buyer, like a Southwest or United, what am I 0:16:54.040 --> 0:16:56.600 saying to these guys? I mean, I fly thousands of 0:16:56.640 --> 0:16:59.600 these planes every single day in my fleet. What am 0:16:59.600 --> 0:17:00.720 I telling the Boeing these days? 0:17:01.320 --> 0:17:04.200 Yeah, so you're watching very very closely. Of course you're 0:17:04.240 --> 0:17:08.560 telling Boeing the quality is job one. Safety quality is 0:17:08.680 --> 0:17:11.439 job one. But if you're especially if you're like a 0:17:11.480 --> 0:17:14.800 Southwest or a Ryanair where you're a pure fleet, right, 0:17:14.840 --> 0:17:18.680 you really can't afford your most important supplier to have 0:17:18.840 --> 0:17:23.400 problems like this. So I think you're quietly coaching them 0:17:23.440 --> 0:17:26.760 to improve things hoping for better. But you're probably biting 0:17:26.800 --> 0:17:29.399 your nails a little bit, right because if there's it 0:17:29.440 --> 0:17:33.720 continues to be serious problems. You're not switching to airbus, 0:17:34.000 --> 0:17:35.960 you know, overnight. And I don't know that those people 0:17:36.000 --> 0:17:38.959 are considering it. I'm not saying that they are, but 0:17:39.000 --> 0:17:40.480 you got to be concerned. You've got to be watching 0:17:40.560 --> 0:17:41.080 very closely. 0:17:41.200 --> 0:17:44.240 George. Let's talk about the other half of your research coverage, 0:17:44.240 --> 0:17:47.720 which is the airlines themselves. I just flew Newark to 0:17:47.880 --> 0:17:51.960 Salt Lake City seven thirty seven Max eight fully packed 0:17:52.119 --> 0:17:54.840 to the gills both ways. How are the airlines doing 0:17:54.840 --> 0:17:55.240 these days? 0:17:55.640 --> 0:17:58.080 Yeah, so in one queue, I think a bunch of 0:17:58.080 --> 0:18:01.200 them are going to show losses. They they're filling airplanes 0:18:01.240 --> 0:18:04.200 because I think the revenue managers never let airplanes go 0:18:04.280 --> 0:18:07.520 down the runway with almost, you know, being entirely full. 0:18:08.200 --> 0:18:10.520 But everything what counts, as you know, the most, is 0:18:10.560 --> 0:18:13.600 going to be the ticket prices. And you know, when 0:18:13.600 --> 0:18:15.480 we looked at four Q as we closed out of 0:18:15.480 --> 0:18:20.040 four Q, the biggest challenge to the higher revenue that 0:18:20.040 --> 0:18:23.080 they were bringing in was all about these higher pilot salaries. 0:18:23.119 --> 0:18:23.239 Right. 0:18:23.240 --> 0:18:25.359 They gave a bunch away to the pilots and so 0:18:25.480 --> 0:18:28.400 while we're all paying more for the ticket, the pilot's 0:18:28.440 --> 0:18:30.600 getting more in the front seat. They probably deserve it. 0:18:30.600 --> 0:18:35.719 They work pretty hardilot's so happy you do. Actually, So 0:18:36.200 --> 0:18:40.439 profitability is still challenged compared to what we saw last decade. 0:18:40.480 --> 0:18:42.959 I think fares would have to go even higher, and 0:18:43.000 --> 0:18:45.600 we've seen them softening a bit. This summer. Could be 0:18:45.640 --> 0:18:48.119 a little bit better for the airlines, if you know, 0:18:48.119 --> 0:18:50.240 if we have a bunch of Airbus A three twenties 0:18:50.240 --> 0:18:52.640 out of the market because of the gear turbo fan problems, 0:18:52.960 --> 0:18:56.840 if Boeing deliveries are slowing down capacity gains in the marketplace, 0:18:57.160 --> 0:18:59.359 it could be a little bit better. But we're not 0:18:59.440 --> 0:19:01.240 looking at an environment where we think they're going to 0:19:01.240 --> 0:19:04.679 see twenty nineteen levels of profitability, not twenty nineteen, you know, 0:19:04.960 --> 0:19:08.359 even last decade levels of profitability this summer. So I'd 0:19:08.359 --> 0:19:11.879 say profits still a little bit weak. As the airlines recover, 0:19:12.160 --> 0:19:14.000 I think there might be just too much capacity in 0:19:14.040 --> 0:19:14.679 the marketplace. 0:19:14.760 --> 0:19:18.080 Our Thanks to George ferguson Bloomberg Intelligence senior aerospace, defense 0:19:18.160 --> 0:19:20.160 and airlines analysts, we move next. 0:19:20.000 --> 0:19:22.639 To the chip space. This week, the US Commerce Department 0:19:22.640 --> 0:19:24.920 announced that it will award the tech company Intel eight 0:19:24.960 --> 0:19:27.000 and a half billion dollars in grants and as much 0:19:27.000 --> 0:19:30.160 as eleven billion dollars in loans. It's a preliminary agreement 0:19:30.200 --> 0:19:33.200 to help fund an expansion of Intel semiconductor factories. 0:19:33.560 --> 0:19:35.920 Intel is the first company to land a funding deal 0:19:35.960 --> 0:19:38.520 from the twenty twenty two Chips and Science Act for 0:19:38.560 --> 0:19:41.920 Advanced chip making facilities. The Chips Act set aside billions 0:19:41.920 --> 0:19:44.879 in grants to persuade chip companies to build factories on 0:19:44.920 --> 0:19:45.600 American soil. 0:19:45.640 --> 0:19:47.760 For more on this, we were joined by Mackenzie Hawkins, 0:19:47.800 --> 0:19:50.600 a Bloomberg News US industrial reporter, and we first asked 0:19:50.600 --> 0:19:52.879