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Speaker 1: This is Bloomberg surveillance. One of the stories that haven't

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Speaker 1: gotten a lot of inc is how poorly the Republicans

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Speaker 1: are doing on fundraising for congressional Canada. The political environment

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Speaker 1: is awful, and I think this is one of the

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Speaker 1: things dragging market stop. When people say the market spotting

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Speaker 1: out to me, that implies we'll have a big seal

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Speaker 1: rebound and that I don't see Bloomberg surveillance. Your link

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Speaker 1: to the world of economics, finance, and investment on Bloomberg Radio.

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Speaker 1: Good Morning at eight o'clock on Wall Street. Michael McKee,

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Speaker 1: Francine Lakhi is sitting in this hour for Tom Keene.

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Speaker 1: Where in the world is Tom Keane? We told you

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Speaker 1: yesterday he's somewhere where they take dollars today are second

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Speaker 1: hint is that there may be sand between his toes.

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Speaker 1: Will let everybody try to figure out where Tom is,

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Speaker 1: whether or not it is because Tom is not here.

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Speaker 1: But we are seeing markets pointing to a higher open.

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Speaker 1: SMP features up four point, it's right now two tenths

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Speaker 1: two times gain for Dow futures as well. They're up

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Speaker 1: forty two. In Europe, the stock six is up by

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Speaker 1: a point that is four tenths of a per cent.

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Speaker 1: We're going to take a look at some of the

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Speaker 1: earnings that are out this morning. A number of companies reporting,

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Speaker 1: Proctor and Gamble earnings top analyst estimates, uh Eli, Lily earnings,

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Speaker 1: DuPont earnings all topping analysts estimates. One that came in

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Speaker 1: a little bit lighter than forecast, at least on a

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Speaker 1: sales pace, is Fiat Chrysler. Over in Europe. Eta McAuley

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Speaker 1: is joining us now to talk a little bit about

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Speaker 1: the auto industry and what it looks like out there.

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Speaker 1: He is with a city Global Markets and covers the

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Speaker 1: auto industry. Good morning to you. Good morning, uh Fiat,

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Speaker 1: I mean yesterday GM, you know comes in and and

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Speaker 1: and looks good. Fiat every month they beat in terms

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Speaker 1: of sales, but we're looking for them to be able

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Speaker 1: to translate that into profit. Yeah. I I don't come

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Speaker 1: to them and actually have approve of that to stick

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Speaker 1: on that issue or so. Can't comment on the earnings

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Speaker 1: this morning, but certainly I think you mentioned GM last

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Speaker 1: week having another strong earnings, and you know you're the

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Speaker 1: stock and GM that's been trading. Is if the autocycle

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Speaker 1: globally is about to end, and yet they do nearly

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Speaker 1: a ten percent margine North America in the first quarter

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Speaker 1: and what was not a very easy market when at

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Speaker 1: the unused car pricing which came under pressure. And think

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Speaker 1: about South America where their sales were down about and

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Speaker 1: losses now significantly. So some of these companies on the

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Speaker 1: DM are showing, um, you know, very different behavior on

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Speaker 1: earnings perspective relative to maybe what they once were. Uh.

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Speaker 1: Where is GM doing it? Uh? You know they they've

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Speaker 1: introduced a lot of new stuff. Is that it that

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Speaker 1: people like their new cars or is it Mary Baris

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Speaker 1: management that is has changed things. I think it's both.

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Speaker 1: I think they've been very proactive and structuring on the

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Speaker 1: performing operations in the past few years. Uh, you're taking

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Speaker 1: brands out of Europe one example of shutting down some

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Speaker 1: capacity globally. But one thing that's really overlooked here in

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Speaker 1: the US. You know, you hear a lot of talk

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Speaker 1: about the peak of the cycle, can sargo higher? I

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Speaker 1: think one of the areas that the street is really

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Speaker 1: missing is a fundamental supply demand imbalance in the all

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Speaker 1: important pickup trucks. From the pickup truck segments where the

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Speaker 1: core profits center is um you know, there's not a

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Speaker 1: ton of competition like an other segments in this segment

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Speaker 1: is performing very well and that's helping their margins. And

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Speaker 1: we don't think it's just some housing explanation or a

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Speaker 1: kind of world place explanation, but rather a real supply

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Speaker 1: demand imbalance that's been enough frankly overlooked out there. It

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Speaker 1: I talked to us a little bit about the sweet spot, right,

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Speaker 1: and you firmly believe that GM and ford have a

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Speaker 1: market share edge in the coming years because they precisely

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Speaker 1: are in this sweet spot. Yes, yes, correctly, So you know,

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Speaker 1: we do have imbalances. There are pressures and in cars segments.

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Speaker 1: I talked about the pressures that's on uth car segments,

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Speaker 1: but both GM and FORDA are very strong in the

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Speaker 1: pickup truck and suv segments, which have been strong in

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Speaker 1: the question I think people have to ask buttally in

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Speaker 1: the pickup truck segmented that just some sort of a

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Speaker 1: fluke because of oil or housing, or is something else

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Speaker 1: And we firmly believe and have for many years that

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Speaker 1: it's it's something else. That is a supply demanding balance

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Speaker 1: that that's been out there. And you know, here's a

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Speaker 1: segment that again does not have a ton of competition,

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Speaker 1: is has a fairly good loyalty UM. So we think

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Speaker 1: globally pickup truck is actually a very attractive segment UM

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Speaker 1: and and there's a stile a fair amount of demand

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Speaker 1: out there as we've been seeing in the in the numbers.

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Speaker 1: And I think we think about big picture what's happening

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Speaker 1: in the transformation of the auto industry. You know, we've

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Speaker 1: written to me about economists driving you ride sharing, and

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Speaker 1: I think having a core pickup truck franchise that they

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Speaker 1: might be less prone to some of these disruptions or

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Speaker 1: transformation is another advantage that could let these companies actually

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Speaker 1: pursue some of these opportunities in autonomous and ride sharing

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Speaker 1: as opposed to perhaps being feel threatened by them because

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Speaker 1: they have this court business generating very strong profits. I'm

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Speaker 1: going to throw you a little bit the curve ball

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Speaker 1: because I came into the newsroom this morning. It was

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Speaker 1: very early for our listeners in the US, and I

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Speaker 1: saw the Mitsubishi and He's right, Mietsubishi motors and proper

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Speaker 1: mileage tests date back in the first thing that I

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Speaker 1: thought of is, Wow, we weren't even looking at emissions

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Speaker 1: back then, right, it was all about fuel efficiency and

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Speaker 1: how can we be sure that this does not and

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Speaker 1: will not affect other carmakers worldwide. So we'll just you

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Speaker 1: have to speak but back on kind of GM and

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Speaker 1: Ford particularly, I think it either always regulatory and you

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Speaker 1: know risks that are inherent in this industry, and we've

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Speaker 1: written in the past you have to kind of ask

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Speaker 1: this stuff, whether it's any issue out there is sort

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Speaker 1: of a legality issue or just maybe a car company

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Speaker 1: trying to lawfully um, you know, get the best ratings

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Speaker 1: are out there, so we have to constantly watch. UM.

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Speaker 1: I think it's a question that a lot of the automakers,

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Speaker 1: the including GM and Ford, have have been asked upon, uh,

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Speaker 1: you know, very frequently by analysts and media. UM and UM.

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Speaker 1: You know kind of have to kind of watch this situation.

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Speaker 1: But you know, it is an industry that has a

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Speaker 1: lot of these types of the events we've seen be

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Speaker 1: calls in the past. If you know, UM and uh

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Speaker 1: you kind of you know, kind of have the common

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Speaker 1: monitor and value each situation kind of case by case.

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Speaker 1: We're talking with Et McAuley of City about the auto

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Speaker 1: industry here on Bloomberg Surveillance, brought to you by Clone

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Speaker 1: Resnick Accounting Tax Advisory. It can be hard to navigate

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Speaker 1: through economic uncertainty. Your business needs industry insight and transformative

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Speaker 1: dot com we are still to hear it from Ford. Uh.

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Speaker 1: This has been a company that kind of took a

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Speaker 1: pause to retool. Where are they now in that process? Sure? Yeah,

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Speaker 1: so so forward. You know, I think like GM is

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Speaker 1: enjoying pricing gains and SUVs and and some pickup trucks

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Speaker 1: as well. You don't think we have reasons we think

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Speaker 1: GM isn't a bit of a sweeter spot in the

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Speaker 1: product cycle currently in Ford. You know, GM is launching

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Speaker 1: the Cruise and Malibu vehicles that have not had a

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Speaker 1: redesign in a very long time. So I tend to

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Speaker 1: create a bit of an easier comparisons in terms of

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Speaker 1: kind of year VI your profits. Um. You know Ford

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Speaker 1: is not quite at that sweet spot themselves, but they too,

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Speaker 1: like GM, are enjoying the kind of benefits of pickup

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Speaker 1: and suv strength. Uh. And also they've they've been doing

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Speaker 1: better in Europe as well. You know, It's funny because

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Speaker 1: of these companies UM, people tend to look at them as,

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Speaker 1: oh gosh, are the over earning because of the strength

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Speaker 1: in North America. But it's a born to remember that

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Speaker 1: Europe is still kind of coming out of a recession

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Speaker 1: and these companies have been losing money. Now you're seeing

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Speaker 1: those losses narrow UM. There are other regions in the Asia,

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Speaker 1: except of course South America has been very weak that

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Speaker 1: they are kind of arguably under earning UM. It's support

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Speaker 1: and doing some of these tail winds as well, but

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Speaker 1: we think that from a product cycle positioning, it's awesome.

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Speaker 1: In some of the mobility aspects, we think GM probably

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Speaker 1: is ahead of FORD UM and and and it's kind

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Speaker 1: of it's the expressed on in our in our ratings approaches.

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Speaker 1: All well. Continue with France thought about regulation in mark

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Speaker 1: fields over in China, saying this week that we're seeing

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Speaker 1: much more regulative regulation of the auto industries, and especially

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Speaker 1: with the idea of UM climate change and fighting that

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Speaker 1: he's expecting much more. How much is that gonna hurt

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Speaker 1: profits going forward? You know, it took question. It's hard

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Speaker 1: to tell me. I think regulations have always been around

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Speaker 1: the auto industry, and you know, you think about the

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Speaker 1: recall activity in the last couple of years that began

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Speaker 1: with GM. There's a lot of concern back there and

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Speaker 1: then back then that you know, what's gonna happen to margins.

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Speaker 1: It's called companies have to start recalling more and more vehicles,

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Speaker 1: and they did in the past. And I would look

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Speaker 1: at again the margins of of GM and FORD. You know,

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Speaker 1: in the last year or so, North America still remaining

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Speaker 1: very strong. As we look at the auto industry, and

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Speaker 1: again there is there's a lot of regulation, a lot

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Speaker 1: of these issues and noise out there. For sure. As

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Speaker 1: we look a big picture at the auto industry, you know,

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Speaker 1: one of the irony is out there that there's a

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Speaker 1: lot of talk to gain about peak auto and regulations

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Speaker 1: all but the head winds. But we look at it,

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Speaker 1: we actually see a lot of uh profit potential in

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Speaker 1: the car being ahead of us. If you think about

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Speaker 1: your autonomous vehicles eventually potential leading to lower insurance, mobility,

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Speaker 1: network connect the car services. So I think probably one

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Speaker 1: of these potential kind of risk that are there are

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Speaker 1: very real. There's actually a laundry list out there of

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Speaker 1: very large new opportunities beyond the cycles. I think people

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Speaker 1: maybe a bit open. So what you're telling me is

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Speaker 1: that in three or four years you probably won't be

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Speaker 1: covering GM, or four you'll be covering Google. Right. If

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Speaker 1: you look at the autonomous drivers, driverless cars, then you

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Speaker 1: need some it's the tech player. You have to go

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Speaker 1: down that route unless you think there will be some

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Speaker 1: kind of joint venture between Google or whoever you know,

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Speaker 1: Facebook and Ford. Yeah, it's just to be a comment

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Speaker 1: on GM. I think one of the things and it's

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Speaker 1: a quick question that it makes you know some of

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Speaker 1: the automakers, and we've written that there will be probably

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Speaker 1: automaker winners and losers in this whole race for autonomous

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Speaker 1: and mobility networks. Again the races for but we think

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Speaker 1: are very large pools of profits that they're sitting out

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Speaker 1: there in autonomous mobility networks. But one thing that does

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Speaker 1: get some, not all, but some automakers an advantage that

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Speaker 1: there is a regulatory framework and there is a need

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Speaker 1: for a lot of data. To think about what what

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Speaker 1: GM did or announced in January with with Mobile I

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Speaker 1: to begin to do crowdsource map being to be able

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Speaker 1: to collect a lot of data for driving little paths

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Speaker 1: in order to you know, actually teach the vehicles how

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Speaker 1: to become better self driving cars in the future. And

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Speaker 1: I think in order to launch one of these drive

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Speaker 1: list networks, and given again to your question before about regulations,

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Speaker 1: which are very real of course, UM, I think some

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Speaker 1: of the large companies can leverage their size and scale

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Speaker 1: UM and and of course some of their technology partners

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Speaker 1: and and and so on to be able to collect

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Speaker 1: more and better data to perhaps skin an early mover advantage.

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Speaker 1: And again to look at GM, and this now goes

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Speaker 1: through for four two in some of the states that

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Speaker 1: we think will begin to launch these types of drive

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Speaker 1: list networks, like perhaps California, New York. The market chair

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Speaker 1: these two companies GM and Ford's is left in their

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Speaker 1: national shares, but complet the opportunity. We gotta leave it

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Speaker 1: there for a moment. We'll come back with the Taba

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Speaker 1: College from City. Continue talking about the auto industry here

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Speaker 1: on Bloomberg. First, we've got to check in with Michael

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Speaker 1: Barr and get the latest world in national headlines. Michael, Mike,

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Speaker 1: thank you very much. Today in Connecticut, Delaware, Maryland, Pennsylvania

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Speaker 1: and Island are holding presidential primaries. Republican Donald Trump could

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Speaker 1: stretches lead over rivals Ted Cruz and John Kasik for

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Speaker 1: the Democrats, Hillary Clinton could pretty much put her very

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Speaker 1: close to the magic number for the nomination if she

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Speaker 1: has a strong day. The Philippine military has come unto

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Speaker 1: increased pressure to rescue more than twenty foeign hostages after

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Speaker 1: their Muslim extremist captors be headed the Canadian man Boo.

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Speaker 1: SF extremists be had the Canadian hostage John Ridsdale yesterday.

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Speaker 1: Canadian Prime Minister Justin Trudeau called the murder heinous act.

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Speaker 1: The Storm Prediction Center out of Oklahoma says conditions are

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Speaker 1: right today for severe weather over a large section of

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Speaker 1: the Central and Southern Plains. Global News twenty four hours

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Speaker 1: a day, powered by our twenty four hundred journalists and

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Speaker 1: more than a hundred fifty news bureaus from around the world.

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Speaker 1: On Michael bar Thank you Michael. As I mentioned, futures

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Speaker 1: are a little bit higher and in the pre market

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Speaker 1: trade GM chairs of seven tenths Ford which reports tomorrow

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Speaker 1: UH to Thursday up six tenths. This is Bloomberg Radio.

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Speaker 1: I'm Karen Moscow and this update is brought to you

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Speaker 1: Goo's value equity managers. Watched the conversation at investco dot

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Speaker 1: com slash Interactive. Now let's go to the first Word

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Speaker 1: breaking news desk for today's morning call, and here's Bill Maloney.

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Speaker 1: Good morning, Bill, Good morning Karen. Us features have improved

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Speaker 1: since the last time we spoke. Deaf. You just currently

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Speaker 1: hired by forty five points, sesamees Game four and NAZAC

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Speaker 1: futures rise by six. He was ten yield at one

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Speaker 1: point nine to per cent and on the US economic

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Speaker 1: front of eight thirty durable goods orders at five market

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Speaker 1: U S Services p m I and at ten o'clock

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Speaker 1: consumer confidence and Richmond fed after Develo's night, Canadian National

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Speaker 1: cut its full year forecast, DuPont operating EPs view was

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Speaker 1: above estimates, and Pioneer Natural boost of sixteen production growth views.

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Speaker 1: Some of your earnings highlights this morning, world Pool missed, Spirit,

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Speaker 1: Airlines three, m lckyed, Martin and Ryder beat Eli, Lillian Parker,

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Speaker 1: Haniffin raised sixteen and just DPS forecast and coach Brock

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Speaker 1: and Gamble and jet Blue EPs all beat estimates and

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Speaker 1: other news. Surreptive fails to win FDA panel backing. And finally,

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Speaker 1: some of your Wellstreet upgrades and downgrades. Caterpillo raised to

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Speaker 1: buy it artists, Canadian National cutdownder perform at Bank of America,

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Speaker 1: US Bancorp cut the hold a Deutsche Bank Parago cut

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Speaker 1: the hold at Jeffreys serepticunter underway to Piper and Newmont

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Speaker 1: Mining raised to outperform at RBC Live from the first

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Speaker 1: breaking News as Scombo Maloney, Karen Alry, thanks Bill and

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Speaker 1: to hear live breaking news over your Bloomberg type squawk

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Speaker 1: and go on your terminal. Let's ask you a w

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Speaker 1: K go and that's a Bloomberg business flash. Mike and

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Speaker 1: Francine Karen, Thank you very much. Et McAuley, as director

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Speaker 1: of US Autos and Auto Parts of City Investment Research,

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Speaker 1: We've been talking about Ford and General motives for it

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Speaker 1: to do out two days from now. General Mortors had

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Speaker 1: a reasonably good corner. Uh. The last quarter story caught

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Speaker 1: my eye eteen that I just have to ask about. Uh,

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Speaker 1: and it's uh, it does involve Ford, but this is

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Speaker 1: about Tesla. Uh. Ford apparently paid essentially two hundred thousand

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Speaker 1: dollars one nine hundred fifty dollars to buy one of

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Speaker 1: the first story sport utility vehicles made by Tesla. Why

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Speaker 1: would they spend so much money to get their hands

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Speaker 1: on one? Uh? Is there something that they're afraid of

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Speaker 1: here that they need to see? What's in this thing? Uh? Yeah. Actually,

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Speaker 1: I think constitsifically on on on kind of active and news.

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Speaker 1: But I think it's just factual knowledge that you know,

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Speaker 1: in the past, companies tend to, you know, always look

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Speaker 1: at this, see what other technologies look like, and you

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Speaker 1: know there's tear downs and things that that they're very

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Speaker 1: kind of common knowledge and in the industry. So uh yeah,

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Speaker 1: I'm not not gonna be aware of what's happened and

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Speaker 1: but but yeah, I mean, I think from Ford and

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Speaker 1: GM perspective, UM, you know, the the things that you're

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Speaker 1: looking at other technologies and it's sort of common practice

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Speaker 1: in the industry. Are they close to their own electric vehicles?

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Speaker 1: I mean, for an, I think idea is shown a

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Speaker 1: electric car the other Ford focus you know what I

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Speaker 1: think now about a hundred miles of range, you know,

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Speaker 1: and General Motors with the Chevrolet both with the b

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Speaker 1: um you know later this year will launch the first

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Speaker 1: two hundred mile over two hundred mile electric car UM,

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Speaker 1: you know, depending if you know the price, depending if

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Speaker 1: you're using the federal credits or not, in the kind

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Speaker 1: of high thirty thousand or thirty thousand dollar range. Uh So,

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Speaker 1: I think I think, I think GM has been ahead

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Speaker 1: and you know a forward as well in terms of

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Speaker 1: the kind of you know, two hundred plus electric electric

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Speaker 1: gut car UM. You know. Chevy also has the Vault

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Speaker 1: with the v that is sort of fifty plus mile

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Speaker 1: plug in electric vehicle that has a range extender for

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Speaker 1: you know, three to four miles I believe of total range. UM.

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Speaker 1: You were talking about the auto cycle and how this

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Speaker 1: is different to other cycles. Can we ever go back

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Speaker 1: to the way it previously was. You write that fundamentally

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Speaker 1: two things have changed from past cycles. Yeah, I know,

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Speaker 1: it's the great question I think they have in cars

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Speaker 1: are lasting a lot longer, so it's created a difficulty

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Speaker 1: for forecasters to understand and know when we go through

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Speaker 1: you through a real replacement cycle. And then then the

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Speaker 1: other change is a bit more complex that we've seen

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Speaker 1: more rapid movement in density kind of ratio of cars

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Speaker 1: per household, which declined in the O we donnine recession,

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Speaker 1: and it has increased in the last two years, and

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Speaker 1: that can create a little tiny change in that ratio

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Speaker 1: can create big changes in auto sales as you could imagine.

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Speaker 1: Our our vue though, has been that you know, we

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Speaker 1: still think a lot of the placement cycle of scraps

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Speaker 1: cycle is ahead of us, just based on analytics we've

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Speaker 1: done on the age of the fleet and when we

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Speaker 1: believe in this new day and age of longer lasting

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Speaker 1: cars cars when cars actually do become scraps, which is

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Speaker 1: why you know, our view has been for a while

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Speaker 1: that we think we can be in kind of mid

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Speaker 1: seventeen million or so sorr um. You know, through through

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Speaker 1: thine is probably the peak here what do you mean

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Speaker 1: by So let's just go back to density, because I

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Speaker 1: think you make a very important point. The density factor

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Speaker 1: is very important because you know in your notes you

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Speaker 1: say one percent decline and density means that basically one

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Speaker 1: million less cars will be sold. Will ever go back up?

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Speaker 1: Or how do you explain the splip? Yeah? I know

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Speaker 1: it before oh eight, Um, car density in the US

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Speaker 1: is either flat or increasing. I think of a lot

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Speaker 1: of people. Uh miss an O eight oh nine. Let's

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Speaker 1: really shook the industry. So for the first time, the

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Speaker 1: ratio of cars per household began to decline. What that

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Speaker 1: means on the ground as we were scrapping more vehicles

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Speaker 1: and we were replacing and it took years of that

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Speaker 1: ratio to stabilize, and then in the last few years

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Speaker 1: it's begun to go back up. You know, we run

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Speaker 1: a density and proprietary density survey city. We literally go

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Speaker 1: out to thousands of consumers a few times a year

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Speaker 1: when we asked them, you know, how many cars perhapsle

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Speaker 1: do you have today? How many might you have in

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Speaker 1: two years and then tell us why. Our latest survey,

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Speaker 1: which we ran around I think mid March, showed uh,

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Speaker 1: you know kind of unchanged dynamics versus our survey back

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Speaker 1: in November. We're just to say pretty flat and stable

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Speaker 1: outlook for for densities. So you know, we don't think

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Speaker 1: that we're going to go continue to go back up up,

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Speaker 1: you know, too too much. UM. But we think it's

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Speaker 1: relatively stable now because they want to fund mental questions

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Speaker 1: in its industry in the last few years. And by

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Speaker 1: the way, it's gonna become an even more important question

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Speaker 1: when you think about right sharing and car sharing an

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Speaker 1: autonomous UM is how many cars per household do people

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Speaker 1: really want to have? UM. They's not a neat base

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Speaker 1: and want based. It's kind of a mixture of both UM,

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Speaker 1: and I think the best way to get at is

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Speaker 1: just to go out there, frankly and and ask and

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Speaker 1: collect a lot of data, which we've done so. Yeah.

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Speaker 1: That's so when we take the view of of kind

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Speaker 1: of a scrapped UM as well as our density survey

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Speaker 1: and put those together, we get to that kind of

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Speaker 1: mid seventeen million view through each McConnelly from City, thank

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Speaker 1: you very much for joining us this morning. Friend, You're

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Speaker 1: gonna have a lot of cars in your family, I'm

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Speaker 1: sure when when your kids get old enough, but you've

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Speaker 1: got a few years right, And I think in the

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Speaker 1: UK in general, especially when you live in central London,

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Speaker 1: our cars are smaller and we're trying probably to go

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Speaker 1: green more than in other countries. Yeah, I just say,

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Speaker 1: you know, give him an oyster card and let him

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Speaker 1: take two perfect, don't teach him to try. We'll talk

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Speaker 1: with Jadasara fakas H. He has the former Greek finance minister.

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Speaker 1: Of course, he's got a new book out and the

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Speaker 1: week suffer what they must. We'll find out what he

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Speaker 1: thinks of the Eurozone and its dealings with Greek. I

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Speaker 1: can only imagine at this point Future is moving higher.

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Speaker 1: SMP futures up by five points right now, dal Future

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00:19:57,040 --> 00:19:59,879
Speaker 1: is up by forty three and Nasdaq futures are up

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Speaker 1: I seven. This is Bloomberg Surveillance on Bloomberg Radio Worldwide

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