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Speaker 2: Boeing shares have really been under pressure lately, investors waiting
Speaker 2: detail to from flight data equipment. So here to tell
Speaker 2: us more about it, break it all down for us.
Speaker 2: George Ferguson Bloomberg Intelligence, Senior Aerospace Defense Airlines analyst, George,
Speaker 2: I want to start with the flight data equipment to
Speaker 2: start here. Have they found all of them? And what
Speaker 2: particularly will they be looking for when it comes to
Speaker 2: this equipment.
Speaker 3: Yeah, so I'm not totally sure if they've found all
Speaker 3: the equipment anything, had found some of the recorders. I
Speaker 3: think once they get into it, I assume you're talking
Speaker 3: about the Air India crash, right, correct, correct, When they
Speaker 3: get into it, I think one of the items are
Speaker 3: absolutely going to focus on is going to be what
Speaker 3: was going on in the engines and that Air India
Speaker 3: seven eighty seven. You know, look at Boeing seventy seven
Speaker 3: can lose one engine and still take off and gain altitude.
Speaker 3: So the videos we saw circumstances indicate that both engines
Speaker 3: potentially were not producing enough lift. So my guess is
Speaker 3: that's where the focus is going to be is on
Speaker 3: what was going on in the engines. It was eleven
Speaker 3: year old airplane, so we think that what it all
Speaker 3: is said and done, probably not going to be a
Speaker 3: manufacturing issue, either at Boeing or ge from original manufacturer,
Speaker 3: and probably going to be some sort of engine issue,
Speaker 3: which I think would probably you know, put Boeing not
Speaker 3: in the responsible category, you know, for that that crash,
Speaker 3: even though obviously something we're never happy to see and
Speaker 3: you know, very sorry about that.
Speaker 4: George, You've in your coverage of Boeing and your discussions
Speaker 4: with us, you've always made sure that we focus on
Speaker 4: what's important. That is the deliveries of aircraft. June was
Speaker 4: a great month, wasn't.
Speaker 3: It looked pretty good. So we see about US sixty deliveries.
Speaker 3: Of that, I think we had maybe forty two or
Speaker 3: so seven thirty seven deliveries. Seven thirty seven is the
Speaker 3: money maker, so that's super important. Of those forty two,
Speaker 3: we're focusing very closely on how many were first flown
Speaker 3: in twenty twenty five. And the reason we're doing that
Speaker 3: is we know Boeing has a lot of inventory airplanes,
Speaker 3: so if they're boosting deliveries through inventory airplanes, that's indicating
Speaker 3: to us that the factory isn't as strong as we
Speaker 3: would hope. What we're seeing right now when we look
Speaker 3: at Syrium data is five of those forty two airplanes
Speaker 3: are inventory deliveries airplanes that were flown previous to this year,
Speaker 3: So that indicates it something around thirty seven Max's came
Speaker 3: through the rentin factory in June. That's a pretty nice number.
Speaker 3: That corresponds pretty well with Boeing CEO's indication that they
Speaker 3: were producing at a thirty eight ish through put in
Speaker 3: the factory and that they were going to be breaking
Speaker 3: into forty two's levels sort of in the back half
Speaker 3: of the year. And so this absolutely confirms I think
Speaker 3: the improving health of the Boeing production system and that
Speaker 3: retin factory.
Speaker 2: Now, George, you mentioned CEO Kelly Ordberg. What's the war
Speaker 2: on the street. How has he been handling this new role?
Speaker 2: I mean, a lot of pressures on him.
Speaker 3: Yeah, I mean, I think when it's all done, it's
Speaker 3: going to be a function of did he get quality improved,
Speaker 3: did he improve throughput? Did he generate cash? Did he
Speaker 3: improve the balance sheet of Boeing, you know, sort of
Speaker 3: stave off any downgrades? And right now I'd say the
Speaker 3: report card would be pretty good for what Kelly Orbrick
Speaker 3: is doing.
Speaker 4: And George, you also told us that, you know, tooling
Speaker 4: up these factors to crank a production, it's not as
Speaker 4: easy as it sounds. It's a little bit more difficult
Speaker 4: in manufacturing and automobile coming down the line here, and
Speaker 4: that goes to the labor issue. You need some pretty
Speaker 4: highly trained labor and coming out of the pandemic, that
Speaker 4: was a challenge. How is Boeing doing these days on
Speaker 4: that front?
Speaker 3: Yeah, So, you know, if we measure it from the
Speaker 3: throughput in the factory, it looks like it's it's doing better.
Speaker 3: We're hearing, you know, better sort of noises from the
Speaker 3: supply chain that labor is stabilizing. I think we see
Speaker 3: in the country right the labor market isn't as sort
Speaker 3: of white hot as it was coming right out of
Speaker 3: the pandemic, especially for you know, some of this manual
Speaker 3: labor that they're looking for and so I think that
Speaker 3: helps stability. That stability allows you to go ahead and
Speaker 3: train people and through put. So it appears to us
Speaker 3: all all those indicators that you know, labor stabilizing qualities improving,
Speaker 3: and that's definitely having Boweing benefiting from it.
Speaker 2: George, you mentioned deliveries earlier. The Paris Air Show is
Speaker 2: a huge event for these airlines. Yes, yes, how did
Speaker 2: how did Boeing fair coming out of that?
Speaker 3: Yeah, So we haven't seen a lot of orders for
Speaker 3: Boeing recently, and we you know, we didn't see any
Speaker 3: Paris air Show right they had pulled out. I think
Speaker 3: just as they're monitoring the developments of that Air India crash.
Speaker 3: But we really haven't seen a lot of orders recently
Speaker 3: for Boeing. I suspect that given the tariff backdrop, you're
Speaker 3: just not going to see a lot of orders for
Speaker 3: Boeing until that tariff backdrop gets cleared right. Boeing has
Speaker 3: one factory they build seven thirty sevens at it's in
Speaker 3: the US, So terraffs between US and the rest of
Speaker 3: the world always get in the way. That has to
Speaker 3: get cleared.
Speaker 4: Up, George. Great stuff has always George Ferguson's senior airspace
Speaker 4: depends in airlines unels.
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Speaker 2: We're going to keep it here kind of in that
Speaker 2: AI tech space. I want to go to Man Deep thing.
Speaker 2: He's Bloomberg Intelligence senior tech industry analysts. So Man Deep,
Speaker 2: we have this sign of just how competitive the AI
Speaker 2: space is for talent. So you have Meta possibly poaching
Speaker 2: Apple's top AI executive, offering this big, big, big payout.
Speaker 2: Explain to us first of all, who this guy is
Speaker 2: and how much are they offering him.
Speaker 5: Well, I don't know the exact dollar amount what they're offering,
Speaker 5: but clearly Meta is going big in terms of poaching
Speaker 5: the top AI researchers. We saw that with the scale
Speaker 5: AI aquahars, they pretty much post the founder and look,
Speaker 5: I think they want to assemble the top fifty AI
Speaker 5: researchers that are out there who have got published papers.
Speaker 5: And they are paying up in this case because they've
Speaker 5: made all the big investments in terms of compute, in
Speaker 5: terms of infrastructure, but they don't have a cloud business
Speaker 5: or some other form of monetization that you know Google
Speaker 5: has or a Microsoft has. So from that perspective, I
Speaker 5: think it's crunched time for them to really show that,
Speaker 5: you know, they can develop an ecosystem with their large
Speaker 5: aguage model, which has been underperforming relative to OpenAI, Google
Speaker 5: and Cloud. And I think it's the founder Mark Zuckerberg
Speaker 5: who really is going all out. I mean, you can't
Speaker 5: expect any other CEO to be that aggressive with paying
Speaker 5: five billion dollars for fifty people. Literally, that's what the
Speaker 5: expense that we are talking about Facebook. A Meta as
Speaker 5: a company has over seventy six thousand employees with an
Speaker 5: expense space of one hundred and fifteen billion. They're adding
Speaker 5: five more billion for fifty people. That's all we're talking about.
Speaker 4: Wow, that's an order magnifade. Yeah, all right, so it's
Speaker 4: clear that metas all in. What does this mean for Apple?
Speaker 3: This?
Speaker 4: If I were an Apple Cheryl, I'd be concerned here A,
Speaker 4: I'm losing talent, but B I've already it's coming from
Speaker 4: an area where I feel like I'm under invested already
Speaker 4: perhaps I'm already behind. What do you think this means
Speaker 4: for Apple?
Speaker 5: I mean, clearly everyone on the research site realizes that
Speaker 5: Apple doesn't have the big AI cluster that these companies have,
Speaker 5: and you know, generative AI is all about having a
Speaker 5: large cluster, training your model on that cluster, and then
Speaker 5: really building from there. So from that perspective, Apple has
Speaker 5: lagged behind. And if you're a top AI researcher, there
Speaker 5: are better companies to work for right now, so I'm
Speaker 5: not surprised, you know, a top AI researcher has ended
Speaker 5: up taking up the offer. But for Apple, look, they're
Speaker 5: going to use a combination of partnerships and some on
Speaker 5: device AI investment, which is what they have done in
Speaker 5: terms of, you know, their own model efforts. They're going
Speaker 5: to partner with cloud open AI, probably Google as well
Speaker 5: once the anti trust issues are over, and that's how
Speaker 5: they're going to provide the functionality. As long as it's
Speaker 5: cloud based. They have the app infrastructure to offer AI
Speaker 5: for on device AI, they have to do it natively
Speaker 5: at the operating system level. You can't really leverage the
Speaker 5: large acreage model from open AI on device because you
Speaker 5: have to really open up your operating system, which Apple
Speaker 5: won't do.
Speaker 2: I have to add some kind of AI in my resume.
Speaker 6: I think.
Speaker 2: On this, Maddie, what kind of tone does this set
Speaker 2: for the industry, what kind of messages sending?
Speaker 5: I mean, to my mind, this is a very high
Speaker 5: risk play right now. The market sentiment is Meta can
Speaker 5: do no wrong. They are making all the right moves
Speaker 5: with getting these you know, big AI researchers, but at
Speaker 5: the end of the day, it is you know, they're
Speaker 5: doubling down on capex, adding more opics. So from a
Speaker 5: spending perspective, Meta is going all in, and so you know,
Speaker 5: once it starts to weigh on free cash flow and
Speaker 5: the returns are not there, which is why I said,
Speaker 5: you know, with everyone else, you see the AI monetization.
Speaker 5: You know, if you have a coding agent from Microsoft
Speaker 5: or Google, they are monetizing it with Meta. All these
Speaker 5: are upfront investments with the hope that if we'll add
Speaker 5: more engagement time across their family of apps, they will
Speaker 5: probably have a killer AI product that they'll be able
Speaker 5: to monetize with in addition to their recommendation systems. So
Speaker 5: the stakes are getting higher and higher, but clearly they
Speaker 5: are doubling down in terms of their investment, and at
Speaker 5: some point the monetization question, kay King, Probably not this
Speaker 5: earning season, but maybe a couple of quarters from now.
Speaker 4: All right, Man deep Seeing, big, big numbers. That's his companies, folks.
Speaker 4: They just they traffic in huge numbers, huge investments, huge revenue, huge,
Speaker 4: huge free cash flow. That is the state of global
Speaker 4: technology these days, centered in the United States. Men Deep
Speaker 4: Seeing senior techannels for Bloomberg Intelligence. We appreciate that, and
Speaker 4: again Meta going all in, not that they weren't before,
Speaker 4: but it's just kind of another example the type of
Speaker 4: investments they are making there.
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Speaker 4: I think from the pandemic, we all became familiar with
Speaker 4: this concept of supply chains and global supply chains and
Speaker 4: where stuff comes from. And boy, when the ship stops sailing,
Speaker 4: that's a problem. And do we need to bring some
Speaker 4: of that stuff closer to home? And that's one of
Speaker 4: the reasons I think for President Trump and his focus
Speaker 4: on tariffs here. But let's get a sense of what
Speaker 4: the global supply chains are looking at now and how
Speaker 4: they may react in a world where tariffs are higher.
Speaker 4: Brandon Daniels joins the CEO of EXEG. He joins us
Speaker 4: from Chicago. Brandon, how do you put into context all
Speaker 4: this talk about tariffs and kind of what it means
Speaker 4: for the global supply chain and how we get stuff,
Speaker 4: where we make stuff, where we import stuff from. How
Speaker 4: do you guys think about that?
Speaker 6: Absolutely? Well, thank you for having me on. It's good
Speaker 6: to talk to you guys today. I think when we
Speaker 6: think about it, it is a reflection of a major
Speaker 6: shift in priorities across across all countries from a global
Speaker 6: commerce perspective. Right, Like, when you think about what the
Speaker 6: United States is doing and what the administration is doing,
Speaker 6: is there they're trying to prioritize three things, right. The
Speaker 6: first thing that we've in our discussions and in our
Speaker 6: talks with the administration, they want to bring back manufacturing
Speaker 6: where the United States can be competitive. And that's that's
Speaker 6: what our customers are utilizing our AI tools today and
Speaker 6: our multi tier supply chain visibility to understand where can
Speaker 6: they actually source in the United States in a way
Speaker 6: that is at parity with their global sourcing requirements. And
Speaker 6: so that is mostly focused on where labor arbitrage has
Speaker 6: been taken out of the equation. So think things like
Speaker 6: additive manufacturing, Think things like you know, largely automated production floors.
Speaker 6: You know, those are the areas where you're starting to
Speaker 6: see major cost collapse in between emerging markets and more
Speaker 6: sophisticated markets, because the cost of the manufacturing equipment it's
Speaker 6: the same across the globe, the cast of the land.
Speaker 6: I mean, there's there's parts of North Texas that are
Speaker 6: cheaper than parts of heav A, China. And with the
Speaker 6: volume of operators necessary in these factories going down and
Speaker 6: them having to be also more higher skilled, uh, the
Speaker 6: the major labor arbitrage effect kind of dwindles, and so
Speaker 6: they want to move those areas of automated manufacturing back
Speaker 6: to the United States. And so I see our customers
Speaker 6: focused on those commodity areas as well as you know,
Speaker 6: some of the more specialized areas that require automated manufacturing floors. Uh,
Speaker 6: that stuff coming back to the US. The second thing
Speaker 6: is national security and economic security. So from a national
Speaker 6: security perspective, you know, there's a there's a core focus
Speaker 6: on semiconductors because AI is the future of our national
Speaker 6: security capacity, whether it's in managing you know, UA s
Speaker 6: and drones, or it's in you know, fighting cyber attacks.
Speaker 6: AI is where it's at. And then the other area
Speaker 6: is in pharmaceuticals. It's actually keeping our you know, medical
Speaker 6: supply chains clean UH and independent. And you know, obviously
Speaker 6: we pulled back the veil on that in COVID Exeger
Speaker 6: was the technology utilized by the federal government to purchase
Speaker 6: seven billion dollars of goods and to do it in
Speaker 6: a way that didn't in a way that we could
Speaker 6: get it to the healthcare frontlines quickly and in a
Speaker 6: way that didn't allow for fraud, waste, abuse, and adversarial investment.
Speaker 6: And I think they're looking to try to expand that
Speaker 6: and trying to bring back pharmaceutical manufacturing, medical device manufacturing
Speaker 6: to the United States. And so when when I look
Speaker 6: at this, I see those two first strategies getting you know,
Speaker 6: sort of being prioritized. The last one is honestly to
Speaker 6: ramp up our actual external UH tariff collection. You know,
Speaker 6: there have been estimates between thirty and one hundred billion
Speaker 6: dollars of transhipment per year. You saw this in the
Speaker 6: deal with Vietnam, where it was twenty percent tariffs and
Speaker 6: then forty percent tariffs on expected or potential transshipment goods. Right.
Speaker 6: So one of the things that we've seen is China
Speaker 6: has used this sort of global economic coercion to create
Speaker 6: veneer centers of manufacturing across the globe, and the US
Speaker 6: is trying to crack down on that to level the
Speaker 6: playing field.
Speaker 2: All right, bern I hear you got to talk about
Speaker 2: a couple of things, so AI pharmaceuticals. One of the
Speaker 2: things you mentioned in your notes is how auto is
Speaker 2: there going to be the best case study and how
Speaker 2: nuanced this policy really is? Can you dig into that
Speaker 2: for us?
Speaker 5: Yeah?
Speaker 6: Absolutely, so auto manufacturing is a great case study of
Speaker 6: where all of this might be going. I don't think
Speaker 6: we'll end up with just blanket country level policies. And
Speaker 6: I think those blanket country level policies will get nuanced
Speaker 6: down to the HTS code or to the actual sort
Speaker 6: of segment or sector of goods, right. And I think
Speaker 6: that they will get nuanced down to a place where
Speaker 6: you know, the recognized dependencies we have on critical minerals
Speaker 6: or specialty alloys, or on specific goods that are indigenous
Speaker 6: to some of our allies, you know, where those are
Speaker 6: necessary for us to do the manufacturing in the United States.
Speaker 6: I think those goods will become subject to exceptions or
Speaker 6: exemptions very similar to USMCA so. So automotive is a
Speaker 6: great example of this because basically, you can have fifteen
Speaker 6: percent of your auto that's being manufactured in the United States.
Speaker 6: You can have fifteen percent of it be parts, components,
Speaker 6: and goods from other places, and your entire tariff burden
Speaker 6: can be offset by the three point seventy five percent
Speaker 6: tear credit you get on the vehicle's MSRP, right, and
Speaker 6: so it's almost like you have your tariff free if
Speaker 6: you have fifteen percent of the goods coming from everywhere else.
Speaker 6: And that's because we realize that in many cases there
Speaker 6: are things that the US doesn't make yet, and it's
Speaker 6: going to take a while for the US or allies
Speaker 6: to build those things right, and we want to give
Speaker 6: you know, people the ability to have some leniency there.
Speaker 4: Red headline crossing the Bloomberg terminal, Trump says August one,
Speaker 4: tariff deadline won't be extended. We'll have more reporting on that.
Speaker 4: Brandom got thirty seconds left here. When you talk to
Speaker 4: your customers, who's going to pay tariff costs? Is there
Speaker 4: going to be the importer or the manufacturer, the distributor
Speaker 4: or the consumer or how are these tariffs going to
Speaker 4: be worn by the economy.
Speaker 6: I think the consumer is going to be the last
Speaker 6: to feel it. And I think, you know, the fact
Speaker 6: is this is going to be absorbed somewhere in the
Speaker 6: supply chain. In twenty eighteen, when we had the regional
Speaker 6: Trump tariffs on steel, you know, the entire defense industry,
Speaker 6: the entire automotive industry, airline industry, they all ate it,
Speaker 6: right because you just needed the steel, yeah, and you
Speaker 6: didn't and you didn't want to affect the end market.
Speaker 6: I think that the consumer is going to be the
Speaker 6: last the feeling on this fr I.
Speaker 4: Hopefully that is the case. Brandon Daniels, Thank you so much.
Speaker 4: Brandon Daniels. He's the CEO of Exeger, joining us from Chicago,
Speaker 4: Vias zoom talking about tariff talk about supply chains, fascinating
Speaker 4: and fluid situation.
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