Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day
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Speaker 2: Terminal and the Bloomberg Business app. Here's the latest. This morning,
Speaker 2: Bren climbing back above one eleven. As President Trump ways
Speaker 2: Around's latest proposal to end the war, the Treasury Secretary
Speaker 2: Scompston saying the US blockade is forcing the Rand's oil
Speaker 2: industry to shut with gasoline shortages to follow. Join us
Speaker 2: now to discuss I'm very pleased to say the US
Speaker 2: Energy Secretary Chris Rai joined us for more. Mister Secretary,
Speaker 2: you are in Croatia. I believe we can talk about
Speaker 2: the relationship between the US and Europe and just a
Speaker 2: moment we have to lead with Iran. This morning, missus
Speaker 2: secapy in your mind, how much storage capacity does Iran
Speaker 2: have left? And what's informing that conclusion at the moment.
Speaker 3: Well, look, there's monitoring of storage tanks that carg islanded
Speaker 3: around the nation of Iran. But yeah, they don't have
Speaker 3: a huge amount of storage capacity, and they've got old
Speaker 3: reservoirs that are low pressure, which means it's much more
Speaker 3: destructive if they have to shut in their production.
Speaker 4: Kepler, mister secretary is talking about twelve to twenty two
Speaker 4: days left that Iran has in terms of storage before
Speaker 4: they have to shut in. Do you see the President
Speaker 4: making any sort of decision on Iran's proposal before that
Speaker 4: time period is up?
Speaker 3: Again, the President's focused on getting the right deal that
Speaker 3: could be independent of their storage. But obviously that puts
Speaker 3: great heat on Iran. If we can get the right resolution,
Speaker 3: that could be tomorrow, that could be two weeks from now,
Speaker 3: But the key thing is the right resolution Iran.
Speaker 5: And let me just put the context again.
Speaker 3: Iran has roughly one thousand pounds of sixty percent enriched uranium.
Speaker 3: There's no commercial, peaceful use for that. That's bomb material
Speaker 3: and that's ten days two weeks tops to turn that
Speaker 3: into highly enrich uranium for bombs.
Speaker 5: So this is an existential crisis.
Speaker 3: I'm very proud of the President to stand up and
Speaker 3: put an end to Iran's efforts to get a nuclear bomb.
Speaker 4: Well, so it doesn't sound like the President would take
Speaker 4: this off ramp from Iran, which is reopening the straight
Speaker 4: up her moves. Obviously the US blockade would have to end,
Speaker 4: and then kicking the can down the road when it
Speaker 4: comes to talks on nuclear.
Speaker 3: Yes, again, the critical outcome here is that we end
Speaker 3: the ability for Ran to have a nuclear weapon. There's
Speaker 3: many ways that deal can be structured, but the compromise
Speaker 3: will not be made on the.
Speaker 5: Principle no nuclear armed Iran.
Speaker 4: We see gasoline prices on average rising again this morning.
Speaker 4: They're above four dollars a gallon. You recently said the
Speaker 4: administration plans to do more to bring down US gas.
Speaker 4: We saw the waiver on the Jones Act extended. What
Speaker 4: else are you thinking about when you.
Speaker 3: Also saw announcements on the EPA for blending requirements this
Speaker 3: summer that allows our refineries to produce a lot more gasoline. Unfortunately,
Speaker 3: a few states foolishly did not go along with it,
Speaker 3: So California is still going to have outrageously high gas
Speaker 3: prices New York State. I don't know why also did
Speaker 3: not go along with the federal regulations, but we're doing
Speaker 3: everything we can to increase refinery throughput. American oil production
Speaker 3: is at record high, American oil exports, store allies are
Speaker 3: broader at record high. So look, we're going through a
Speaker 3: purity of discomfort to solve a forty seven year crisis,
Speaker 3: and gasoline prices are still a dollar a gallon cheaper
Speaker 3: than they were during the middle of the Biden administration.
Speaker 5: Well, I'm hearing that.
Speaker 4: The administration is also considering an export ban on US products.
Speaker 5: Is that accurate? Absolutely not, Absolutely not.
Speaker 3: Here I am in Dubruvnik, in Croatia signing multi billion
Speaker 3: dollar deals to sell American energy exports. That is the
Speaker 3: fastest growing export out of our country. We're selling American
Speaker 3: natural gas, American oil, American jet fuel, diesel, and gasoline
Speaker 3: all around the world. We're not going to stop those exports.
Speaker 3: We're going to grow those exports.
Speaker 6: Secretary, how much are you trying to ameliorate some of
Speaker 6: the price considerations and traditional allies of the United States
Speaker 6: As this does potentially.
Speaker 5: Drag on for a longer period. Of time.
Speaker 6: I mean, how much does cost a big part of
Speaker 6: some of these exports.
Speaker 3: Yes, everyone understands, particularly over here in Central and Eastern Europe.
Speaker 3: People understand the existential threat from Iran. Everybody wants to
Speaker 3: see that the United States successful in ending Iran's nuclear
Speaker 3: weapon ambitions. Nobody likes, of course, high prices in the
Speaker 3: short term, but they understand increased American energy exports in
Speaker 3: increased energy addition policies lean into more energy production. That's
Speaker 3: what President Trump is all about. We've got to get
Speaker 3: away from those Western European policies of making intentionally making
Speaker 3: hydrocarbons expensive and energy subtraction policies. The future of Europe,
Speaker 3: the dynamic growth of Europe, is going to be in
Speaker 3: these Central and Eastern European nations that lean into the
Speaker 3: President Trump's American agenda of more energy, more economic growth,
Speaker 3: more opportunities for citizens.
Speaker 6: Amrie was alluding to this idea, this idea of potentially
Speaker 6: having restrictions on exports, and this has been deployed before
Speaker 6: in part because prices were going up and it increased
Speaker 6: the price when we were exporting a significant part of
Speaker 6: resources in the United States. How do you plan to
Speaker 6: have exports continue to increase to US allies will not
Speaker 6: necessarily having the ramifications of much higher prices here.
Speaker 3: Because the refinery capacity we have in the United States
Speaker 3: now is greater than all of consumption.
Speaker 5: In the United States.
Speaker 3: If we didn't export our diesel and jet fuel, we'd
Speaker 3: have to turn down our refineries. Who would want to
Speaker 3: turn down their refining capacity.
Speaker 5: In today's world? We want them.
Speaker 3: The higher utilization they run, the higher throughput they run on,
Speaker 3: the more efficient they are, they produce more products. That
Speaker 3: puts a downward pressure on prices, not just in the United.
Speaker 5: States, but for everyone abroad.
Speaker 3: That's what America is about, bringing more energy to the
Speaker 3: world and pushing prices down.
Speaker 4: Mister Secretary, and you're announcing today Trump Peace pipelines, will
Speaker 4: it be something that all of our allies in Europe
Speaker 4: can get a handle of.
Speaker 3: Absolutely. This Trump Peace pipeline agenda is to grow the
Speaker 3: connection between the nations of Europe.
Speaker 5: Where I'm standing right here in Croatia.
Speaker 3: These nations were at the end of Russian Soviet Union
Speaker 3: energy system. They were at the behest they were beholden
Speaker 3: to Russia. That's not a good place to be. What
Speaker 3: we're doing here is expanding this pipeline network so they
Speaker 3: can import oil and natural gas from the United States
Speaker 3: and then transported among the nations in this region, so
Speaker 3: their economies can grow and they can realize lower prices
Speaker 3: for their citizens in greater economic futures. I think the
Speaker 3: idea of the Trump Peace pipeline, Peace pipelines, there's many
Speaker 3: of these are huge. We'll announce today a couple of
Speaker 3: historic agreements in this regard.
Speaker 2: Stay with us Mulbloomberg surveillance coming up. After this, let's
Speaker 2: talk about some earnings. General Motors reporting better than expected
Speaker 2: first quarter earnings and raising it's full yet guidance. The
Speaker 2: General Motors CFO Paul Jacobson joins us now for more. Paul,
Speaker 2: Welcome to the program. The bus word disc earning season
Speaker 2: appears to be resilient. I think it would be unfair
Speaker 2: just to call this resilient. It looks strong, Sir Paul.
Speaker 2: Where is that strength coming from?
Speaker 7: Hell out, Good morning, John, Thanks thanks for having us.
Speaker 7: You know, this quarter was a really strong one for us.
Speaker 7: But I think that resiliency word works really well. It's
Speaker 7: something that we've demonstrated for the last several years, whether
Speaker 7: it was the chip crisis or tariffs or inflation. I
Speaker 7: think the teams responded really well, and this quarter was
Speaker 7: no exception when you look at some of the challenges
Speaker 7: that we faced around inventory levels. The go to market
Speaker 7: team did an outstanding job dealing with the traffic that
Speaker 7: we saw in the stores, which continue to be strong
Speaker 7: and steady and has continued through April. So we feel
Speaker 7: good about the quarter, and you know, we're able to
Speaker 7: take up our guidance as a result of the IEPA tariff,
Speaker 7: a crewle that we took in the quarter, and you know,
Speaker 7: so far it looks like we're able to handle some
Speaker 7: of the pressure that we've seen in inflationary items, primarily
Speaker 7: resulting from energy prices.
Speaker 2: Well, Paul, let's talk about that.
Speaker 5: It's an important topic.
Speaker 2: Your supply chains have been battle tested, batsle hardened, the pandemic,
Speaker 2: the tariffs, and now this what challenge is he working
Speaker 2: through as a team at the moment?
Speaker 7: Well, I think right now, obviously the team's done a
Speaker 7: really strong job of maintaining it through even some of
Speaker 7: the dram memory chip issues that we saw in the
Speaker 7: middle part.
Speaker 5: Of last year.
Speaker 7: I think a lot of that has calmed down. But
Speaker 7: what we're really seeing across the board right now is
Speaker 7: inflationary effects and raw materials aluminum steel, just overall transportation
Speaker 7: and logistics costs. We're calling out about five hundred million
Speaker 7: dollars of pressure that we've added to our forecast for
Speaker 7: the year. So despite our beat, we're not taking up
Speaker 7: our guidance by nearly as much as that beat, primarily
Speaker 7: because we're continuing to adjust the business. But we feel
Speaker 7: good that we're a little bit out of it right now,
Speaker 7: but we are cautious about how long this might.
Speaker 6: Last, how much we're able to pass along those extra
Speaker 6: costs Paul to consumers in the face of already relatively
Speaker 6: high prices but a very strong consumer demand.
Speaker 7: Yeah, so we came into the year saying that price
Speaker 7: was only going to be up by about a half percent,
Speaker 7: which really was the annualization of model year twenty six
Speaker 7: price increases. We haven't built any significant price increases into
Speaker 7: our models. In fact, what we're seeing is the industry
Speaker 7: discounting a little bit more. There's some competitive pressure out there,
Speaker 7: but our teams held up well. I think when you
Speaker 7: look at the GM portfolio, we've really got a vehicle
Speaker 7: for every consumer out there. We're known for our trucks
Speaker 7: and our SUVs, but we sold over seven hundred thousand
Speaker 7: vehicles last year with a starting price of approximately thirty
Speaker 7: thousand dollars or less, so we've got that portfolio. The
Speaker 7: Chevy traxis hitting record levels for us last quarter, so
Speaker 7: we feel like we're in a good spot depending on
Speaker 7: where the consumer might be.
Speaker 6: Has there been any pushback against some of the large vehicles,
Speaker 6: the SUVs, the pickups in the face of higher gasoline prices,
Speaker 6: or have you seen no ramifications whatsoever?
Speaker 7: You know, we really haven't seen any changes. In fact,
Speaker 7: our light duty pickup sales were up about eight percent
Speaker 7: year over year in the quarter. On like I said,
Speaker 7: traffic has been strong. If anything, we probably were a
Speaker 7: little bit light on inventory coming into the quarter because
Speaker 7: we had such a strong December and with the weather
Speaker 7: in January and so on, we had difficulty making up
Speaker 7: those inventory levels. So we're down quite a bit from
Speaker 7: where we were a year ago. It gives us an
Speaker 7: opportunity to replenish that stock and make sure that we've
Speaker 7: got product in the stores at our dealers.
Speaker 5: For customers when they come.
Speaker 7: But so far, traffic has remained steady.
Speaker 4: Well when it comes to the tariffs, how is it
Speaker 4: going in terms of getting the refunds back from the
Speaker 4: US government.
Speaker 7: So, you know, we're exposed a lot differently. I think
Speaker 7: many companies out there are principally focused on IEPA. Many
Speaker 7: of our tariffs are under Section two thirty two, and
Speaker 7: there's been a pretty robust process. We haven't had any
Speaker 7: challenges with the offsets and making sure that we're getting
Speaker 7: the accounting right with the government to make sure that
Speaker 7: the cash is flowing efficiently with IEPA. With Theupreme Court
Speaker 7: decision that was somewhat unexpected, we took the accrual. We
Speaker 7: have not moved our free cash flow guidance like we
Speaker 7: did our EBIT because we're not sure when that refund
Speaker 7: is going to come. We haven't applied for anything yet.
Speaker 7: But you know, we're going to work through that with
Speaker 7: the government in partnership, because I think that partnership has
Speaker 7: worked really well as we've adjusted and tried to benefit
Speaker 7: the US auto industry the best we can.
Speaker 5: Well how deep is this partnership.
Speaker 4: A few weeks ago there was a report that the
Speaker 4: Pentagon is talking to General Motors and other auto companies
Speaker 4: about making munitions and helping in the war effort. Is
Speaker 4: that accurate and where are those conversations now?
Speaker 7: Well, I can't comment on anything specific, but we do
Speaker 7: have a growing GM defense business, particularly with the infantry
Speaker 7: squad vehicle, which has been great for the troops and
Speaker 7: for the Department as well. But this is taking advantage
Speaker 7: of really strong US manufacturing and that's where we lead
Speaker 7: the way I think as automakers and do a great job.
Speaker 7: So you know, while we would rather not be paying
Speaker 7: tariffs across the board, we understand the environment that we're
Speaker 7: in and we're making sure that we can pivot the
Speaker 7: business the best we can to adjust to that reality.
Speaker 7: And I think the team's done a good job. When
Speaker 7: you look at the consistency of our earnings over the
Speaker 7: last several years.
Speaker 2: The unly space for them salves poll at a difficult time.
Speaker 2: We talked all throughout this interview about the challenges on
Speaker 2: the horizon. How does that inform your approach to capital
Speaker 2: returns for the year ahead.
Speaker 7: Well, you know, our capital allocation policy starts with investing
Speaker 7: in the business. We'll put ten to twelve billion dollars in.
Speaker 7: Much of that this year is actually on shoring work
Speaker 7: that was previously done internationally, and we're bringing that in
Speaker 7: as a result of our teriff response. The second pillar
Speaker 7: of our capital allocation is making sure we've got a
Speaker 7: strong balance sheet. And when you look at where our
Speaker 7: balance sheet is, how funded our pension plans are, we're
Speaker 7: in a really, really strong position. And what that's allowed
Speaker 7: us to do is take some of that free cash
Speaker 7: flow and allocate it back to shareholders to reward them
Speaker 7: for their confidence in the GM's story and make sure
Speaker 7: that they're generating the returns for their customers as well.
Speaker 7: During the quarter, we were able to repurchase about eight
Speaker 7: hundred million dollars worth of stock at about seventy five
Speaker 7: dollars a share, taking advantage of some of that dip
Speaker 7: and continuing to be very very consistent about the way
Speaker 7: we apply our capital allocation.
Speaker 6: Well, when you look forward and at the potential priorities
Speaker 6: of General Motors, how.
Speaker 5: Much do you see evs.
Speaker 6: As playing a bigger part just because of some of
Speaker 6: the questions around oil as well as of course autonomous driving.
Speaker 7: So while we did take a number of charges special
Speaker 7: item charges last year and even in the quarter, as
Speaker 7: we continue to right size our EV footprint as a
Speaker 7: result of the new regulatory environment. Unlike many of our competitors,
Speaker 7: we're sticking with our models. We discontinued the Bright drop
Speaker 7: van for very specific reasons, but we're not impairing any
Speaker 7: of other EV programs. Like some of our competitors, we
Speaker 7: continue to believe that we can make EV's work through
Speaker 7: our winning platform. They're not affordable, are not profitable at
Speaker 7: these levels right now, and that's something that we've got
Speaker 7: to work on. So we've got a number of battery chemistry,
Speaker 7: architecture initiatives coming in over the next couple of years
Speaker 7: that are going to get the costs down and where
Speaker 7: we think we can take and continue our leading role.
Speaker 7: We're already number two in the US in EV's and
Speaker 7: I think we can continue that and to continue to
Speaker 7: grow it in the future.
Speaker 2: Before we go, inquiring minds want to know the corvette
Speaker 2: behind you. What kind of money do we need to
Speaker 2: come up with.
Speaker 7: It's definitely in your price range.
Speaker 2: John, We'll have a whip around around at tame Pool.
Speaker 5: Thank you, Paul Brat, thank you.
Speaker 2: Stay with us. Mult Bloomberg Surveillance coming up after this.
Speaker 2: So here's the laces this morning, President Donald Trumps tind
Speaker 2: of advice is he's not satisfied with the Rounds proposal
Speaker 2: to reopen the straight ofform was General Karen Gibson of
Speaker 2: Accountby Securities writing for US, reopening this straight is a
Speaker 2: matter of urgency, and Around knows it. I suspected Ran
Speaker 2: is gambling. It cannot lost US here, General Gibson joins US.
Speaker 2: Now for more, General Gibson that last line, is there
Speaker 2: good reason to believe that Around can outlast the US?
Speaker 1: Well, I think it's a matter of political fortitude on
Speaker 1: our part, and if we want to achieve the objectives
Speaker 1: of this campaign, which were, as we've just heard, to
Speaker 1: impose very strict limits on Iran's ability to gain nuclear weapons,
Speaker 1: then this key leverage is something that we need to sustain.
Speaker 5: I think it's.
Speaker 1: Telling the actions that iron is taking right now and indicating,
Speaker 1: as you said, that the combination of previous sanctions, of
Speaker 1: the wartime, infrastructure damage and now essentially a maritime blockade,
Speaker 1: our interdiction efforts are probably beginning to take a toll
Speaker 1: on a regime that has previously proved very resilient to
Speaker 1: economic pressure.
Speaker 4: Well, if the Ironians are so resilient, do you see
Speaker 4: the United States doing anything before they reach their maximum
Speaker 4: capacity on storage in the oil industry called tank tops.
Speaker 1: I think that the strategy that we have now really
Speaker 1: this post kinetic phase of using our military assets mutually.
Speaker 1: Iran is doing the same thing to exert economic pressure
Speaker 1: on one another. Iran preventing essentially the flow of traffic
Speaker 1: in and out of the Strait and the US Navy
Speaker 1: preventing the flow of traffic in and out of Iranian
Speaker 1: ports is proving to be pretty successful. Again, I think
Speaker 1: when we look at Iran's negotiating strategy at this point,
Speaker 1: trying to decouple the economic pressure from the nuclear discussions,
Speaker 1: I think they're seeking economic relief, they want military relief
Speaker 1: in terms of sustaining the ceasefire, and then that would
Speaker 1: allow them to postpone drag out or negotiate at least
Speaker 1: on the nuclear ASPI from a position of a less
Speaker 1: coercive position, a trade or advantage to them.
Speaker 4: If Trump cannot open up the trader for moves diplomatically,
Speaker 4: will he do so with the military.
Speaker 1: I think in terms of opening it with the military,
Speaker 1: that would really mean escorting tankers.
Speaker 5: And other vessels. As we've talked.
Speaker 1: About before, it's certainly a feasible military option, and I
Speaker 1: don't think that Iran would be in a position to
Speaker 1: really strongly contest that they could strike take pot shots.
Speaker 5: At vessels that are going through.
Speaker 1: But I think if they did that, they would be
Speaker 1: inviting more of those very punishing air strikes that we've
Speaker 1: levied in the past.
Speaker 6: General, what do you make of the comments we've heard
Speaker 6: from both the administration and other analysts that there really
Speaker 6: isn't any kind of cohesion in the Iranian leadership, that
Speaker 6: there isn't anyone like the former Ayatola who could have
Speaker 6: come out and said this is the route that we're
Speaker 6: going to take. The poison Tellice that we're going to
Speaker 6: drink and.
Speaker 5: We're going to come to this agreement.
Speaker 6: Do you think that that's an accurate reflection of things
Speaker 6: on the ground.
Speaker 1: Well, I certainly think it's fair to say that the
Speaker 1: current Iotolia does lacks the strength of his father to act,
Speaker 1: you know, certainly with greater authority. But I think that
Speaker 1: the IRGC is really the Iranian Revolutionary Guard core remains
Speaker 1: probably pretty cohesive. I've often heard there are no real
Speaker 1: moderates among those who are in charge. It's just various
Speaker 1: factions of hardliners. And I'm not sure we see yet
Speaker 1: concrete evidence that there's significant friction within the Iranian the
Speaker 1: Islamic Republics leadership.
Speaker 6: Donald, what do you make of reports that there is
Speaker 6: some dissension from the rank and file that aren't getting
Speaker 6: paid because of a lack of cash coming into the regime.
Speaker 1: So I think that's where we would probably be more
Speaker 1: likely to see some friction. Some of the indicators I
Speaker 1: would look for would be defections or units that are
Speaker 1: no longer willing to carry out orders. But now that
Speaker 1: we're not conducting kinetic operations and Iran is not responding
Speaker 1: in kind, that's a little harder to detect. But those
Speaker 1: are some of the indicators I would look for that
Speaker 1: would lead me to believe that there was a growing
Speaker 1: friction within the security establishment.
Speaker 2: This is the Bloomberg Surveillance Podcast, bringing you the best
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