Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Bramowitz. Each day we
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Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. General
Speaker 1: Electric shocking up markets today, ousting John Flannery after just
Speaker 1: a year of his tenure there as chief executive and
Speaker 1: replacing him with the renowned turnaround experts, shares surging the
Speaker 1: most in nine years, up more than twelve The question
Speaker 1: is what is this new CEO going to do and
Speaker 1: will it be enough to fix a situation that seems
Speaker 1: to be growing increasingly urgent. Karen, youveil Heart joining us
Speaker 1: now senior industrials analysts for Bloomberg Intelligence. Karen, thank you
Speaker 1: so much for being here. It seems like this move
Speaker 1: is almost one of desperation, saying we need to fix something,
Speaker 1: and we need to fix something fast. I think it is.
Speaker 1: I don't think this was a plan. You know, a plan.
Speaker 1: They put Larry on the board, Larry cop on the board.
Speaker 1: I think you know as a part partially credibility, partially
Speaker 1: because he's a great operating guy, and they and they's
Speaker 1: a new CEO. The new CEO. Yeah, um and uh,
Speaker 1: I think this was as they just had to get
Speaker 1: something done quickly. And he's a very good operator. He's
Speaker 1: a lot of credibility on the street because of his history.
Speaker 1: And I just felt I just think they gave up
Speaker 1: on what if you got to if let's say, Larry
Speaker 1: Cop called Karen you will heart and said, tell me,
Speaker 1: based on your experience covering GE, what do you think
Speaker 1: is the most important thing I should focus on right now? Well,
Speaker 1: clearly it's it's Power. But um, I was a little disturbed.
Speaker 1: Um that he that Flannery was going to make Power
Speaker 1: the largest business in GE with an operating margin goal
Speaker 1: of ten percent. You know that is not a solid plan. Um,
Speaker 1: and I think, uh, you know, a ten percent operating
Speaker 1: margin company, you need a much higher you know, that's
Speaker 1: not going to please shareholders. Um. Larry Culp came in,
Speaker 1: dannaher was at ten percent, it was but don margin
Speaker 1: money left. I mean, uh, you know, so I said
Speaker 1: that is not going to be enough. He's got to
Speaker 1: shrink Power quickly. Um, I think he's got to sell
Speaker 1: off pieces of powers and and that's what his iterative process.
Speaker 1: Dana her business systems does get down to the granular level.
Speaker 1: And I think he's gonna look at that not as
Speaker 1: one business, but as many businesses. Try to stop the
Speaker 1: bleeding as much as he can there. I think he
Speaker 1: may rethink some of those assets sales like healthcare. Uh,
Speaker 1: you know, and because that is a good business that
Speaker 1: they were getting rid of because they needed cash. Um,
Speaker 1: I think he'll be able to pull cash out of
Speaker 1: the different businesses. There's a lot of fategy and and uh,
Speaker 1: Danna her Business Systems help solve some of those problems.
Speaker 1: So one thing that we were talking about earlier, so
Speaker 1: that even though you're seeing that rally in GES shares,
Speaker 1: you're not seeing a commensurate rally in the company's bonds.
Speaker 1: And they have a lot of them. They have more
Speaker 1: than a hundred and twelve billion dollars of debt. Uh,
Speaker 1: you're not seeing the same pop. I'm just wondering a
Speaker 1: much smaller General Electric, how will they right size their
Speaker 1: debt portfolio right now? That's massive, h That's that's uh,
Speaker 1: you know, that's a good question. He's got to generate uh,
Speaker 1: you know cash to be able to you know, retire it,
Speaker 1: and that's going to be his number one priority. I think, uh,
Speaker 1: you take that. His number one priority is going to
Speaker 1: be dealing with the massive amount of debt while also
Speaker 1: shrinking the company and making sure that it revives it. Yes,
Speaker 1: and and the rate I mean, I'm not I'm not,
Speaker 1: I'm not the credit guy, of course, but but the
Speaker 1: rating was always vulnerable and now they just took twenty
Speaker 1: three billion dollars in the good will, you know, wrote
Speaker 1: down the asset value of the company quite substantially. So
Speaker 1: that should have some implications too. Although that's a good thing,
Speaker 1: I think. Is is it a job that Larry Couple
Speaker 1: find a little easy because he is not a ge veteran.
Speaker 1: I think the fresh look it will make it easier
Speaker 1: for him to take, you know, take some you know,
Speaker 1: bigger actions. One of the negatives against Flannery was, yes,
Speaker 1: he was a fresh um you know, uh new CEO,
Speaker 1: but he was ge generated, if you will, And so
Speaker 1: this gives him a chance. I think the one thing
Speaker 1: that's most interesting is he was a builder of business,
Speaker 1: right and now he's got to be a deconstructor of
Speaker 1: a very large business. So, um, it's gonna be a
Speaker 1: different kind of challenge. I think one thing I'm struck
Speaker 1: by is that g E is tasked with the shrinking
Speaker 1: dramatically and quickly at a time when they're increasing trade
Speaker 1: tensions between the U S and China. How does that
Speaker 1: affect the valuations that they're going to be able to
Speaker 1: realize when they do try to go and sell quickly.
Speaker 1: That that's a good question, um. I think a lot
Speaker 1: of their businesses, like the healthcare business for example, a
Speaker 1: lot of the businesses are producing local you know, they're
Speaker 1: operating locally. Um. And you haven't really seen multiples come
Speaker 1: down that much in M and A so um so
Speaker 1: far with the trade tension. So I don't wouldn't put
Speaker 1: that on the top of the list of concerns. The
Speaker 1: potential liabilities that g E still faces because of payouts
Speaker 1: having to do with pensions and so on. What can
Speaker 1: you tell us there the long the pension? You know, hey,
Speaker 1: they're gonna lucky a little bit on the pension because
Speaker 1: interest rates are going up and and and they already
Speaker 1: have lowered the pension somewhat as a result of that.
Speaker 1: In some cash they put in. They're putting six billion
Speaker 1: dollars into it. That's gonna be less of a problem.
Speaker 1: I think the concern is what else is in that
Speaker 1: black hole, like the long term liability that no one expected,
Speaker 1: right yeah, So I think that's the concern, Like what
Speaker 1: else is in that ge credit? Um? I think pension.
Speaker 1: They're chipping away at it, and they're gonna get lucky
Speaker 1: with were interest rates are going and are expected to
Speaker 1: go just twenty seconds. I'm just wondering, how does it
Speaker 1: affect g E that they're going to basically have forced sales?
Speaker 1: Does that reduce the prices that people will be willing
Speaker 1: to offer them? I well, you know, so far what
Speaker 1: they've sold, they actually did a little bit better than
Speaker 1: expected on almost all of them. Um. It's a hot
Speaker 1: market for for for M and A. So UM, I
Speaker 1: don't think they'll they'll do something in desperation. He's a
Speaker 1: methodical guy. It's going to be interesting because he has
Speaker 1: to move fast, but he also doesn't want to make,
Speaker 1: you know, mistakes. It's it's it's not an easy challenge.
Speaker 1: I mean, right now the pop is you know, everyone's
Speaker 1: excited about him, but it's gonna be an uphill battle
Speaker 1: for him to well. Inteed, looking at the shares of
Speaker 1: General Electric, they are higher right now by more than
Speaker 1: twelve percent. Our thanks to Karen uble Hart, Senior Analyst
Speaker 1: for Machinery and All Things ge at Bloomberg Intelligence. Last
Speaker 1: week was dominated by the Brett Kavanaught hearings, where he
Speaker 1: addressed some allegations of sexual misconduct when he was in
Speaker 1: high school. Joining us now Aspreneurs Senior editor of the
Speaker 1: National View, also a Bloomberg opinion columnist. I am so
Speaker 1: glad that you're with us for MESH, because you've been
Speaker 1: supporting Brett Kavanaugh, and we've had people on who have
Speaker 1: sort of been very critical of his performance last week.
Speaker 1: What was your impression, not of the allegations of sexual misconduct,
Speaker 1: but of his actual comportment in front of the Senate
Speaker 1: Judiciary Committee. I think he acted like somebody who believes
Speaker 1: he's innocent and is genuinely outraged by the allegations against him,
Speaker 1: and showed the kind of righteous indignation um that somebody
Speaker 1: in that situation would expect. The thing is guilty. People
Speaker 1: also often have the same affect, uh, And we can't
Speaker 1: really infer something one way or the other from just
Speaker 1: the way he comported himself well, but but putting aside
Speaker 1: the sexual allegations altogether, I guess that there's one question.
Speaker 1: Especially because he brought up, you know, sort of very
Speaker 1: partisan comments about the Democratic plot against him, and because
Speaker 1: he was cutting off senators, people are saying that that
Speaker 1: shows a lack of respective procedure that's sort of important
Speaker 1: for the judicial system. So I guess I'm wondering what
Speaker 1: your senses of that. Yes, so people have been saying,
Speaker 1: you know, he lacks a usual temperament and even saying
Speaker 1: that he's he disqualified himself for the job just by
Speaker 1: his behavior, and I think that, Look, he's been on
Speaker 1: the he's been on an important court for more than
Speaker 1: a decade now, and the judicial temperament that one is
Speaker 1: seeking is the is the temperament of a person as
Speaker 1: a judge, not as a quasi defendant, which is what
Speaker 1: he is in this instance. You know, Look, judges are
Speaker 1: asked to recuse themselves when their personal interests are on
Speaker 1: the line. This is the case where he is being
Speaker 1: a two very very serious offenses, and I think it
Speaker 1: would be foolish to expect him to be sort of
Speaker 1: weighing the charges against him the way a judge would
Speaker 1: be weighing the charges against somebody else. Do you believe that,
Speaker 1: if confirmed, Judge Kavanaugh would make a good Justice of
Speaker 1: the Supreme Court? I do. I think he is extremely
Speaker 1: well qualified, has been a solid judge on the d
Speaker 1: C circuit um. You know. I the real question in
Speaker 1: my mind has been, uh, whether we would get evidence
Speaker 1: which suggested that he was guilty of some of these
Speaker 1: very serious offenses that have been charged against him. If
Speaker 1: that were the case, then I would say he would
Speaker 1: be disqualified. But hey, I don't think that that evidence
Speaker 1: has materialized, and be I think absent such evidence, UM,
Speaker 1: he is an extraordinarily well qualified nominee to Supreme Court.
Speaker 1: You believe that Merrick Garland would have made a good
Speaker 1: Justice of the Supreme Court? I do. I think that
Speaker 1: he would have been at you know, perfectly well qualified
Speaker 1: nominee um easily um of the same caliber as Stephen
Speaker 1: Brier and Sonya Soto mayor uh and so forth, and
Speaker 1: and would have very likely voted with them the vast
Speaker 1: majority of the time. So given that, do you in
Speaker 1: any way sort of begrudge the political nature of what
Speaker 1: these hearings have become because of that situation. I certainly
Speaker 1: understand many of the passions that Senate Democrats have brought
Speaker 1: to this, which are not limited to anger over the
Speaker 1: Garland situation, but also to their genuine belief in many
Speaker 1: cases in Kavanaugh's guilt of these charges, and their passionate
Speaker 1: over issues like Roe v. Wade. Um. When it comes
Speaker 1: to specifically the Garlands situation, I think, look, a Senate
Speaker 1: Senate Democrats are perfectly within their rights if they wish
Speaker 1: to not move ahead on the Kavanaugh nomination, if they
Speaker 1: wish to vote him down, um, if they wish to
Speaker 1: refuse to meet him the way that Republicans refused to
Speaker 1: meet even with Merrick Garland. Uh. But of course, you know,
Speaker 1: if you believe that what the way they're acting with
Speaker 1: respect of these charges is unjustified, I think it's very
Speaker 1: different to assassinate a man's character. Um. That didn't happen
Speaker 1: with Judge Garland, which is a good thing. Uh. And
Speaker 1: I do believe that there has been some reckless behavior
Speaker 1: with respect to Judge Kavanaugh. Hold on a second reckless behavior,
Speaker 1: I want to home in on that, because what exactly
Speaker 1: are you talking about considering the fact that it seemed
Speaker 1: like it was only that a Washington Post reporter reached
Speaker 1: out to Christine Forward, that she came forward with her story,
Speaker 1: and otherwise there was sort of she asked for for privacy.
Speaker 1: She didn't want these made public, these allegations. Well, there
Speaker 1: are a couple of things. First of all, so how
Speaker 1: did the Washington Post get tipped off in the first place? Two?
Speaker 1: Reach out? Uh? And you know, if you listen to um,
Speaker 1: not just the Post, but the Intercept reporter, um it,
Speaker 1: he's ruled out pretty much everybody but a Democratic congresswoman
Speaker 1: Anna su. But beyond that, you've got Democratic senators who
Speaker 1: are saying um and said in advance and okay, let
Speaker 1: me let me back up a second. I think it
Speaker 1: would have been I think it was wrong for people
Speaker 1: to pre judge on either side of this issue. And
Speaker 1: some Republicans said, before they heard either of them, they
Speaker 1: were still with Kavanaugh, And some Democratic senators said, before
Speaker 1: they heard either of them, they believed he was guilty.
Speaker 1: That's what Senator Blumenthall said, for example. So Senator her
Speaker 1: own No basically said the higher male sex should shut up, right. Okay,
Speaker 1: So this is incredibly emotionally charged on all sides, both
Speaker 1: from a political perspective as well as just an emotional perspective.
Speaker 1: I'm wondering from from your point of view as a
Speaker 1: judicial expert, someone who's been following the courts for your lifetime,
Speaker 1: I'm just wondering how this whole process will affect the
Speaker 1: credibility of the Supreme Court going forward. Well, it is
Speaker 1: certainly not the kind of thing that is going to
Speaker 1: raise public esteem for the courts. And I suspect that
Speaker 1: there's not a single justice as the Supreme Court from
Speaker 1: Sonya Soto, mayor on the left, to Clarence Thomas on
Speaker 1: the right, who looked at the spectacle in the Senate
Speaker 1: over the last week and said, you know, we really
Speaker 1: need to bring cameras into our courtroom. Um. But the
Speaker 1: emotions of the moment do often passed. So there were
Speaker 1: a lot of emotions on both sides surrounding the Clarence
Speaker 1: Thomas confirmation. You admittedly those less serious charges at that time,
Speaker 1: and basically that didn't affect the long run, uh public
Speaker 1: sentiment towards the court. Um. So we we I think
Speaker 1: we have to get a little bit of distance from
Speaker 1: these events before we figure that out. All right, We're
Speaker 1: gonna leave it there, but thanks very much for being
Speaker 1: with us. Remesh Panuru is a senior editor at The
Speaker 1: National Review and a Bloomberg opinion columnist, speaking on the
Speaker 1: ongoing h I Guess investigation into Brett Kavanaugh and the
Speaker 1: allegations of sexual assault and the potential for Brett Kavanaugh's
Speaker 1: nomination to the Supreme Court to go to the full
Speaker 1: Senate for a vote. We are awaiting comments from President Trump,
Speaker 1: who will be speaking about the renegotiated NAFTA agreements in
Speaker 1: the Rose Garden at the White House, which will occur momentarily.
Speaker 1: In the meantime, I want to bring in Josh Glue.
Speaker 1: He is White House editor for Bloomberg. Josh, what are
Speaker 1: we expecting to hear from President Trump right now? Well,
Speaker 1: we're I think we're expecting to uh hear about what
Speaker 1: a great achievement this was. You know, he's been putting
Speaker 1: this up. It's a He's gotten a lot of criticism
Speaker 1: for his stance on NAFTA, and there were a lot
Speaker 1: of doubts that anything would come through, and he's going
Speaker 1: to portray this as a huge victory, even though really
Speaker 1: money of the revisions they're actually making are quite modest.
Speaker 1: So it's unclear what this means for him politically, but
Speaker 1: he's gonna try and make the most of it for sure. Josh.
Speaker 1: Part of the deal has to do with Canada's dairy
Speaker 1: market for US farmers. Correct. That's right. That's been a
Speaker 1: major sticking point the negotiations for uh for some time.
Speaker 1: And President Trump, on his typical stump piece of stump speeches,
Speaker 1: will go out and talk about that that uh, you know,
Speaker 1: American product, American dairy products in Canada more expensive due
Speaker 1: to tariffs, uh and calling it very unfair. You know,
Speaker 1: he is. The farmers are really a group that's been
Speaker 1: you know, stuck in the middle of all this his
Speaker 1: trade policy. Um, and they've been targeted by China with
Speaker 1: the retaliatory tariffs, and uh, he really needed to do
Speaker 1: something here to reach out to people who are really
Speaker 1: his core constituency. All right, So, Josh, what I would
Speaker 1: love to hear from you is what the shakeout is
Speaker 1: From the analysts that have been passing through the details
Speaker 1: since they were released of this renegotiated agreement. Do people
Speaker 1: think that it will increase production even at the margins
Speaker 1: in the US and will increase wages. Do they think
Speaker 1: that it will shift more production elsewhere? What's the what's
Speaker 1: sort of the breakdown here? Well, I actually I think
Speaker 1: the jury is still out on that. We Uh it's
Speaker 1: a bit early to say, and I think you're it's
Speaker 1: right now, You're gonna have to tease apart what we're
Speaker 1: what's uh, what's an analysis and what's more of a
Speaker 1: political thing, because right now in Washington, the President is
Speaker 1: going to put as as the heart of political spin
Speaker 1: on it as he can. Um, these are these are
Speaker 1: things he's been you know, Democrats have tried to break
Speaker 1: him over the coals on these and uh, even many
Speaker 1: people in his own party have been unsupportive of the stance.
Speaker 1: So uh, it's likely that, as with most or any
Speaker 1: disruption to a trade agreement, they are gonna be winners
Speaker 1: and losers. And um, we're gonna have to see how
Speaker 1: that shakes out. But the analysis that I've seen so
Speaker 1: far is not that he has achieved some major victory
Speaker 1: here for the for for U. S. Exporters, Josh. Just
Speaker 1: to continue the political theme, this pact or treaty would
Speaker 1: have to be approved by the US Congress. That's right,
Speaker 1: And um, you know it's unclear the I think most
Speaker 1: of Congress wanted some kind of deep you know, I
Speaker 1: don't I don't know if left to Congress that there
Speaker 1: would have been much of a disruption to so UM,
Speaker 1: I don't know that there's going to be a huge
Speaker 1: bar for that to happen. But we'll see you never
Speaker 1: it's if there's one thing that's unpredictable here, it's which
Speaker 1: way Congress is going to go on any given issue
Speaker 1: right now. You know, one question is how much political
Speaker 1: capital was spent or exhausted during this process. What is
Speaker 1: the relationship between the US and Canada emerging from this renegotiation.
Speaker 1: That's a great question, and it's really hard to handicap
Speaker 1: because yes, there this was a cause for a pretty
Speaker 1: significant rift between UM, President Trump and Prime Minister Trudeau
Speaker 1: in Canada and on you usual one, right, this is
Speaker 1: a longtime ally of the United States neighbor. Uh. You know,
Speaker 1: there's never really been any major UH issue with Canada,
Speaker 1: and suddenly it became quite heated and a little bit nasty. UM.
Speaker 1: If you you know, if you think about this in
Speaker 1: the larger context of how Trump deals with other leaders
Speaker 1: in general. UM, you know, on the one hand and
Speaker 1: and other politicians quite frankly, you know, he when he
Speaker 1: is in some sort of negotiation, he will go all
Speaker 1: out insult them, you know, a bare knuckle fight. But
Speaker 1: then he'll turn around and say like, oh, I love
Speaker 1: Justin Trudeau or you know he haven't done that yet,
Speaker 1: but um he does that with uh President She of China.
Speaker 1: He's done it with political foes where they were at
Speaker 1: each other's other's throats during a campaign and then afterwards
Speaker 1: they've amended fences and work together. Know, so, um, he
Speaker 1: plays it both ways, and it's hard to know how
Speaker 1: lasting any grudge will be. Well, Josh Galu, thanks very
Speaker 1: much for being with us. Just I know you're going
Speaker 1: to be listening to the president's comments. We are awaiting
Speaker 1: President Donald Trump walking out into the Rose Garden in Washington,
Speaker 1: d C. Thanks for listening to the Bloomberg P and
Speaker 1: L podcast. You can subscribe and listen to interviews at
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Speaker 1: Pim Fox. I'm on Twitter at pim Fox. I'm on
Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You
Speaker 1: can always catch us worldwide on Bloomberg Radio.