WEBVTT - Max Grounding Will Cost Boeing $100 Million Per Month (Podcast) 0:00:02.640 --> 0:00:05.320 Welcome to the Bloomberg Penel Podcast. I'm Paul swing you. 0:00:05.360 --> 0:00:07.680 Along with my co host Lisa Brahma Waits. Each day 0:00:07.720 --> 0:00:10.240 we bring you the most noteworthy and useful interviews for 0:00:10.280 --> 0:00:12.520 you and your money. Whether at the grocery store or 0:00:12.560 --> 0:00:15.480 the trading floor. Find a Bloomberg Penl podcast on Apple 0:00:15.520 --> 0:00:17.959 podcast or wherever you listen to podcasts, as well as 0:00:17.960 --> 0:00:23.279 at Bloomberg dot com. Bowing back on the hot seat 0:00:23.280 --> 0:00:26.200 they cannot catch a break. The latest is at Seattle 0:00:26.280 --> 0:00:30.040 Times is reporting that the f a A was alerted 0:00:30.080 --> 0:00:32.800 to issues at Boeing and Bowing should have been aware 0:00:32.840 --> 0:00:37.720 of some of the regulatory problems here seven years ago. 0:00:37.880 --> 0:00:40.239 Joining us now to talk about it is Peter Robinson, 0:00:40.400 --> 0:00:44.080 projects an investigations reporter, as well as George Ferguson of 0:00:44.240 --> 0:00:48.680 Bloomberg Intelligence. Uh, Peter, let's start with you. What do 0:00:48.720 --> 0:00:51.919 we know here? What should Boeing have been aware of 0:00:52.479 --> 0:00:56.160 that led to the two fatal crashes that have left 0:00:56.200 --> 0:01:00.520 so many people wondering whether their new jet is fit 0:01:00.680 --> 0:01:03.400 to fly well? The the issue for Boeing and that 0:01:03.480 --> 0:01:06.000 the reason the shares are down almost three percent today 0:01:06.040 --> 0:01:09.479 is that the the process by which the seven thirty 0:01:09.560 --> 0:01:12.400 seven plane and involved in the crashes was certified as 0:01:12.720 --> 0:01:14.520 by the f a A is is coming under really 0:01:14.600 --> 0:01:19.440 unusual scrutiny by both the Department of Transportations Inspector General and, 0:01:19.600 --> 0:01:23.679 according to the Wall Street Journal, federal prosecutors. A grand 0:01:23.720 --> 0:01:26.280 jury in Washington, d C. That the journal is reporting 0:01:26.560 --> 0:01:28.920 issued a subpoena to at least one person involved in 0:01:28.959 --> 0:01:33.279 the planes development, which is not something that in recent 0:01:33.319 --> 0:01:38.400 memory has happened within a new aircraft program. Yeah, George, 0:01:38.440 --> 0:01:40.880 a question for you, if I mean, the thing that 0:01:40.959 --> 0:01:44.880 strikes me about Peter story what was unnamed sources in 0:01:45.240 --> 0:01:50.000 the Seattle Times that they underestimated the power of the 0:01:50.000 --> 0:01:52.720 flight control software that they reported to the f a A. 0:01:53.200 --> 0:01:55.960 And the newspaper also cited and said that the system 0:01:56.080 --> 0:01:59.240 could not reset itself each time a pilot or or 0:02:00.080 --> 0:02:03.080 each time a pilot responds. In essence, it ratcheted the 0:02:03.280 --> 0:02:07.520 horizontal stabilizer into a dive position. How does something like 0:02:07.600 --> 0:02:11.400 that just go by the boards? Yeah, I mean, I 0:02:11.400 --> 0:02:13.959 think that's uh, that's going to be the big question here. 0:02:14.600 --> 0:02:16.200 It sounds like the first time they showed the f 0:02:16.280 --> 0:02:18.960 a A some of that data, that's the deflection they 0:02:19.000 --> 0:02:21.680 had on that on the elevator, that trim piece was 0:02:22.480 --> 0:02:25.520 much less than it ultimately was at at the final 0:02:26.480 --> 0:02:28.640 approval or what have you gonna call it? For the airplane, 0:02:28.720 --> 0:02:32.280 so um, it shouldn't go by the boards the f 0:02:32.360 --> 0:02:35.320 A ship been looking at that closer. I think that 0:02:35.360 --> 0:02:39.360 there's always a challenge when you're when you're the big 0:02:39.639 --> 0:02:43.080 behemoth in the in the industry. Right. We've seen it 0:02:43.080 --> 0:02:46.720 in finance, where the regulators try to regulate an industry 0:02:46.720 --> 0:02:49.240 that's probably a heck of a lot more conversant and 0:02:49.280 --> 0:02:53.200 what's going on inside the you know, in the cutting 0:02:53.280 --> 0:02:55.480 edge of the space. And I think that's you have 0:02:56.480 --> 0:02:58.639 a bit of maybe the FA differring too much to 0:02:58.720 --> 0:03:00.880 Boeing here and thinking they're were in the cutting edge 0:03:00.880 --> 0:03:05.280 and not focusing on details like that, details details that 0:03:05.360 --> 0:03:08.200 led to the death of hundreds of people. Uh. But 0:03:08.320 --> 0:03:11.000 Peter to that point to exactly what George Ferguson was 0:03:11.040 --> 0:03:13.880 just saying, how much is this a problem with the 0:03:13.919 --> 0:03:15.480 f a A And how much is this a problem 0:03:15.480 --> 0:03:19.560 with Bowen? I mean, who looks worse here? They both 0:03:19.560 --> 0:03:21.480 are on the hot seats. As you were saying that 0:03:21.560 --> 0:03:25.400 the the issue we we we reported on UM concerns 0:03:25.440 --> 0:03:27.680 that people within the f A had as as long 0:03:27.680 --> 0:03:32.119 as seven years ago, that people, UH, we were set 0:03:32.200 --> 0:03:35.360 enough about this way that Boeing had over the approval 0:03:35.400 --> 0:03:38.480 process that they went to the Department of Transportations Inspector 0:03:38.520 --> 0:03:42.520 General and said that there needed to be changes in 0:03:42.560 --> 0:03:44.720 the process. Who are those people? Can you just give us? 0:03:44.840 --> 0:03:48.920 So the the in its report, which was only released 0:03:49.160 --> 0:03:51.880 UM in a public records request, which didn't get any 0:03:51.880 --> 0:03:55.840 attention at the time, some of these allegations weren't anonymous 0:03:55.840 --> 0:03:58.800 facts is which were sent from f A managers UM 0:03:58.840 --> 0:04:01.880 to the O I G and and these UH employees 0:04:01.920 --> 0:04:04.240 that the FAA felt that they weren't being heard and 0:04:04.280 --> 0:04:07.119 that they were trying to hold Bowing accountable but their 0:04:07.120 --> 0:04:11.520 managers were not letting them. So. Again but back to 0:04:11.760 --> 0:04:15.160 the the you know, as you say, who's more culpable, 0:04:15.240 --> 0:04:19.039 the f A or or Boeing. SKay, we're trying to 0:04:19.520 --> 0:04:22.279 um Peter. They were trying to speed up the certification 0:04:22.360 --> 0:04:25.760 process because they were behind. You know, you talk about 0:04:25.800 --> 0:04:28.880 bank regulation being one thing. You know, somebody embezzles money, 0:04:28.880 --> 0:04:31.200 a plane doesn't fall out of the sky. To to 0:04:31.360 --> 0:04:34.280 try to rush a brand new design of an airplane 0:04:34.760 --> 0:04:44.839 seems perilous and irresponsible. I'm sorry, I understand, but you know, yes, 0:04:45.360 --> 0:04:48.280 that is a question, and I guess that George to you, 0:04:48.400 --> 0:04:51.200 I'm curious, do you have a sense of what the 0:04:51.240 --> 0:04:54.279 bigger liability is to Bowing at this point from a 0:04:54.360 --> 0:04:58.000 from a financial standpoint? Is it the potential for lawsuits 0:04:58.360 --> 0:05:01.640 or is this a potential for are for airlines not 0:05:01.839 --> 0:05:05.200 ordering from them because of concerns about safety? Yes, so, 0:05:05.240 --> 0:05:07.680 I mean I think you know the numbers that we're 0:05:07.680 --> 0:05:11.920 starting to run, is that the cost of the airplane 0:05:11.960 --> 0:05:14.040 being out of service and getting it back in service 0:05:14.040 --> 0:05:17.320 will be a lot more. I mean, notwithstanding our sensitivity 0:05:17.320 --> 0:05:20.440 to the fact that people died on this crash, these 0:05:20.480 --> 0:05:23.640 two crashes, you know, we kind of see Bowings liability 0:05:23.720 --> 0:05:27.640 being about a hundred million dollars a month um to 0:05:27.800 --> 0:05:32.839 buy to support airlines that have airplanes grounded in maintaining 0:05:32.880 --> 0:05:36.200 their um the route networks. We don't think there's enough 0:05:36.240 --> 0:05:39.760 airplanes actually parked to get that done as we go 0:05:39.800 --> 0:05:42.720 through the year, because there's the majority of the deliveries 0:05:42.760 --> 0:05:45.679 for Boeing seven seven throughout this year would be would 0:05:45.680 --> 0:05:48.080 have been max is like I still think they'll get 0:05:48.080 --> 0:05:50.440 this airplane in service UM in a bunch of months. 0:05:50.520 --> 0:05:54.000 I think the the the burden will be hired to 0:05:54.040 --> 0:05:56.360 get into service, given the issues at the f A 0:05:56.360 --> 0:05:59.640 A and and Boeing. But we see again a hundred 0:05:59.680 --> 0:06:02.360 million of month. We think every month as another twelve 0:06:02.520 --> 0:06:06.360 or months, two hundred and twelve months, three four million UM, 0:06:06.480 --> 0:06:08.840 and we haven't even started to We can't really give 0:06:08.839 --> 0:06:11.160 a good estimate on what it's going to take to 0:06:11.279 --> 0:06:14.240 fix the airplane. We think if it takes work to 0:06:14.360 --> 0:06:16.960 the structure, that will be a lot more money than 0:06:17.000 --> 0:06:19.080 just a software fix. And I tend to think there'll 0:06:19.080 --> 0:06:21.839 be at least some work under the structure UM to 0:06:21.880 --> 0:06:24.200 make it easier to shut off the autopilot and maybe 0:06:24.240 --> 0:06:28.600 to manage some of the center gravity issues. So Peter 0:06:28.920 --> 0:06:31.920 um back to the public if you will, UM. Even 0:06:32.080 --> 0:06:35.480 solving all these problems, UM, it doesn't strike me that 0:06:35.600 --> 0:06:39.279 the consumer is going to feel terribly confident flying in 0:06:39.320 --> 0:06:43.919 this airplane immediately after the fix. How does that impact bowing, 0:06:43.960 --> 0:06:47.520 how does that impact the air traffic system, etcetera. Well, 0:06:47.560 --> 0:06:50.120 there there's a lot of conversation that that this is 0:06:51.200 --> 0:06:54.480 going to impact bowing future sales of this plane. And 0:06:54.720 --> 0:06:57.279 already you see commentary on social media. You see that 0:06:57.320 --> 0:07:00.480 Line Air which I had the first seven thirty seven 0:07:00.520 --> 0:07:03.719 Mac they crashes, has has pulled a twenty two billion 0:07:03.760 --> 0:07:08.160 dollar order for Boeing planes. Uh so, over time it 0:07:08.400 --> 0:07:11.360 could create pressure for Boeing to to move on to 0:07:11.480 --> 0:07:13.680 the next generation of airplanes, which is going to be 0:07:13.760 --> 0:07:18.960 extremely expensive, and just to sort of finish up here. George, 0:07:19.000 --> 0:07:22.680 I'm curious from your perspective going forward, what does Boeing 0:07:22.720 --> 0:07:25.800 need to do to give people confidence that it has 0:07:25.840 --> 0:07:29.880 reached a bottom in this whole issue. Yeah, I think. 0:07:30.040 --> 0:07:32.640 I think that any fix that comes out can't be 0:07:33.000 --> 0:07:36.040 a partial fix. It has to be clear that it 0:07:36.240 --> 0:07:41.360 is um the right fix, maximize his safety, I think, 0:07:41.360 --> 0:07:45.320 to restore faith in Boeing, I think that's gonna that's 0:07:45.320 --> 0:07:47.760 going to be huge. Thank you so much to both 0:07:47.760 --> 0:07:51.360 of you. Peter Robinson, Projects an investigations reporter for Bloomberg News, 0:07:51.440 --> 0:07:54.760 joining us from Seattle. George Ferguson, Senior Aerospace, Defense and 0:07:54.840 --> 0:08:13.160 Airlines analyst for Bloomberg Intelligence. Right now it is that 0:08:13.240 --> 0:08:16.000 time to take a look at small and mid cap shares. 0:08:16.040 --> 0:08:18.600 Dave Wilson has not blasted off into space. Just yet, 0:08:19.040 --> 0:08:21.320 he is joining us here in her believe we're getta active. 0:08:21.320 --> 0:08:24.360 Broger Studios. Small caps and mid caps doing pretty well. 0:08:24.800 --> 0:08:29.520 I am firmly on the ground. Cap stocks are firmly higher. 0:08:30.120 --> 0:08:32.800 The Wrestle two thousand index up one percent, while the 0:08:32.880 --> 0:08:34.880 S and P five hundred is only up four tenths 0:08:34.880 --> 0:08:37.520 of a percent. So smaller companies leading the way here 0:08:37.760 --> 0:08:40.640 and the Russell's biggest game belongs to Dermira, whose ticker 0:08:40.760 --> 0:08:43.880 is d e r M. The drug developer has soared 0:08:44.040 --> 0:08:48.040 nineties seven per cent. Second stage study data showed the 0:08:48.040 --> 0:08:51.880 company's proposed treatment for a skin condition was safe and effective. 0:08:52.480 --> 0:08:56.400 Dermira's results also lifted shares of a Claris Therapeutics ticker 0:08:56.480 --> 0:08:59.319 a c r S. They're up twenty two and a 0:08:59.400 --> 0:09:02.439 half percent. The company is developing a rival medicine for 0:09:02.480 --> 0:09:06.680 the condition known as a topic dermatitis. Now. The Sans 0:09:06.760 --> 0:09:10.839 Joanes Solutions ticker dz s I has risen ten and 0:09:10.880 --> 0:09:13.599 a half percent. To communications equipment maker narrow It is 0:09:13.640 --> 0:09:18.080 projected first quarter loss before interest, taxes, depreciation and amortization. 0:09:18.440 --> 0:09:21.800 The russell steepest drop belongs to n II Holdings ticker 0:09:21.960 --> 0:09:24.640 n i h D, the owner of a seventy percent 0:09:24.679 --> 0:09:27.000 stake in the wireless company next to Help Brazil is 0:09:27.040 --> 0:09:30.679 down twenty six percent, and II is Selliens holding to 0:09:30.800 --> 0:09:33.520 Mexico's American Mobile as part of a nine five million 0:09:33.520 --> 0:09:37.240 dollar takeover and will dissolve once the deal is final. 0:09:37.520 --> 0:09:39.880 And Synaptics ticker s y n A as well in 0:09:39.960 --> 0:09:43.439 twenty percent. The maker of touch sensitive paths from mobile 0:09:43.440 --> 0:09:46.840 phones and computers, was cut to neutral from by Mitzuho Financial, 0:09:47.080 --> 0:09:51.280 which cited market share losses. DA Wilson firmly on earth. 0:09:51.720 --> 0:09:54.480 Thank you so much for that, Davilis some lyrics sucks. Editor. 0:09:55.040 --> 0:09:57.959 Right now, let us turn our focus to Lift, seeking 0:09:57.960 --> 0:10:01.120 to raise almost two point one billion dollars in its 0:10:01.120 --> 0:10:04.160 initial public offering, which will be the largest startup listing 0:10:04.440 --> 0:10:08.400 since Snaps twenty seventeen. I p O joining us now 0:10:08.440 --> 0:10:12.000 to discuss a Tish Davda, chief executive officer of Equiti 0:10:12.080 --> 0:10:15.200 Zen based in New York, A tich, what do you 0:10:15.280 --> 0:10:17.960 think of this valuation, which would give the firm a 0:10:18.080 --> 0:10:21.440 value of about twenty billion dollars. Well, I'll tell you this. 0:10:21.559 --> 0:10:23.520 I don't know that Lift wants to be compared to 0:10:23.520 --> 0:10:26.840 Snap too many times ahead of this public list they're 0:10:26.840 --> 0:10:31.400 working on. Uh lifts last valuation was at fifteen billion dollars. 0:10:31.559 --> 0:10:33.920 UH and Equities and is a firm that allows buying 0:10:33.920 --> 0:10:37.120 and selling of private companies with issuer approval for many 0:10:37.200 --> 0:10:39.880 years ahead of the I p O. With that said, 0:10:40.000 --> 0:10:42.200 you know, looking at our data and not talking about 0:10:42.240 --> 0:10:45.000 anyone company in particular, I think it's uh, you know, 0:10:45.040 --> 0:10:47.559 I think it's pretty promising for a company to come 0:10:47.600 --> 0:10:51.000 out there and put evaluation target meaningfully higher, it's above 0:10:51.080 --> 0:10:54.760 round um because you know, we've definitely seen some some 0:10:55.200 --> 0:10:58.079 unicorns go out to the public market with with the 0:10:58.200 --> 0:11:02.240 value at or even sometimes below their last private valuation. 0:11:02.320 --> 0:11:05.679 So this definitely seems promising. A question for you is 0:11:05.920 --> 0:11:09.040 we we had a Bloomberg story that said in its filing, 0:11:09.480 --> 0:11:12.800 Lifts said that expenses are likely to increase and that 0:11:12.920 --> 0:11:16.200 it may not be able to achieve or maintain profitability 0:11:16.280 --> 0:11:18.640 in the future. How does that speak to attended to 0:11:18.640 --> 0:11:23.679 hold multiple Basically, you know, that's UH that's actually becoming 0:11:23.720 --> 0:11:26.559 more and more common in a lot of companies going public, 0:11:26.600 --> 0:11:28.480 a lot of unicorns going public. Look if you take 0:11:28.520 --> 0:11:31.200 a look at what wall streets looking for Uh. Wall 0:11:31.240 --> 0:11:34.720 Street seeing a record low number of publicly listed companies 0:11:34.760 --> 0:11:37.680 into which it can and it can invest. Uh. You know, 0:11:37.800 --> 0:11:41.880 growth has been continuously rewarded over the last several years. 0:11:41.920 --> 0:11:45.920 And I think what LIFT is trying to say publicly, um, 0:11:45.960 --> 0:11:48.560 the same way that you know, Uber apparently next month 0:11:48.640 --> 0:11:50.400 is going to go out with its own roads show 0:11:50.400 --> 0:11:52.520 and is gonna likely say the exact same thing, same 0:11:52.520 --> 0:11:54.800 thing We've seen many other companies out there that are 0:11:54.840 --> 0:11:58.920 public now say, is we are focused on growth. We 0:11:59.000 --> 0:12:02.040 believe we have that of the interneconomics. Uh so if 0:12:02.080 --> 0:12:05.680 we ever turn off the marketings pigot, we automatically turn 0:12:05.840 --> 0:12:08.360 positive in terms of our net income. But one of 0:12:08.400 --> 0:12:10.679 the best things we see about LIFT, and it is promising, 0:12:10.720 --> 0:12:13.160 is that in addition to a growth, you know, they 0:12:13.160 --> 0:12:15.320 went from about a billion in revenue to over two 0:12:15.320 --> 0:12:19.440 point one in revenue last year, we see shrinking net income, 0:12:19.480 --> 0:12:22.720 lost margins. UM. That's not something you see in every company. 0:12:22.720 --> 0:12:25.000 It's obviously very important to show that there's a line 0:12:25.000 --> 0:12:27.880 of sight to profitability. UH. And I think the LIFT 0:12:27.960 --> 0:12:30.439 is trying to make sure that that is seen by 0:12:30.480 --> 0:12:33.280 its you know, by the investors. It's road showing too today. 0:12:33.400 --> 0:12:35.400 So one thing a teach that you said was that 0:12:35.520 --> 0:12:38.480 probably Lift doesn't want to be associated with the Snap 0:12:38.520 --> 0:12:41.959 i p O too much, given the disastrous performance of 0:12:42.000 --> 0:12:45.640 that IPO in subsequent trading months. But I do have 0:12:45.720 --> 0:12:47.880 to wonder if there is a similarity here, because these 0:12:47.880 --> 0:12:51.360 are both startups that waited quite a long time before 0:12:51.600 --> 0:12:54.840 the i p oed being able to get financing through 0:12:54.880 --> 0:12:58.320 private markets and through public debt markets. I'm just wondering, 0:12:58.559 --> 0:13:01.920 does that set these company needs up to have less upside. 0:13:01.920 --> 0:13:05.840 In other words, they've already become mature enough that the 0:13:05.920 --> 0:13:10.120 growth perspective just isn't there. I think that's true for 0:13:10.200 --> 0:13:13.920 the typical public market only investor. I mean, one of 0:13:13.920 --> 0:13:16.840 the reasons our business exists is that, you know, equities 0:13:16.840 --> 0:13:20.440 don't allow is qualified, accredited investors that want to invest 0:13:20.720 --> 0:13:24.240 ahead of the I p O to actually gain that access. 0:13:24.360 --> 0:13:27.040 Uh So, whether or not you know it's it's Lift 0:13:27.080 --> 0:13:29.439 or Uber or the you know twenty other companies that 0:13:29.520 --> 0:13:31.360 we believe are going to go public later this year, 0:13:31.600 --> 0:13:33.800 I think one thing is absolutely true is that you know, 0:13:33.840 --> 0:13:36.319 you hit the nail on the head more and more value, 0:13:36.360 --> 0:13:38.720 more and more value creation is happening in the private 0:13:38.760 --> 0:13:41.800 markets now. The story Lift and Uber and many of 0:13:41.880 --> 0:13:44.000 these other firms are trying to say is that we're 0:13:44.000 --> 0:13:47.880 still in the kind of early stages of transportation as 0:13:47.880 --> 0:13:50.679 a service as a sector um and so you know 0:13:50.720 --> 0:13:52.720 you're gonna see Lift come out and say, you know, 0:13:52.800 --> 0:13:55.360 here's why we see U. You know, we only operate 0:13:55.400 --> 0:13:57.719 in North America at the moment. There's the rest of 0:13:57.760 --> 0:13:59.679 the world to conquer. Uber is going to come out 0:13:59.720 --> 0:14:01.840 hopefull a month from now and come out and say, look, 0:14:01.880 --> 0:14:04.840 we already have bits and pieces of the world now. 0:14:04.880 --> 0:14:08.320 In addition to ride sharing, we're offering Uber eats and 0:14:08.559 --> 0:14:11.480 autonomous vehicles and you know the four or five other 0:14:11.520 --> 0:14:14.280 ways in which they can see, um, you know, a 0:14:14.320 --> 0:14:17.199 way to capture market. I think one comparison though, that 0:14:17.320 --> 0:14:20.320 Lift wants to avoid but can't get around, is that 0:14:20.440 --> 0:14:22.800 of corporate governance. You see. You know, the same thing 0:14:22.800 --> 0:14:25.880 that Google and Facebook did, that Snapped tried to do, 0:14:26.200 --> 0:14:28.720 it did successfully, really didn't work out well for them, 0:14:28.880 --> 0:14:31.280 is the dual class listing of shares and listed Lift 0:14:31.360 --> 0:14:33.040 is uh, you know, it's no different in that matter. 0:14:33.360 --> 0:14:35.280 A TI Data, Thank you so much for being with 0:14:35.360 --> 0:14:39.080 us a Ti Dafta, chief executive of Equity Zen talking 0:14:39.080 --> 0:15:01.440 about that lift I p O. Over the weekend, President 0:15:01.440 --> 0:15:06.000 Trump tweeting about General Motors plan to close an Ohio 0:15:06.080 --> 0:15:10.440 factor their closure of an Ohio factory, demanding that the 0:15:10.640 --> 0:15:15.120 carmaker reopen UH the facility, also saying that the United 0:15:15.320 --> 0:15:19.920 Auto Workers, run by Democrats, are to blame for this closure. 0:15:20.000 --> 0:15:23.200 Joining us now, Alan Baum principle of Baum and Associates, 0:15:23.200 --> 0:15:26.200 which is in a Michigan based research firm focused on 0:15:26.240 --> 0:15:29.640 automotive UH for analysis of auto sales. Allan, thank you 0:15:29.640 --> 0:15:33.160 so much for being with us. Let's start with what 0:15:33.360 --> 0:15:36.440 this closure actually came as a result of How long 0:15:36.480 --> 0:15:39.280 was it in the works. Can you give us some background? Well, 0:15:39.360 --> 0:15:42.960 the the obvious problem is that GM has far more 0:15:43.000 --> 0:15:47.640 assembly plants than it has sales that that justified those plants. 0:15:47.880 --> 0:15:51.320 And obviously that's particularly true on the car side. UM 0:15:51.480 --> 0:15:55.960 and so you saw closures uh in Oshua, uh In, 0:15:55.960 --> 0:15:59.960 in Lordstown, uh and in Detroit ham Trammic the unforced. 0:16:00.120 --> 0:16:02.760 The thing is GMS cars are a lot better than 0:16:02.800 --> 0:16:07.160 their sales. UM. Now, of course GM some responsibility for that. 0:16:07.200 --> 0:16:11.120 They've had some marketing issues on those cars. UM. But 0:16:11.200 --> 0:16:13.920 the other thing is that cars and crossovers are in 0:16:14.000 --> 0:16:17.120 fact built on the same platform, and they're they're made 0:16:17.160 --> 0:16:22.800 to be built together. UH, Honda, Toyota, Nissan all understand that. 0:16:22.920 --> 0:16:25.920 Obviously the rest of the industry does as well, they're 0:16:25.920 --> 0:16:28.600 just not as good as implementing it. And obviously GM 0:16:28.680 --> 0:16:31.480 is is an example of that how much of this 0:16:31.560 --> 0:16:33.920 is economics and how much of it is politics? And 0:16:34.280 --> 0:16:36.960 the GM said they've they've placed more than a thousand 0:16:37.000 --> 0:16:41.200 employees from the unallocated plants and that they have opportunities 0:16:41.200 --> 0:16:45.480 available for basically all of the impacted employees. And of 0:16:45.520 --> 0:16:47.720 course those employees are going to have to give up 0:16:47.760 --> 0:16:51.480 a huge uh portion of their personal lives if because 0:16:51.520 --> 0:16:55.600 the UW contract allows for bumping UM to other plants, 0:16:55.600 --> 0:16:59.480 but of course the plants are are not necessarily within 0:17:00.040 --> 0:17:03.600 the Lord's town or even Cleveland area, and so they're 0:17:03.640 --> 0:17:08.000 they're talking about major moves the the the issue is 0:17:08.040 --> 0:17:11.400 obviously much more economic, and the obvious problem is we're 0:17:11.440 --> 0:17:14.320 also into a period where the auto industry is starting 0:17:14.320 --> 0:17:18.480 to turn south, not dramatically, but the auto industry was 0:17:18.520 --> 0:17:21.919 ahead of the overall economy and its recovery. It's also 0:17:22.000 --> 0:17:25.800 ahead of the overall economy and its downturn. How much 0:17:26.080 --> 0:17:31.000 is this alan a case of automation taking jobs and 0:17:31.080 --> 0:17:33.840 just not there being the need for as many plants 0:17:33.920 --> 0:17:36.960 or as many employees at each plant. And how much 0:17:37.160 --> 0:17:40.600 is this that it is just cheaper to produce cars 0:17:40.640 --> 0:17:44.879 in the parts elsewhere? Well, and that's not just a 0:17:44.960 --> 0:17:49.560 North American issue. Obviously, North America is competing with the 0:17:49.600 --> 0:17:51.920 rest of the world. When you look at the case 0:17:51.960 --> 0:17:57.000 of the Detroit three. UH, the Detroit three is generally 0:17:57.119 --> 0:18:01.760 maintaining obviously declining in some situation issues. It's it's footprint 0:18:01.800 --> 0:18:04.919 here in then in North America, whereas the rest of 0:18:04.960 --> 0:18:09.400 the world's automakers see North America as a great opportunity. 0:18:09.400 --> 0:18:12.920 Our volume is not increasing so much, but our our 0:18:12.960 --> 0:18:16.680 profitability remains among the highest in the world. UM with 0:18:16.720 --> 0:18:21.520 respect to automation. That's true across the board. UH. It's 0:18:21.520 --> 0:18:25.960 it's true when you particularly when you have declining profit 0:18:26.080 --> 0:18:29.800 margins and you need to reduce your cost UH. The 0:18:29.880 --> 0:18:34.479 Detroit three UH in cars obviously have had that. Again, 0:18:34.600 --> 0:18:39.359 the Detroit three could be as profitable UH and sell 0:18:39.440 --> 0:18:43.440 more cars than they do as compared to their competitors. 0:18:43.800 --> 0:18:49.399 They simply haven't put as much opportunity or focus on 0:18:49.640 --> 0:18:54.439 cars and perhaps more importantly, on crossovers where the market 0:18:54.480 --> 0:18:58.159 is growing. Sure they're strong, but they're losing some of 0:18:58.200 --> 0:19:02.040 their their share there as well. Is there an opportunity 0:19:02.080 --> 0:19:05.000 for the for the North American three, if you will, 0:19:05.040 --> 0:19:08.280 to get a potential bump if we imposed tariffs on 0:19:08.440 --> 0:19:11.120 European cars, Well, this sort of be a backdoor push 0:19:11.160 --> 0:19:15.639 for them. Maybe. Well, that's that's the idea. The the 0:19:15.840 --> 0:19:19.840 of course, the dirty little secret is all automakers use 0:19:20.320 --> 0:19:25.080 lots of parts and to different levels of degree, car 0:19:25.359 --> 0:19:28.320 imports from around the world, and of course I should 0:19:28.320 --> 0:19:34.160 say vehicle imports. Um So in theory the Detroit three 0:19:34.240 --> 0:19:39.119 would be less disadvantaged in the other players. But the 0:19:39.240 --> 0:19:44.040 point is what I just said, less disadvantaged. Uh, Those 0:19:44.119 --> 0:19:50.000 those brute forced tarraffs are likely to reduce the overall industry, 0:19:50.320 --> 0:19:54.640 and obviously UH to the extent that that a company 0:19:54.760 --> 0:19:59.600 is less in less than great shape relatively speaking, they'll 0:19:59.600 --> 0:20:02.040 be heard even more. Allan boun thank you so much 0:20:02.080 --> 0:20:04.520 for being with us, Alan bound principle of Baum and 0:20:04.600 --> 0:20:08.159 Associates joining us from Michigan and Vince I am struck 0:20:08.480 --> 0:20:11.399 by the idea that this is Ohio, we're talking about 0:20:11.400 --> 0:20:14.400 a swing state, and that President Trump is making this 0:20:14.600 --> 0:20:17.800 into something of a campaign issue as we sort of 0:20:17.840 --> 0:20:22.080 have a drumbeat towards elections. Sort Of interesting to note that, yeah, 0:20:22.119 --> 0:20:25.080 it does have it rings, a lot of politics and 0:20:25.160 --> 0:20:27.320 a lot less economics to me, to be perfectly honest. 0:20:27.480 --> 0:20:31.720 Generator shares though, are down one percent today. Interesting to 0:20:31.760 --> 0:20:35.480 see that to sort of what degree President Trump's involvement 0:20:35.600 --> 0:20:38.919 in this just there is a certain political risk that 0:20:39.040 --> 0:20:57.120 is inherent to companies regardless of the economic factors. Right now, 0:20:57.200 --> 0:21:00.520 let us talk about the wicked experience of trying to 0:21:00.680 --> 0:21:03.439 bet on the Commerce Bank Deutsche Bank tie up that 0:21:03.520 --> 0:21:06.480 has been in the works for so long. Joining us 0:21:06.520 --> 0:21:08.640 now is a Lisa Martin Usy. She's a columnist covering 0:21:08.680 --> 0:21:11.879 finance for a Bloomberg opinion. Joining us from London. We 0:21:11.920 --> 0:21:14.439 have seen the shares rally of both Deutsche Bank and 0:21:14.600 --> 0:21:17.160 Commerce Bank. I guess the key question is how much 0:21:17.160 --> 0:21:19.840 of a game changer is it that the German government 0:21:20.080 --> 0:21:23.639 has officially or not officially but given a sign that 0:21:23.720 --> 0:21:27.000 they are okay with the job cuts that would make 0:21:27.040 --> 0:21:29.800 this tie up worthwhile? Yes. On the one hand, as 0:21:29.840 --> 0:21:32.159 you say, the government has signaled that they would be 0:21:32.359 --> 0:21:34.479 they wouldn't stand in the way of job cuts. On 0:21:34.520 --> 0:21:37.320 the other hand, you had Angla locals. The chief of 0:21:37.359 --> 0:21:40.000 staff today is signaling that, you know, there wouldn't be 0:21:40.040 --> 0:21:42.399 too keen on job cuts. And in the middle all 0:21:42.400 --> 0:21:44.960 of this is the role that will be played by 0:21:45.160 --> 0:21:48.880 the employee and label representatives that of course sit on 0:21:48.920 --> 0:21:52.760 both of those banks supervisory boards. So we are quite 0:21:52.760 --> 0:21:56.639 a long way, it feels like from from an agreement. Um, 0:21:56.680 --> 0:21:59.920 the formal discussions only started over the weekend, but critical 0:22:00.080 --> 0:22:03.359 to the steel working would be tens of thousands of 0:22:03.480 --> 0:22:06.439 job cuts in Germany, something in the order of you know, 0:22:06.440 --> 0:22:10.000 as many as thirty thous So getting the backing for 0:22:10.040 --> 0:22:13.600 those is going to be absolutely crucial. How much of 0:22:13.640 --> 0:22:17.080 this when you put it all together, um, and you 0:22:17.080 --> 0:22:19.080 know it's separately, both banks would have had to have 0:22:19.200 --> 0:22:24.040 job cuts and consolidation to make both institutions work anyway, 0:22:24.680 --> 0:22:26.919 how much of this makes it a little easier to 0:22:26.960 --> 0:22:29.159 swallow in job cuts when you say, well, there was 0:22:29.200 --> 0:22:31.760 a merger and that the job cuts are as a 0:22:31.840 --> 0:22:34.479 result of the consolidation and the merger as opposed to 0:22:34.520 --> 0:22:37.800 just meaning both absolutely. But I think the trouble there 0:22:37.920 --> 0:22:42.040 is that these two banks overlapped considerably in parts of 0:22:42.040 --> 0:22:45.200 commercial and consumer banking in Germany, and by putting them together, 0:22:45.280 --> 0:22:47.720 as you are allowing the cost, but you're not necessarily 0:22:47.800 --> 0:22:51.080 changing the competitive landscape in Germany because they would become 0:22:51.160 --> 0:22:55.439 the dominant player. They're still competing with hundreds of local 0:22:55.600 --> 0:23:00.000 savings banks, local cooperatives that compete on very different terms 0:23:00.000 --> 0:23:02.359 that they're not necessarily competing to make huge you know, 0:23:02.400 --> 0:23:06.520 to make profit, so that dynamic will remain unchanged. And 0:23:06.600 --> 0:23:09.720 on top of that, you're not really grapping with the 0:23:09.760 --> 0:23:12.800 weaknesses the Deutsche Bank banks to the table, which is 0:23:12.800 --> 0:23:15.840 it's investent bank, because Commis Bank doesn't have much of 0:23:15.840 --> 0:23:18.480 an investon bank. So putting those together isn't really going 0:23:18.520 --> 0:23:21.800 to change the difficulties that Deutsche Bank has. On Wall Street, 0:23:22.960 --> 0:23:25.440