1 00:00:00,640 --> 00:00:07,800 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,600 --> 00:00:14,400 Speaker 2: This is Bloomberg Intelligence with Alex Steel and Paul'sweeny. 3 00:00:14,520 --> 00:00:17,720 Speaker 3: The real app performance has been the US corporate high yield. 4 00:00:17,920 --> 00:00:20,280 Speaker 4: Are the companies lean enough? Have they trimmed all the fats? 5 00:00:20,320 --> 00:00:24,080 Speaker 3: The semiconductor business is a really cyclical business. 6 00:00:23,640 --> 00:00:27,200 Speaker 2: Breaking market headlines and corporate news from across the globe. 7 00:00:27,280 --> 00:00:29,920 Speaker 4: Do investors like the M and A that we've seen? 8 00:00:30,120 --> 00:00:33,159 Speaker 3: These are two big time blue chip companies. 9 00:00:33,360 --> 00:00:36,960 Speaker 4: The window between the peak and cut changing super fast. 10 00:00:37,120 --> 00:00:42,040 Speaker 2: Bloomberg Intelligence with Alex Steel and Paul'sweeny on Bloomberg Radio. 11 00:00:43,360 --> 00:00:46,120 Speaker 3: On Today's Bloomberg Intelligence Show, we dig inside the big 12 00:00:46,120 --> 00:00:48,519 Speaker 3: business stories impacting Wall Street in the local markets. 13 00:00:48,640 --> 00:00:50,880 Speaker 4: Each and every week we provide in research and data 14 00:00:50,920 --> 00:00:52,720 Speaker 4: on some of the two thousand companies and one hundred 15 00:00:52,720 --> 00:00:55,160 Speaker 4: and thirty industries our analysts cover worldwide. 16 00:00:55,240 --> 00:00:57,840 Speaker 3: Today, we'll look at why negotiations between Boeing and it's 17 00:00:57,840 --> 00:00:59,680 Speaker 3: striking workers are at an in pass. 18 00:01:00,040 --> 00:01:02,680 Speaker 4: Discuss why Honeywell International is planning to spin off its 19 00:01:02,720 --> 00:01:04,440 Speaker 4: advanced materials division. 20 00:01:04,760 --> 00:01:07,560 Speaker 3: But first we begin with some big news for Alphabet's Google. 21 00:01:07,760 --> 00:01:10,720 Speaker 4: This week, we heard that the US DOJ is considering 22 00:01:10,760 --> 00:01:13,080 Speaker 4: asking a federal judge to force Google to sell off 23 00:01:13,120 --> 00:01:13,959 Speaker 4: parts of its business. 24 00:01:14,280 --> 00:01:16,120 Speaker 3: This will be a historic breakup of one of the 25 00:01:16,160 --> 00:01:18,880 Speaker 3: world's biggest tech companies. For more, we were joined by 26 00:01:18,880 --> 00:01:21,240 Speaker 3: Mandep Singh, Bloomberg Intelligence Senior technost. 27 00:01:21,400 --> 00:01:24,119 Speaker 4: We first asked man Deep what he actually thinks will 28 00:01:24,120 --> 00:01:25,080 Speaker 4: happen now with Google. 29 00:01:25,440 --> 00:01:29,039 Speaker 5: Well, so there are three big lawsuits out there against 30 00:01:29,120 --> 00:01:32,840 Speaker 5: Google in the US, two from DOJ. One is the 31 00:01:32,920 --> 00:01:37,039 Speaker 5: monopoly lawsuit with the lost and that's where we're looking 32 00:01:37,040 --> 00:01:40,480 Speaker 5: at remedies. The other one is also from dj against 33 00:01:40,520 --> 00:01:44,199 Speaker 5: their ad tech business, where the DOJ is looking at 34 00:01:44,240 --> 00:01:47,000 Speaker 5: their at tech stack and how you know, they control 35 00:01:47,040 --> 00:01:49,800 Speaker 5: all parts of the stack. The third one is from 36 00:01:49,880 --> 00:01:54,800 Speaker 5: the you know, different state attorney journals, again targeting their 37 00:01:54,920 --> 00:01:57,800 Speaker 5: at tech business. So when I look at, you know, 38 00:01:57,920 --> 00:02:02,280 Speaker 5: everything that obviously the regulators want to change with Google, 39 00:02:02,600 --> 00:02:05,520 Speaker 5: the ad tech piece is the one which comes up 40 00:02:05,640 --> 00:02:08,640 Speaker 5: over and over again, the fact that they control different 41 00:02:08,720 --> 00:02:12,040 Speaker 5: parts of the as tec. Now in the monopoly lawsuit, 42 00:02:12,320 --> 00:02:15,680 Speaker 5: they're talking about a force breakup of the Chrome business 43 00:02:15,840 --> 00:02:19,200 Speaker 5: or the play store business, Android business. I think it's 44 00:02:19,360 --> 00:02:22,560 Speaker 5: very hard to take out, you know, a single product 45 00:02:22,560 --> 00:02:24,760 Speaker 5: from a company like Google and say this is a 46 00:02:24,800 --> 00:02:28,359 Speaker 5: separate entity. It's just like it's all run or shared infrastructure. 47 00:02:28,680 --> 00:02:32,239 Speaker 5: I can't imagine you know, doing that with Google, and 48 00:02:32,880 --> 00:02:35,480 Speaker 5: you know, doing it successfully in the sense that Android 49 00:02:35,560 --> 00:02:38,960 Speaker 5: can be a separate company. Maybe YouTube, But again with YouTube, 50 00:02:39,480 --> 00:02:42,320 Speaker 5: it's run on that same infrastructure that searches run on. 51 00:02:42,360 --> 00:02:44,800 Speaker 5: So how do you split that infrastructure. It's very hard 52 00:02:44,800 --> 00:02:46,040 Speaker 5: to do it at the product level. 53 00:02:46,040 --> 00:02:48,200 Speaker 3: All right, here's some inside Bloomberg for you. You can get 54 00:02:48,240 --> 00:02:50,799 Speaker 3: really smart on a new piece of information that just 55 00:02:50,880 --> 00:02:53,200 Speaker 3: hit the tape about a company type in the ticker 56 00:02:53,360 --> 00:02:56,959 Speaker 3: g oog L for Google in equity. Then hit BCO 57 00:02:57,120 --> 00:03:00,560 Speaker 3: BICO for Bloomberg Intelligence Company Research, and you get what's 58 00:03:00,600 --> 00:03:03,040 Speaker 3: called a recent event reaction. So I want to know 59 00:03:03,120 --> 00:03:07,720 Speaker 3: immediately what Mandeep Singh thinks about this stuff. And what 60 00:03:07,800 --> 00:03:10,160 Speaker 3: I read I didn't expect to read. We see a 61 00:03:10,200 --> 00:03:12,600 Speaker 3: breakup of Google's add tech business as the most likely 62 00:03:12,639 --> 00:03:15,040 Speaker 3: outcome for remedy in the company's monopoly case with the 63 00:03:15,120 --> 00:03:17,600 Speaker 3: US Justice Department. I thought what I would have read 64 00:03:17,639 --> 00:03:20,080 Speaker 3: is don't worry about it, but this has some teeth. 65 00:03:20,120 --> 00:03:21,480 Speaker 3: Here is what you're kind. 66 00:03:21,320 --> 00:03:24,799 Speaker 5: Of well, because they lost that first lawsuit at the 67 00:03:24,840 --> 00:03:27,480 Speaker 5: dog and the second one the ad tech as well. 68 00:03:28,080 --> 00:03:31,360 Speaker 5: It's very likely that the judge will rule against Google. 69 00:03:31,680 --> 00:03:34,639 Speaker 5: So when you lose the cases, there has to be 70 00:03:34,760 --> 00:03:38,320 Speaker 5: both behavior and structural remedy. And in the case of 71 00:03:38,440 --> 00:03:42,840 Speaker 5: behavior remedy, yeah, they can't make those payments to Apple anymore. 72 00:03:42,880 --> 00:03:45,840 Speaker 5: To be the default search or any other hardware maker, 73 00:03:46,080 --> 00:03:48,840 Speaker 5: they will have to open up Android to offer search 74 00:03:48,920 --> 00:03:52,240 Speaker 5: screens so that you just don't have to use Chrome 75 00:03:52,840 --> 00:03:55,400 Speaker 5: or Google Search. You can use bing Search for example. 76 00:03:55,520 --> 00:03:59,800 Speaker 5: So choice screens is another behavior. But the structural remedy 77 00:03:59,880 --> 00:04:02,920 Speaker 5: in terms of a forced sale, I find it hard 78 00:04:02,920 --> 00:04:06,160 Speaker 5: to believe that the dot will ask them to sell 79 00:04:06,160 --> 00:04:08,440 Speaker 5: a product. It has to be more at the technology 80 00:04:08,560 --> 00:04:09,240 Speaker 5: stack level. 81 00:04:09,320 --> 00:04:10,360 Speaker 6: So when we go to. 82 00:04:10,360 --> 00:04:12,720 Speaker 4: The ad tech stack, maybe that just dumptail with what 83 00:04:12,760 --> 00:04:15,880 Speaker 4: you were saying. So what does control the ad tech 84 00:04:15,960 --> 00:04:18,360 Speaker 4: stack mean when you're talking about Google. 85 00:04:18,560 --> 00:04:22,960 Speaker 5: So think of how an ad exchange works. You have 86 00:04:23,080 --> 00:04:26,720 Speaker 5: the supply side, you know, in terms of the publisher 87 00:04:26,839 --> 00:04:29,359 Speaker 5: ad inventory, and then you have the demand side, the 88 00:04:29,440 --> 00:04:33,560 Speaker 5: advertisers who are buying those ads, and then you have 89 00:04:33,640 --> 00:04:36,600 Speaker 5: the exchange in the middle, who is matching the supply 90 00:04:36,720 --> 00:04:40,840 Speaker 5: and the demand side for ads. Google has products across 91 00:04:41,160 --> 00:04:44,600 Speaker 5: the stack where they have a demand side platform, they 92 00:04:44,600 --> 00:04:47,839 Speaker 5: have a supply side ad platform. They are an online 93 00:04:47,839 --> 00:04:51,960 Speaker 5: exchange and they've built it over the years because they 94 00:04:52,040 --> 00:04:54,960 Speaker 5: made a few acquisitions. Double Click was the most notable 95 00:04:55,000 --> 00:05:00,000 Speaker 5: one where they acquired all the capabilities to really operate 96 00:05:00,160 --> 00:05:03,480 Speaker 5: as an entity that knows everything when it comes to 97 00:05:03,680 --> 00:05:07,479 Speaker 5: digital ads being sold in the marketplace. So they control 98 00:05:07,560 --> 00:05:10,320 Speaker 5: that stack end to end. That's why when you compare 99 00:05:10,360 --> 00:05:13,720 Speaker 5: Google's ad pricing to everyone else out there, they are 100 00:05:13,760 --> 00:05:17,480 Speaker 5: far superior. One they have the best targeting. The other 101 00:05:17,720 --> 00:05:20,919 Speaker 5: is when you're operating a stack where you have the 102 00:05:21,000 --> 00:05:25,280 Speaker 5: dominant product across the different pieces, you have a pricing advantage. 103 00:05:25,600 --> 00:05:29,320 Speaker 5: And that's what you know. The regulators are saying that 104 00:05:29,440 --> 00:05:32,880 Speaker 5: this company controls pretty much everything in the ads stack. 105 00:05:33,000 --> 00:05:38,039 Speaker 3: But the advertisers themselves they're not complaining, of course not. 106 00:05:38,279 --> 00:05:41,719 Speaker 6: I mean they're getting like, who are they protecting? 107 00:05:41,760 --> 00:05:44,320 Speaker 3: This is a solution in search of a problem here 108 00:05:44,560 --> 00:05:46,960 Speaker 3: in my opinion, because I have a competition in this market. 109 00:05:47,080 --> 00:05:49,479 Speaker 3: I think I have competition. I mean, I Google's huge, 110 00:05:49,880 --> 00:05:51,960 Speaker 3: so it's Facebook, and now I've got this little company 111 00:05:51,960 --> 00:05:56,360 Speaker 3: in a Seattle called Amazon. They're monsters advertising player. So 112 00:05:56,400 --> 00:05:57,440 Speaker 3: where's the problem here? 113 00:05:57,480 --> 00:05:59,839 Speaker 5: So it all comes down to how you look at 114 00:05:59,880 --> 00:06:02,200 Speaker 5: the market. If you look at the market the way 115 00:06:02,200 --> 00:06:05,640 Speaker 5: you just described, where Meta is as formidable as Google 116 00:06:05,720 --> 00:06:09,200 Speaker 5: and Amazon is a big third player, then yes there 117 00:06:09,240 --> 00:06:12,640 Speaker 5: is competition. But when you look at certain type of ads, 118 00:06:12,680 --> 00:06:15,960 Speaker 5: whether it's on the desktop or you know the third 119 00:06:16,000 --> 00:06:19,479 Speaker 5: party ads that are going through Google Ad Exchange, these 120 00:06:19,520 --> 00:06:22,440 Speaker 5: companies don't overlap. Like remember, Meta is a walled garden, 121 00:06:22,960 --> 00:06:26,320 Speaker 5: even though it's big in terms of the digital ad advertising, 122 00:06:26,600 --> 00:06:30,039 Speaker 5: it's its own world garden. Amazon is its own world 123 00:06:30,080 --> 00:06:33,880 Speaker 5: garden Google. So these companies have their own swim lanes. 124 00:06:34,360 --> 00:06:37,320 Speaker 5: They are big in terms of the digital ad dollars, 125 00:06:37,560 --> 00:06:40,279 Speaker 5: but they have their own swim lanes. They don't overlap. 126 00:06:40,320 --> 00:06:43,520 Speaker 5: And that's the objection that I think regulators have. 127 00:06:43,640 --> 00:06:47,400 Speaker 4: Okay, so if they wound up, you know, moving around 128 00:06:47,440 --> 00:06:49,640 Speaker 4: that ad tech stack and changing stuff up, what does 129 00:06:49,640 --> 00:06:51,960 Speaker 4: that change look like and how much money could then 130 00:06:52,080 --> 00:06:52,760 Speaker 4: Google lose? 131 00:06:53,240 --> 00:06:56,239 Speaker 5: Well? So Google Search obviously is a two hundred billion 132 00:06:56,279 --> 00:06:59,200 Speaker 5: dollars rund rate business, still the cash cow for Google. 133 00:07:00,120 --> 00:07:03,039 Speaker 5: That's where you know the Google Network piece, which is 134 00:07:03,360 --> 00:07:06,880 Speaker 5: the ads that Google shows on third party platforms. So 135 00:07:06,920 --> 00:07:10,600 Speaker 5: one is Google showing ads on YouTube and their own 136 00:07:10,640 --> 00:07:14,040 Speaker 5: search page. The other is Google showing ad on let's 137 00:07:14,040 --> 00:07:17,120 Speaker 5: say a New York Times or some other publisher. Because 138 00:07:17,120 --> 00:07:20,679 Speaker 5: it's going through the Google Ad Exchange. That's the part 139 00:07:20,720 --> 00:07:23,520 Speaker 5: that can be divested where and it's a thirty two 140 00:07:23,560 --> 00:07:27,080 Speaker 5: billion dollars rundred business. Within that two hundred billion, that's 141 00:07:27,120 --> 00:07:30,240 Speaker 5: the part that's not growing, but you could argue could 142 00:07:30,280 --> 00:07:32,960 Speaker 5: be split up in a way where I think Google 143 00:07:33,000 --> 00:07:36,080 Speaker 5: maybe a smaller search ad business. But at the same 144 00:07:36,120 --> 00:07:38,960 Speaker 5: time that will appease the regulators because they're not controlling 145 00:07:38,960 --> 00:07:40,600 Speaker 5: different parts of the ads tack. 146 00:07:40,800 --> 00:07:43,280 Speaker 3: Our thanks to Man Deep Seeing Bloomberg Intelligence senior tech 147 00:07:43,320 --> 00:07:44,080 Speaker 3: industry analyst. 148 00:07:44,400 --> 00:07:47,520 Speaker 4: Earlier this year, French multi billion dollar brand Perier came 149 00:07:47,600 --> 00:07:50,640 Speaker 4: under scrutiny following the discovery of traces of fecal matter 150 00:07:50,920 --> 00:07:53,120 Speaker 4: in one of the seven wells used to source its 151 00:07:53,160 --> 00:07:56,560 Speaker 4: mineral water. As a result, Perrier owner Nesle said it 152 00:07:56,600 --> 00:07:59,120 Speaker 4: had to close some of its wells in recent months. 153 00:07:59,480 --> 00:08:03,040 Speaker 3: Now, the globe water business is grappling with questions of sustainability. 154 00:08:03,240 --> 00:08:05,880 Speaker 3: It's a subject of a Bloomberg Big Take story entitled 155 00:08:06,040 --> 00:08:09,520 Speaker 3: Perrier Contamination Woes add to three hundred and thirty billion 156 00:08:09,520 --> 00:08:11,000 Speaker 3: dollars sectors hurdles. 157 00:08:11,360 --> 00:08:13,040 Speaker 4: For more we were drawn by one of the story's 158 00:08:13,120 --> 00:08:17,400 Speaker 4: co authors, Dasha afanasch Vieva, a Bloomberg Consumer goods reporter. 159 00:08:17,760 --> 00:08:20,680 Speaker 3: We first asked Dasha to break down her findings from 160 00:08:20,720 --> 00:08:21,160 Speaker 3: the story. 161 00:08:21,560 --> 00:08:24,680 Speaker 7: So at the start of this year, Nesse had to 162 00:08:24,800 --> 00:08:29,200 Speaker 7: admit that it had been illegally filtering its mineral water 163 00:08:29,520 --> 00:08:32,840 Speaker 7: in France and in particular Perier. And the reason why 164 00:08:32,840 --> 00:08:35,440 Speaker 7: it's legal is because mineral water, under French law and 165 00:08:35,440 --> 00:08:38,400 Speaker 7: actually European law, you shouldn't really do much stuff with it. 166 00:08:38,400 --> 00:08:41,079 Speaker 7: It's supposed to be quite natural, whereas they were using 167 00:08:41,160 --> 00:08:44,520 Speaker 7: charcoal filters and using UV filters. So they kind of 168 00:08:44,559 --> 00:08:47,120 Speaker 7: come clean on that because there's a leaked report that 169 00:08:47,200 --> 00:08:50,480 Speaker 7: forces them to and then a few months later there's 170 00:08:50,480 --> 00:08:54,719 Speaker 7: another leaked report that says, well, there's vehical contaminants and 171 00:08:54,840 --> 00:08:59,880 Speaker 7: pesticide contaminants and pfast contaminants in the source the Perier saw. 172 00:09:00,440 --> 00:09:02,800 Speaker 7: And then after that, the other thing that happens is 173 00:09:02,800 --> 00:09:05,800 Speaker 7: that they have to suspend a well because of contaminants. 174 00:09:06,000 --> 00:09:09,439 Speaker 7: So it's all kind of wrapped up in trust issues 175 00:09:09,840 --> 00:09:13,199 Speaker 7: and contaminants. But I'd like to hide like no food 176 00:09:13,280 --> 00:09:15,360 Speaker 7: safety issues and no health issues. 177 00:09:15,679 --> 00:09:18,200 Speaker 4: So how does this evolve? Like how does Perry fix it? 178 00:09:18,280 --> 00:09:20,320 Speaker 4: Like how much is going to cost all that good stuff? 179 00:09:21,120 --> 00:09:25,280 Speaker 7: Yeah, Perry found out back in twenty twenty that it 180 00:09:25,400 --> 00:09:27,360 Speaker 7: was doing this. It was doing the legal filtering. But 181 00:09:27,400 --> 00:09:30,319 Speaker 7: a new boss came in in twenty twenty and realized 182 00:09:30,360 --> 00:09:32,760 Speaker 7: they were doing this filtering and then brought in a 183 00:09:32,800 --> 00:09:35,360 Speaker 7: program to modernize the plant so you wouldn't have to 184 00:09:35,640 --> 00:09:38,319 Speaker 7: do it anymore. And that whole time they were in 185 00:09:38,400 --> 00:09:43,200 Speaker 7: conversation with regulators. They say to upgrade production and also 186 00:09:43,480 --> 00:09:46,679 Speaker 7: get everything shipshape, and they invested in modernizing the plant 187 00:09:46,840 --> 00:09:50,199 Speaker 7: something to the tune of one hundred and fifty million euros. 188 00:09:50,240 --> 00:09:53,400 Speaker 7: So they're saying, now it's all good, nothing to see here, 189 00:09:54,200 --> 00:09:56,240 Speaker 7: but that one well out of seven is still shut, 190 00:09:56,960 --> 00:09:57,800 Speaker 7: it is still suspended. 191 00:09:57,800 --> 00:10:01,600 Speaker 3: I should say this water, this is big business for France. 192 00:10:01,640 --> 00:10:05,800 Speaker 3: Reading your article today, Dasha, the world's biggest bottled water 193 00:10:05,880 --> 00:10:08,840 Speaker 3: exporting country, that be, France has fought hard to preserve 194 00:10:08,880 --> 00:10:11,040 Speaker 3: the integrity and identity of its water with an eye 195 00:10:11,080 --> 00:10:15,040 Speaker 3: on jobs and growth. The industry contributes one billion euros 196 00:10:15,120 --> 00:10:18,160 Speaker 3: each year to France's external trade indirectly or indirectly employees 197 00:10:18,200 --> 00:10:20,480 Speaker 3: about thirty eight thousand people. So this is big business here, 198 00:10:21,240 --> 00:10:24,199 Speaker 3: and I would think the brand value is what it's 199 00:10:24,240 --> 00:10:26,200 Speaker 3: all about here, So they have to be careful, don't they. 200 00:10:27,400 --> 00:10:29,760 Speaker 7: I think it is about the brand value. And Perry 201 00:10:30,360 --> 00:10:32,800 Speaker 7: has had issues with this in the past decades and 202 00:10:32,840 --> 00:10:36,680 Speaker 7: decades ago when there was a benzine contamination, so it 203 00:10:36,720 --> 00:10:40,760 Speaker 7: did this massive recall, a global recall. So it has form. 204 00:10:40,960 --> 00:10:45,200 Speaker 7: And this very product hinges on this premium status and 205 00:10:45,240 --> 00:10:49,160 Speaker 7: on this idea that it's sort of pure and better 206 00:10:49,200 --> 00:10:52,320 Speaker 7: than tap water. So you have to preserve that in 207 00:10:52,360 --> 00:10:55,320 Speaker 7: the eye of the consumer. And maybe the individual consumer 208 00:10:55,400 --> 00:10:58,120 Speaker 7: might not care how you're filtering it. But over time, 209 00:10:58,200 --> 00:11:01,079 Speaker 7: these sort of this trick if you will have news 210 00:11:01,320 --> 00:11:06,599 Speaker 7: definitely tarnishes or can tarnish the brand potentially. 211 00:11:06,880 --> 00:11:09,400 Speaker 4: How big is a business is this? Like I got 212 00:11:09,440 --> 00:11:11,520 Speaker 4: a so to stream at home. You know, we bubble 213 00:11:11,600 --> 00:11:14,240 Speaker 4: up our regular old New York tap water. But talk 214 00:11:14,280 --> 00:11:15,680 Speaker 4: to me about the industry at large. 215 00:11:16,000 --> 00:11:18,400 Speaker 7: It's not a huge business for Nesle, Forinestle, it's only 216 00:11:18,440 --> 00:11:22,160 Speaker 7: three point five percent of revenue. But the industry globally 217 00:11:22,440 --> 00:11:26,000 Speaker 7: is around three hundred and six a billion and growing 218 00:11:26,040 --> 00:11:29,400 Speaker 7: around four percent a year, so it is rather large, 219 00:11:29,920 --> 00:11:32,160 Speaker 7: but as I say, not huge for Nestle. 220 00:11:32,840 --> 00:11:35,720 Speaker 3: So I mean, I guess if you're thinking about a 221 00:11:35,720 --> 00:11:38,160 Speaker 3: green economy, you ask a good question here in the article. 222 00:11:38,200 --> 00:11:41,240 Speaker 3: Does it make ecological sense to transport millions of bottles 223 00:11:41,240 --> 00:11:44,040 Speaker 3: of water, about ninety seven percent of them made from plastic, 224 00:11:44,320 --> 00:11:47,160 Speaker 3: across the globe instead of sourcing it locally. How did 225 00:11:47,160 --> 00:11:48,160 Speaker 3: the French think about that? 226 00:11:48,559 --> 00:11:51,040 Speaker 7: Well, the French would say, our mineral water is super 227 00:11:51,080 --> 00:11:55,160 Speaker 7: special and are amazing tarooa. It's a bit like with wine. 228 00:11:55,679 --> 00:11:58,440 Speaker 7: You know, it comes from this incredible terrowire and we 229 00:11:58,520 --> 00:12:02,079 Speaker 7: have the minerals, we have this heritage of producing it. 230 00:12:02,360 --> 00:12:05,360 Speaker 7: And that's the rut of Perie's marketing. But what Perrier's 231 00:12:05,360 --> 00:12:09,160 Speaker 7: done to protect its future revenue streams is they've said, well, 232 00:12:09,200 --> 00:12:12,040 Speaker 7: we'll have this other whole other product called Maison Perier 233 00:12:12,440 --> 00:12:15,800 Speaker 7: that they can filter how much they want because it's 234 00:12:15,800 --> 00:12:20,320 Speaker 7: not called mineral water, and it's now fronted by Emily 235 00:12:20,320 --> 00:12:24,440 Speaker 7: and Paris active Lily Collins, and it still travels to 236 00:12:24,520 --> 00:12:26,599 Speaker 7: the US. So even if you're making these if you 237 00:12:26,640 --> 00:12:29,000 Speaker 7: think the Taro War French era is so so special. 238 00:12:29,600 --> 00:12:32,199 Speaker 7: If you're filtering the water, you sort of think, well, 239 00:12:32,200 --> 00:12:34,960 Speaker 7: why not just get the water in the US and 240 00:12:35,040 --> 00:12:37,880 Speaker 7: filter it? And the reason is marketing. 241 00:12:38,240 --> 00:12:41,760 Speaker 3: Our thanks to Dasha Afanasieva, Bloomberg Consumer Goods Reporter. 242 00:12:42,000 --> 00:12:44,520 Speaker 4: Coming up, we're going to look at sustainable aviation fuel 243 00:12:44,559 --> 00:12:46,920 Speaker 4: and why it's important and how it's being used. 244 00:12:47,040 --> 00:12:49,880 Speaker 3: We're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 245 00:12:49,920 --> 00:12:52,120 Speaker 3: depth research and data on two thousand companies and one 246 00:12:52,160 --> 00:12:55,160 Speaker 3: hundred and thirty industries. You can access Bloomberg Intelligence via 247 00:12:55,240 --> 00:12:57,520 Speaker 3: b I go on the terminal on Paul Sweeney. 248 00:12:57,200 --> 00:12:59,400 Speaker 4: An amlex deal and this is Bloomberg. 249 00:13:04,160 --> 00:13:08,040 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 250 00:13:08,120 --> 00:13:10,839 Speaker 2: weekdays at ten am Eastern on Apple car Playing and 251 00:13:10,960 --> 00:13:13,800 Speaker 2: broud Otto with the Bloomberg Business App. Listen on demand 252 00:13:13,880 --> 00:13:17,959 Speaker 2: wherever you get your podcasts, or watch us live on YouTube. 253 00:13:18,800 --> 00:13:21,959 Speaker 4: We move next to the planemaker Boeing. This week, negotiations 254 00:13:22,000 --> 00:13:24,280 Speaker 4: between Boeing and its striking workers broke down. 255 00:13:24,559 --> 00:13:27,280 Speaker 3: Boeing withdrew a contract offer to striking workers that would 256 00:13:27,320 --> 00:13:29,560 Speaker 3: have given them a thirty percent raise over four years. 257 00:13:29,800 --> 00:13:32,840 Speaker 3: The contract also included at boost to retirement benefits. 258 00:13:33,040 --> 00:13:35,560 Speaker 4: The impath leaves Boeing with no clear path forward to 259 00:13:35,600 --> 00:13:38,440 Speaker 4: overcome a month's long strike, and production remains shut down 260 00:13:38,480 --> 00:13:41,320 Speaker 4: at it's key commercial manufacturing based on the US West Coast. 261 00:13:41,559 --> 00:13:44,160 Speaker 3: For more, we were joined by George ferguson Bloomberg Intelligence 262 00:13:44,160 --> 00:13:46,480 Speaker 3: senior Aerospace, defense and airlines analysts. 263 00:13:46,480 --> 00:13:48,640 Speaker 4: We first asked George why he thinks Boeing with through 264 00:13:48,679 --> 00:13:49,600 Speaker 4: its contract offer. 265 00:13:49,920 --> 00:13:52,520 Speaker 8: I think you, if you're at the company, you have to, 266 00:13:53,400 --> 00:13:56,600 Speaker 8: you know, make it look like there's a scarcity. I think, 267 00:13:56,600 --> 00:13:59,840 Speaker 8: to whatever you offer right, so that the employees already 268 00:13:59,880 --> 00:14:02,800 Speaker 8: to jump the next time you give them. I think, 269 00:14:03,080 --> 00:14:08,200 Speaker 8: you know, a decent contract terms, but I don't know 270 00:14:08,240 --> 00:14:10,560 Speaker 8: that it works here, right, So I think that it's 271 00:14:10,600 --> 00:14:13,520 Speaker 8: interesting that they withdrew their offer. But I guess at 272 00:14:13,520 --> 00:14:16,640 Speaker 8: the same time, I'm looking at the dock workers strike 273 00:14:17,320 --> 00:14:20,160 Speaker 8: and they just got an agreement for what sixty percent 274 00:14:20,240 --> 00:14:22,760 Speaker 8: over six years. It looks like ten percent a year 275 00:14:22,800 --> 00:14:27,000 Speaker 8: to me if my mask still works Boeing. Boeing, folks, 276 00:14:27,040 --> 00:14:30,200 Speaker 8: I think rejected a contract there's what thirty percent over 277 00:14:30,280 --> 00:14:33,960 Speaker 8: four years. I think they're probably more highly skilled workers, 278 00:14:34,000 --> 00:14:38,240 Speaker 8: no offense to the dock workers, but manufacturing airplanes a 279 00:14:38,240 --> 00:14:42,200 Speaker 8: little more challenging, I think so. I think sort of 280 00:14:42,200 --> 00:14:45,160 Speaker 8: the withdraws Boeing trying to make it feel scarce. I'm 281 00:14:45,240 --> 00:14:47,520 Speaker 8: not sure that it works, George. 282 00:14:47,640 --> 00:14:49,240 Speaker 3: The more I think about this story, the more I'd 283 00:14:49,240 --> 00:14:52,040 Speaker 3: read about this story, it just doesn't look good from 284 00:14:52,080 --> 00:14:55,440 Speaker 3: a Boeing perspective in terms of leverage here. But if 285 00:14:55,480 --> 00:14:58,480 Speaker 3: I'm the union, if my guys can hit last a 286 00:14:58,520 --> 00:15:01,120 Speaker 3: few more weeks, I can really flick some pain here 287 00:15:01,160 --> 00:15:05,320 Speaker 3: on this company here, which strengthens my position. How do 288 00:15:05,440 --> 00:15:08,520 Speaker 3: the pros think about this negotiation between these two sides? 289 00:15:09,360 --> 00:15:12,000 Speaker 8: Yeah, I mean I agree. I think it's really challenging. 290 00:15:12,080 --> 00:15:15,800 Speaker 8: Like I just said, you know, we've seen other increases 291 00:15:15,800 --> 00:15:20,160 Speaker 8: in the marketplace for union labor higher than what this 292 00:15:20,280 --> 00:15:23,720 Speaker 8: union's asking for. If you're Boeing, you just can't possibly 293 00:15:23,760 --> 00:15:27,360 Speaker 8: be replaced thirty three thousand employees. There's just no way. 294 00:15:27,800 --> 00:15:31,600 Speaker 8: And on top of it, again, there's skilled employees right, 295 00:15:31,720 --> 00:15:36,600 Speaker 8: so they're handmaking aircraft, right, And if you decided you 296 00:15:36,600 --> 00:15:39,000 Speaker 8: were going to backfill and train some, you'd have to 297 00:15:39,000 --> 00:15:41,640 Speaker 8: have people on hand to train the new people coming 298 00:15:41,680 --> 00:15:45,160 Speaker 8: in to make an airplane. Well, it's just it's impossible 299 00:15:45,560 --> 00:15:48,120 Speaker 8: to replace them. And now where I think we're in 300 00:15:48,160 --> 00:15:51,960 Speaker 8: this game of chicken, right where like we've talked about previously, 301 00:15:52,880 --> 00:15:55,320 Speaker 8: Boeing's potentially gonna have a downgrade. But look, I think 302 00:15:55,320 --> 00:15:58,680 Speaker 8: the downgrade doesn't matter as much anyways, Right, it's just 303 00:15:58,680 --> 00:16:00,840 Speaker 8: a credit rating. You can get it back later on. 304 00:16:01,960 --> 00:16:05,760 Speaker 8: This is the recovery of this company. That cash is dwindling. 305 00:16:06,920 --> 00:16:09,320 Speaker 8: They have a lot of airplanes sitting in inventory. They 306 00:16:09,320 --> 00:16:11,600 Speaker 8: need to get back to work, and I think if 307 00:16:11,600 --> 00:16:13,360 Speaker 8: the workers can find a way to hold out, they 308 00:16:13,360 --> 00:16:14,760 Speaker 8: can get a lot of what they've asked for. 309 00:16:15,720 --> 00:16:18,240 Speaker 4: So I understand that. Then Boeing has to front it, right, 310 00:16:18,280 --> 00:16:21,320 Speaker 4: they have to act like they're also playing hardball. How 311 00:16:21,360 --> 00:16:24,800 Speaker 4: long do you think they can really realistically sustain that? 312 00:16:26,480 --> 00:16:29,600 Speaker 8: So, I mean that's the question, right, can Boeing last 313 00:16:29,720 --> 00:16:32,280 Speaker 8: longer than the workers? If the workers can hold out 314 00:16:32,360 --> 00:16:36,000 Speaker 8: multiple months, I don't think the company can hold out 315 00:16:36,040 --> 00:16:39,640 Speaker 8: multiple months. I don't think there's customers that aren't getting airplanes, 316 00:16:40,000 --> 00:16:42,200 Speaker 8: Like air Bus isn't making a lot of hay out 317 00:16:42,200 --> 00:16:45,920 Speaker 8: of this, right, They're having similar problems with their supply chains, 318 00:16:46,280 --> 00:16:48,480 Speaker 8: so it's not like they can surge and take a 319 00:16:48,480 --> 00:16:51,280 Speaker 8: bunch of market share away. But Boeing can't let this 320 00:16:51,400 --> 00:16:53,520 Speaker 8: go on for three or four months, right, that would 321 00:16:53,560 --> 00:16:56,200 Speaker 8: start to hurt I think their market share. I think 322 00:16:56,200 --> 00:16:59,120 Speaker 8: you see customers get in the airbus queue just thinking. Look, 323 00:16:59,160 --> 00:17:00,800 Speaker 8: I just don't know when Boeing is going to write 324 00:17:00,800 --> 00:17:04,880 Speaker 8: this ship and really build airplanes in large numbers anytime soon. 325 00:17:05,040 --> 00:17:07,320 Speaker 2: So I don't think they have a quarter. 326 00:17:07,400 --> 00:17:08,680 Speaker 8: I don't think they have three months. 327 00:17:09,160 --> 00:17:11,840 Speaker 3: How far apart do you think that the two sides are? 328 00:17:11,880 --> 00:17:15,640 Speaker 3: And is there any smart money betting on timing? 329 00:17:17,359 --> 00:17:21,520 Speaker 8: So I don't know. I don't know if what smart 330 00:17:21,520 --> 00:17:25,679 Speaker 8: money's betting on right now. But look, it seems like 331 00:17:25,720 --> 00:17:28,000 Speaker 8: when you pull back your contract and you stop talking 332 00:17:28,000 --> 00:17:29,919 Speaker 8: and the union goes to its corner and they're kind 333 00:17:29,960 --> 00:17:33,159 Speaker 8: of irritated, it seems like something hasn't been set up 334 00:17:33,200 --> 00:17:35,520 Speaker 8: well right. To me, frankly, I think it's just it's 335 00:17:35,520 --> 00:17:38,280 Speaker 8: probably bad negotiating, right, don't you always kind of try 336 00:17:38,320 --> 00:17:42,120 Speaker 8: to engage to a certain degree. So to me, it 337 00:17:42,160 --> 00:17:45,200 Speaker 8: feels like it feels like they're really far apart because 338 00:17:45,720 --> 00:17:48,280 Speaker 8: of just the rhetoric I'm hearing in the press. But 339 00:17:48,520 --> 00:17:52,239 Speaker 8: like again, like a lot of things in life, some 340 00:17:52,320 --> 00:17:54,520 Speaker 8: money can go a long way, can put smiles back 341 00:17:54,520 --> 00:17:57,600 Speaker 8: in people's faces, and so you know, you could be 342 00:17:57,600 --> 00:18:00,320 Speaker 8: surprised overnight if Boeing turns around and sweet and the 343 00:18:00,359 --> 00:18:02,120 Speaker 8: offer and tries to get the deal done. But right 344 00:18:02,119 --> 00:18:04,359 Speaker 8: now it feels like they're a distance apart. 345 00:18:04,440 --> 00:18:06,760 Speaker 4: Well, aside from wages obviously, which is a big one, 346 00:18:06,960 --> 00:18:09,000 Speaker 4: what's another really big sticking point or do you think 347 00:18:09,000 --> 00:18:10,920 Speaker 4: it all just boils down to wages at this point. 348 00:18:11,840 --> 00:18:13,800 Speaker 8: I think a lot of it boils down to wages. 349 00:18:14,160 --> 00:18:16,600 Speaker 8: You know, we have heard that the union wants the 350 00:18:16,640 --> 00:18:20,600 Speaker 8: pension back. I just can't believe they realistically thinking they're 351 00:18:20,640 --> 00:18:24,040 Speaker 8: getting the pension back. But so I gotta believe they're 352 00:18:24,040 --> 00:18:26,439 Speaker 8: looking for a sweetener on the four to one k, 353 00:18:27,480 --> 00:18:30,840 Speaker 8: you know, some sort of added incentive there. And then 354 00:18:30,840 --> 00:18:33,000 Speaker 8: the airplane. I haven't heard a lot of noise about 355 00:18:33,480 --> 00:18:37,280 Speaker 8: negotiation about the next airplane. Again, if I were the union, 356 00:18:37,760 --> 00:18:40,480 Speaker 8: especially if I was a union leadership, the machinist leadership, 357 00:18:40,840 --> 00:18:44,080 Speaker 8: I would want the next Boeing seven thirty seven successor 358 00:18:44,560 --> 00:18:47,840 Speaker 8: built in the Pacific Northwest in plants that machinists are 359 00:18:47,920 --> 00:18:50,879 Speaker 8: working at because that's the life bullet of your union, 360 00:18:51,040 --> 00:18:52,600 Speaker 8: right and that's the life butt. 361 00:18:52,400 --> 00:18:55,920 Speaker 3: Of Boeing our thanks to George Ferguson, Bloomberg Intelligence Senior Aerospace, 362 00:18:56,040 --> 00:18:57,399 Speaker 3: Defense and Airlines analysts. 363 00:18:57,560 --> 00:18:59,840 Speaker 4: Each week we look at research from Bloomberg and e 364 00:19:00,119 --> 00:19:02,800 Speaker 4: F previously known as Bloomberg New Energy Finance. They're the 365 00:19:02,840 --> 00:19:05,760 Speaker 4: team at Bloomberg that tracks and analyzes the energy transition 366 00:19:05,880 --> 00:19:09,919 Speaker 4: from commodities to power, transport, industries, buildings, and the ag sector. 367 00:19:10,200 --> 00:19:12,600 Speaker 3: This se IF, we took a look at sustainable aviation 368 00:19:12,760 --> 00:19:15,880 Speaker 3: fuel from where we were joined by Anna Davies BNEF, 369 00:19:15,960 --> 00:19:17,280 Speaker 3: head of Renewables Fuels. 370 00:19:17,600 --> 00:19:20,440 Speaker 4: We first asked Anna to explain what sustainable aviation fuel 371 00:19:20,640 --> 00:19:22,040 Speaker 4: is and how it's being used. 372 00:19:22,320 --> 00:19:25,320 Speaker 1: What is sustainable aviation fuel? You use it exactly like that. 373 00:19:25,359 --> 00:19:27,160 Speaker 1: You can throw it in your private jet and go 374 00:19:27,520 --> 00:19:30,000 Speaker 1: and it'll work just the same way. Really, it is, 375 00:19:30,680 --> 00:19:34,200 Speaker 1: in its simplest form, molecularly, pretty much identical to fossil 376 00:19:34,240 --> 00:19:36,080 Speaker 1: jet fuel. The only difference is it doesn't come from 377 00:19:36,119 --> 00:19:40,040 Speaker 1: fossil fuels, so mostly it comes at the moment from biofuels. 378 00:19:40,240 --> 00:19:44,119 Speaker 1: So instead of having a crude oil, you're using a biooil, 379 00:19:44,160 --> 00:19:46,560 Speaker 1: so something like soybean oil or use cooking oil, the 380 00:19:46,640 --> 00:19:49,240 Speaker 1: leftover oils from your deep fryer. 381 00:19:49,359 --> 00:19:52,600 Speaker 4: Which would be the issue now, supply or demand when 382 00:19:52,600 --> 00:19:53,919 Speaker 4: it comes to saff that is. 383 00:19:53,920 --> 00:19:56,160 Speaker 1: A very good question, because everybody says we need more, 384 00:19:56,160 --> 00:19:58,600 Speaker 1: there's not enough produced. There's all this demand that we 385 00:19:58,720 --> 00:19:59,040 Speaker 1: need to. 386 00:19:58,960 --> 00:19:59,920 Speaker 6: Replace fossil jet. 387 00:20:00,200 --> 00:20:02,719 Speaker 1: But we have seen both suppliers and actually airlines kind 388 00:20:02,760 --> 00:20:06,639 Speaker 1: of push back roll back their targets right now. The 389 00:20:06,680 --> 00:20:09,560 Speaker 1: problem is it's expensive and nobody is really willing to 390 00:20:09,600 --> 00:20:12,359 Speaker 1: pay it, So we see buyers not quite willing or 391 00:20:12,359 --> 00:20:14,240 Speaker 1: able to step in to take it, and as a result, 392 00:20:14,240 --> 00:20:16,880 Speaker 1: we don't see suppliers able to secure financing to build 393 00:20:16,880 --> 00:20:17,520 Speaker 1: their facilities. 394 00:20:17,520 --> 00:20:19,840 Speaker 3: So how do That's a Chicken and Yan type type 395 00:20:19,840 --> 00:20:22,520 Speaker 3: of thing. How do you think you solve for that? 396 00:20:22,640 --> 00:20:24,840 Speaker 3: Is that bringing the cost of production down? Is it 397 00:20:24,880 --> 00:20:26,280 Speaker 3: trying to stimulate demand somehow? 398 00:20:26,480 --> 00:20:29,200 Speaker 1: So we anticipate the cost of production at p nof, 399 00:20:29,240 --> 00:20:33,360 Speaker 1: We try and calculate and marsh exactly, and we do 400 00:20:33,359 --> 00:20:35,560 Speaker 1: not see the cost coming down to reach parity. Really 401 00:20:35,720 --> 00:20:37,560 Speaker 1: like current jet fuel prices, it's always going to be 402 00:20:37,680 --> 00:20:41,200 Speaker 1: orders a couple orders a magnitude above so the real 403 00:20:41,359 --> 00:20:43,919 Speaker 1: crux that's needed is policy. You need to have a 404 00:20:43,920 --> 00:20:47,560 Speaker 1: policy push to either incentivize its uptake or force it, 405 00:20:47,600 --> 00:20:49,800 Speaker 1: and we're seeing both of those policies developing. 406 00:20:49,400 --> 00:20:52,200 Speaker 4: Which basically what that means is that have to subsidize 407 00:20:52,200 --> 00:20:54,919 Speaker 4: the difference between staff and regular jet fuel. And what 408 00:20:54,960 --> 00:20:57,840 Speaker 4: the IRA did it was really helpful and incentivizing the supply, 409 00:20:57,960 --> 00:21:00,879 Speaker 4: but not the demand side of it. How close do 410 00:21:00,920 --> 00:21:02,080 Speaker 4: you think that is right now? 411 00:21:02,440 --> 00:21:05,520 Speaker 1: So the IRA, the Inflation Reduction Act, does offer a 412 00:21:05,600 --> 00:21:08,920 Speaker 1: tax credit for sustainable aviation fuel production, which does help 413 00:21:08,960 --> 00:21:11,239 Speaker 1: to project app there's still a lot of uncertainty as 414 00:21:11,320 --> 00:21:13,840 Speaker 1: to what will qualify. You need to have a certain 415 00:21:13,840 --> 00:21:16,479 Speaker 1: amount of types of feedstock in order to bring your 416 00:21:16,520 --> 00:21:17,920 Speaker 1: actual emissions reduction down. 417 00:21:18,000 --> 00:21:19,360 Speaker 6: That's a big issue in the market. 418 00:21:20,119 --> 00:21:21,760 Speaker 1: It also is not only in place for a couple 419 00:21:21,800 --> 00:21:23,840 Speaker 1: of years, which isn't going to help finance a thirty 420 00:21:23,920 --> 00:21:27,320 Speaker 1: year facility. You see places like Europe taking the opposite 421 00:21:27,320 --> 00:21:30,040 Speaker 1: approach where they're just mandating blending in so they're saying 422 00:21:30,080 --> 00:21:33,720 Speaker 1: airlines and airports have to blend a certain amount and 423 00:21:33,840 --> 00:21:35,520 Speaker 1: that's going to ramp up of the next few years. 424 00:21:35,520 --> 00:21:37,160 Speaker 6: Sort it out, figure out the cost. 425 00:21:37,240 --> 00:21:39,760 Speaker 1: And then you see places like Singapore which is actually 426 00:21:39,840 --> 00:21:43,760 Speaker 1: imposing a levee on airline tickets and saying, Okay, we 427 00:21:43,760 --> 00:21:45,400 Speaker 1: think staff is going to cost this much in order 428 00:21:45,400 --> 00:21:47,400 Speaker 1: to blend in we have blending targets. We're just going 429 00:21:47,440 --> 00:21:51,560 Speaker 1: to put an additional cost on airline tickets. 430 00:21:51,200 --> 00:21:53,439 Speaker 6: In order to cover the cost of staff. I mean, 431 00:21:53,600 --> 00:21:54,920 Speaker 6: see what works in theory? 432 00:21:54,960 --> 00:21:57,239 Speaker 4: That makes sense, right, Like you just pass it down 433 00:21:57,280 --> 00:21:58,920 Speaker 4: to the consumer. But it does point out that any 434 00:21:58,920 --> 00:22:01,920 Speaker 4: anyergy transition that you can do will eventually be then 435 00:22:01,960 --> 00:22:03,320 Speaker 4: passed on to the consumer. 436 00:22:03,040 --> 00:22:04,040 Speaker 6: Consumer, tax payer. 437 00:22:04,160 --> 00:22:04,360 Speaker 7: Yeah. 438 00:22:04,400 --> 00:22:07,520 Speaker 3: Probably interesting. So what the US airlines are here? I'm 439 00:22:07,560 --> 00:22:09,680 Speaker 3: just reading some of your research here. So BNF tracks 440 00:22:09,720 --> 00:22:13,479 Speaker 3: airline net zero commitments and sustainable aviation fuel commitments, and 441 00:22:13,520 --> 00:22:16,119 Speaker 3: currently forty four airlines counting for just under half of 442 00:22:16,200 --> 00:22:19,760 Speaker 3: jet fuel consum globally have some saf target usually ten 443 00:22:19,760 --> 00:22:22,600 Speaker 3: percent by twenty thirty. Is that good enough? 444 00:22:23,200 --> 00:22:25,600 Speaker 6: Well, it's a target, So the question is will they 445 00:22:25,640 --> 00:22:26,240 Speaker 6: hit those target? 446 00:22:26,520 --> 00:22:26,960 Speaker 7: Is it real? 447 00:22:27,359 --> 00:22:28,040 Speaker 6: Can they do that? 448 00:22:28,080 --> 00:22:30,719 Speaker 1: And that's where we are starting to see some airlines 449 00:22:31,000 --> 00:22:34,080 Speaker 1: procure staff volumes, like United procures a lot if you 450 00:22:34,160 --> 00:22:36,679 Speaker 1: fly out if you fly on say United out of 451 00:22:36,680 --> 00:22:38,160 Speaker 1: San Francisco or La Chances. 452 00:22:37,960 --> 00:22:39,360 Speaker 6: Are there some staff in the tank. 453 00:22:39,440 --> 00:22:40,040 Speaker 3: Can they blended? 454 00:22:40,400 --> 00:22:41,520 Speaker 6: They can blend it one for one. 455 00:22:41,600 --> 00:22:44,160 Speaker 1: That's one of the beautiful things about sustainable aviation fuel. 456 00:22:44,240 --> 00:22:47,359 Speaker 4: Well, only that you can just like easy replacement, you 457 00:22:47,359 --> 00:22:49,359 Speaker 4: can take the jet fuel allowed and put it back 458 00:22:49,400 --> 00:22:51,320 Speaker 4: in versus if you did a hydrogen plane or some 459 00:22:51,359 --> 00:22:52,119 Speaker 4: other kind of plane. 460 00:22:52,240 --> 00:22:54,480 Speaker 1: Yeah, so you don't need new tanks or new aircrafts. 461 00:22:54,960 --> 00:22:57,080 Speaker 1: You can blend it up to fifty percent currently is 462 00:22:57,119 --> 00:22:58,760 Speaker 1: the regulatory system. 463 00:22:59,240 --> 00:23:00,359 Speaker 6: It is currently. 464 00:23:00,080 --> 00:23:02,760 Speaker 1: Produced in very small quantities. So right now, less than 465 00:23:02,800 --> 00:23:05,240 Speaker 1: one percent of all jet fuel a sustainable aviation fuel, 466 00:23:05,280 --> 00:23:08,000 Speaker 1: so we're talking very small volumes. It's produced a lot 467 00:23:08,040 --> 00:23:10,280 Speaker 1: of oil and gas companies and refiners are in on 468 00:23:10,280 --> 00:23:13,240 Speaker 1: this space. So next see there's a company called World 469 00:23:13,320 --> 00:23:15,760 Speaker 1: Energy and one called Montana Renewables that are producing at 470 00:23:15,760 --> 00:23:19,320 Speaker 1: the moment we're seeing P sixty six and Valero through 471 00:23:19,320 --> 00:23:21,240 Speaker 1: their partnerships with Darling Ingredients. 472 00:23:20,920 --> 00:23:22,320 Speaker 4: To those are regular refiners. 473 00:23:22,359 --> 00:23:24,160 Speaker 3: So does who does jet fuel today? 474 00:23:24,720 --> 00:23:26,159 Speaker 1: A lot of the refinery, So if you think of 475 00:23:26,200 --> 00:23:27,800 Speaker 1: a refinery, go talk to the refinery. 476 00:23:27,840 --> 00:23:29,160 Speaker 3: So you guys need to put out more. 477 00:23:29,040 --> 00:23:30,600 Speaker 1: And a lot of them are looking at it because 478 00:23:30,880 --> 00:23:32,679 Speaker 1: a lot of the process at the moment is similar. 479 00:23:32,760 --> 00:23:34,919 Speaker 1: You basically, instead of taking a crude oil, you take 480 00:23:34,920 --> 00:23:37,640 Speaker 1: a biooil, you put it through a refinery and get 481 00:23:38,000 --> 00:23:40,920 Speaker 1: sustainable aviation fuel. So you can actually convert some existing 482 00:23:41,000 --> 00:23:45,720 Speaker 1: oil refineries to take biofeedstocks and therefore make these biofuels. 483 00:23:46,119 --> 00:23:47,200 Speaker 6: So we are seeing them active. 484 00:23:47,320 --> 00:23:51,119 Speaker 4: What about the okay, so a different question, how do 485 00:23:51,160 --> 00:23:54,920 Speaker 4: you think this industry develops and where does the strength develop? 486 00:23:55,520 --> 00:23:57,399 Speaker 1: So a lot of this is policy led. We are 487 00:23:57,400 --> 00:24:00,600 Speaker 1: starting to see a lot of policies support it though, because. 488 00:24:00,200 --> 00:24:01,399 Speaker 6: Aviation is one of the crucks. 489 00:24:01,440 --> 00:24:05,240 Speaker 1: You can make these types of sustainable fuels into a 490 00:24:05,240 --> 00:24:07,280 Speaker 1: whole lot of things. You can make diesel molecules, you 491 00:24:07,320 --> 00:24:11,240 Speaker 1: can make methanol molecules, petrochemicals. But aviation is the industry 492 00:24:11,240 --> 00:24:13,719 Speaker 1: where there aren't any really good alternatives, especially if you're 493 00:24:13,760 --> 00:24:16,879 Speaker 1: looking at like a twenty fifty SAP or net zero target, 494 00:24:17,000 --> 00:24:20,680 Speaker 1: because hydrogen aircraft, electric aircraft, it takes decades to get 495 00:24:20,680 --> 00:24:22,439 Speaker 1: those off the ground. It takes decades for fleets to 496 00:24:22,480 --> 00:24:24,840 Speaker 1: roll over. So if you really want to decarbonize aviation 497 00:24:25,240 --> 00:24:28,000 Speaker 1: by twenty fifty, you're going to need to decarbonize the 498 00:24:28,040 --> 00:24:30,480 Speaker 1: fuel that they're currently using. So this is the area 499 00:24:30,520 --> 00:24:32,360 Speaker 1: where we're seeing a lot of policies start to move. 500 00:24:32,400 --> 00:24:34,560 Speaker 1: I've mentioned a few of them. We're starting to see 501 00:24:34,560 --> 00:24:36,879 Speaker 1: some interest from different producers. We're starting to see a 502 00:24:36,920 --> 00:24:40,000 Speaker 1: lot of investment going into this because everybody assumes. 503 00:24:39,640 --> 00:24:40,640 Speaker 6: The market will get there. 504 00:24:40,760 --> 00:24:43,679 Speaker 1: So, for instance, there's a different way of producing it 505 00:24:43,680 --> 00:24:46,720 Speaker 1: where you take green hydrogen and captured carbon dioxide to 506 00:24:46,720 --> 00:24:49,080 Speaker 1: make the fuel. That's popular because you don't have the 507 00:24:49,640 --> 00:24:53,240 Speaker 1: food verus fuel issues of a biofuel. Just earlier this 508 00:24:53,280 --> 00:24:56,040 Speaker 1: month we saw Brookfield invest over a billion dollars into 509 00:24:56,040 --> 00:24:57,640 Speaker 1: one of these e fuel facilities. 510 00:24:58,400 --> 00:25:00,680 Speaker 3: I need to go check out when these worthies are. 511 00:25:00,720 --> 00:25:03,680 Speaker 3: They just like in Texas and Louisiana. World They California, California. 512 00:25:03,760 --> 00:25:05,359 Speaker 1: A lot of the fuel is sold in California and 513 00:25:05,400 --> 00:25:07,560 Speaker 1: a lot of the old refineries are being converted there, 514 00:25:07,560 --> 00:25:10,360 Speaker 1: but they are being produced everywhere. It depends on where 515 00:25:10,359 --> 00:25:12,600 Speaker 1: the feedstock is, so you can see a lot of 516 00:25:12,640 --> 00:25:14,680 Speaker 1: feedstock in the Midwest, a lot of the productions coming 517 00:25:14,760 --> 00:25:17,560 Speaker 1: out there. We're starting to see e fuels which are 518 00:25:17,640 --> 00:25:20,920 Speaker 1: take green hydrogen. They need to be near cheap renewable energy, 519 00:25:20,960 --> 00:25:23,760 Speaker 1: and so you'll see a lot of these fuels. 520 00:25:23,960 --> 00:25:27,040 Speaker 3: As efficient as carbon the regular fuel, because I don't 521 00:25:27,040 --> 00:25:28,600 Speaker 3: want to be thirty five thousand feet in the air 522 00:25:28,600 --> 00:25:30,280 Speaker 3: and then engine as reliable. 523 00:25:30,880 --> 00:25:35,399 Speaker 1: Yeah, thank you, Yes, it produces jet aspec fuel. There 524 00:25:35,440 --> 00:25:37,520 Speaker 1: are questions if you had one hundred percent staff in 525 00:25:37,560 --> 00:25:40,520 Speaker 1: your tank. Actually a lot of the fossil jet fuels 526 00:25:40,560 --> 00:25:42,640 Speaker 1: have some aromatics that end up in the jet fuel 527 00:25:42,640 --> 00:25:44,679 Speaker 1: stream and that actually helps with seals in the engines. 528 00:25:44,720 --> 00:25:47,480 Speaker 1: So they're testing that out, but nobody we don't have 529 00:25:47,520 --> 00:25:49,560 Speaker 1: the quantities produced that you're anywhere near one hundred percent 530 00:25:49,720 --> 00:25:51,480 Speaker 1: these days, and in general you could think of it 531 00:25:51,480 --> 00:25:53,200 Speaker 1: as exactly the same as jet fuel. 532 00:25:53,600 --> 00:25:55,879 Speaker 3: Our thanks to Anna Davies, b n EF, head of 533 00:25:55,920 --> 00:25:56,960 Speaker 3: Renewables Fuels. 534 00:25:57,160 --> 00:25:59,640 Speaker 4: Coming up, we look at Bloomberg Intelligence's list of ten 535 00:26:00,080 --> 00:26:01,520 Speaker 4: needs to watch in the fourth quarter. 536 00:26:01,720 --> 00:26:04,520 Speaker 3: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 537 00:26:04,600 --> 00:26:06,720 Speaker 3: depth research and data on two thousand companies and one 538 00:26:06,800 --> 00:26:10,120 Speaker 3: hundred and thirty industries. Can access Bloomberg Intelligence via Bigo 539 00:26:10,200 --> 00:26:10,720 Speaker 3: on the terminal. 540 00:26:10,760 --> 00:26:13,679 Speaker 4: Now, Paul Sweeney and am Alex Steel, and this is Bloomberg. 541 00:26:18,960 --> 00:26:22,879 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 542 00:26:22,960 --> 00:26:26,480 Speaker 2: weekdays at ten am Eastern on applecar Play and Android 543 00:26:26,480 --> 00:26:29,280 Speaker 2: Auto with the Bloomberg Business app. You can also listen 544 00:26:29,400 --> 00:26:32,480 Speaker 2: live on Amazon Alexa from our flagship New York station, 545 00:26:32,840 --> 00:26:36,560 Speaker 2: Just say Alexa Play Bloomberg eleven thirty. 546 00:26:37,000 --> 00:26:39,640 Speaker 4: Back in January, Bloomberg Intelligence came up with a list 547 00:26:39,640 --> 00:26:42,000 Speaker 4: of fifty companies to watch in twenty twenty four, and 548 00:26:42,040 --> 00:26:44,040 Speaker 4: now they're back with a list of ten companies to 549 00:26:44,080 --> 00:26:45,879 Speaker 4: watch specifically in the fourth quarter. 550 00:26:46,160 --> 00:26:48,680 Speaker 3: This is based on scenarios from our bi analysts who 551 00:26:48,680 --> 00:26:51,640 Speaker 3: sorted through the barrel to find the good apples across 552 00:26:51,640 --> 00:26:52,680 Speaker 3: sectors and regions. 553 00:26:52,800 --> 00:26:54,720 Speaker 4: For more. We are joined by Tim Craig, head, Bloomberg 554 00:26:54,760 --> 00:26:56,760 Speaker 4: Intelligence Global Chief Content Officer. 555 00:26:57,080 --> 00:26:59,480 Speaker 3: We first asked Tim to talk about the companies on 556 00:26:59,560 --> 00:27:00,240 Speaker 3: the list. 557 00:27:00,440 --> 00:27:02,960 Speaker 9: Just to put context. This list of ten are all 558 00:27:03,000 --> 00:27:06,399 Speaker 9: focus ideas of ours, so companies where we have a 559 00:27:06,440 --> 00:27:08,840 Speaker 9: high conviction view that we think is different from what 560 00:27:08,880 --> 00:27:12,679 Speaker 9: the market thinks, and there's catalyst ahead. True Leave is 561 00:27:13,080 --> 00:27:17,840 Speaker 9: a marijuana grower and a distributor. They have stores. Seventy 562 00:27:17,840 --> 00:27:21,560 Speaker 9: percent of their stores are in Florida, and Florida has 563 00:27:21,720 --> 00:27:25,600 Speaker 9: on the referendum this November, the potential for legalization for 564 00:27:25,680 --> 00:27:28,520 Speaker 9: recreational use. It would be a big deal for truely 565 00:27:28,640 --> 00:27:29,680 Speaker 9: that this were to come through. 566 00:27:30,359 --> 00:27:32,280 Speaker 3: Yeah, maybe Florida a huge market. And you know what 567 00:27:32,320 --> 00:27:34,400 Speaker 3: I recognize when we went over to Hireland, Coupic Sco. 568 00:27:34,760 --> 00:27:36,720 Speaker 3: They don't do the gummy thing over there. They don't 569 00:27:36,760 --> 00:27:39,159 Speaker 3: have the weed thing They're gonna get on board there. 570 00:27:39,200 --> 00:27:40,080 Speaker 6: They just got answer down. 571 00:27:40,119 --> 00:27:41,280 Speaker 4: Maybe that's what they don't. 572 00:27:41,119 --> 00:27:43,760 Speaker 9: Really need to I'll on that they just go to 573 00:27:43,840 --> 00:27:45,359 Speaker 9: New York and then they come back to. 574 00:27:45,680 --> 00:27:48,960 Speaker 3: Exact Ireland exactly. Anti Sports talk to us about that 575 00:27:49,000 --> 00:27:51,160 Speaker 3: because I feel like I know they're an Asian company, 576 00:27:51,200 --> 00:27:54,240 Speaker 3: so I'm assuming this has a China call to it. 577 00:27:54,240 --> 00:27:58,040 Speaker 9: It does with an interesting twist. Anta is a is 578 00:27:58,040 --> 00:28:01,199 Speaker 9: a sportswear company. They have a number of brands. I 579 00:28:01,200 --> 00:28:03,800 Speaker 9: think when I've been on your show before, you may 580 00:28:03,840 --> 00:28:08,399 Speaker 9: have seen that I've had an Arctics best one. 581 00:28:08,880 --> 00:28:13,280 Speaker 3: Is like an extreme biker, climber hiker. All the stuff 582 00:28:13,280 --> 00:28:13,560 Speaker 3: that I. 583 00:28:13,520 --> 00:28:16,320 Speaker 6: Just have good for you. I got nothing on that. 584 00:28:16,359 --> 00:28:20,760 Speaker 9: But no Arctics is owned by Anta. But the reason 585 00:28:20,760 --> 00:28:23,360 Speaker 9: why Anta is on here is twofold number one. Do 586 00:28:23,560 --> 00:28:25,360 Speaker 9: have a lot of things going on from the standpoint 587 00:28:25,359 --> 00:28:28,919 Speaker 9: of driving their business with various brands and the Olympics 588 00:28:29,359 --> 00:28:33,920 Speaker 9: playthrough will get results when they report next in terms 589 00:28:33,960 --> 00:28:36,800 Speaker 9: of how good it's been the China national team or 590 00:28:37,000 --> 00:28:41,480 Speaker 9: anti sports kit. But it's also the case you've seen 591 00:28:41,560 --> 00:28:45,560 Speaker 9: lots of news about Adidas and Nike and how they're 592 00:28:45,560 --> 00:28:49,840 Speaker 9: trying to get their inventory under control. That's making pricing 593 00:28:50,000 --> 00:28:53,080 Speaker 9: better for sports where generally, and we think that that's 594 00:28:53,120 --> 00:28:57,480 Speaker 9: playing through into anti sports margins as a corollary. 595 00:28:57,760 --> 00:29:00,400 Speaker 4: That's interesting when you compare it to like sing I 596 00:29:00,440 --> 00:29:03,480 Speaker 4: understand that they do different things, but still you've also 597 00:29:04,080 --> 00:29:07,440 Speaker 4: on here. So this is basically straight up railroad stock. 598 00:29:08,000 --> 00:29:09,040 Speaker 4: Why do you guys like this one? 599 00:29:09,880 --> 00:29:12,320 Speaker 9: Well, there's two things here. If you were to look 600 00:29:12,400 --> 00:29:15,800 Speaker 9: at a three year, five year type chart, you would 601 00:29:15,840 --> 00:29:20,200 Speaker 9: see that this company has gone through some problems. They 602 00:29:20,200 --> 00:29:23,800 Speaker 9: had a big right off and problem that was announced 603 00:29:23,800 --> 00:29:27,480 Speaker 9: a year or so ago. Stock had collapsed, that's been 604 00:29:27,640 --> 00:29:30,640 Speaker 9: settled and they're on the right track. No pun intended 605 00:29:31,320 --> 00:29:35,760 Speaker 9: at this point. But importantly, there is a new European 606 00:29:36,200 --> 00:29:40,840 Speaker 9: union wide signaling system that's coming into place that is 607 00:29:41,640 --> 00:29:45,520 Speaker 9: meant to be reducing a lot of complication between different 608 00:29:45,520 --> 00:29:48,560 Speaker 9: countries and whatnot, and it's an Alstom system and in 609 00:29:48,600 --> 00:29:52,120 Speaker 9: general the train businesses is running pretty well. We think 610 00:29:52,120 --> 00:29:53,480 Speaker 9: they're on a road for recovery. 611 00:29:53,800 --> 00:29:56,080 Speaker 3: One of the bigger market cap names on your list 612 00:29:56,280 --> 00:29:59,760 Speaker 3: is Saudi National Bank, and I'll start with I know 613 00:30:00,080 --> 00:30:02,600 Speaker 3: nothing about Saudi National Bank, but it's fifty seven billion 614 00:30:02,640 --> 00:30:04,080 Speaker 3: market cap. What's the story there? 615 00:30:05,000 --> 00:30:07,680 Speaker 9: Yeah, you know, it's really interesting. And this is true 616 00:30:07,680 --> 00:30:10,680 Speaker 9: for Saudi National Bank. It's also true for some others 617 00:30:11,000 --> 00:30:16,200 Speaker 9: in the country. It's running contra to what most banks 618 00:30:16,320 --> 00:30:19,840 Speaker 9: are experiencing. I think there's been lots of news and 619 00:30:19,880 --> 00:30:23,080 Speaker 9: coverage and certainly we've written about the pressure coming ahead 620 00:30:23,160 --> 00:30:28,120 Speaker 9: for most banks with their net interest margins. As interest 621 00:30:28,200 --> 00:30:32,520 Speaker 9: rates start to decline, you know, their loan pricing comes down, 622 00:30:32,600 --> 00:30:36,160 Speaker 9: and you know that's not great for margins. Saudi National 623 00:30:36,200 --> 00:30:39,400 Speaker 9: Bank isn't is an interesting case. We're given the nature 624 00:30:39,480 --> 00:30:44,200 Speaker 9: of how their loans reprice versus their deposits repricing. They 625 00:30:44,200 --> 00:30:46,880 Speaker 9: actually stand to see over the course of the next 626 00:30:46,880 --> 00:30:51,080 Speaker 9: six to twelve months, then interest margin growth and expansion, 627 00:30:51,440 --> 00:30:55,520 Speaker 9: and so it's running counter given just simply the nature 628 00:30:55,560 --> 00:30:59,720 Speaker 9: of their asset and liability mix to normal bank profitability 629 00:30:59,720 --> 00:31:01,480 Speaker 9: in the aren't cycle we're in. So it's a really 630 00:31:01,560 --> 00:31:02,560 Speaker 9: unusual story. 631 00:31:03,120 --> 00:31:05,000 Speaker 4: Okay, we got like a minute, can you do for 632 00:31:05,200 --> 00:31:08,720 Speaker 4: solar for me? Because that's for me, that's a TVD 633 00:31:08,800 --> 00:31:11,400 Speaker 4: based on what happens with the Inflation Reduction Act here 634 00:31:11,400 --> 00:31:12,520 Speaker 4: in the US, But you tell. 635 00:31:12,360 --> 00:31:16,680 Speaker 9: Me it absolutely is. I mean, we all know that 636 00:31:17,040 --> 00:31:19,800 Speaker 9: the election coming up is going to have a lot 637 00:31:19,800 --> 00:31:24,600 Speaker 9: of implications for what happens from energy transition related spending 638 00:31:25,000 --> 00:31:28,600 Speaker 9: and whatnot. That said, we're still going to see solar 639 00:31:28,720 --> 00:31:33,840 Speaker 9: panels as a renewable energy source continued to grow. These 640 00:31:33,880 --> 00:31:37,600 Speaker 9: guys are in the catbird seat, so to speak, from 641 00:31:37,600 --> 00:31:40,600 Speaker 9: the standpoint of they have a dominant position in the US. 642 00:31:40,680 --> 00:31:44,120 Speaker 9: They've got good technology. Even though the Chinese producers are 643 00:31:44,160 --> 00:31:48,120 Speaker 9: bigger and lower cost with arguably better technology, there's way 644 00:31:48,160 --> 00:31:51,600 Speaker 9: too many restrictions for China product to come into the States, 645 00:31:52,040 --> 00:31:55,200 Speaker 9: and so for solar is not you wouldn't say it's 646 00:31:55,200 --> 00:31:58,480 Speaker 9: in a monopoly position, but it's a very advantaged position. 647 00:31:58,640 --> 00:32:02,320 Speaker 9: And almost regardless of what happens with the IRA, we 648 00:32:02,400 --> 00:32:04,240 Speaker 9: think that they've got wind that they're back for better 649 00:32:04,320 --> 00:32:05,360 Speaker 9: order growth going ahead. 650 00:32:05,560 --> 00:32:08,120 Speaker 4: All right, thanks to Tim craig Head, Bloomberg Intelligence Research 651 00:32:08,120 --> 00:32:09,760 Speaker 4: of Global Chief Content Officer. 652 00:32:10,080 --> 00:32:13,080 Speaker 3: We moved next to news on Honeywell International. This week, 653 00:32:13,120 --> 00:32:15,280 Speaker 3: we heard that Honeywell plans to spin off its advanced 654 00:32:15,360 --> 00:32:16,200 Speaker 3: materials division. 655 00:32:16,440 --> 00:32:19,080 Speaker 4: It's the latest move by the industrial conglomerate to reshape 656 00:32:19,120 --> 00:32:21,280 Speaker 4: its portfolio, and this comes as there have been calls 657 00:32:21,280 --> 00:32:23,440 Speaker 4: for the company to spin off or trium it's holdings 658 00:32:23,600 --> 00:32:23,920 Speaker 4: for more. 659 00:32:23,960 --> 00:32:27,480 Speaker 3: We were joined by Karen Uberlhart, Bloomberg Intelligence Senior industrials Analysts. 660 00:32:27,520 --> 00:32:29,800 Speaker 4: We first asked Karen if this potential spinoff is a 661 00:32:29,800 --> 00:32:31,240 Speaker 4: big enough catalyst for Honeywell. 662 00:32:31,640 --> 00:32:33,160 Speaker 10: It's big enough to count. 663 00:32:33,480 --> 00:32:37,080 Speaker 11: I don't think it's big enough to settle the question 664 00:32:37,160 --> 00:32:38,800 Speaker 11: of should they have more focus. 665 00:32:39,280 --> 00:32:41,280 Speaker 10: They've tried on the M and A side, which. 666 00:32:41,120 --> 00:32:44,520 Speaker 11: They were criticized for not doing any deals despite sitting 667 00:32:44,520 --> 00:32:46,280 Speaker 11: on ten to twelve billion dollars in cash for a 668 00:32:46,360 --> 00:32:49,320 Speaker 11: very long time. They've done four deals under the new CEO, 669 00:32:49,480 --> 00:32:53,080 Speaker 11: one of them rather large. It's not moving the needle 670 00:32:53,520 --> 00:32:56,520 Speaker 11: because acquisitions take time to tell you if they're successful 671 00:32:56,600 --> 00:32:58,760 Speaker 11: or not right. But they haven't done anything on the 672 00:32:59,040 --> 00:33:02,360 Speaker 11: divestitor side since twenty sixteen, when they did the two spinoffs, 673 00:33:03,200 --> 00:33:06,200 Speaker 11: so they were looking to do something. I thought they'd 674 00:33:06,200 --> 00:33:08,719 Speaker 11: do something, but it had to be big. Is this 675 00:33:08,720 --> 00:33:09,240 Speaker 11: big enough? 676 00:33:09,280 --> 00:33:09,360 Speaker 9: No? 677 00:33:09,600 --> 00:33:12,640 Speaker 11: But he did signal at a conference recently that if 678 00:33:12,680 --> 00:33:14,760 Speaker 11: they didn't do something material by the end of this year, 679 00:33:14,760 --> 00:33:17,520 Speaker 11: he'd be disappointed, so we knew something was coming. I 680 00:33:17,560 --> 00:33:18,680 Speaker 11: don't know if this is enough. 681 00:33:19,200 --> 00:33:21,840 Speaker 3: So, I mean, Alex, no one on Global Wall Street 682 00:33:21,840 --> 00:33:25,640 Speaker 3: has more experience with divestitures than Karen Haart. She's been 683 00:33:26,320 --> 00:33:28,720 Speaker 3: covering these industrial companies for decades and they're always buying 684 00:33:28,760 --> 00:33:32,520 Speaker 3: something or selling something. And the best example is Ge. 685 00:33:32,560 --> 00:33:34,560 Speaker 3: And it seems like Ge has gotten to a spot 686 00:33:34,600 --> 00:33:38,120 Speaker 3: where the market likes where they are and how they're positioned. 687 00:33:38,360 --> 00:33:41,440 Speaker 3: Is Honeywell, Karen trying to do something like Ge. 688 00:33:41,640 --> 00:33:44,200 Speaker 4: To be fair, g you took a real long degeneration. 689 00:33:45,080 --> 00:33:48,160 Speaker 11: I said, yeah, I said, don't bet against Larry. 690 00:33:48,200 --> 00:33:50,080 Speaker 10: But it took a very long time for it to work. 691 00:33:50,840 --> 00:33:53,760 Speaker 3: So I don't think so it's Honeywell in the same 692 00:33:53,840 --> 00:33:55,000 Speaker 3: kind of strategy. 693 00:33:55,160 --> 00:33:57,480 Speaker 10: You know, they have very good businesses. 694 00:33:57,560 --> 00:33:59,959 Speaker 11: They were never in the trouble that Ge was in, 695 00:34:00,040 --> 00:34:03,200 Speaker 11: and you know, and they're one of the more most 696 00:34:03,200 --> 00:34:05,880 Speaker 11: profitable companies in the group. The problem is there's a 697 00:34:05,920 --> 00:34:08,040 Speaker 11: lack of catalyst number one and number two. As we know, 698 00:34:08,120 --> 00:34:10,640 Speaker 11: these things go in waves and people want focus now. 699 00:34:11,000 --> 00:34:13,239 Speaker 11: You know, I've said over the cycles, they break them 700 00:34:13,280 --> 00:34:15,040 Speaker 11: all up, they put them back together, they break them 701 00:34:15,040 --> 00:34:17,279 Speaker 11: all up. We're in the break them all up now 702 00:34:17,440 --> 00:34:19,919 Speaker 11: And a lot of the companies have really paired down, 703 00:34:20,000 --> 00:34:22,000 Speaker 11: like the ah VAT companies for example. 704 00:34:22,480 --> 00:34:24,560 Speaker 10: So people want something big. 705 00:34:25,040 --> 00:34:27,200 Speaker 11: And the other point I'd say is they have you know, 706 00:34:27,320 --> 00:34:30,600 Speaker 11: mediocre organic growth for a while now, but they always 707 00:34:30,600 --> 00:34:32,920 Speaker 11: delivered on earnings. They missed for the first time in 708 00:34:32,960 --> 00:34:34,440 Speaker 11: the last quarter and that' stuck. 709 00:34:34,200 --> 00:34:36,839 Speaker 10: Blew up because they don't miss. So you know, it's 710 00:34:36,960 --> 00:34:39,720 Speaker 10: it's been an underperformer now on any time period. 711 00:34:39,719 --> 00:34:43,359 Speaker 11: You want to look one, three, five years and he's frustrated. 712 00:34:42,840 --> 00:34:45,920 Speaker 10: You can tell. But I think there has to be 713 00:34:45,960 --> 00:34:46,480 Speaker 10: something more. 714 00:34:46,800 --> 00:34:50,239 Speaker 4: What is honeywell now? So if I was to go 715 00:34:50,280 --> 00:34:51,279 Speaker 4: to you and be like, what did they do? 716 00:34:51,480 --> 00:34:52,320 Speaker 3: Won't be your answer. 717 00:34:53,600 --> 00:34:57,919 Speaker 11: The biggest business is aerospace, very well positioned. They're very 718 00:34:57,920 --> 00:35:01,719 Speaker 11: good business, a good long term outlook. Building automation is 719 00:35:01,760 --> 00:35:04,560 Speaker 11: a second one. It's the rest of the three are smaller, 720 00:35:05,520 --> 00:35:08,080 Speaker 11: and that's a decent business. I don't think it's a 721 00:35:08,120 --> 00:35:10,439 Speaker 11: particularly high grower, and they did a big acquisition there. 722 00:35:11,000 --> 00:35:15,040 Speaker 11: The other third big business is automation, and it's factorial 723 00:35:15,160 --> 00:35:19,640 Speaker 11: industrial automation, process automation, it's warehouse automation, which has not 724 00:35:19,719 --> 00:35:22,040 Speaker 11: worked out that well so far, and a few other 725 00:35:22,600 --> 00:35:25,240 Speaker 11: bits and pieces. And the third piece is what remains 726 00:35:25,239 --> 00:35:27,759 Speaker 11: of the chemical business, which is a catalyst business called 727 00:35:27,880 --> 00:35:30,239 Speaker 11: up So, Karen, I know. 728 00:35:30,239 --> 00:35:32,360 Speaker 3: From reading your research and talking to over the years, 729 00:35:32,600 --> 00:35:35,080 Speaker 3: you got to get the right CEO in there to 730 00:35:35,200 --> 00:35:38,960 Speaker 3: really get things done because you start big, big lumbering companies. 731 00:35:39,320 --> 00:35:41,600 Speaker 3: The CEO now, Vimal Kopor, has been in the role 732 00:35:41,640 --> 00:35:42,960 Speaker 3: for a little more than a year, but he's been 733 00:35:42,960 --> 00:35:45,800 Speaker 3: at Honeywell for a long time. What's the street feeling 734 00:35:46,280 --> 00:35:49,560 Speaker 3: about himc the guy who, like Larry Colp, can get 735 00:35:49,560 --> 00:35:50,240 Speaker 3: things done. 736 00:35:50,440 --> 00:35:55,799 Speaker 11: I think people were surprised but took the change positively 737 00:35:55,880 --> 00:35:58,239 Speaker 11: because people have been frustrated that they sat on so 738 00:35:58,360 --> 00:36:01,600 Speaker 11: much cash and probably didn't and didn't do anything with it, 739 00:36:01,640 --> 00:36:05,879 Speaker 11: and people wanted bigger changes, so he took the first 740 00:36:05,880 --> 00:36:10,680 Speaker 11: step with all the acquisitions. I think operationally, you know, 741 00:36:10,719 --> 00:36:11,280 Speaker 11: he does. 742 00:36:11,160 --> 00:36:11,840 Speaker 10: A great job. 743 00:36:12,040 --> 00:36:14,840 Speaker 11: That's been the Honeywell story I think we'll have to 744 00:36:14,840 --> 00:36:16,919 Speaker 11: wait and see what else he does in the portfolio change. 745 00:36:16,960 --> 00:36:18,879 Speaker 11: This is a decent size move, but it's only ten 746 00:36:18,920 --> 00:36:21,040 Speaker 11: percent of the company, so I'd say wait and see 747 00:36:21,080 --> 00:36:21,239 Speaker 11: on that. 748 00:36:21,760 --> 00:36:24,120 Speaker 4: When we've talked in the past, it's really been that 749 00:36:24,239 --> 00:36:27,600 Speaker 4: warehouse part of the business because it's so very, very 750 00:36:27,800 --> 00:36:31,680 Speaker 4: very early cyclical, and that's been causing a lot of 751 00:36:31,800 --> 00:36:35,640 Speaker 4: short term pain for that business. Have we hit a trough, 752 00:36:35,840 --> 00:36:38,880 Speaker 4: like is there a recovery in sight? Or to buy 753 00:36:39,600 --> 00:36:41,120 Speaker 4: the CEO some time. 754 00:36:41,560 --> 00:36:45,440 Speaker 11: It sounds like by the order pattern that things have troughed. 755 00:36:45,480 --> 00:36:48,080 Speaker 11: You know, there was an overbuilding warehouses as we know right, 756 00:36:48,160 --> 00:36:50,239 Speaker 11: and then it collapsed and they only got one or 757 00:36:50,239 --> 00:36:52,600 Speaker 11: two good years out of that deal before it collapsed. 758 00:36:52,880 --> 00:36:55,479 Speaker 10: They've structurally fixed it. The margins are not bad. 759 00:36:55,760 --> 00:36:58,960 Speaker 11: It looks like it's troughed, but I don't think we're 760 00:36:59,160 --> 00:37:02,000 Speaker 11: expecting a really big rebound. But one thing I will 761 00:37:02,000 --> 00:37:04,560 Speaker 11: say that the CEO said, you know, it's four percent 762 00:37:04,600 --> 00:37:06,719 Speaker 11: of the company now only because its trunk so much, 763 00:37:08,120 --> 00:37:09,880 Speaker 11: But it's we get spent a lot more time than 764 00:37:09,920 --> 00:37:10,920 Speaker 11: four percent of the time. 765 00:37:11,400 --> 00:37:13,560 Speaker 10: That's because it's still not fixed. It needs volume. 766 00:37:14,440 --> 00:37:16,680 Speaker 11: I thought that was when they might think about doing 767 00:37:16,719 --> 00:37:19,320 Speaker 11: something with but again, not enough to move the needle. 768 00:37:19,360 --> 00:37:21,160 Speaker 11: And I'm not sure they're convinced it doesn't have a 769 00:37:21,160 --> 00:37:24,879 Speaker 11: good long term story. We're convinced, I think in generally. 770 00:37:24,560 --> 00:37:28,000 Speaker 3: I think about the dividend here, Karen, dividend two point 771 00:37:28,000 --> 00:37:31,279 Speaker 3: two percent dividend yield. I got, you know, six seven 772 00:37:31,320 --> 00:37:34,239 Speaker 3: billion dollars for free cash flow every year. Should they 773 00:37:34,239 --> 00:37:35,520 Speaker 3: be paying more of a dividend or do you think 774 00:37:35,560 --> 00:37:37,640 Speaker 3: most industries are happy with a two point two percent 775 00:37:37,640 --> 00:37:38,200 Speaker 3: divid yield. 776 00:37:38,640 --> 00:37:39,440 Speaker 10: I think that's okay. 777 00:37:39,440 --> 00:37:42,200 Speaker 11: I think they'd rather have them use the cash in 778 00:37:42,239 --> 00:37:46,280 Speaker 11: a more active way, like either more buybacks or more deals. 779 00:37:46,480 --> 00:37:49,200 Speaker 11: So the question is will they do anything with it 780 00:37:49,239 --> 00:37:53,040 Speaker 11: when they get rid of this business, which will dilute earnings. 781 00:37:53,239 --> 00:37:55,880 Speaker 11: I think they'll probably take the route of buyback and 782 00:37:56,320 --> 00:37:58,400 Speaker 11: grow into the dividend. It's not going to be like 783 00:37:58,520 --> 00:38:00,640 Speaker 11: it was with Emerson years ago and the dividend was 784 00:38:00,680 --> 00:38:03,360 Speaker 11: way too large after they sold a third of the company. 785 00:38:03,680 --> 00:38:05,440 Speaker 11: I think they'll keep the dividend. I don't know that 786 00:38:05,440 --> 00:38:06,480 Speaker 11: they'll grow it all right. 787 00:38:06,520 --> 00:38:10,879 Speaker 4: Thanks to Karen Uberheart, Bloomberg Intelligence Senior Industries analyst, this is. 788 00:38:10,800 --> 00:38:15,600 Speaker 2: The Bloomberg Intelligence podcast, available on apples, Spotify, and anywhere 789 00:38:15,600 --> 00:38:18,920 Speaker 2: else you'll get your podcasts. Listen live each weekday, ten 790 00:38:18,960 --> 00:38:22,600 Speaker 2: am to noon Eastern on Bloomberg dot com, the iHeartRadio 791 00:38:22,680 --> 00:38:25,480 Speaker 2: app tune In, and the Bloomberg Business app. You can 792 00:38:25,520 --> 00:38:29,080 Speaker 2: also watch us live every weekday on YouTube and always 793 00:38:29,120 --> 00:38:30,280 Speaker 2: on the Bloomberg terminal