1 00:00:04,760 --> 00:00:08,080 Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox. 2 00:00:08,119 --> 00:00:11,200 Speaker 1: Along with my co host Lisa Abramowitz. Each day we 3 00:00:11,280 --> 00:00:14,480 Speaker 1: bring you the most important, noteworthy, and useful interviews for 4 00:00:14,520 --> 00:00:16,880 Speaker 1: you and your money, whether at the grocery store or 5 00:00:16,920 --> 00:00:20,680 Speaker 1: the trading floor. Find the Bloomberg P L Podcast on iTunes, 6 00:00:20,840 --> 00:00:29,760 Speaker 1: SoundCloud and at Bloomberg dot com. A new kind of 7 00:00:29,920 --> 00:00:34,800 Speaker 1: Cold war, perhaps one waged in trade policy and sanctions. 8 00:00:34,840 --> 00:00:37,159 Speaker 1: Here to tell us more Ariel Cohen. He is a 9 00:00:37,200 --> 00:00:40,200 Speaker 1: Senior Fellow at the Atlantic Council and also the director 10 00:00:40,240 --> 00:00:44,440 Speaker 1: of the Center for Energy, Natural Resources, and Geopolitics at 11 00:00:44,440 --> 00:00:48,040 Speaker 1: the Institute for the Analysis of Global Security. Ariel, thank 12 00:00:48,080 --> 00:00:51,159 Speaker 1: you very much for being with us. Now, I gotta 13 00:00:51,320 --> 00:00:53,199 Speaker 1: just by that introduction, I have to assume you know 14 00:00:53,320 --> 00:00:56,320 Speaker 1: just about everything there is to know, but you can't 15 00:00:56,360 --> 00:01:00,800 Speaker 1: foretell the future. But having said that, so, given your contact, 16 00:01:00,840 --> 00:01:03,240 Speaker 1: the context in which we operate right now, what is 17 00:01:03,280 --> 00:01:07,240 Speaker 1: the most crucial, UH kind of foreign policy issue that 18 00:01:07,280 --> 00:01:11,679 Speaker 1: you believe President elect Donald Trump will tackle. I think 19 00:01:11,840 --> 00:01:15,800 Speaker 1: the clear focus of Trump is on the Pacific UH. 20 00:01:16,560 --> 00:01:20,280 Speaker 1: I suspect that the one who is going to implement 21 00:01:20,360 --> 00:01:24,399 Speaker 1: the pivot to the Pacific that President Obama talked about 22 00:01:24,480 --> 00:01:27,560 Speaker 1: so much and didn't do much uh, and then got 23 00:01:27,560 --> 00:01:29,559 Speaker 1: an egg on his face with the Philippines. Of course, 24 00:01:30,400 --> 00:01:32,319 Speaker 1: the real pivot is going to be on the Trump 25 00:01:32,680 --> 00:01:35,120 Speaker 1: and it's not going to be pretty. Because China is 26 00:01:35,160 --> 00:01:39,000 Speaker 1: the rising power, it's rising great power. Uh. They have 27 00:01:39,400 --> 00:01:43,720 Speaker 1: a history and culture of playing strategic games. UH. Their 28 00:01:43,800 --> 00:01:48,640 Speaker 1: national game is go, which is capturing territory. UH, and 29 00:01:48,720 --> 00:01:51,960 Speaker 1: it's played for a long, long period of time. So 30 00:01:52,200 --> 00:01:56,320 Speaker 1: I suspect that Donald Trump is trying to butter up 31 00:01:56,840 --> 00:02:02,400 Speaker 1: Putin uh detached Russia for China at toll order. Indeed, 32 00:02:02,520 --> 00:02:06,880 Speaker 1: I wasn't Russia three weeks ago, and the Russians told 33 00:02:06,880 --> 00:02:10,080 Speaker 1: me it'll take you a great effort to detach us 34 00:02:10,080 --> 00:02:13,760 Speaker 1: from China. Uh, and then there will be some kind 35 00:02:13,919 --> 00:02:17,799 Speaker 1: of a new Cold war trade war with Beijing. And 36 00:02:18,000 --> 00:02:20,480 Speaker 1: I really hope and pray that our country will come 37 00:02:20,480 --> 00:02:22,840 Speaker 1: out on top and in fact that we'll turn it 38 00:02:22,880 --> 00:02:26,120 Speaker 1: into a win win. Well, based on what you know 39 00:02:26,320 --> 00:02:29,040 Speaker 1: of President elect Donald Trump and also the books that 40 00:02:29,160 --> 00:02:32,040 Speaker 1: he has written, what's your estimate, what's it looked like 41 00:02:32,080 --> 00:02:35,800 Speaker 1: in the future. It looks like the art of the 42 00:02:35,919 --> 00:02:40,920 Speaker 1: deal is going to be the guiding principle, push the 43 00:02:40,960 --> 00:02:44,200 Speaker 1: other side as much as you think it's safe to 44 00:02:44,240 --> 00:02:47,760 Speaker 1: push them without losing the deal. What does Trump want? 45 00:02:47,800 --> 00:02:51,080 Speaker 1: He wants jobs, jobs, jobs for Americans. What does that mean. 46 00:02:51,160 --> 00:02:56,040 Speaker 1: It means that we cannot have our prime, prime industrial 47 00:02:56,080 --> 00:03:00,120 Speaker 1: competitor China with such a low exchange rate for that 48 00:03:00,200 --> 00:03:02,840 Speaker 1: you want. Uh, it means we'll have to find ways 49 00:03:02,880 --> 00:03:06,200 Speaker 1: to make our industry more competitive. After all, if you're 50 00:03:06,200 --> 00:03:10,760 Speaker 1: looking at industrial production, uh, and not just services and 51 00:03:11,160 --> 00:03:15,399 Speaker 1: alto high tech. We have to compete against the workers 52 00:03:15,440 --> 00:03:18,760 Speaker 1: that are paid maybe a fraction of our workers are paid. 53 00:03:18,880 --> 00:03:21,920 Speaker 1: And when it comes to Russia, look, Russia is not 54 00:03:22,000 --> 00:03:25,520 Speaker 1: our friend. Um. I was born there, I speak the language. 55 00:03:25,520 --> 00:03:28,359 Speaker 1: I met put In ten times, and I can tell 56 00:03:28,360 --> 00:03:31,520 Speaker 1: you they don't like us. Having said that, there are 57 00:03:31,720 --> 00:03:34,040 Speaker 1: can you just hold on, Ario, just expand a little 58 00:03:34,080 --> 00:03:37,800 Speaker 1: bit on your your meetings with Vladimir Putin. Maybe just 59 00:03:37,840 --> 00:03:40,400 Speaker 1: give us some insight into the kind of person he's 60 00:03:40,440 --> 00:03:42,240 Speaker 1: he is, and what's it like to be in a 61 00:03:42,320 --> 00:03:46,640 Speaker 1: room with him and so on. Uh. You know, it's 62 00:03:46,680 --> 00:03:52,320 Speaker 1: a weird combination of intensity and being really cold. Um, 63 00:03:52,400 --> 00:03:56,200 Speaker 1: so it's cold intensity, I guess. Uh. He makes his 64 00:03:56,240 --> 00:04:01,320 Speaker 1: staff scared he got his translator that he kept correcting, 65 00:04:02,520 --> 00:04:05,840 Speaker 1: very very nervous in front of the group of US. 66 00:04:06,760 --> 00:04:10,720 Speaker 1: But he commands a huge amount of information, keeps it 67 00:04:10,760 --> 00:04:15,360 Speaker 1: in his head, doesn't use the queue cards or notes uh, 68 00:04:15,440 --> 00:04:19,880 Speaker 1: and sometimes makes really really big mistakes, which raises a 69 00:04:19,960 --> 00:04:22,320 Speaker 1: question who is briefing him? And I know who's briefing 70 00:04:22,360 --> 00:04:24,840 Speaker 1: him to see his security services are briefing him. What 71 00:04:24,960 --> 00:04:28,400 Speaker 1: kind of mistakes are you talking about? Oh, he for example, 72 00:04:28,440 --> 00:04:31,480 Speaker 1: said that the United States was supporting the Gades in 73 00:04:32,120 --> 00:04:34,839 Speaker 1: North Caucuses in Chechenna, and I don't buy it for 74 00:04:34,880 --> 00:04:37,760 Speaker 1: a moment. We're not that crazy. Would you say that 75 00:04:37,760 --> 00:04:40,040 Speaker 1: that's a mistake or rather, do you believe that he 76 00:04:40,160 --> 00:04:42,840 Speaker 1: is saying that because he he wants just to say that, 77 00:04:42,960 --> 00:04:44,919 Speaker 1: rather than knowing that it's a mistake or what what 78 00:04:45,080 --> 00:04:48,440 Speaker 1: is that? I think Russian should know that we did 79 00:04:48,440 --> 00:04:52,240 Speaker 1: not do that. And there's there's a huge difference between collection. 80 00:04:52,920 --> 00:04:56,560 Speaker 1: I asked him flat out, So what's your evidence for that? Said, Oh, 81 00:04:56,760 --> 00:04:59,599 Speaker 1: your intelligence officers met with it, where our intelligence officers 82 00:04:59,600 --> 00:05:02,680 Speaker 1: would meet almost with anybody to collect. But that does 83 00:05:02,720 --> 00:05:05,760 Speaker 1: not mean we would train and equip the jihadi is 84 00:05:05,760 --> 00:05:09,160 Speaker 1: the Chechens who killed children and things like that. I 85 00:05:09,480 --> 00:05:12,400 Speaker 1: hope and pray we don't. All right, law, Let's turn, 86 00:05:12,800 --> 00:05:14,920 Speaker 1: so what is what have you learned about Vladimir Putin's 87 00:05:14,920 --> 00:05:17,760 Speaker 1: relationship with China that would be useful for an investment. 88 00:05:17,880 --> 00:05:21,559 Speaker 1: And they have a strategic they have a strategic relationship. Uh, 89 00:05:21,960 --> 00:05:24,960 Speaker 1: energy is very important, that is aimed at us. Energy 90 00:05:25,040 --> 00:05:30,159 Speaker 1: is important. But if you look at the costs of 91 00:05:30,600 --> 00:05:35,920 Speaker 1: building these two huge gas pipelines, uh, the Power of 92 00:05:35,920 --> 00:05:39,159 Speaker 1: Siberia and the Altai. One is from East Siberia once 93 00:05:39,160 --> 00:05:42,680 Speaker 1: from West Siberia. We're talking billions and billions, tens of 94 00:05:42,720 --> 00:05:46,120 Speaker 1: billions of dollars. And the Chinese were lending this money. 95 00:05:46,160 --> 00:05:50,560 Speaker 1: And to get their worth back, the Russians need high 96 00:05:50,640 --> 00:05:54,200 Speaker 1: oil prices. This is a paramount concern for the Russians. 97 00:05:54,400 --> 00:05:57,480 Speaker 1: The oil prices as they are now are too low. 98 00:05:58,600 --> 00:06:01,560 Speaker 1: Cents fifty two is not good for the Russians at 99 00:06:01,720 --> 00:06:04,359 Speaker 1: not at all, not at all. And you remember everybody 100 00:06:04,440 --> 00:06:08,400 Speaker 1: was talking about this deal that rex Diderson cut with 101 00:06:08,720 --> 00:06:14,320 Speaker 1: ross Neft, the Russian for the Socolon project. No after that, 102 00:06:14,760 --> 00:06:18,200 Speaker 1: after the Arctic for the Arctic hundred billion dollars over 103 00:06:18,279 --> 00:06:22,159 Speaker 1: thirty years. But guess what. The Arctic oil is not 104 00:06:22,320 --> 00:06:26,320 Speaker 1: profitable when oil prices are below eighty and there, as 105 00:06:26,320 --> 00:06:29,120 Speaker 1: you said, fifty two now and nobody knows when they're 106 00:06:29,120 --> 00:06:32,440 Speaker 1: going to be eighty again. So Russia is an interesting play. 107 00:06:32,480 --> 00:06:35,599 Speaker 1: There's plenty of oil and Russian UH and gas UH, 108 00:06:35,640 --> 00:06:38,800 Speaker 1: and some of it is still very economical, so they 109 00:06:38,839 --> 00:06:41,240 Speaker 1: want to compete. But they will push, push, push in 110 00:06:41,240 --> 00:06:44,320 Speaker 1: the Middle East and elsewhere for instability to drive the 111 00:06:44,360 --> 00:06:49,320 Speaker 1: oil prices up. Mr Putin is ahead of Russia oil 112 00:06:49,320 --> 00:06:52,520 Speaker 1: and guests Inc. Meaning the gas prom and ross Neft 113 00:06:52,520 --> 00:06:55,760 Speaker 1: and other companies that they control and UH. He is 114 00:06:55,800 --> 00:06:59,200 Speaker 1: a tough negotiator. Mr Kitchen, the head of Ross's Neft, 115 00:06:59,839 --> 00:07:02,800 Speaker 1: is a very tough negotiator. He just pulled in UH 116 00:07:03,120 --> 00:07:09,400 Speaker 1: over eleven billion from Katar and Glencore to buy rosne 117 00:07:09,880 --> 00:07:13,680 Speaker 1: Still valuations per barrel UH a much much lower than 118 00:07:13,920 --> 00:07:17,680 Speaker 1: x Ono, BP or Shell. But nevertheless, Russia is a 119 00:07:17,720 --> 00:07:22,400 Speaker 1: huge player. They want the sanctions um waived by Mr 120 00:07:22,440 --> 00:07:26,040 Speaker 1: Trump UH. And the question I'm asking is Mr Trump 121 00:07:26,560 --> 00:07:29,280 Speaker 1: applying the art of the deal. What is going to 122 00:07:29,320 --> 00:07:33,320 Speaker 1: be the quickpro lall when you're negotiating with Mr Putson. Well, 123 00:07:33,400 --> 00:07:35,080 Speaker 1: maybe he's going to give you a call. We look 124 00:07:35,120 --> 00:07:37,840 Speaker 1: forward to it. You certainly have met Mr Puttin apparently 125 00:07:37,880 --> 00:07:41,200 Speaker 1: more times than President elect Donald Trump. Thank you very much. 126 00:07:41,680 --> 00:07:45,239 Speaker 1: Ril Cohen. He is a Senior Fellow at the Atlantic Council. 127 00:07:45,240 --> 00:07:48,400 Speaker 1: He's also the director of the Center for Energy, Natural 128 00:07:48,440 --> 00:07:53,240 Speaker 1: Resources and Geopolitics at the Institute for Analysis of Global 129 00:07:53,400 --> 00:07:56,400 Speaker 1: Security in Washington, d C. Of course home to Bloomberg 130 00:07:57,560 --> 00:08:12,200 Speaker 1: and one oh five point seven h d to. I 131 00:08:12,280 --> 00:08:13,880 Speaker 1: know that we've got on on Trin of us and 132 00:08:13,920 --> 00:08:16,200 Speaker 1: he joins us in studio and on you. You are 133 00:08:16,280 --> 00:08:18,920 Speaker 1: the expert when it comes to the semiconductor industry or 134 00:08:18,960 --> 00:08:21,920 Speaker 1: a hardware analysts to force here at Bloomberg Intelligence. Thanks 135 00:08:21,920 --> 00:08:24,800 Speaker 1: for coming in. UH tell us about what's going on 136 00:08:24,840 --> 00:08:27,680 Speaker 1: with the US chip industry and this idea that there is. 137 00:08:28,120 --> 00:08:32,640 Speaker 1: I was writing this down. There's the Committee on Foreign Investments. 138 00:08:32,720 --> 00:08:34,840 Speaker 1: It's a little hard to figure out exactly who they 139 00:08:34,880 --> 00:08:37,520 Speaker 1: are what they do, but they're important. If a foreign 140 00:08:37,520 --> 00:08:39,880 Speaker 1: company wants to buy shares in the U S company 141 00:08:40,920 --> 00:08:44,000 Speaker 1: that that that's right, PIM. This is a congressional committee 142 00:08:44,080 --> 00:08:48,240 Speaker 1: which has different UM. This is an agency that is 143 00:08:48,320 --> 00:08:52,720 Speaker 1: formed with members from Treasury from UM. UH from justice, 144 00:08:52,760 --> 00:08:57,320 Speaker 1: from defense from state, and this collective group will weigh 145 00:08:57,360 --> 00:09:01,319 Speaker 1: in as to the whether mayor can interests are being 146 00:09:01,840 --> 00:09:05,800 Speaker 1: upheld or threatened as a result of any particular transaction. 147 00:09:06,240 --> 00:09:09,080 Speaker 1: This could be the American subsidiary of a firm, This 148 00:09:09,200 --> 00:09:13,160 Speaker 1: could be American manufacturing exposure, or this could be an 149 00:09:13,160 --> 00:09:17,520 Speaker 1: American domiciles company. UM and in this in over the 150 00:09:17,640 --> 00:09:21,000 Speaker 1: last two years or so, the Chinese government has made 151 00:09:21,040 --> 00:09:25,199 Speaker 1: it a mandate of source to UM heighten its exposure 152 00:09:25,240 --> 00:09:28,720 Speaker 1: and interest in the in the global semiconductor space by 153 00:09:28,800 --> 00:09:33,080 Speaker 1: acquiring intellectual property, by acquiring companies outright. They wanted to 154 00:09:33,080 --> 00:09:35,960 Speaker 1: buy Extron right and that they did and they were. 155 00:09:36,000 --> 00:09:40,720 Speaker 1: They were indications of Chinese state owned in company interest 156 00:09:40,800 --> 00:09:43,320 Speaker 1: in Micron as well, which is the last memory company 157 00:09:43,320 --> 00:09:46,840 Speaker 1: here in the United States. And all of this has 158 00:09:46,960 --> 00:09:51,400 Speaker 1: heightened the interest level by Cephius and they are both 159 00:09:51,679 --> 00:09:56,480 Speaker 1: UM more engaged as well as perhaps feel more threatened 160 00:09:56,520 --> 00:10:00,560 Speaker 1: as a result of this heightened state owned interest, a 161 00:10:00,679 --> 00:10:04,760 Speaker 1: Chinese state interest in the semiconducting industry. They're worried that 162 00:10:05,080 --> 00:10:10,800 Speaker 1: intellectual property could go overseas and that the us UM 163 00:10:10,880 --> 00:10:14,119 Speaker 1: interests could be threatened. Now in the case of Extron. 164 00:10:14,280 --> 00:10:16,640 Speaker 1: And the reason I mentioned this is because here you 165 00:10:16,760 --> 00:10:20,960 Speaker 1: have a company that is in domicile in Germany, headquarters 166 00:10:20,960 --> 00:10:24,040 Speaker 1: in Germany, but because just as you described, it has 167 00:10:24,200 --> 00:10:28,600 Speaker 1: operations in the United States. This Committee on Foreign Investments 168 00:10:28,880 --> 00:10:31,720 Speaker 1: they have a say. Right the purview of this particular 169 00:10:31,760 --> 00:10:35,440 Speaker 1: agency isn't determined by whether the company is incorporated here 170 00:10:36,080 --> 00:10:40,160 Speaker 1: UM or is domiciled here, it's UH, it's interests depending 171 00:10:40,200 --> 00:10:43,679 Speaker 1: on whether they have jobs here, there are this intellectual 172 00:10:43,720 --> 00:10:47,520 Speaker 1: property here, there's manufacturing here, there's sales here, and potentially 173 00:10:47,559 --> 00:10:52,480 Speaker 1: customers here, etcetera, etcetera. So loosely defined whether American interests 174 00:10:52,840 --> 00:10:56,439 Speaker 1: are are at risk or not, and you know that 175 00:10:56,640 --> 00:10:58,959 Speaker 1: you have to look at the context overall as well. 176 00:10:59,000 --> 00:11:01,559 Speaker 1: The semikin of industry the last two years has going 177 00:11:01,679 --> 00:11:05,800 Speaker 1: through a substantial consolidation for a variety of reasons, whether 178 00:11:05,800 --> 00:11:10,280 Speaker 1: it's for scale, whether it's for margin expansion, sales expansion, UH, 179 00:11:10,360 --> 00:11:14,920 Speaker 1: putting two products together, UM, logical product overlap, etcetera, etcetera. 180 00:11:15,000 --> 00:11:18,720 Speaker 1: For a whole host of reasons, the consolidation has made sense, 181 00:11:19,400 --> 00:11:23,840 Speaker 1: and the Chinese state owned interest or state owned companies 182 00:11:23,880 --> 00:11:27,000 Speaker 1: have been a participant in in that category. In a 183 00:11:27,040 --> 00:11:30,480 Speaker 1: substantial way. If you take that out, it takes a 184 00:11:30,520 --> 00:11:34,960 Speaker 1: little bit out of the um uh, the fluff out 185 00:11:35,000 --> 00:11:38,679 Speaker 1: of the semiconductor land takes a buy if if right, 186 00:11:38,720 --> 00:11:40,480 Speaker 1: it takes a buyer out. If you've got fewer bias, 187 00:11:40,559 --> 00:11:43,520 Speaker 1: chances are you're not gonna necessarily get that much bidding activities. 188 00:11:43,559 --> 00:11:46,480 Speaker 1: So maybe if the presses prices that these companies are 189 00:11:46,520 --> 00:11:49,840 Speaker 1: hoping to get absolutely so, one of the other routes 190 00:11:49,920 --> 00:11:52,720 Speaker 1: for Chinese companies, whether it's state owned or private, to 191 00:11:52,800 --> 00:11:56,280 Speaker 1: take in this in this scenario could be a partnership. 192 00:11:56,400 --> 00:12:00,200 Speaker 1: We've seen a lot of HP transactions as UM with 193 00:12:00,280 --> 00:12:03,120 Speaker 1: this sort of a model. We've seen as seen a 194 00:12:03,200 --> 00:12:05,680 Speaker 1: little bit of Intel do this similar things. We've seen 195 00:12:05,760 --> 00:12:09,719 Speaker 1: Qualcom do similar things. Maybe the nature of the m 196 00:12:09,760 --> 00:12:13,760 Speaker 1: and A or the nature of the transactions changes into 197 00:12:13,800 --> 00:12:17,360 Speaker 1: more of a JV structure, more of a partnership agreement 198 00:12:17,400 --> 00:12:20,280 Speaker 1: structure rather than an outright by which is going to 199 00:12:20,360 --> 00:12:23,600 Speaker 1: be more difficult. The third parties get squeezed. I mean 200 00:12:24,320 --> 00:12:27,920 Speaker 1: companies that are doing manufacturing let's say in Taiwan or 201 00:12:28,040 --> 00:12:32,559 Speaker 1: in um you know, uh, South Korea, for example, are 202 00:12:32,559 --> 00:12:34,560 Speaker 1: they getting squeezed because it's either going to be you 203 00:12:34,600 --> 00:12:36,959 Speaker 1: make it in China and just strict rules or in 204 00:12:37,040 --> 00:12:40,400 Speaker 1: the introductional property comes from the the Actually, to be 205 00:12:40,520 --> 00:12:44,080 Speaker 1: quite honest, there's a more disrupting influence in this equation, 206 00:12:44,120 --> 00:12:48,440 Speaker 1: which is the US China trade relationship. And if there is, 207 00:12:48,880 --> 00:12:52,560 Speaker 1: if there's a wrench thrown into that kind of a system, 208 00:12:52,600 --> 00:12:57,920 Speaker 1: then UH, semiconductor manufacturing particularly will be will be threatened, 209 00:12:58,440 --> 00:13:01,880 Speaker 1: technology manufacturing gen really will be threatened, and we will 210 00:13:01,920 --> 00:13:04,600 Speaker 1: have to find a new home for all of these places. 211 00:13:04,640 --> 00:13:08,600 Speaker 1: One of the interesting UM by products is of the 212 00:13:08,760 --> 00:13:13,120 Speaker 1: of the new incoming administration, could be some shifts in 213 00:13:13,160 --> 00:13:17,760 Speaker 1: this particular landscape could certainly make a portent to shift 214 00:13:17,760 --> 00:13:20,480 Speaker 1: in where the money is coming. Absolutely, But the interesting 215 00:13:20,520 --> 00:13:24,760 Speaker 1: part of it is, look, US companies or global technology 216 00:13:24,800 --> 00:13:29,480 Speaker 1: companies don't manufacture in China because it's neat, it's it's 217 00:13:29,520 --> 00:13:36,160 Speaker 1: substantially cheaper, and you get substantial tax breaks, manufacturing incentives, etcetera. 218 00:13:36,280 --> 00:13:40,439 Speaker 1: To try and make UM your ecosystem there. And it's 219 00:13:40,480 --> 00:13:44,360 Speaker 1: also you've had a history of success there. All of 220 00:13:44,360 --> 00:13:48,760 Speaker 1: the companies are co located very efficiently from a geographic perspective, 221 00:13:48,800 --> 00:13:52,480 Speaker 1: So all of these things make for UM an interesting location. 222 00:13:52,520 --> 00:13:55,680 Speaker 1: To make it and a movement there will be harmful. 223 00:13:56,120 --> 00:13:58,480 Speaker 1: Thanks very much on Entren of US and our senior 224 00:13:58,480 --> 00:14:12,120 Speaker 1: Semiconductor and hardware anal for Bloomberg Intelligence. We also want 225 00:14:12,160 --> 00:14:15,559 Speaker 1: to look at as the automobile companies because President elect 226 00:14:15,600 --> 00:14:21,440 Speaker 1: Donald Trump tweeted over the holiday, I guess respite that 227 00:14:21,560 --> 00:14:25,560 Speaker 1: the General Motors should be making the Chevy Cruise in 228 00:14:25,760 --> 00:14:28,800 Speaker 1: the United States. Well, when we want to know about automobiles, 229 00:14:28,880 --> 00:14:33,520 Speaker 1: we called David Welch, bureau chief for Bloomberg News in Detroit. David, 230 00:14:33,720 --> 00:14:37,720 Speaker 1: thanks for being with us. How many Crews automobiles are 231 00:14:37,840 --> 00:14:41,360 Speaker 1: made every year and where are they made? Well, So 232 00:14:41,520 --> 00:14:45,120 Speaker 1: GM sols a couple of hundred, and it's mostly the 233 00:14:45,200 --> 00:14:49,200 Speaker 1: sedan these days. Americans aren't really interested in compact cars 234 00:14:49,240 --> 00:14:52,520 Speaker 1: because gas is cheap, and they have never been interested 235 00:14:52,520 --> 00:14:55,600 Speaker 1: in hatchbacks. The crew hatchback is with the plant in 236 00:14:55,680 --> 00:14:59,320 Speaker 1: Mexico builds and it's mostly for the Mexican market, for 237 00:14:59,440 --> 00:15:03,640 Speaker 1: South America and to export to other places. The Cruise 238 00:15:03,680 --> 00:15:07,880 Speaker 1: that is sold mostly to Americans is building words toown Ohio. 239 00:15:07,960 --> 00:15:11,720 Speaker 1: So there's there's a bit of uh saber rattling over 240 00:15:11,840 --> 00:15:15,960 Speaker 1: a really small number of cars. With Donald Trump's tweet 241 00:15:16,000 --> 00:15:18,600 Speaker 1: this morning, I see, so that the point being that 242 00:15:18,680 --> 00:15:22,800 Speaker 1: the automobiles in question are typically for the Mexican market. 243 00:15:22,920 --> 00:15:26,120 Speaker 1: So I read a number that this accounts for maybe 244 00:15:26,160 --> 00:15:28,480 Speaker 1: like two two and a half percent of all the 245 00:15:28,480 --> 00:15:31,240 Speaker 1: production of cruise vehicles. And as you said, the hatchback 246 00:15:31,360 --> 00:15:36,280 Speaker 1: is not a big seller, correct, it's a very small number. Now, 247 00:15:36,720 --> 00:15:40,760 Speaker 1: the broader point, and you know, let's face it, Trump 248 00:15:40,800 --> 00:15:44,640 Speaker 1: has never really um bothered himself with with my new 249 00:15:44,720 --> 00:15:49,360 Speaker 1: details on things or specifics. His broader point is that 250 00:15:49,480 --> 00:15:52,280 Speaker 1: a lot of production has gone to Mexico, and about 251 00:15:52,280 --> 00:15:56,120 Speaker 1: two thirds, a little less let's call it, of Mexican 252 00:15:56,160 --> 00:16:00,320 Speaker 1: auto production is sent to the US or ended that. 253 00:16:00,520 --> 00:16:04,560 Speaker 1: So there is a wage difference. It's about five or 254 00:16:04,600 --> 00:16:08,000 Speaker 1: six hours an hour versus an average of about twenty four. 255 00:16:08,880 --> 00:16:11,680 Speaker 1: Uh So automakers are saving on that. And it's not 256 00:16:11,760 --> 00:16:15,080 Speaker 1: just US automakers. Everybody is down there now. And there 257 00:16:15,120 --> 00:16:17,840 Speaker 1: are also some great free trade deals that allow companies 258 00:16:17,840 --> 00:16:22,160 Speaker 1: to export cars all over over the world. Mexico is 259 00:16:22,200 --> 00:16:24,120 Speaker 1: kind of about flank to the US and Canada on 260 00:16:24,160 --> 00:16:27,040 Speaker 1: those deals. So there's a lot of stagments, and that's 261 00:16:27,080 --> 00:16:31,880 Speaker 1: that's his point. This particular car though, is not really Uh, 262 00:16:32,080 --> 00:16:35,400 Speaker 1: it wouldn't be of any consequence. GM cut a shift. 263 00:16:35,680 --> 00:16:38,080 Speaker 1: They used to make the Cruise on three shifts, now 264 00:16:38,120 --> 00:16:41,120 Speaker 1: they make it at two shifts in Lordstown, Ohio. If 265 00:16:41,160 --> 00:16:44,240 Speaker 1: you brought the Cruise hatchback to the US, that would 266 00:16:44,280 --> 00:16:46,240 Speaker 1: not add a shift. They would just camp up the 267 00:16:46,280 --> 00:16:48,920 Speaker 1: line speed a little bit and have the same workers, 268 00:16:49,080 --> 00:16:50,640 Speaker 1: you know, work a little quicker to make it. It's 269 00:16:50,680 --> 00:16:54,440 Speaker 1: just not a consequential number of cars. It certainly does 270 00:16:54,520 --> 00:16:57,600 Speaker 1: look like investors and kind of seeing through this latest 271 00:16:58,080 --> 00:17:01,840 Speaker 1: Trump effect, you might say in GM was down just 272 00:17:02,640 --> 00:17:05,560 Speaker 1: maybe half a percent or so before the opening bell, 273 00:17:06,240 --> 00:17:09,920 Speaker 1: and since then means stock has generally been higher. It's 274 00:17:10,000 --> 00:17:12,800 Speaker 1: up almost two percent at this point. So for the 275 00:17:12,840 --> 00:17:15,280 Speaker 1: same thing with Ford Motor Company. Ford Motor Company up 276 00:17:15,480 --> 00:17:17,280 Speaker 1: more than two and a half percent, right, and they've 277 00:17:17,320 --> 00:17:19,399 Speaker 1: certainly been in the cross hairs as well because of 278 00:17:19,480 --> 00:17:23,200 Speaker 1: their Mexican production. So you know, it's like people are 279 00:17:23,240 --> 00:17:25,960 Speaker 1: looking at what's coming out over Twitter and really trying 280 00:17:26,040 --> 00:17:28,280 Speaker 1: to make sense out of it, as opposed to just 281 00:17:29,240 --> 00:17:32,760 Speaker 1: knee jerk reacting to whatever the latest A hundred and 282 00:17:32,800 --> 00:17:36,359 Speaker 1: forty characters are saying, Well, David Welch. You mentioned something 283 00:17:36,400 --> 00:17:39,919 Speaker 1: about what Americans like to drive, and right now, with 284 00:17:40,000 --> 00:17:41,879 Speaker 1: gasoline prices where they are, it seems like if they 285 00:17:41,920 --> 00:17:45,080 Speaker 1: only want large automobiles, large vehicles, light trucks for example, 286 00:17:45,880 --> 00:17:48,560 Speaker 1: pretty much yeah, it's you pickup trucks are doing well 287 00:17:49,080 --> 00:17:51,280 Speaker 1: and and now that's often tired of the housing market. 288 00:17:51,320 --> 00:17:54,679 Speaker 1: But it terms were consumers by the family car is 289 00:17:54,720 --> 00:17:59,200 Speaker 1: now really the family crossover actual, So the Chevy Equinox 290 00:17:59,720 --> 00:18:03,640 Speaker 1: is GMS some mid sized crossover suv that's pretty new 291 00:18:03,680 --> 00:18:07,800 Speaker 1: to the market, always the newest generation is that's the 292 00:18:07,840 --> 00:18:10,000 Speaker 1: one that Trump actually could have made some hay out 293 00:18:10,040 --> 00:18:12,960 Speaker 1: of if he had really studied what GM was doing 294 00:18:12,960 --> 00:18:16,399 Speaker 1: in Mexico, because that vehicle is made in a plant 295 00:18:16,440 --> 00:18:19,199 Speaker 1: in Ingersoll, Ontario, and with the new version that's just 296 00:18:19,280 --> 00:18:22,159 Speaker 1: coming out, GM went from one plant, which is the 297 00:18:22,160 --> 00:18:25,040 Speaker 1: one in Canada, to three and the other tour in Mexico. 298 00:18:25,920 --> 00:18:29,080 Speaker 1: So you will see a number of very important vehicles 299 00:18:29,080 --> 00:18:33,240 Speaker 1: that sell for thirty thousand or more for American families 300 00:18:33,280 --> 00:18:36,119 Speaker 1: with a Chevy badge on coming up from Mexico. That's 301 00:18:36,160 --> 00:18:38,840 Speaker 1: really the one that if he wanted to make hay, 302 00:18:39,000 --> 00:18:41,560 Speaker 1: he could have the same kind of goes for the 303 00:18:41,600 --> 00:18:45,119 Speaker 1: link in m K very small volume vehicle that Ford 304 00:18:45,160 --> 00:18:47,320 Speaker 1: made in Kentucky. They were going to send it Mexico. 305 00:18:47,440 --> 00:18:50,880 Speaker 1: Trump got them to keep it. That was another kind 306 00:18:50,880 --> 00:18:54,080 Speaker 1: of similar to the Cruise, pretty small volume. If you 307 00:18:54,119 --> 00:18:57,000 Speaker 1: really want to go after these guys, you got to 308 00:18:57,040 --> 00:19:00,159 Speaker 1: find a big volume vehicle and a plant that and 309 00:19:00,200 --> 00:19:05,200 Speaker 1: started making production. Yet and you say it's the Equinox, Yeah, 310 00:19:05,840 --> 00:19:09,040 Speaker 1: is a big deal. How much? Just quickly? How many? About? 311 00:19:09,040 --> 00:19:12,240 Speaker 1: How many do they sell? You are they planning to sell? Oh? 312 00:19:12,640 --> 00:19:16,080 Speaker 1: It's you know, depending on how will they do it? Well? 313 00:19:16,119 --> 00:19:20,480 Speaker 1: Over two? Right and probably close to three. All right, 314 00:19:20,480 --> 00:19:23,520 Speaker 1: thanks very much. David Welch of your chief Bloomberg News 315 00:19:23,560 --> 00:19:38,040 Speaker 1: from Detroit. Part he's got his comfortable shoes packed. He's 316 00:19:38,080 --> 00:19:42,679 Speaker 1: getting ready for Consumer Electronics show in Las Vegas. But 317 00:19:42,800 --> 00:19:46,760 Speaker 1: before he goes out west, he joins us here in 318 00:19:46,800 --> 00:19:49,000 Speaker 1: the studio. David Garretty is the chief executive a g 319 00:19:49,320 --> 00:19:54,160 Speaker 1: v A Research, a columnist at Investo PDA, and he 320 00:19:54,240 --> 00:19:57,959 Speaker 1: is followable on Twitter at g v A Research. Alright, 321 00:19:58,240 --> 00:20:00,840 Speaker 1: followable at g v A You search, I like you know, 322 00:20:00,880 --> 00:20:03,480 Speaker 1: this is a whole new Twitter world, David, You've been 323 00:20:03,520 --> 00:20:07,879 Speaker 1: following technology for how long now, uh, since the last millennium? Yeah, okay, 324 00:20:07,920 --> 00:20:10,800 Speaker 1: since the lab right when was allowed. Is this a 325 00:20:10,840 --> 00:20:14,000 Speaker 1: new era where you have the President elect of the 326 00:20:14,080 --> 00:20:18,720 Speaker 1: United States tweeting about GM about building a car that 327 00:20:19,400 --> 00:20:22,320 Speaker 1: isn't actually that you know, widely sold the United States, 328 00:20:22,359 --> 00:20:24,680 Speaker 1: building it in Mexico and saying, you know, you better 329 00:20:24,680 --> 00:20:27,119 Speaker 1: build it in the United States, and then Ford coming 330 00:20:27,119 --> 00:20:30,000 Speaker 1: out and saying, on the other hand, we're not going 331 00:20:30,080 --> 00:20:34,840 Speaker 1: to build out that plant in San Potosi, San Luis Potosi, 332 00:20:34,920 --> 00:20:37,960 Speaker 1: in Mexico, the one point six billion dollar plant. This 333 00:20:38,040 --> 00:20:39,879 Speaker 1: is a tech store as much as anything. Do you 334 00:20:39,920 --> 00:20:41,800 Speaker 1: think it's very much of a tech story in very 335 00:20:41,880 --> 00:20:45,760 Speaker 1: much discussion here about the technology disrupting what had been 336 00:20:45,800 --> 00:20:48,960 Speaker 1: sort of well established patterns in this case of communication 337 00:20:49,040 --> 00:20:53,400 Speaker 1: and policy making and also the communication of policy. From 338 00:20:53,400 --> 00:20:57,560 Speaker 1: that standpoint, one has to be always concerned with respect 339 00:20:57,640 --> 00:21:04,880 Speaker 1: to technologies ability to outrun human comprehension. So from that standpoint, 340 00:21:05,000 --> 00:21:09,280 Speaker 1: we stand here at a maybe a dangerous point where 341 00:21:09,440 --> 00:21:13,360 Speaker 1: you know, things out strip, where events move faster than 342 00:21:13,480 --> 00:21:16,800 Speaker 1: people have the ability to actually manage them. And when 343 00:21:16,840 --> 00:21:20,639 Speaker 1: you're talking about you know the world's leading economy and 344 00:21:20,760 --> 00:21:26,080 Speaker 1: worlds leading military power the consequences should be concerning clearly, 345 00:21:26,440 --> 00:21:29,959 Speaker 1: having said that technology always has the mantra that if 346 00:21:30,000 --> 00:21:33,159 Speaker 1: there is a problem that technology creates, they also have 347 00:21:33,200 --> 00:21:37,680 Speaker 1: a solution, and in this case artificial intelligence, this is 348 00:21:37,720 --> 00:21:39,320 Speaker 1: going to be one of the trends that is going 349 00:21:39,400 --> 00:21:42,600 Speaker 1: to be featured at the Consumer Electronics Show. Tell us 350 00:21:42,600 --> 00:21:45,720 Speaker 1: about artificial intelligence very much so in terms of looking 351 00:21:45,760 --> 00:21:49,160 Speaker 1: at AI mean, we're looking here at arguably a technology 352 00:21:49,200 --> 00:21:52,879 Speaker 1: development that one might be considering as an apex, a 353 00:21:53,040 --> 00:21:57,679 Speaker 1: peak element in terms of dominating the technology ecosystem, and 354 00:21:57,760 --> 00:22:00,520 Speaker 1: this is something that potentially is going to be introduced 355 00:22:00,560 --> 00:22:04,399 Speaker 1: in a fairly wide range of areas. We certainly know that, 356 00:22:04,440 --> 00:22:06,560 Speaker 1: you know, there are elements in terms of chat bots 357 00:22:06,640 --> 00:22:09,000 Speaker 1: that are being developed by various social media companies, but 358 00:22:09,080 --> 00:22:11,920 Speaker 1: clearly this goes well beyond that, and we may be 359 00:22:12,080 --> 00:22:15,520 Speaker 1: looking here just given the amount of data that's being generated. 360 00:22:15,560 --> 00:22:18,439 Speaker 1: I mean, we're looking here potentially at something long so 361 00:22:18,600 --> 00:22:21,159 Speaker 1: you know, forty four zetta bytes of data being produced 362 00:22:21,160 --> 00:22:24,360 Speaker 1: by that's a lot of information to basically I don't 363 00:22:24,400 --> 00:22:26,280 Speaker 1: even know what a zetta byte is. I mean, I 364 00:22:26,320 --> 00:22:27,959 Speaker 1: know how many movies you know, you can get with 365 00:22:27,960 --> 00:22:31,440 Speaker 1: one gigabyte. That's kind of one. But Tesla I love 366 00:22:31,520 --> 00:22:37,159 Speaker 1: this example. Tesla has aggregated the data of eight hundred 367 00:22:37,200 --> 00:22:41,320 Speaker 1: million miles of driving already already, And obviously this is 368 00:22:41,359 --> 00:22:43,200 Speaker 1: only you get the opt out when you get into 369 00:22:43,240 --> 00:22:45,040 Speaker 1: behind the wheel of a Tesla and say, look, I 370 00:22:45,040 --> 00:22:47,480 Speaker 1: don't want my driving. I would imagine that you're going 371 00:22:47,520 --> 00:22:49,480 Speaker 1: to find a situation. I don't think that de'll be 372 00:22:49,560 --> 00:22:52,280 Speaker 1: able to because clearly the interest here in terms of 373 00:22:52,320 --> 00:22:55,320 Speaker 1: the people providing the products is to capture the information. 374 00:22:55,359 --> 00:22:58,240 Speaker 1: The value resides in the data and what you can 375 00:22:58,320 --> 00:23:00,359 Speaker 1: learn from this. And in the case of back to 376 00:23:00,440 --> 00:23:03,800 Speaker 1: artificial intelligence, we're probably gonna be seeing creation of new 377 00:23:03,840 --> 00:23:07,639 Speaker 1: market here called artificial intelligence as a service, and in 378 00:23:07,720 --> 00:23:10,879 Speaker 1: its full blown promise, it might lead to an improvement 379 00:23:10,920 --> 00:23:14,920 Speaker 1: in terms of productivity because clearly machines that have greater 380 00:23:15,000 --> 00:23:18,000 Speaker 1: computing power than possibly humans you know, maybe turned over 381 00:23:18,040 --> 00:23:19,560 Speaker 1: to do this work. The question is always going to 382 00:23:19,600 --> 00:23:20,720 Speaker 1: be what are the humans going to do in the 383 00:23:20,720 --> 00:23:24,920 Speaker 1: meanwhile with all this code augmented reality? Because that's trend 384 00:23:24,960 --> 00:23:28,080 Speaker 1: number two. Tell me about a are augmented reality? Well, 385 00:23:28,119 --> 00:23:31,760 Speaker 1: I mean, certainly, you know, uh, ces consumer electronic show 386 00:23:31,760 --> 00:23:33,760 Speaker 1: in twenty sixteen was very much taken up with you 387 00:23:33,800 --> 00:23:36,320 Speaker 1: know what Facebook was coming out with the Oculus Rift 388 00:23:36,359 --> 00:23:39,240 Speaker 1: and with virtual reality headsets, and that turn proved to 389 00:23:39,240 --> 00:23:41,080 Speaker 1: be a little bit bit of a bust because the 390 00:23:41,160 --> 00:23:43,720 Speaker 1: Rift didn't sell as much as Facebook did still sold 391 00:23:43,760 --> 00:23:45,760 Speaker 1: four un a thousand units, but not enough is the 392 00:23:45,840 --> 00:23:48,439 Speaker 1: millions that people might have thought. But here, clearly we're 393 00:23:48,480 --> 00:23:51,800 Speaker 1: looking at a situation that with you know, with augmented reality, 394 00:23:51,960 --> 00:23:54,560 Speaker 1: you know, technologies that are crossing the physical digital divide, 395 00:23:54,560 --> 00:23:57,199 Speaker 1: you know, do represent that the future of computing. And 396 00:23:57,280 --> 00:23:59,399 Speaker 1: from this standpoint, you know, we're looking at a wide 397 00:23:59,480 --> 00:24:01,080 Speaker 1: range of come but he's that be going to be 398 00:24:01,160 --> 00:24:03,440 Speaker 1: coming out, you know, we're thinking here that you're looking 399 00:24:03,480 --> 00:24:08,080 Speaker 1: at you know, at augmented reality headsets UM. You know, 400 00:24:08,240 --> 00:24:11,280 Speaker 1: certainly with regards to UM, you know, all the things 401 00:24:11,280 --> 00:24:13,440 Speaker 1: that are being advertised over the Christmas season in terms 402 00:24:13,440 --> 00:24:15,640 Speaker 1: of people like being able to use their Galaxy seven 403 00:24:15,720 --> 00:24:18,359 Speaker 1: when it wasn't bursting into flames, using it as a 404 00:24:18,440 --> 00:24:22,960 Speaker 1: virtual reality headset certainly, and use it an autonomous vehicle. 405 00:24:23,000 --> 00:24:24,960 Speaker 1: I guess you could, right because if you're not going 406 00:24:25,000 --> 00:24:26,959 Speaker 1: to be driving, you could put on that headset and 407 00:24:27,000 --> 00:24:29,639 Speaker 1: just you know, watch a movie, It's quite possible. I 408 00:24:29,640 --> 00:24:32,000 Speaker 1: mean from the standpoint that you're looking at automated vehicles. 409 00:24:32,359 --> 00:24:34,800 Speaker 1: Once they get into a highway, they probably will be 410 00:24:34,800 --> 00:24:37,880 Speaker 1: have a fully automated control system. So from that standpoint, 411 00:24:38,200 --> 00:24:40,480 Speaker 1: the person who is the otherwise driver is free to 412 00:24:40,480 --> 00:24:43,399 Speaker 1: do pretty much whatever they want. It could be augmented reality, 413 00:24:43,440 --> 00:24:45,520 Speaker 1: it could be virtual reality. I think I'm going to 414 00:24:45,600 --> 00:24:48,400 Speaker 1: need all those how all those realities to help me navigate. 415 00:24:49,400 --> 00:24:51,960 Speaker 1: And also David Garritty, thank you very much for coming 416 00:24:52,000 --> 00:24:54,000 Speaker 1: in and spending time. He's the chief executive of g 417 00:24:54,119 --> 00:24:57,800 Speaker 1: v A Research, a columnist for investor Pedia, and he 418 00:24:57,840 --> 00:25:01,280 Speaker 1: can be followed on Twitter at the g v A Research. 419 00:25:06,680 --> 00:25:09,600 Speaker 1: Thanks for listening to the Bloomberg p L podcast. You 420 00:25:09,600 --> 00:25:13,560 Speaker 1: can subscribe and listen to interviews at iTunes, SoundCloud, or 421 00:25:13,800 --> 00:25:17,880 Speaker 1: whatever podcast platform you prefer. I'm pim Fox. I'm out 422 00:25:17,880 --> 00:25:20,720 Speaker 1: there on Twitter at pim Fox. I'm out there on 423 00:25:20,760 --> 00:25:24,040 Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You 424 00:25:24,040 --> 00:25:26,680 Speaker 1: can always catch us worldwide on Bloomberg Radio.