WEBVTT - BI Weekend: China Boeing Halt, LVMH Earnings 0:00:00.280 --> 0:00:11.680 Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Intelligence 0:00:11.800 --> 0:00:13.840 with Alex Steele and Paul Sweeney. 0:00:14.000 --> 0:00:17.200 The real app performance has been in US corporate high yield. 0:00:17.400 --> 0:00:19.720 Are the companies lean enough? Have they trimmed all the facts? 0:00:19.800 --> 0:00:22.960 The semiconductor business is a really cyclical. 0:00:22.560 --> 0:00:26.760 Business, breaking market headlines and corporate news from across the globe. 0:00:26.800 --> 0:00:29.280 Do investors like the M and A that we've seen? 0:00:29.480 --> 0:00:32.440 These are two big time blue chip companies. 0:00:32.680 --> 0:00:36.080 Window between the peak and cunt changing super fast. 0:00:36.320 --> 0:00:41.360 Bloomberg Intelligence with Alex Steele and Paul Sweeney on Bloomberg Radio. 0:00:42.800 --> 0:00:45.720 Oh, Paul Sweeney and I'm Normalinda filling in for Alex Steel. 0:00:45.920 --> 0:00:48.199 On today's Bloomberg Intelligence Show. We dig inside that big 0:00:48.240 --> 0:00:50.640 business story is impacting Wall Street and the global markets. 0:00:50.840 --> 0:00:53.120 Each and every week we provide in depth research and 0:00:53.240 --> 0:00:55.640 data on some of the two thousand companies and one 0:00:55.760 --> 0:00:58.360 hundred and thirty industries are analysts cover worldwide. 0:00:58.440 --> 0:01:02.480 Today, we'll look at why Lovemaker LVMH posted weaker than 0:01:02.520 --> 0:01:03.920 expected sales last quarter. 0:01:04.120 --> 0:01:06.920 Plus we'll discuss how the tech company Intel is now 0:01:06.959 --> 0:01:10.040 making good on plans to start spinning off non core assets. 0:01:10.160 --> 0:01:13.240 But first we begin with the drug in pharmaceutical space. 0:01:13.280 --> 0:01:16.680 This week, Pfizer terminated development of its obesity bill after 0:01:16.720 --> 0:01:20.120 a patient in a clinical trial developed signs of liver injury. 0:01:20.400 --> 0:01:22.319 This raises the odds that the drug maker will spend 0:01:22.400 --> 0:01:25.360 billions on an acquisition to break in the blockbuster weight 0:01:25.400 --> 0:01:28.400 loss market dominated by Novo, Nordisk and Eli Lilly. 0:01:28.640 --> 0:01:30.640 For more, guest host Emily Grafail and I were joined 0:01:30.680 --> 0:01:34.600 by Mikey Shap Bloomberg Intelligence senior pharma biotech analysts. We 0:01:34.640 --> 0:01:37.360 first asked Mikey how big of an issue this recent 0:01:37.400 --> 0:01:38.480 news is for Pfizer. 0:01:38.840 --> 0:01:41.920 Yeah, I mean, I think it's a sentiment issue. I mean, clearly, 0:01:42.360 --> 0:01:45.120 you know, you go to massive BC market out the 0:01:45.480 --> 0:01:49.480 one hundred billion dollar plus in terms of sides, and 0:01:49.520 --> 0:01:52.120 it's a market where you know, Phiz's already kind of 0:01:52.160 --> 0:01:57.800 trailing large farm appears like Lily Rosch Novo in terms 0:01:57.840 --> 0:02:00.680 of you know, the ABC pill itself. So this was 0:02:00.960 --> 0:02:06.680 Danny glitpron So what what it they actually did was 0:02:06.680 --> 0:02:10.440 it used to be a twice daily pill. They kind 0:02:10.440 --> 0:02:13.079 of can that and repurposed it into a once daily 0:02:13.080 --> 0:02:16.120 Following the failure of another one of their OBCs pills, 0:02:16.160 --> 0:02:19.920 Lot of Glippron, So I'd say, you know, confidence into 0:02:19.960 --> 0:02:22.720 this readout, you know, was pretty low. We had ready 0:02:22.840 --> 0:02:25.320 kind of removed it from our models, you know, back 0:02:25.320 --> 0:02:29.079 in twenty three. But what it does, you know, create is, 0:02:29.320 --> 0:02:32.440 you know to two concerns. One is you know, the 0:02:32.480 --> 0:02:35.919 trailing timeline in the BCC space. And two it kind 0:02:35.919 --> 0:02:38.240 of adds to the mid to long term growth worries 0:02:38.520 --> 0:02:41.160 of the company. So they've got you know, about fifteen 0:02:41.200 --> 0:02:44.800 billion dollars and lost revenue to looees that they'll need 0:02:44.840 --> 0:02:47.960 to kind of offset over twenty five to twenty nine. 0:02:49.000 --> 0:02:51.480 And at the moment, you know, it's quite hard to 0:02:51.520 --> 0:02:54.639 see you know where that where that offset and where 0:02:54.639 --> 0:02:57.000 that additional growth is going to come come from. Long 0:02:57.120 --> 0:03:00.600 term obesity would be kind of one pillar. But you know, 0:03:00.680 --> 0:03:03.680 following the danaglip from read out today or the news today, 0:03:04.400 --> 0:03:07.440 you know that's obviously mean terminated. So you know, we 0:03:07.480 --> 0:03:09.360 think that they're going to have to go to you know, 0:03:09.440 --> 0:03:14.120 look to external assets in the obcit space if they're 0:03:14.120 --> 0:03:18.160 going to remain a relevant player in the in that market. 0:03:19.120 --> 0:03:23.239 Is anyone else doing obesity pills in this market right now? 0:03:24.520 --> 0:03:26.880 Yeah? So, I mean there's a few biotechs out there 0:03:27.320 --> 0:03:29.000 that are that are doing pills. In terms of the 0:03:29.080 --> 0:03:32.079 large farmer competitors, you know, Lily's got one, we'll see 0:03:32.120 --> 0:03:34.639 the data for that this year. Phase three that could 0:03:34.680 --> 0:03:39.120 potentially launch in twenty six. Novo's got one they're expected 0:03:39.160 --> 0:03:42.680 to file, and then you know Rush also has one 0:03:42.880 --> 0:03:45.640 kind of in early to mid stage development too. On 0:03:45.720 --> 0:03:48.680 the biotech front, you know, we're seeing moves for you know, 0:03:48.800 --> 0:03:52.440 Viking structure turns and they all hold or or JP 0:03:52.600 --> 0:03:54.280 ones in their pipeline two. 0:03:54.520 --> 0:03:57.880 Hey, Mikey, can you put into just perspective the size 0:03:57.920 --> 0:04:03.200 of this obesity market relative to other big verticals that 0:04:03.320 --> 0:04:04.640 drive these former companies. 0:04:06.520 --> 0:04:09.280 I mean, I think the excitement around robust is you 0:04:09.320 --> 0:04:13.360 know one, it's you know, prevalence is rising. You're forty 0:04:13.360 --> 0:04:18.400 percent of US adults at the moment that are obese, 0:04:18.720 --> 0:04:23.520 and it's a relatively underpenetrated market. So I mean, you know, 0:04:23.720 --> 0:04:27.479 penetration rates are you know, low single digits, you know 0:04:27.520 --> 0:04:30.160 in the US at the moment, you know, probably even 0:04:30.200 --> 0:04:36.560 lower elsewhere, you know, globally, and you know, we think 0:04:36.600 --> 0:04:38.640 that this market could grow, you know, well in excess 0:04:38.640 --> 0:04:42.320 of one hundred billion dollars so yeah, I mean it's 0:04:42.320 --> 0:04:46.080 a massive opportunity. I think in terms of you know, 0:04:46.200 --> 0:04:51.160 drug classes, I think PD you know, immuno oncology PD 0:04:51.279 --> 0:04:53.640 are one PD one drugs, you know, with a kind 0:04:53.720 --> 0:04:56.120 of biggest class to date in terms of sales. So 0:04:56.200 --> 0:04:59.520 that's like your contruder Bristol or Duvo, but you know 0:04:59.640 --> 0:05:02.400 gr ones could potentially surpass that. 0:05:02.800 --> 0:05:06.560 So Michael, where does Fizer go from here after this setback? 0:05:07.120 --> 0:05:09.560 Do they double down on obesc pills? Do they do 0:05:09.600 --> 0:05:12.080 they try something new? What's the plan here for Pfizer? 0:05:13.440 --> 0:05:15.760 So, I mean they've got another oral jylp one in 0:05:15.800 --> 0:05:18.600 their pipeline, so it's in phase one. It's being developed 0:05:18.600 --> 0:05:22.200 for diabetes, notatural you know, whether or not they can 0:05:22.279 --> 0:05:25.919 also look at that in obesity two. But clearly the 0:05:25.960 --> 0:05:28.720 timeline here is the issue. You know, You've got oral 0:05:28.800 --> 0:05:31.520 jilp ones coming to market in twenty six onwards. You'll 0:05:31.560 --> 0:05:34.960 probably have a wave of new treatments coming in, you know, 0:05:35.040 --> 0:05:38.159 towards the end of the end of the decade. So 0:05:38.240 --> 0:05:39.760 you know, we really think that Fiser is going to 0:05:39.839 --> 0:05:41.960 have to go out, you know, either in license at 0:05:42.000 --> 0:05:44.680 jilp one or do some sort of m and a 0:05:45.200 --> 0:05:47.240 they're well positioned to do that. You know, they've got 0:05:47.279 --> 0:05:50.359 ten to fifteen billion of M and a firepower you 0:05:50.360 --> 0:05:55.719 know to four acquisitions. So that's really you know, how 0:05:55.760 --> 0:05:57.880 we think that they're going to do, you know, play 0:05:57.920 --> 0:06:01.200 catch up in this space in terms of you know, 0:06:01.240 --> 0:06:03.440 I mentioned some biotechs out there that have you know, 0:06:03.520 --> 0:06:08.920 quite appealing assets. You know, you've also got China to say, 0:06:09.000 --> 0:06:12.480 you know, we've seen some very competitive data in Chinese 0:06:12.560 --> 0:06:16.320 patients for some of those domestic players, and you know 0:06:16.320 --> 0:06:19.279 we've seen the lights of Novo Astro mark kind of 0:06:19.360 --> 0:06:21.560 all kind of you know, delve into China's R and 0:06:21.640 --> 0:06:25.800 D locker to essentially bolster their OBC pipelines. 0:06:26.160 --> 0:06:30.159 Our thanks to Mikey Shaw, Bloomberg Intelligence Senior Pharma biotech analysts. 0:06:30.440 --> 0:06:32.520 The trade war between the US and China has been 0:06:32.520 --> 0:06:35.040 heating up. This week, China ordered its airlines to stop 0:06:35.080 --> 0:06:37.719 taking deliveries of Boeing jets and to halt purchases of 0:06:37.800 --> 0:06:41.040 aircraft related equipment and parts from US companies. 0:06:41.279 --> 0:06:43.400 The move is seen as a retaliatory measure in the 0:06:43.440 --> 0:06:45.880 ongoing trade war between the US and China, which is 0:06:45.880 --> 0:06:48.799 imposed here is to one hundred and forty five percent 0:06:49.120 --> 0:06:50.080 on American goods. 0:06:50.279 --> 0:06:52.080 For more on Boeing, Nora and I were joined by 0:06:52.120 --> 0:06:56.000 George ferguson Bloomberg Intelligence senior Aerospace, Defense and airlines analysts. 0:06:56.040 --> 0:06:57.880 We first asked George, how big of a deal this 0:06:57.920 --> 0:06:58.960 news is for Boeing. 0:06:59.400 --> 0:07:01.320 I don't see the being a big issue, right, So 0:07:01.400 --> 0:07:04.160 this is one of those things that the relationship has 0:07:04.200 --> 0:07:07.840 deteriorated over a period of time. We took another look 0:07:07.880 --> 0:07:11.800 at when we saw orders from the Chinese airlines for Boeing, 0:07:12.280 --> 0:07:16.600 and there's been like fifteen or sixteen this decade. I 0:07:16.600 --> 0:07:20.680 think fifteen came in I think last year of two 0:07:20.800 --> 0:07:25.160 hundred and forty two orders from China that are on 0:07:25.240 --> 0:07:28.880 the books right now, the last real material size and 0:07:29.040 --> 0:07:32.800 orders from the big Chinese airlines we saw back in 0:07:32.880 --> 0:07:36.400 twenty eighteen. So this is a relationship that's been broken 0:07:36.520 --> 0:07:39.280 for a while. Frankly, the Chinese haven't really been, like 0:07:39.320 --> 0:07:41.280 I said, ordering from Boeing. 0:07:41.480 --> 0:07:43.720 So the bigger issue. 0:07:43.400 --> 0:07:45.560 Here, I think is Boeing delivering some of the airplanes 0:07:45.840 --> 0:07:48.679 they've already built for the Chinese. Like I said, there's 0:07:48.680 --> 0:07:51.360 some two forty of them sitting in the order books. 0:07:51.680 --> 0:07:54.600 I suspect a bunch of them are already made and 0:07:54.680 --> 0:07:56.400 Boeing would like to get rid of them. Part of 0:07:56.440 --> 0:08:00.520 the shadow factory elimination they're trying to do to streamline operations. 0:08:00.520 --> 0:08:01.880 Is the pain in the neck to have an airplane 0:08:02.240 --> 0:08:04.560 on the tarmac that's sold that you've got to maintain, 0:08:04.960 --> 0:08:06.840 but the customer isn't taking delivery of. 0:08:07.200 --> 0:08:08.200 It'll slow that down. 0:08:08.240 --> 0:08:11.920 I think it might hasten some of Boeing's push to 0:08:12.000 --> 0:08:14.480 sell some of those airplanes. The Indians have bought a. 0:08:14.480 --> 0:08:14.960 Bunch of them. 0:08:15.240 --> 0:08:18.160 Maybe they're they're game for more, but I just don't 0:08:18.760 --> 0:08:22.120 This is China admitting what they've already been doing. 0:08:22.160 --> 0:08:25.320 Frankly, So, George, what exactly is the goal here? I mean, 0:08:25.360 --> 0:08:28.200 to your point and also Jeffrey's analysts, they're noting that 0:08:28.280 --> 0:08:30.840 Boeing has largely de risked from China, they said of 0:08:30.880 --> 0:08:34.160 the country contributing roughly about five percent of the skyline 0:08:34.200 --> 0:08:37.160 over the next couple of years. But also a source 0:08:37.240 --> 0:08:39.760 of upside. What do you think the goal is here 0:08:39.800 --> 0:08:42.640 if there seems to be marginal impact here to Boeing. 0:08:43.320 --> 0:08:44.120 Yeah, look, I think. 0:08:44.000 --> 0:08:46.240 It's splashy right for the Chinese to make this kind 0:08:46.240 --> 0:08:51.600 of commentary, And look, I do think there's potentially some upside. So, look, 0:08:52.040 --> 0:08:54.400 there's a couple of things that's been going on right China. 0:08:54.440 --> 0:08:57.720 One is growing a lot slower since the pandemic. Prior 0:08:57.760 --> 0:09:00.480 to the pandemic, China would take in three three hundred 0:09:00.480 --> 0:09:02.839 and narrow bodies a year, more than half of them 0:09:02.880 --> 0:09:06.120 would be Boeing. And so you know since the pandemic, 0:09:06.240 --> 0:09:09.199 last year we saw about one hundred and fifty deliveries 0:09:09.200 --> 0:09:13.120 of narrow bodies in a China. They were airbus airplanes. 0:09:13.600 --> 0:09:17.000 So and look, you know in a global trade battle, 0:09:17.520 --> 0:09:20.480 China could see a diminishing GDP. Right, this is a 0:09:20.720 --> 0:09:25.400 country grown eight percent last decade, fourish percent this decade. 0:09:25.520 --> 0:09:27.200 But if they get that, you know, if they decide 0:09:27.200 --> 0:09:29.600 they're going to negotiate with the US, they get some 0:09:29.720 --> 0:09:32.920 of that growth back on the rails. I think inside 0:09:32.960 --> 0:09:36.640 some of that negotiation you could see a requirement to 0:09:36.800 --> 0:09:40.400 order Boeing airplanes. Donald Trump cut a similar deal in 0:09:40.480 --> 0:09:45.080 his last administration. So there is some silver lining. And 0:09:45.120 --> 0:09:47.840 like I said, I think the Chinese sort of they 0:09:47.960 --> 0:09:50.640 know that the Boeing's at one of our biggest exporters. 0:09:51.000 --> 0:09:53.040 They know they'll get some good headlines out of saying 0:09:53.040 --> 0:09:55.680 we're not going to take any more bowing airplanes. But again, 0:09:55.679 --> 0:09:58.959 I think this is already this is a microcosm of 0:09:59.000 --> 0:10:02.880 the US kind of begetting uncoupled from China right now. 0:10:03.040 --> 0:10:05.520 So this isn't a major headwind here for Boeing. But 0:10:05.600 --> 0:10:08.080 what do you think are some headwinds that they could 0:10:08.080 --> 0:10:12.360 be facing. What are some near term hurdles, you know. 0:10:12.679 --> 0:10:16.040 I think Boeing has been down for so long that 0:10:16.120 --> 0:10:19.240 I think most of the hurdles are clearing and you're 0:10:19.240 --> 0:10:20.760 going to see a pretty good year. I think the 0:10:20.800 --> 0:10:22.960 big issue this year is they've really got to get 0:10:23.280 --> 0:10:27.160 Spirit Aerosystems bought and integrated into Boeing. 0:10:27.200 --> 0:10:28.760 I think that's well underway. 0:10:29.040 --> 0:10:31.480 I'm hearing good news from people I know in the 0:10:31.480 --> 0:10:35.160 industry about quality coming out of Spirit. They've got to 0:10:35.160 --> 0:10:38.199 get rid of that shadow factory. These airplanes already built 0:10:38.240 --> 0:10:40.600 sitting on the tarmac that they're maintaining. 0:10:41.559 --> 0:10:43.480 You know, that's just a huge dragon expenses. 0:10:43.520 --> 0:10:46.160 They got to get them delivered out to customers, sold 0:10:46.200 --> 0:10:49.040 off to new customers, and it's all about in the 0:10:49.120 --> 0:10:52.720 back half of the year building more airplanes in the factory. 0:10:52.760 --> 0:10:55.520 We've been watching it in the first quarter of the year. 0:10:55.559 --> 0:10:58.560 I think they're getting about twenty twenty five through the 0:10:58.600 --> 0:11:02.280 factory every month to keep building on that cadence. That's 0:11:02.320 --> 0:11:05.480 going to generate the cash and the profitability they need. 0:11:05.720 --> 0:11:08.120 And oh, by the way, they added. 0:11:07.880 --> 0:11:11.720 Twenty six billion dollars to inventory since I think twenty 0:11:11.840 --> 0:11:15.480 eighteen we have it and support at some five hundred 0:11:15.960 --> 0:11:19.559 equivalent to five hundred and seven thirty sevens. As they 0:11:19.600 --> 0:11:23.440 start building from the inventory on hand, their cash generation 0:11:23.640 --> 0:11:26.640 is going to be supercharged. They could have a really 0:11:26.760 --> 0:11:28.760 nice back half of twenty twenty five. 0:11:29.120 --> 0:11:32.160 Our thanks to George ferguson Bloomberg Intelligence, senior Aerospace, Defense 0:11:32.200 --> 0:11:33.199 and Airlines analysts. 0:11:33.280 --> 0:11:36.040 Coming up, we'll break down why Elliott Investment Management is 0:11:36.080 --> 0:11:39.240 said to be building a stake in Hewlett Packard Enterprise. 0:11:39.480 --> 0:11:42.160 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:11:42.240 --> 0:11:44.520 debt research and data on two thousand companies and one 0:11:44.559 --> 0:11:47.439 hundred and thirty industries. You can access Bloomberg Intelligence via 0:11:47.480 --> 0:11:48.440 Bigo on the terminal. 0:11:48.440 --> 0:11:51.160 I'm Paul Sweeney and I'm normal Linda. This is Bloomberg. 0:11:56.240 --> 0:11:59.880 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:00.080 --> 0:12:02.720 weekdays at ten am. He's done on Apple, Coarclay and 0:12:02.720 --> 0:12:06.000 Android Otto with the Bloomberg Business App. Listen on demand 0:12:06.080 --> 0:12:10.040 wherever you get your podcasts, or watch us live on YouTube. 0:12:10.480 --> 0:12:12.720 I'm Paul Sweeney and I'm Normal Linda filling it for 0:12:12.760 --> 0:12:15.760 Alex Biel. We moved next to the luxury sector this week. 0:12:15.920 --> 0:12:18.960 LVMA shares dropped after the luxury group published weaker than 0:12:19.000 --> 0:12:20.160 expected quarterly sales. 0:12:20.400 --> 0:12:22.600 The company was weighed down by sluggish demand for high 0:12:22.640 --> 0:12:25.280 end goods in China and the US and an escalating 0:12:25.320 --> 0:12:25.800 trade war. 0:12:26.160 --> 0:12:28.280 For more, Nora and I were joined by Debora Aik 0:12:28.360 --> 0:12:30.320 and Bloomberg Intelligence luxury goods analyst. 0:12:30.520 --> 0:12:33.200 We first asked deb what she took away from LVMH's 0:12:33.360 --> 0:12:34.400 most recent results. 0:12:34.720 --> 0:12:37.600 Fashion and Leather goods is fifty percent of their sales, 0:12:37.679 --> 0:12:41.240 so actually this is a key one organic sales growth 0:12:41.280 --> 0:12:44.719 figure only, not yearnings. And we saw with Fashion and 0:12:44.800 --> 0:12:47.960 Leather it was down five the marketed expected down half. 0:12:48.400 --> 0:12:50.600 And what we saw behind that the US is holding 0:12:50.640 --> 0:12:53.480 o poque social Europe, but where they did a big 0:12:53.559 --> 0:12:56.920 chunk of their business last year from tourism shifting across 0:12:56.960 --> 0:13:00.160 from China to Japan. That's now dried up against two 0:13:00.240 --> 0:13:03.880 years of big numbers, and the big thing is that 0:13:03.920 --> 0:13:07.199 it hasn't repatriated back to the mainland. So that was 0:13:07.280 --> 0:13:11.240 one side. Another side for them would be if we 0:13:11.320 --> 0:13:16.319 think about the wines and Spirits division, which houses their cognacs, 0:13:16.559 --> 0:13:20.400 that's still very tough in the US and also in China, 0:13:20.960 --> 0:13:23.800 and then Sephara was a big growth driver last year 0:13:23.800 --> 0:13:26.120 for them in the US that's kind of fallen away 0:13:26.160 --> 0:13:27.560 a little bit on the big comps. 0:13:27.960 --> 0:13:30.800 So of course we know weakness in sales in China 0:13:30.840 --> 0:13:33.120 has really been an overhang for LVMH and just the 0:13:33.160 --> 0:13:36.959 broader luxury industry. But the EU expects US tariffs to 0:13:37.000 --> 0:13:40.680 remain as talks make little progress. So that being said, 0:13:40.760 --> 0:13:44.199 how are a lot of these luxury companies really thinking 0:13:44.240 --> 0:13:46.959 about this tear iff environment and the uncertainty there as 0:13:47.000 --> 0:13:48.800 it thinks about the US consumer. 0:13:49.400 --> 0:13:52.600 We've done certainly a lot of our own work on 0:13:52.800 --> 0:13:56.520 Excel dug deep gone through all of the different factors, 0:13:56.920 --> 0:13:59.640 and we can see when we look at these companies 0:14:00.280 --> 0:14:02.800 a range of maybe two to eight percent or in 0:14:02.920 --> 0:14:07.599 terms of needing price rise. So the highest end companies 0:14:07.679 --> 0:14:12.040 have the biggest margin, so therefore costs are lower and 0:14:12.120 --> 0:14:16.080 generally they're operating out of Europe, and so that means 0:14:16.120 --> 0:14:18.760 that they would need to price probably low to mid 0:14:18.800 --> 0:14:22.040 single digit to cover that, given that currently across Europe 0:14:22.120 --> 0:14:24.840 we have a ten percent power of risk hike. 0:14:25.400 --> 0:14:26.040 Of course that. 0:14:26.000 --> 0:14:29.000 Could change, but you know it's going to be difficult 0:14:29.040 --> 0:14:31.600 because the last three years we've seen price hikes of 0:14:31.680 --> 0:14:35.960 twenty five percent, so since we've had a pandemic recovery, 0:14:36.280 --> 0:14:38.960 so there really are running off a very high base 0:14:39.040 --> 0:14:41.000 on the price in they're going to have to really 0:14:41.400 --> 0:14:44.440 determine what they do in terms of more manufacturing over 0:14:44.440 --> 0:14:47.200 there where they can so for mid range for some 0:14:47.280 --> 0:14:51.120 of elv Matre's fashion and leather goods, we think around 0:14:51.160 --> 0:14:54.240 a third of their US is covered in terms of 0:14:54.400 --> 0:14:57.440 US sales versus production. But there's a long way to go, 0:14:57.880 --> 0:15:00.320 and it can't be done quickly because you need really 0:15:00.320 --> 0:15:04.120 good artisans and to be training in labor, and that's 0:15:04.160 --> 0:15:06.480 one of the biggest issues for these companies. 0:15:06.920 --> 0:15:10.400 I'm looking at the PGeo function on the Bloomberg terminine. 0:15:10.440 --> 0:15:13.320 I see that Asia excluding Japan picks up about twenty 0:15:13.320 --> 0:15:17.480 seven percent of LVMH's business. So it's material. What are 0:15:17.480 --> 0:15:19.920 they saying about China. Is this a market that they 0:15:19.960 --> 0:15:24.080 can depend upon being a growth driver going forward or not? 0:15:24.360 --> 0:15:27.080 Because it's I know just from reading your work and 0:15:27.160 --> 0:15:30.000 talking to you in the past, China's really a lynchpin 0:15:30.240 --> 0:15:31.560 for global luxury. 0:15:31.840 --> 0:15:32.160 Yeah. 0:15:32.440 --> 0:15:35.560 I mean the big thing and the big hit over 0:15:35.600 --> 0:15:38.520 the last quarter really in these share prices has been 0:15:38.920 --> 0:15:42.000 that second half of last year we saw the US 0:15:42.040 --> 0:15:45.320 really start to improve, and that was offering a bit 0:15:45.360 --> 0:15:48.360 of a lifeline until we could start to see China, 0:15:48.400 --> 0:15:51.480 hopefully by the second half this year improve that or 0:15:51.520 --> 0:15:55.800 that changes, the mindset changes, the consumer sentiment changes, and 0:15:55.840 --> 0:15:58.080 so yes, for the long term, there's still a lot 0:15:58.120 --> 0:16:00.160 to do for all these companies in each of then 0:16:00.240 --> 0:16:03.080 we'll say they still pin their hopes on China for 0:16:03.120 --> 0:16:07.160 the long term, more infrastructure into the marketplace, owning the 0:16:07.200 --> 0:16:10.400 consumer more over there. But certainly in the short term 0:16:10.440 --> 0:16:13.200 and in the year ahead, the Cummuch uncertainty, and I 0:16:13.240 --> 0:16:16.800 really think that that hits hard on consumer sentiment, not 0:16:16.840 --> 0:16:20.200 only in the US, but also and particularly in China. 0:16:20.880 --> 0:16:23.400 Another one we saw was biased off with Nivre in 0:16:23.440 --> 0:16:26.160 the very high end LA Prairie came out, and I'm 0:16:26.200 --> 0:16:28.600 just trying to get a feel of how beauty is 0:16:28.640 --> 0:16:31.600 doing over there, and the view there is that they've 0:16:31.600 --> 0:16:35.280 had to clean up China even more on their Laprairie brand, 0:16:35.320 --> 0:16:38.400 which is very high end skin care, and they're having 0:16:38.480 --> 0:16:41.800 to actually also think about Nivia and rebrand and to 0:16:41.880 --> 0:16:45.920 at least the premium level. So there's more price volatility 0:16:46.760 --> 0:16:49.440 in the market and that's already starting to creep up 0:16:49.440 --> 0:16:50.320 in China. 0:16:50.400 --> 0:16:53.760 Thanks to Debek and Bloomberg Intelligence luxury goods analysts. 0:16:53.800 --> 0:16:56.120 This week, we focus on a Bloomberg Big Take story 0:16:56.160 --> 0:16:58.880 titled GM and It's eight year, thirty five billion dollar 0:16:59.000 --> 0:17:02.040 EV bet brace for tariff head. You can find that 0:17:02.160 --> 0:17:04.600 on Bloomberg dot com. And the terminal. 0:17:04.440 --> 0:17:06.600 Story looks at how General Motors has to figure out 0:17:06.640 --> 0:17:09.320 how to sell cars in Donald Trump's America after spending 0:17:09.359 --> 0:17:11.920 about thirty five billion dollars on its EV transition. 0:17:12.280 --> 0:17:14.720 For more, Paul and I will join by David Welch, 0:17:14.800 --> 0:17:16.320 Bloomberg Detroit BUREA Chief. 0:17:16.320 --> 0:17:18.479 We first asked David to break down why times are 0:17:18.520 --> 0:17:19.679 tough right now at GM. 0:17:19.960 --> 0:17:23.159 If you look at Trump's policies, they're pretty tough on 0:17:23.200 --> 0:17:24.919 all the car companies, right, I mean, you've got this 0:17:25.000 --> 0:17:27.680 tariff regime out there that still hasn't been sorted out. 0:17:28.000 --> 0:17:31.560 Trump has indicated that he might have some leniency in 0:17:31.600 --> 0:17:34.720 the offering for car companies. But they've built up the 0:17:34.760 --> 0:17:38.960 supply chain and assembly in the US, Canada, Mexico and 0:17:39.000 --> 0:17:43.160 other places for decades now. They have made more investments 0:17:43.200 --> 0:17:46.840 based on USMCA, which was a Trump trade deal, and 0:17:46.920 --> 0:17:49.280 now that could be upended. GM makes two of its 0:17:49.320 --> 0:17:52.760 evs in Mexico. It's two of its cheapest ones, the 0:17:52.840 --> 0:17:56.040 Chevy Equinox and Chevy Blazer, and so it makes it 0:17:56.080 --> 0:17:59.239 tough from that standpoint for those two vehicles and some 0:17:59.280 --> 0:18:01.040 of the parts that can in for those vehicles, and 0:18:01.040 --> 0:18:04.359 then generally for GM's business, tariffs are just not a 0:18:04.359 --> 0:18:06.919 good thing. They import vehicles, they import components, all of 0:18:06.960 --> 0:18:09.280 that that makes it tough. Trump has also said he 0:18:09.280 --> 0:18:10.840 hasn't done it yet, but he said that he wants 0:18:10.880 --> 0:18:14.560 to get rid of the Biden era Inflation Reduction Act. 0:18:14.640 --> 0:18:17.120 Those are up to seventy five hundred dollars in tax 0:18:17.200 --> 0:18:21.600 credits for people who buy evs. That makes GM's life difficult. 0:18:21.680 --> 0:18:24.160 With this big investment they have out there. There could 0:18:24.160 --> 0:18:26.399 be relief on this. There are ways to get around it. 0:18:26.440 --> 0:18:28.280 But if you're General Motors and you've got a dozen 0:18:28.280 --> 0:18:31.200 of v's out there and the program on the whole 0:18:31.240 --> 0:18:34.840 loses money. They're improving the profitability, but it does lose money. 0:18:35.560 --> 0:18:37.919 The pressure's really on, as it always has been, but 0:18:38.000 --> 0:18:41.200 even more so with Trump policies to get those vehicles 0:18:41.240 --> 0:18:43.880 to a break even or a profitable level and then 0:18:43.920 --> 0:18:45.840 sell them in big enough numbers where you continue to 0:18:45.840 --> 0:18:48.200 get economies of scale and you can drive the cost down. 0:18:48.720 --> 0:18:51.399 So it's not impossible. They're working hard at it, as 0:18:51.440 --> 0:18:53.440 we have a lot of detail on in the story 0:18:53.480 --> 0:18:57.639 in terms of reducing battery cost, improving efficiency at the 0:18:57.640 --> 0:19:00.680 assembly plan level, that sort of thing. It's hard work 0:19:00.800 --> 0:19:03.320 and EV's this kind of transition was always going to 0:19:03.320 --> 0:19:06.240 be difficult. It is for everybody. But you know, in 0:19:06.240 --> 0:19:09.200 GM's case, they've done some reining in of investment, but 0:19:09.240 --> 0:19:12.119 they've really continued their push and some of their rivals 0:19:12.160 --> 0:19:14.760 have reined it in, pulled back in the face of 0:19:14.800 --> 0:19:18.520 all of this. So GM's sticking with it and they're 0:19:18.560 --> 0:19:20.760 really working hard to make it profitable. 0:19:21.200 --> 0:19:23.959 David, As you said, the pressure is on does CEO 0:19:24.040 --> 0:19:26.399 Mary Barrow really have a dog in this fight to 0:19:26.440 --> 0:19:29.280 electrify GM in the EV space. I mean, of course 0:19:29.320 --> 0:19:30.720 she's trying to get a little bit of a peek 0:19:30.760 --> 0:19:34.800 into Tesla's playbook by hiring some of their veterans from Tesla, 0:19:34.960 --> 0:19:36.919 But do they really have the brand recognition that they 0:19:37.000 --> 0:19:39.280 need to push through on this charge. 0:19:39.760 --> 0:19:43.280 Yeah, that's a tough one. I think what they're trying 0:19:43.320 --> 0:19:46.360 to do here is they're trying to change that right. 0:19:46.440 --> 0:19:48.879 So one thing they'll point out is one they doubled 0:19:48.880 --> 0:19:52.800 their market share in the EV segment EV space in 0:19:52.840 --> 0:19:55.920 the US over the past year, and they did even 0:19:55.960 --> 0:19:58.639 better in the first quarters. They've got some sales momentum, 0:19:59.160 --> 0:20:01.200 and they're doing a on the coast, which is where 0:20:01.200 --> 0:20:04.119 most TV buyers are. But it is it is a 0:20:04.160 --> 0:20:07.520 bit tough when Chevrolet, for example, known for big pickup trucks, 0:20:07.560 --> 0:20:12.600 known for Chevy suburbans, Cadillact known for the Escalade. These 0:20:12.600 --> 0:20:16.439 are pretty thirsty and pretty expensive vehicles. They tend to 0:20:16.480 --> 0:20:18.399 do well in the middle of the country and in 0:20:18.400 --> 0:20:21.119 the South. So for GM, you can see why they 0:20:21.119 --> 0:20:24.119 want to push this right. They've got brands that do 0:20:24.240 --> 0:20:27.840 better in middle America. And if EV's are bought on 0:20:27.880 --> 0:20:30.239 the coast and you can get market share there, why 0:20:30.280 --> 0:20:32.240 wouldn't you push for that? It does bring in a 0:20:32.240 --> 0:20:35.400 different kind of buyer. And I think there's a bit 0:20:35.400 --> 0:20:37.840 of chicken egg and an egg here. Does the brand 0:20:37.920 --> 0:20:40.760 hurt them from selling EV's or does does selling EV's 0:20:40.840 --> 0:20:44.120