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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney. Along

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Speaker 1: with my co host of Bonnie Quinn. Every business day

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Speaker 1: we bring you interviews from CEO, market pros and Bloomberg experts,

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Speaker 1: along with essential market moving news. Kind a Bloomberg Markets

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Speaker 1: podcast on Apple podcast or wherever you listen to podcasts,

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Speaker 1: and on Bloomberg dot com. And today's special edition of

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Speaker 1: Bloomberg Markets is focused on E s G and green finance.

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Speaker 1: Let's bring in somebody who knows all about that now,

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Speaker 1: Eugenia Jackson, as head of E s G Research and

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Speaker 1: co chair of the E s G Committee for PGM

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Speaker 1: Fixed Income about eight nine billion dollars in assets under management. Eugenia,

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Speaker 1: thanks for joining your co chair of the E s

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Speaker 1: G Committee, head of E s G Research, I can

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Speaker 1: only imagine how much work that is E s G.

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Speaker 1: You now seems to permeate every single investment and every

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Speaker 1: investment product. How do you manage all of that research

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Speaker 1: and decision making on investments? Hello, and thank you for

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Speaker 1: having me Um. Yes, I mean E s G. S

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Speaker 1: you rightly said. E s G today is at the

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Speaker 1: front and center of very many investment decisions, but it's

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Speaker 1: also such a constantly evolving space, and things are shifting

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Speaker 1: at a very at increasing speed. So and also unlike

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Speaker 1: in many other investment areas, in E s G, we're

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Speaker 1: seeing a lot of subjectivity and a lot of preconsumptions

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Speaker 1: associated with D s G, So most people would find

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Speaker 1: it very difficult to keep space pace with the U

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Speaker 1: s G development. So I will give you an example.

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Speaker 1: For example, the imperative of addressing climate change and transitioning

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Speaker 1: to low carbon economy is changing business models, operations, product

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Speaker 1: services of many industries and companies all over the world.

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Speaker 1: And energy companies are often verified for their contribution to

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Speaker 1: climate change, but these are also the industries that are

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Speaker 1: adapting fast, that transforming their business models through their investments

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Speaker 1: and renewable power generation, investing in developing new technologies, exploring

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Speaker 1: opportunities for credible offsetting programs, and these are this This

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Speaker 1: creates investment risks and offers investment opportunities. But given the

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Speaker 1: sheer scale of ESG topic and the pace of change,

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Speaker 1: investors need both expertise and agility to create value. So

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Speaker 1: this is exactly what we're doing at Digion's ext income

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Speaker 1: and I'm very fortunate to be given this opportunity to

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Speaker 1: contribute to this exciting and involving area. Digim So, Eugenia,

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Speaker 1: you know, I'm gonna talking about data, the data that's

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Speaker 1: out there to support investors really want to factor E

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Speaker 1: s G into their calculus. Here for typical investing, you know,

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Speaker 1: you go to the financial statements, income statement, to balance sheet,

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Speaker 1: the cash flow statements. They're all audited data and that

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Speaker 1: can really help analysts and investors make decisions when you

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Speaker 1: want to factor an E s G investing, Talk to

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Speaker 1: us about the quality of data that is out there

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Speaker 1: for investors to help them, uh, you know, using their analysis. Well,

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Speaker 1: if I compare to what we had even ten years

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Speaker 1: ago in E s G, I would say that it

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Speaker 1: being a tremendous improvement in the both the amount and

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Speaker 1: the quality of data that we have. However, you're absolutely right,

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Speaker 1: compared to what we get is the financial data that

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Speaker 1: we get E s G data is not sufficient, it's inconsistent,

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Speaker 1: and it's still largely produced a voluntary basis by companies.

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Speaker 1: So there is very little um laws and regulations that

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Speaker 1: would require the disclosure of the data. And this is

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Speaker 1: one of the major struggles when it comes to doing

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Speaker 1: U S G analysis and trying to you know, make

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Speaker 1: investment decisions on the basis of s G considerations. So

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Speaker 1: this is why you know, at Pigeon six th Income

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Speaker 1: we do not rely so much on third party data

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Speaker 1: and third party ratings. We are collecting the data ourselves.

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Speaker 1: We are doing our own research. We are reading the

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Speaker 1: disclosures provided by the issues. We are engaging actively with

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Speaker 1: the companies and with you know, software issues and others

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Speaker 1: to get the information and to get our questions answered.

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Speaker 1: And that's how we are collecting, analyzing and incorporating this

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Speaker 1: information into our analysis. If we only relied on right, well,

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Speaker 1: I was just going to say, what do you prioritize?

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Speaker 1: Is that outcomes? Is how much change that that investment

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Speaker 1: might effect to as is it's something else. How do

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Speaker 1: you decide what's important when it comes to the metrics. Um,

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Speaker 1: that's very good question. So at Picture Fixed Income, we'll

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Speaker 1: look at s G factors from two different perspectives. So

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Speaker 1: on one hand, we are looking at those us G

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Speaker 1: factors that we believe as an active fundamental investor, we

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Speaker 1: believe our credit material are financially material that they can

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Speaker 1: move this. This are the us factors that can move

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Speaker 1: bond prices that can move spreads, and therefore we integrate

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Speaker 1: them directly into our credit analysis and in relative value discussions.

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Speaker 1: Now this on the second set of On the other hand,

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Speaker 1: we're also assessing how issues companies and and their economic

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Speaker 1: activities are impacting the environment and society it and for

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Speaker 1: this way you're using our proprietary eas impact ratings. So

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Speaker 1: there are two types of assessments u s G assessments

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Speaker 1: that we're doing. And we feel that this is really

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Speaker 1: important because you know, there are certain elements of certain

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Speaker 1: us G factors which today they might not be credit material,

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Speaker 1: or may not even be credit material in the foreseeable future.

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Speaker 1: But over time, as more and a sustainability becomes bigger

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Speaker 1: and bigger consideration for a growing number of investors and policymakers,

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Speaker 1: these factors are going to become a lot more material.

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Speaker 1: So this is also the forward looking perspective. So and

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Speaker 1: this is how we saw how we look at the

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Speaker 1: data that we have, how the factors that we analyze,

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Speaker 1: and then so that we're looking at them from the

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Speaker 1: materiality perspective, the financial materiality as well as from the

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Speaker 1: environmental and social impact perspective. You need to spout thirty seconds.

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Speaker 1: How has COVID nineteen impact the e s G invested

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Speaker 1: as an accelerated trends or maybe even slowed it down.

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Speaker 1: I think it has accelerated very significantly because what it's

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Speaker 1: done is really cost the spotlight on the social inequalities

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Speaker 1: and the differences and working conditions and treatment of employees, suppliers,

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Speaker 1: you know, across companies, industries, countries, and these are all

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Speaker 1: social issues. The COVID really has brought the social issues

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Speaker 1: to the forefront. And I think it's also highlighted the

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Speaker 1: risks that investors face when it comes to supply chains.

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Speaker 1: So um, this will have consequences for companies and their investors,

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Speaker 1: and I think it's just really another tale wind for emergy. Eugenie,

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Speaker 1: thank you so much for joining us. Really appreciate your time.

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Speaker 1: Just a fascinating discussion. Eugenia Jackson, head of E s

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Speaker 1: G Research and co chair of the E s G

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Speaker 1: Committee for Pigeon Fixed Income. They had eight nine billion

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Speaker 1: dollars under management, and you can tell that they are

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Speaker 1: clearly focused and committed to E s G investing, and

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Speaker 1: we're hearing more and more of that for more and

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Speaker 1: more large global institutional investors will have more on that

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Speaker 1: coming up. This is Bloomberg. Today's show is special edition

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Speaker 1: of Bloomberg Markets. We're focusing on E S, g N

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Speaker 1: green finance. Joining us right now is Catherine Nice, chief

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Speaker 1: European economist for PGIM Fixed Income based in London. Catherine,

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Speaker 1: thanks so much for joining us here. Boy, what a

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Speaker 1: year has been. Just extraordinary. In the second quarter just

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Speaker 1: seeing bearing the full brunt of the pandemic and then

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Speaker 1: of course that's snap back in the third quarter. Here,

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Speaker 1: fourth quarter a little bit uncertain here as it relates

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Speaker 1: to Europe. Give us a sense of kind of how

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Speaker 1: do you think Europe is going to finish out the

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Speaker 1: year and then more importantly, how do you think the

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Speaker 1: economies across the European Union and Union are going to

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Speaker 1: perform in next year. Thanks so much for having me. Yes,

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Speaker 1: it has been an extraordinary year. I think for for

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Speaker 1: all of us, we each have our own unique story

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Speaker 1: to tell. In Europe. The economy has has has moved

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Speaker 1: in ways that we never seen before. The hits that

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Speaker 1: we had in Q two was really completely off the scale.

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Speaker 1: We're going to end up with GDP hits to the

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Speaker 1: your area that are around twice the size of what

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Speaker 1: we saw during the global financial crisis. The good news

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Speaker 1: is that it wasn't as bad as as we thought

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Speaker 1: in real time, and the bounce back in Q three

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Speaker 1: was really remarkable. On sort of seasonally adjusted annualized rates,

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Speaker 1: we're looking at a number that's over sixt A comparable

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Speaker 1: number for the US was a little over thirty. These

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Speaker 1: are huge numbers and very promising in that UH. It

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Speaker 1: suggests that as we do move to a phase where

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Speaker 1: the vaccine becomes more widely available, we could see some

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Speaker 1: really strong bounce backs. I think said that we are

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Speaker 1: experiencing now a second as in Europe we've had a

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Speaker 1: second round of restrictions put in place. These restrictions have

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Speaker 1: been much less UH severe and restrictive generally speaking than

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Speaker 1: they were in the spring UH, and you know, encouragingly,

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Speaker 1: the numbers are looking good. We're seeing a turnaround, we're

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Speaker 1: seeing a flattening in that curve, but that has come

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Speaker 1: at an economic cost. So I think you are looking

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Speaker 1: at a sort of W shaped, sort of lopside of

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Speaker 1: W if you like, UH for Europe, where we see

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Speaker 1: GDP contracting in Q four UH and potentially also into

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Speaker 1: Q one. If we think that these lighter touch restrictions

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Speaker 1: will need to stay in place post the holiday season,

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Speaker 1: that would put Europe in a sort of double dip

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Speaker 1: recession UH position, which of course raises risks of long

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Speaker 1: term scarring. Well, just as we're seeing an extraordinary amount

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Speaker 1: of heterogeneity across the United States in different regions, we're

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Speaker 1: obviously seeing that in Europe too. Now, if you look

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Speaker 1: at the bond market, it tells you a vastly different

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Speaker 1: story in Italy than it does in Spain, for example.

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Speaker 1: How can we read what investors are anticipating for these

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Speaker 1: various countries from the data? Absolutely great point. Qualitatively, of course,

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Speaker 1: across Europe you've seen a very similar pattern. This big

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Speaker 1: hit is very strong, bounced back and now, um, you

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Speaker 1: know a bit of a bit of a step step

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Speaker 1: step back in Q four as I just described. But

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Speaker 1: looking underneath that, there is this heterogeneity, and that's a

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Speaker 1: real concern for the your area because this is a

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Speaker 1: monetary union that doesn't have a complete risk sharing ability,

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Speaker 1: so there's always this risk the union UH could be

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Speaker 1: stressed and tested. Um, where you're really seeing the divergence

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Speaker 1: to pick out you know, some of the countries you

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Speaker 1: just mentioned Italy Spain clearly hit very hard by the

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Speaker 1: public health crisis very early on uh in this pandemic,

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Speaker 1: but also their economies were more vulnerable to the social

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Speaker 1: distancing measures that that were needed to help manage the virus.

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Speaker 1: That was especially true in Spain they have a very

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Speaker 1: large tourism sector and clearly uh, you know, international travel Brits,

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Speaker 1: you know, my fellow friends and nelighbors, they couldn't go

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Speaker 1: to Spain in the summer, and and that you know,

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Speaker 1: translated into these GDP hits. Whereas countries like Germany, which

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Speaker 1: are much more manufacturing based and which have really benefited

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Speaker 1: from the rebound that you're seeing in China, their hits

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Speaker 1: aren't two. GDP has been much more muted, and they're

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Speaker 1: recovering better now even with these social restrictions in place,

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Speaker 1: because the manufacturing sector is helping to kind of offset

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Speaker 1: what's happening uh in the services sector, you know, by

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Speaker 1: by a construction, you know, through these social distancing measures.

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Speaker 1: So I think that is a concern that there is

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Speaker 1: this uh, you know, potential divergence uh in the economic

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Speaker 1: outlook across the European region. And I think that you

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Speaker 1: know that really underpins a lot of the policy action

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Speaker 1: that we've seen, uh since this pandemic, where European policy

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Speaker 1: makers have been much more unified and coordinated than I

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Speaker 1: think perhaps we're used to seeing them respond in the

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Speaker 1: face of these sorts of stresses that we've seen in

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Speaker 1: the past, in the sovereign debt crisis, in the global

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Speaker 1: financial crisis. Now they're acting decisively on monetary policy, decisively

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Speaker 1: on Cisco to enable uh, you know, the support from

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Speaker 1: the stronger member states in the European Union to help

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Speaker 1: support and prop up some of those countries that have

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Speaker 1: really been hit hard. Well, Catherine, just as you say

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Speaker 1: that the euro has extended its advanced and strongest levels

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Speaker 1: since two thousand eighteen versus the dollars, so you certainly

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Speaker 1: bring out the headlines on the Bloomberg. Thank you for

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Speaker 1: joining us today. Would love to talk to you more

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Speaker 1: about the European economy as time goes on. That's Catherine Nice,

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Speaker 1: chief European economist for PGM Fixed Income joining us there.

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Speaker 1: And again Katherine Nice of PIGIM. This is Bloomberg. Let's

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Speaker 1: bring in somebody very fascinating now, q m A. It's

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Speaker 1: the quantum division of PGIM and the person who's the

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Speaker 1: chairman and CEO of q m A is Andrew Dyson,

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Speaker 1: who joins us now. By the way, q m A

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Speaker 1: with almost ninety one billion dollars in assets under management. Andrew,

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Speaker 1: thanks for joining. I can imagine with the election you

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Speaker 1: had all sorts of models ready to go and althors

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Speaker 1: of inputs ready to to press enter on. Let's say,

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Speaker 1: when we knew an outcome, how does the outcome of

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Speaker 1: this election change the equation or the algebra or whatever

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Speaker 1: goes into quant investing for you. Look, I think I

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Speaker 1: think that you know this. This is in a sense

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Speaker 1: that potential for a regime change um an element. It

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Speaker 1: was already discounted in the market. But I think you've

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Speaker 1: seen many positives come through, and in terms of have

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Speaker 1: a market to have responded, and certainly in terms of

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Speaker 1: value for example, which has been out of favor for

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Speaker 1: a long time, that the last few weeks have generally

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Speaker 1: been a strong sort of rally. And that's a common

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Speaker 1: theme for quant so I think you know you're likely

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Speaker 1: to see I think those themes continue generally. And then

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Speaker 1: one area I know we're particularly interesting is what does

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Speaker 1: this mean to the future of E s G in

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Speaker 1: the US, and that's certainly something where we could be

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Speaker 1: a ce change I think in the next few years. Right,

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Speaker 1: we even have a star now, John Harry So Andrew.

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Speaker 1: I guess you know, I first started really getting questioned

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Speaker 1: about E s G investing probably a dozen years ago,

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Speaker 1: and it was by my institutional investor clients in Europe

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Speaker 1: and London and frankfort Uh way before the US. So

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Speaker 1: it seems to be E s G investing kind of

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Speaker 1: was was much more firmly entrenched in Europe and maybe

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Speaker 1: some other regions of the world. Where do you think

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Speaker 1: it is here in the US and how do you

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Speaker 1: how do you think it might play out over the

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Speaker 1: next several years and will abide administration maybe accelerate that. Oh,

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Speaker 1: I completely agree. I mean historically, I think the US

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Speaker 1: in terms of E s G adoption, whether it's for

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Speaker 1: institutional or or for individuals, has really lagged you know,

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Speaker 1: most of Europe, probably all of Europe now and market

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Speaker 1: like Australia, and some of that I think was just

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Speaker 1: history and cultural and but but I think what's been

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Speaker 1: very interesting is actually think now clients interest is actually

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Speaker 1: really probably at all time highs if if you chart

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Speaker 1: interest in the US, and what has held back that

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Speaker 1: that turning into assets has been some of the sort

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Speaker 1: of much more hostile regulatory environment that the d o

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Speaker 1: L has has sort of propagated over the last two

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Speaker 1: a few years. And so if that's right, you can

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Speaker 1: absolutely envisage that um that that regulator vironment, that regulatory

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Speaker 1: tone will change to be much more favorable. And then

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Speaker 1: I think that sort of pent up demand that that

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Speaker 1: we're seeing from a lot of plants as they both

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Speaker 1: institutional and individual plants will come to the floor. So

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Speaker 1: so this really could be a turning point in terms

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Speaker 1: of interest from all sides really in the US and

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Speaker 1: be a four year period where you do see a

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Speaker 1: big catch up in that gap between the US and

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Speaker 1: the rest of the work. Yes, I mean the very

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Speaker 1: fact that there's somebody dedicated to it now on the administration,

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Speaker 1: Assuming that you know, all goes well and Don Kerry

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Speaker 1: does you know, get into the position of climate I

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Speaker 1: guess sorrow or whatever they will call them, will re

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Speaker 1: enter paris most likely, and there are the authors that

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Speaker 1: will that impact any of your strategies. Well, we run

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Speaker 1: all our strategies now very cognizant of B s G consideration.

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Speaker 1: So as you as you mentioned before him, and we're

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Speaker 1: QUANTZ and so the way we would think about it

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Speaker 1: is we would talk about a regime change, in other words,

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Speaker 1: a situation where the future diverges from the path, and

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Speaker 1: that would be very clearly a regime change. So I

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Speaker 1: think the in any events, in our strategies were already

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Speaker 1: modeling the risk, if you like, or the potential of

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Speaker 1: that sort of regime change. And I think the likelihood

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Speaker 1: of that increased significantly, and so yes, you would expect

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Speaker 1: to see that cat gay through it. If that happens,

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Speaker 1: there'll be winners and losers in the market, and they'll

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Speaker 1: be you know, changing demand patterns from plants as the

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Speaker 1: results of that. Andrew, you know, I assume you folks

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Speaker 1: at q m A have your version of the black

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Speaker 1: box sitting on your desk here, How what are the

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Speaker 1: key inputs for the E s G part of your

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Speaker 1: uh you know, your format, your formula. What are some

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Speaker 1: of the key components? So we we have a number

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Speaker 1: of them. So we would look at, for example, elements

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Speaker 1: of government, so typically board independence, there's been one we've

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Speaker 1: used actually for quite a long time. But in terms

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Speaker 1: of the newer risks. We would particularly give a high

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Speaker 1: premium to c O two emissions, and I'm giving that weight.

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Speaker 1: If you look historically, you know companies have not had

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Speaker 1: to pay for the externalities if you like permitting zero two,

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Speaker 1: that's likely to change, It's like through quire sort of

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Speaker 1: business models. So so we elevate that is a key

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Speaker 1: sort of regime change risk, if you like. And so

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Speaker 1: our models will therefore favor companies that otherwise have the

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Speaker 1: same characteristics that lower missions um and so you see that.

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Speaker 1: But we also try and look in context at different

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Speaker 1: industries because I do think one of the other themes

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Speaker 1: of the s G is a theme around customization. So

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Speaker 1: underneath the letters, actually it means very different things for

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Speaker 1: different people, and it means very different things to companies.

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Speaker 1: So in our models we try and have a much

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Speaker 1: more industry driven view rather than one size fits all.

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Speaker 1: And certainly I think in terms of how we build

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Speaker 1: portfolios for clients were likewise we think customization is the

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Speaker 1: future in this area as well well. And so in

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Speaker 1: those cases, do you look across the globe, is there

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Speaker 1: an area where you find more candidates that fit your models?

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Speaker 1: You know? What I mean is the United States in

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Speaker 1: there at all. Oh yes, I mean if it's a

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Speaker 1: global efforts, I mean, of course of the United States

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Speaker 1: is in there in both directions. And then there are

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Speaker 1: fantastic companies doing great things in their laggers as well.

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Speaker 1: But that's that's true across all markets. I mean, the

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Speaker 1: issue is now a global seed, and I think it

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Speaker 1: will be great to welcome the US fully to that

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Speaker 1: party in terms of investing and in terms of plants. Hey, Andrew,

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Speaker 1: thank you so much for joining us. We really appreciated.

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Speaker 1: Andrew Dyson, chairman and CEO of q m A. Q

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Speaker 1: M A is the quant division of PIG and about

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Speaker 1: ninety one billion dollars under management. And and you know, Vannie,

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Speaker 1: I think one of the key things we learned from

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Speaker 1: today is just how much growth there isn't E S

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Speaker 1: G investing, both on the buy side and the sell

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Speaker 1: side and companies themselves, right, and such a mandate for

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Speaker 1: it now across you know, from family officers to you know,

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Speaker 1: endowments and so on. You just need to need to

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Speaker 1: be able to do this. Every every shop needs to

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Speaker 1: have an E s g R M and H S

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Speaker 1: g RM even better health. Yeah, it's interesting and one

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Speaker 1: of the aspects that here Bloomberg is trying to make

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Speaker 1: sure that we have the data available for clients who

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Speaker 1: want to really incorporate E s G uh into their

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Speaker 1: investment analysis. And on the f A function there's actually

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Speaker 1: an E s G tab, so when you're doing your

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Speaker 1: financial analysis you can look at the E s G

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Speaker 1: data though, So that's pretty interesting as well. Well the

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Speaker 1: next three it just fascinates me. You know, you think

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Speaker 1: about the electric vehicle business and you think Tesla, and

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Speaker 1: you think where are the big U S automakers, where

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Speaker 1: are they in the electric vehicle business? With General Motors recently,

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Speaker 1: you know, made a plan to take a steak and

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Speaker 1: equity stake in clean energy trucking startup Nickela Corporation. But

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Speaker 1: that plan has fallen apart, and quite frankly, I'm confused,

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Speaker 1: but I know somebody's on top of it, and that's

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Speaker 1: Tim O'Brien, senior calumnist for Bloomberg Opinion. Tim, it was

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Speaker 1: a promising deal, but a strange one. But what's even

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Speaker 1: stranger here is that General Motors has kind of pulled

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Speaker 1: out of the deal with Nicola. What's going on, Well,

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Speaker 1: they're pulling out Paul because it's become an embarrassment. And

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Speaker 1: and the curious thing in in this whole transaction is

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Speaker 1: GM had every opportunity not to do the deal. It

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Speaker 1: it UH famously began unraveling in September after Hindenburgh researcher,

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Speaker 1: a short seller, published a research report pointing out a

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Speaker 1: whole raft of problems with Nicola's leadership and and statements

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Speaker 1: by by its founder Trevor Milton and UH that ultimately

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Speaker 1: forced Mary barn and GM to step back. But it

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Speaker 1: wasn't September when a lot of controversial things about Niccola

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Speaker 1: was known. We're known that goes back as far as July,

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Speaker 1: when issues were raised about claims that had made for

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Speaker 1: trucks it was producing that that um it it said

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Speaker 1: there were heightened design and um uh energy efficiencies around

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Speaker 1: that vehicle that weren't the case. UH. Other things came

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Speaker 1: out about Milton's past over the summer, so the father

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Speaker 1: was out there. And the real question that comes up

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Speaker 1: and all this is what sort of due diligence did

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Speaker 1: GM actually do when they decided to give its corporate

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Speaker 1: blessing to a three year old startup that was still

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Speaker 1: an essentially an unproven truck producer, right, and why don't

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Speaker 1: we know that? I surely that should be transparent. Well,

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Speaker 1: it should be. I mean I think you know there's

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Speaker 1: now the Security and Exchange Commission and the Justice Department

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Speaker 1: are both now reportedly looking into, um, some of nicholas

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Speaker 1: public statements and Trevor Milton's public statements. Uh. There are

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Speaker 1: probably legitimate legal reasons uh for GM and for bear

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Speaker 1: Up not wanting to be more more forthcoming in the moment.

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Speaker 1: That's an argument that that could be made. The problem is,

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Speaker 1: I think GM has some problems of its own in

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Speaker 1: this transaction. It came to GM and Mary Bearas attention

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Speaker 1: through Steve Girsky. He's a former GM and executive who

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Speaker 1: became an investor and invested in Nicola and was very

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Speaker 1: um uh public in his statements that Niccola was the

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Speaker 1: real thing. It was Steve Gursky who brought this deal

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Speaker 1: through GM's doors. So was there an arm's length transaction here?

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Speaker 1: When when Mary Bera says that her team and the

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Speaker 1: company's accountants and lawyers and financial wizards scrutinized this before

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Speaker 1: GM tied up with Nicola, Well, did they really we

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Speaker 1: don't know, and I think that it would be useful

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Speaker 1: for the company to be more transparent and offer a

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Speaker 1: more public timeline of what occurred here and tim you know.

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Speaker 1: For for background, I used to work with Steve Gersky

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Speaker 1: way way back in the day when he was a

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Speaker 1: young OTTO analyst of Payne Warbert. I know he's enjoyed

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Speaker 1: it very good career in the auto industry. Government folks

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Speaker 1: known from the bailout, plus Mary Barra, who again has

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Speaker 1: a very good reputation. You just wonder how, you know,

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Speaker 1: people like these could put such an odd transaction together.

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Speaker 1: Do you think this is going to weigh on Mary

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Speaker 1: Barra's reputation and maybe even that of General Motors. Well,

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Speaker 1: I think they've taken a repute. Both of them have

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Speaker 1: taken a reputational hit. You know, I agree with you, Paul.

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Speaker 1: I think Mary Bara is an incredibly inspiring executive. She's

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Speaker 1: one of the few women to run a fortune. She's

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Speaker 1: the daughter of a GM tool and die craftsman. She's

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Speaker 1: entirely self made. She went to work for GIM when

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Speaker 1: she was eighteen, went on to get a degree in

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Speaker 1: electrical engineering and an NBA from Stanford. She's been g

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Speaker 1: m CEO for almost seven years, and she's handled a

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Speaker 1: bunch of thorny problems very deftly. But this, this, this

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Speaker 1: is a real problem for her because she's been opaque

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Speaker 1: about it. Her decision making here was clearly flawed and

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Speaker 1: and she's not really coming clean about what led to

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Speaker 1: a debacle. This this, there's no allegations of fraud here.

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Speaker 1: This is not going to cause legal headaches for her.

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00:26:11,880 --> 00:26:15,440
Speaker 1: She actually engineered a very smart financial deal for GM,

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00:26:15,480 --> 00:26:18,639
Speaker 1: so there's no money being lost, but there is reputational

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00:26:18,720 --> 00:26:21,040
Speaker 1: damage that I think they should think about. And as

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00:26:21,040 --> 00:26:23,960
Speaker 1: it also assigned him of the desperation a sort of

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00:26:24,000 --> 00:26:27,040
Speaker 1: older legacy companies to try and get in on what

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00:26:27,119 --> 00:26:30,560
Speaker 1: they see as something that might be disrupting them and

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00:26:30,680 --> 00:26:33,200
Speaker 1: not missing out on that. Well, you know, it's this

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00:26:33,320 --> 00:26:36,040
Speaker 1: is classic in corporate America when up starts find new

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00:26:36,119 --> 00:26:40,359
Speaker 1: markets and they get um lush valuations from the market.

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00:26:40,400 --> 00:26:43,240
Speaker 1: We saw it, uh you know a decade ago when

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00:26:43,280 --> 00:26:47,359
Speaker 1: banks UH began, you know, rushing to create internet only

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00:26:47,440 --> 00:26:50,240
Speaker 1: banks under new brands, but over the banks to sort

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00:26:50,240 --> 00:26:57,560
Speaker 1: of capitalize on the markets enthusiasm for standalone digital only

447
00:26:57,600 --> 00:27:03,119
Speaker 1: financial UH services companies. And it's happening now clearly in

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00:27:03,160 --> 00:27:06,840
Speaker 1: this sector. Tesla's obviously enjoyed a big run up, but

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00:27:06,880 --> 00:27:10,360
Speaker 1: at one point in June, Nicola had a market capitalization

450
00:27:10,400 --> 00:27:13,840
Speaker 1: that was larger than Ford's and um. I think the

451
00:27:13,880 --> 00:27:16,359
Speaker 1: auto companies are seeing this. They want to capture that value.

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00:27:16,359 --> 00:27:17,880
Speaker 1: But the end of the at the end of the day,

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00:27:18,400 --> 00:27:21,280
Speaker 1: a well run company and a well run corporation captures

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00:27:21,359 --> 00:27:24,680
Speaker 1: value by making great products and being very profitable. And

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00:27:25,160 --> 00:27:28,640
Speaker 1: if if legacy automakers want to be competitive in this

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00:27:28,680 --> 00:27:31,080
Speaker 1: new space, they've got to be shrewd about who they

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00:27:31,119 --> 00:27:33,080
Speaker 1: partner with, and they've got to be willing to embrace

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00:27:33,080 --> 00:27:36,600
Speaker 1: authentic innovation. It's interesting, Tim, I was talking about this

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00:27:36,680 --> 00:27:40,080
Speaker 1: with Kevin Tynan Bloomberg Intelligence auto analysts, and you know,

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00:27:40,200 --> 00:27:43,400
Speaker 1: just we had this ongoing conversation. It just feels like

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00:27:43,640 --> 00:27:45,720
Speaker 1: the big automakers, say, let's just take the big three

462
00:27:45,760 --> 00:27:48,840
Speaker 1: in Detroit are just so far behind in this ev

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00:27:49,320 --> 00:27:51,639
Speaker 1: that they're seating the market to Tesla. But Kevin and

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00:27:51,680 --> 00:27:53,840
Speaker 1: other auto and also come back and say, hey, when

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00:27:53,880 --> 00:27:56,240
Speaker 1: there's a big enough market to make these things profitably,

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00:27:56,480 --> 00:27:59,199
Speaker 1: really profitably, the big three will be there. Is that

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00:27:59,440 --> 00:28:01,840
Speaker 1: kind of the few you think is permitting through Detroit.

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00:28:02,960 --> 00:28:05,640
Speaker 1: I think so, and I think there's some truth to that.

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00:28:05,680 --> 00:28:08,919
Speaker 1: You know, the reality is that Tesla's not necessarily at

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00:28:08,920 --> 00:28:11,760
Speaker 1: a point right now where it can scale its production

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00:28:12,119 --> 00:28:14,600
Speaker 1: at all on the order of a Ford or a

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00:28:14,720 --> 00:28:18,560
Speaker 1: GM UM. I think at some point Testa will will

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00:28:18,600 --> 00:28:22,000
Speaker 1: probably need a production partner if it really wants to

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00:28:22,040 --> 00:28:26,639
Speaker 1: become a mammoth producer of vehicles at a lower price

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00:28:26,680 --> 00:28:29,719
Speaker 1: point than it than it sells right now. UM. On

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00:28:29,760 --> 00:28:32,520
Speaker 1: the other hand, I don't think legacy companies can just

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00:28:32,640 --> 00:28:36,520
Speaker 1: sit back and say we have production advantages, we have

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00:28:36,600 --> 00:28:40,680
Speaker 1: marketing advantages, we have scale, we're authentically global, Therefore we

479
00:28:40,720 --> 00:28:43,720
Speaker 1: can let someone else innovate and then we'll pick them

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00:28:43,720 --> 00:28:47,920
Speaker 1: off when they're mature enough. That's a dangerous strategy for

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00:28:48,040 --> 00:28:51,760
Speaker 1: any corporation in any industry, and we've seen this in media.

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00:28:51,920 --> 00:28:55,720
Speaker 1: We've seen it in traditional manufacturing and other sectors where

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00:28:55,960 --> 00:28:59,200
Speaker 1: people wait too long to innovate. Well, Tim, thank you.

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00:28:59,200 --> 00:29:01,680
Speaker 1: You're always innovation with your columns, so we appreciate it.

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Speaker 1: Tim O'Brien is senior columnist for Bloomberg Opinion, and his

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00:29:04,920 --> 00:29:07,520
Speaker 1: column to say Mary barn needs to explain GMS Nicola

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00:29:07,640 --> 00:29:10,440
Speaker 1: miss step pretty much speaks for itself. To have a

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Speaker 1: read of it. Thanks for listening to Bloomberg Markets podcast.

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00:29:14,560 --> 00:29:17,880
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts

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00:29:18,040 --> 00:29:21,600
Speaker 1: or whatever podcast platform you prefer. I'm Bonnie Quinn. I'm

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00:29:21,640 --> 00:29:24,280
Speaker 1: on Twitter at Bonny Quinn, and I'm Paul Sweeney. I'm

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00:29:24,280 --> 00:29:26,920
Speaker 1: on Twitter at pt Sweeney. Before the podcast, you can

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Speaker 1: always catch us worldwide at Bloomberg Radio.