1 00:00:02,720 --> 00:00:10,600 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,640 --> 00:00:14,600 Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 3 00:00:14,640 --> 00:00:17,880 Speaker 1: Easterned on Apple, Cocklay and Android Auto with the Bloomberg 4 00:00:17,960 --> 00:00:21,080 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,400 --> 00:00:22,800 Speaker 1: or watch us live on. 6 00:00:22,680 --> 00:00:26,800 Speaker 2: YouTube, Netflix, Comcast said to be interested in Warner Brothers. 7 00:00:26,840 --> 00:00:29,800 Speaker 2: Who isn't interested in Warner Brothers Discovery Again, I spent 8 00:00:29,840 --> 00:00:32,479 Speaker 2: most of my career putting that company together. Now they're 9 00:00:32,520 --> 00:00:34,600 Speaker 2: taking it a part. Go figure. That's how the bankers 10 00:00:34,600 --> 00:00:36,440 Speaker 2: and lawyers get paid. That's how it works, folks. Geith 11 00:00:36,560 --> 00:00:39,440 Speaker 2: ron Gannathan Bloomberg Intelligence analyst. She covers all the media stuff. 12 00:00:39,479 --> 00:00:42,519 Speaker 2: She's been covering media for gosh, north of fifteen years now, 13 00:00:42,520 --> 00:00:44,920 Speaker 2: one of the best on the street. Githa, I'm gonna 14 00:00:44,920 --> 00:00:46,560 Speaker 2: put it to you. You got to get this deal done. 15 00:00:46,600 --> 00:00:49,280 Speaker 2: I mean, what happens to Warner Brothers Discovery here. 16 00:00:49,760 --> 00:00:52,920 Speaker 3: Oh they're gonna get sold Paul one way or the other, 17 00:00:53,040 --> 00:00:55,840 Speaker 3: and David Zaslav will make sure of that. So his 18 00:00:55,920 --> 00:00:58,880 Speaker 3: whole move this morning. Yes, we got the red headline 19 00:00:58,880 --> 00:01:02,360 Speaker 3: on Netflix and Comcast, but before that, basically what Warner 20 00:01:02,360 --> 00:01:05,200 Speaker 3: Brothers management team did is they kind of launched this 21 00:01:05,319 --> 00:01:10,240 Speaker 3: whole strategic review of the company, which was basically amounting 22 00:01:10,280 --> 00:01:12,920 Speaker 3: to just putting on like a forced sale sign. So, 23 00:01:13,160 --> 00:01:14,959 Speaker 3: you know, we know that they wanted to already split 24 00:01:15,120 --> 00:01:17,360 Speaker 3: their company into two parts. You have the low growth business, 25 00:01:17,360 --> 00:01:19,399 Speaker 3: which was TV Networks. You have the other high growth 26 00:01:19,400 --> 00:01:23,120 Speaker 3: streaming and studios. But really the problem for Warner Brothers 27 00:01:23,160 --> 00:01:26,280 Speaker 3: Discovery was that they were you know, I guess the 28 00:01:26,319 --> 00:01:28,440 Speaker 3: way that people were thinking about it was not everybody 29 00:01:28,560 --> 00:01:31,120 Speaker 3: was kind of incentivized to put in a bid for 30 00:01:31,200 --> 00:01:34,720 Speaker 3: the whole company other than Paramount. And this is really 31 00:01:34,720 --> 00:01:37,679 Speaker 3: the way that they kind of drum up interest from 32 00:01:37,840 --> 00:01:40,759 Speaker 3: everybody to kind of get that sale process going. 33 00:01:41,640 --> 00:01:43,800 Speaker 4: So where does Paramount stand? I mean, wasn't their offer 34 00:01:43,880 --> 00:01:46,200 Speaker 4: too low? Were they going to come back? What are 35 00:01:46,200 --> 00:01:46,960 Speaker 4: they doing now? 36 00:01:47,640 --> 00:01:50,480 Speaker 3: Yeah, So, you know, we had a Bloomberg report suggesting 37 00:01:50,520 --> 00:01:54,040 Speaker 3: that Paramount made a twenty dollars per share offer, which 38 00:01:54,120 --> 00:01:58,080 Speaker 3: was rejected. There were multiple reports this morning suggested that 39 00:01:58,200 --> 00:02:02,680 Speaker 3: Paramount actually made several bits for Warner Brothers Discovery, all 40 00:02:02,760 --> 00:02:08,160 Speaker 3: higher than that reported twenty dollars price, so probably somewhere 41 00:02:08,200 --> 00:02:12,000 Speaker 3: even upwards of twenty five dollars, but again those were rejected. 42 00:02:12,040 --> 00:02:12,639 Speaker 5: So this is. 43 00:02:13,080 --> 00:02:17,440 Speaker 3: Basically, you know, really kind of forcing Paramount's hand to 44 00:02:17,600 --> 00:02:21,040 Speaker 3: raise their price pretty significantly. We know it's been reported 45 00:02:21,120 --> 00:02:24,239 Speaker 3: that you know, David's aslov is seeking something like forty 46 00:02:24,320 --> 00:02:29,080 Speaker 3: dollars per share for all of the company, and so 47 00:02:29,200 --> 00:02:31,720 Speaker 3: this is really his way, you know, kind of putting 48 00:02:31,840 --> 00:02:34,760 Speaker 3: you know, basically inviting everybody out there to bid on 49 00:02:34,840 --> 00:02:37,920 Speaker 3: all of the assets. Really kind of forcing Paramount to 50 00:02:37,960 --> 00:02:40,440 Speaker 3: take that price up or the price point up for 51 00:02:40,520 --> 00:02:42,440 Speaker 3: Warner Brothers pretty pretty dramatically. 52 00:02:43,240 --> 00:02:45,359 Speaker 2: All right, here's my prediction. You heard it here, folks, 53 00:02:45,360 --> 00:02:48,240 Speaker 2: This will be the biggest M and A ticket certainly 54 00:02:48,240 --> 00:02:50,399 Speaker 2: in the TMT space ever because they have so many 55 00:02:50,400 --> 00:02:52,480 Speaker 2: companies that have to be bought sold here, so much financing, 56 00:02:52,480 --> 00:02:54,880 Speaker 2: so much refinancing. Everybody's going to get paid here. The 57 00:02:54,960 --> 00:02:57,120 Speaker 2: name that kind of came out of nowhere for some 58 00:02:57,160 --> 00:03:00,720 Speaker 2: people GITHA is Comcast. But we know Bran, we know 59 00:03:00,760 --> 00:03:04,600 Speaker 2: the team there. They are very comfortable during transformational deals here. 60 00:03:04,720 --> 00:03:06,160 Speaker 2: What do you think Comcast strategy is? 61 00:03:07,720 --> 00:03:09,639 Speaker 3: So this actually, Paul, if you just kind of think 62 00:03:09,639 --> 00:03:12,120 Speaker 3: about it even more than Netflix, and you know this 63 00:03:12,240 --> 00:03:15,960 Speaker 3: really well the Warner Brothers Discovery really makes perfect sense 64 00:03:15,960 --> 00:03:19,040 Speaker 3: for comcasts. I mean, they have linear TV assets, they 65 00:03:19,080 --> 00:03:22,200 Speaker 3: have a streaming business with Peacock, they have a fabulous 66 00:03:22,200 --> 00:03:26,000 Speaker 3: studio with Universal. They could do a lot, a lot 67 00:03:26,160 --> 00:03:28,840 Speaker 3: with the Warner Brothers Discovery assets. And I think everybody's 68 00:03:28,919 --> 00:03:31,359 Speaker 3: kind of looking at this as a once in a generation, 69 00:03:31,400 --> 00:03:33,800 Speaker 3: as a once in a lifetime opportunity. I mean, you 70 00:03:33,880 --> 00:03:37,440 Speaker 3: let Warner Brothers Discovery go, there's really nothing else on 71 00:03:37,480 --> 00:03:40,240 Speaker 3: the market that even compares, that even comes close to 72 00:03:40,280 --> 00:03:42,920 Speaker 3: these assets. I mean you have top tier ip here, 73 00:03:43,280 --> 00:03:45,680 Speaker 3: whether you're thinking about DC Comics or Harry Potter or 74 00:03:45,760 --> 00:03:48,320 Speaker 3: Game of Thrones, So everybody knows they have to do something. 75 00:03:48,360 --> 00:03:50,560 Speaker 3: I think it makes a lot of sense for comcasts. 76 00:03:50,680 --> 00:03:52,600 Speaker 3: The only problem for them is really going to be 77 00:03:52,720 --> 00:03:56,040 Speaker 3: getting regulatory approval. We know that, you know, Brand Roberts 78 00:03:56,040 --> 00:03:58,120 Speaker 3: has not exactly been in the good graces of either 79 00:03:58,160 --> 00:04:01,080 Speaker 3: the FCC or the Trump administration, so that's going to 80 00:04:01,080 --> 00:04:04,080 Speaker 3: be a difficult hurdle to cross. And then of course financing. 81 00:04:04,120 --> 00:04:06,240 Speaker 3: I mean, this is going to be, as you just said, 82 00:04:06,280 --> 00:04:08,920 Speaker 3: it's going to be the biggest deal probably for a 83 00:04:08,920 --> 00:04:10,920 Speaker 3: long time to come in the media space. So we're 84 00:04:10,920 --> 00:04:13,640 Speaker 3: looking at you know, tens of billions of dollars, if 85 00:04:13,640 --> 00:04:14,720 Speaker 3: not maybe even hundreds. 86 00:04:16,160 --> 00:04:18,599 Speaker 6: Stay with us. More from Bloomberg Intelligence coming. 87 00:04:18,480 --> 00:04:19,240 Speaker 2: Up after this. 88 00:04:22,920 --> 00:04:26,600 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 89 00:04:26,680 --> 00:04:29,400 Speaker 1: weekdays at ten am. He's done on Apple, Cocklay and 90 00:04:29,400 --> 00:04:32,680 Speaker 1: Android Auto with the Bloomberg Business app. Listen on demand 91 00:04:32,720 --> 00:04:35,800 Speaker 1: wherever you get your podcasts, or watch us live on 92 00:04:35,839 --> 00:04:38,000 Speaker 1: YouTube ahead. 93 00:04:38,200 --> 00:04:41,800 Speaker 2: You know, all these companies reporting earnings, Lockheed Martin, just 94 00:04:41,920 --> 00:04:45,680 Speaker 2: Rathon some really good numbers. GE Airspace rt X, which 95 00:04:45,680 --> 00:04:48,680 Speaker 2: is j Ratheon, also reported some good numbers. Let's go 96 00:04:48,760 --> 00:04:52,000 Speaker 2: to the analys who covers this stuff for Bloomberg Intelligence, 97 00:04:52,000 --> 00:04:55,120 Speaker 2: George Ferguson. He's been covering these companies for decades and 98 00:04:55,200 --> 00:04:58,239 Speaker 2: he has Bloomberg Intelligence senior Aerospace, Defense and Airlines analysts, 99 00:04:58,600 --> 00:05:01,960 Speaker 2: George ste Ge Air. Here's a company that you know, 100 00:05:02,000 --> 00:05:04,280 Speaker 2: we've all grown up with GE putting itself together than 101 00:05:04,279 --> 00:05:07,400 Speaker 2: breaking itself apart into smaller companies. I think the market 102 00:05:07,520 --> 00:05:09,279 Speaker 2: likes this. Ge Airspace business doesn't. 103 00:05:10,240 --> 00:05:14,200 Speaker 7: Yeah, so I think it's telling too that Larry Colep, 104 00:05:14,240 --> 00:05:17,039 Speaker 7: the CEO of the combined companies, broke them apart and 105 00:05:17,080 --> 00:05:20,479 Speaker 7: went with the aerospace business, right, that was the other 106 00:05:20,560 --> 00:05:23,800 Speaker 7: the crown jewel. They're they're the largest maker of jet 107 00:05:23,839 --> 00:05:27,360 Speaker 7: engines globally. I think they have probably the best technology 108 00:05:27,400 --> 00:05:31,640 Speaker 7: for jet engines globally. And look, this was a really 109 00:05:31,720 --> 00:05:36,919 Speaker 7: nice quarter. Margins were even stronger than we expected. I 110 00:05:36,960 --> 00:05:39,920 Speaker 7: think they may be close to plateauing though. Here there's 111 00:05:39,960 --> 00:05:43,640 Speaker 7: just a heavy, heavy demand for aircraft maintenance, even higher 112 00:05:43,680 --> 00:05:47,480 Speaker 7: than sort of the amount of the increase in airline 113 00:05:47,480 --> 00:05:51,880 Speaker 7: traffic would indicate just a lot of pent up demand. 114 00:05:51,960 --> 00:05:54,120 Speaker 7: And then coming out of the pandemic and some of 115 00:05:54,120 --> 00:05:57,320 Speaker 7: the newer technology engines just aren't as robust, so a 116 00:05:57,400 --> 00:06:00,800 Speaker 7: lot of people flying the old ones longer. And we 117 00:06:00,839 --> 00:06:02,800 Speaker 7: heard a lot of good news about supply chain. Supply 118 00:06:02,880 --> 00:06:05,640 Speaker 7: chain sound like it was delivering. For Larry, it's been 119 00:06:06,000 --> 00:06:08,200 Speaker 7: generally been a challenge. It was delivering, and he had 120 00:06:08,240 --> 00:06:10,960 Speaker 7: parts to put on airplanes and those were high margin 121 00:06:11,040 --> 00:06:13,240 Speaker 7: parts and each each showed it in the financial statements. 122 00:06:15,440 --> 00:06:17,839 Speaker 4: Hey, George, you mentioned maintenance and repairs. So does that 123 00:06:17,920 --> 00:06:20,360 Speaker 4: help the company kind of offset those those higher costs 124 00:06:20,360 --> 00:06:22,520 Speaker 4: when you have the rise in the new engine deliveries. 125 00:06:24,040 --> 00:06:27,039 Speaker 7: Yeah, So, like I said, I think we might be 126 00:06:27,080 --> 00:06:30,240 Speaker 7: seeing a plateau here in the margins we're gonna get 127 00:06:30,240 --> 00:06:33,800 Speaker 7: out of this company. So the air framers Bowing and 128 00:06:33,839 --> 00:06:37,279 Speaker 7: Airbus have been slow in ramping up deliveries because they're 129 00:06:37,320 --> 00:06:40,760 Speaker 7: working through their supply chain challenges. So we really see 130 00:06:40,800 --> 00:06:44,960 Speaker 7: Boeing an Airbus increasing deliveries of new aircraft all the 131 00:06:45,000 --> 00:06:47,680 Speaker 7: way to the back end of the decade. And that 132 00:06:47,760 --> 00:06:51,440 Speaker 7: increase in deliveries is going to you know, we'll come 133 00:06:51,440 --> 00:06:55,200 Speaker 7: with those new engines from ge and RTX for that matter, 134 00:06:55,520 --> 00:06:59,000 Speaker 7: and those are diluted to margins, so you know, so 135 00:06:59,040 --> 00:07:03,159 Speaker 7: they're kind of in this sweet spot where the original equipment, 136 00:07:03,320 --> 00:07:06,640 Speaker 7: you know, shipments haven't taken off yet because Boeing and 137 00:07:06,680 --> 00:07:09,600 Speaker 7: Airbus are working on that supply chain and they're doing 138 00:07:09,640 --> 00:07:13,240 Speaker 7: a lot of spare parts deliveries and that's really juicing 139 00:07:13,320 --> 00:07:17,400 Speaker 7: profitability very strongly. So next year I think becomes more 140 00:07:17,480 --> 00:07:19,920 Speaker 7: challenging on the whole profitability front. 141 00:07:21,920 --> 00:07:25,480 Speaker 2: All right, George, rt X, the old wraitheon. That's kind 142 00:07:25,480 --> 00:07:27,520 Speaker 2: of how I know this company. Tell us like what's 143 00:07:27,880 --> 00:07:30,440 Speaker 2: the business of RTX, what are their specialties and what 144 00:07:30,480 --> 00:07:31,160 Speaker 2: did they report? 145 00:07:32,080 --> 00:07:35,880 Speaker 7: So they they make jet engines as well, right, competitor 146 00:07:35,920 --> 00:07:38,840 Speaker 7: to ge. They make the pratt Wickie gear turbo fan. 147 00:07:39,960 --> 00:07:44,440 Speaker 7: They have the Collins business, which is is all kinds 148 00:07:44,480 --> 00:07:46,920 Speaker 7: of parts for aircraft, you know, it could be breaks, 149 00:07:46,960 --> 00:07:50,160 Speaker 7: it could be landing gear. And then they've got the 150 00:07:50,240 --> 00:07:53,720 Speaker 7: Raytheon business, which is the old wraitheon that you know, 151 00:07:53,760 --> 00:07:57,360 Speaker 7: the defense contractor from up Boston area, and they make 152 00:07:58,200 --> 00:08:03,160 Speaker 7: they make radars, they missiles, they make air defense kind 153 00:08:03,160 --> 00:08:06,800 Speaker 7: of equipment, and like all of the you know, all 154 00:08:06,840 --> 00:08:11,280 Speaker 7: of those businesses in that portfolio are really clicking right now. Look, 155 00:08:11,360 --> 00:08:14,240 Speaker 7: defense is going to grow slower. It takes time. The 156 00:08:14,360 --> 00:08:17,800 Speaker 7: backlog builds quickly, but it takes a lot longer to 157 00:08:17,840 --> 00:08:20,440 Speaker 7: build some of those products because they're not you know, 158 00:08:20,520 --> 00:08:22,960 Speaker 7: running down a line that are making you know, as 159 00:08:23,000 --> 00:08:25,840 Speaker 7: many like you know seven thirty sevens or a three 160 00:08:25,880 --> 00:08:27,800 Speaker 7: twenties where you're doing five or six hunderd a year. 161 00:08:28,280 --> 00:08:32,360 Speaker 7: These are a lot slower cadence. But we're seeing a 162 00:08:32,000 --> 00:08:36,199 Speaker 7: lot of demand from customers around the world for missiles 163 00:08:36,240 --> 00:08:39,360 Speaker 7: and for air defense, and so that backlog continues to 164 00:08:39,440 --> 00:08:42,400 Speaker 7: build and they're building margin in that business. They're still 165 00:08:42,400 --> 00:08:45,160 Speaker 7: in kind of eleven is twelve ish percent margin. That 166 00:08:45,280 --> 00:08:48,920 Speaker 7: was quite good in that defense business, and then at 167 00:08:48,960 --> 00:08:51,040 Speaker 7: the same time, like it has told you, for GE, 168 00:08:51,760 --> 00:08:56,240 Speaker 7: the strength of demand for aircraft maintenance right now and 169 00:08:56,280 --> 00:08:59,680 Speaker 7: the high margin parts that go into it thoroughly drove 170 00:08:59,720 --> 00:09:03,120 Speaker 7: that Allen's business. Their collins business is a thirteen ish 171 00:09:03,200 --> 00:09:08,079 Speaker 7: fourteen percent is operating margin business, really seeing strong growth. 172 00:09:08,520 --> 00:09:11,280 Speaker 7: Their engine business is not as strong as gees. GE's 173 00:09:11,360 --> 00:09:16,559 Speaker 7: returns in the twenty plus percent margins pat and Whitney's 174 00:09:16,600 --> 00:09:20,160 Speaker 7: kind of an eight to nine percent operating margin. They've 175 00:09:20,200 --> 00:09:23,960 Speaker 7: had problems with their latest narrow body engines, so they're 176 00:09:24,000 --> 00:09:26,360 Speaker 7: managing some of those issues. They just don't the volume 177 00:09:26,720 --> 00:09:30,240 Speaker 7: that GE has, but they continue to see margin growth 178 00:09:30,559 --> 00:09:33,640 Speaker 7: in that business too as they deliver spare parts of 179 00:09:33,840 --> 00:09:37,280 Speaker 7: some of the older legacy V twenty five hundred engines 180 00:09:37,320 --> 00:09:40,400 Speaker 7: we know them as that power old A three twenties. 181 00:09:40,840 --> 00:09:42,800 Speaker 7: Really did a nice job in that business, and they 182 00:09:42,880 --> 00:09:46,120 Speaker 7: raise guidance even more than GE going into the back 183 00:09:46,400 --> 00:09:48,360 Speaker 7: into the last quarter of the year. I think they 184 00:09:48,360 --> 00:09:49,960 Speaker 7: had some of that in their back pocket, but it 185 00:09:49,960 --> 00:09:52,520 Speaker 7: looked pretty nice. 186 00:09:53,080 --> 00:09:54,880 Speaker 4: Hey, jeorded before you go about a minute left on 187 00:09:55,280 --> 00:09:58,000 Speaker 4: they're one of the largest recipients of US federal contract 188 00:09:58,000 --> 00:10:00,960 Speaker 4: funding we're talking about RTX. Can you name some of 189 00:10:01,000 --> 00:10:03,240 Speaker 4: the projects they're working on with the Trump administration. What 190 00:10:03,240 --> 00:10:03,840 Speaker 4: are they working on? 191 00:10:04,840 --> 00:10:07,119 Speaker 7: Yeah, so, I mean they're gonna do things like patriot 192 00:10:07,240 --> 00:10:11,320 Speaker 7: missile systems. They're gonna do a bunch of sorry, patriot 193 00:10:11,320 --> 00:10:13,800 Speaker 7: air defense systems. They're gonna do a bunch of missile 194 00:10:13,840 --> 00:10:16,520 Speaker 7: systems like gen T all right, you can think of 195 00:10:17,640 --> 00:10:20,080 Speaker 7: if you know, in air defense, you use they make 196 00:10:20,200 --> 00:10:23,480 Speaker 7: radars as well. You use a radar, you find a target, 197 00:10:23,920 --> 00:10:26,719 Speaker 7: you you sort all the targets you got coming at 198 00:10:26,760 --> 00:10:28,920 Speaker 7: you at it, and then you have to shoot a 199 00:10:29,000 --> 00:10:32,440 Speaker 7: high value interceptor at that target. And the reason that 200 00:10:32,520 --> 00:10:35,160 Speaker 7: interceptor is so high value is it's got to go 201 00:10:35,200 --> 00:10:39,520 Speaker 7: and hit a missile approaching you know, your position, your country, whatever, 202 00:10:39,760 --> 00:10:41,680 Speaker 7: which means you put a lot of value out in 203 00:10:41,720 --> 00:10:44,600 Speaker 7: that missile so it can go find another one and 204 00:10:44,679 --> 00:10:48,560 Speaker 7: destroy it. So that's part of what they're building. They'll 205 00:10:48,600 --> 00:10:52,080 Speaker 7: also probably be involved in the in the you know, 206 00:10:52,160 --> 00:10:54,880 Speaker 7: the Global Dome or whatever, you know, the our version 207 00:10:54,920 --> 00:10:55,640 Speaker 7: of iron. 208 00:10:55,360 --> 00:10:56,760 Speaker 2: Dome, Golden Dome. Yeah. 209 00:10:57,440 --> 00:11:00,320 Speaker 7: Yeah, So there's just a lot of demand for the 210 00:11:00,360 --> 00:11:01,440 Speaker 7: products that they're going to build. 211 00:11:02,360 --> 00:11:05,520 Speaker 6: Stay with us more from Bloomberg Intelligence coming up after this. 212 00:11:09,400 --> 00:11:13,080 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 213 00:11:13,160 --> 00:11:16,240 Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android 214 00:11:16,280 --> 00:11:19,600 Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever 215 00:11:19,640 --> 00:11:22,760 Speaker 1: you get your podcasts, or watch us live on YouTube. 216 00:11:23,840 --> 00:11:27,160 Speaker 2: An automaker, General Motors put out some really good numbers 217 00:11:27,200 --> 00:11:30,840 Speaker 2: here and the stocks are reacting up double digits. You're 218 00:11:30,840 --> 00:11:35,400 Speaker 2: Steve manjoins is Bloomberg Intelligence Global Autos and Industrials Research analyst. Steve. 219 00:11:35,400 --> 00:11:37,640 Speaker 2: What are your takeaways from the results from our friends 220 00:11:37,640 --> 00:11:38,400 Speaker 2: at General Motors? 221 00:11:38,640 --> 00:11:43,640 Speaker 5: Hey, Paul, I mean, the earnings report was just half 222 00:11:43,840 --> 00:11:49,120 Speaker 5: of the story. The call was very, very positive, That's 223 00:11:49,160 --> 00:11:53,440 Speaker 5: my takeaway. And the biggest takeaway from that call was 224 00:11:53,559 --> 00:11:58,600 Speaker 5: really the mixshift towards more selling more bigger SUVs, the 225 00:11:58,640 --> 00:12:05,839 Speaker 5: picka trucks. Those are usually the highest margin business for them. 226 00:12:06,000 --> 00:12:08,800 Speaker 4: Now they did get some really from the Trump Administration's 227 00:12:08,840 --> 00:12:11,800 Speaker 4: tariffs on auto parts, right, wasn't that part of the discussions? 228 00:12:12,160 --> 00:12:15,120 Speaker 5: Yeah, terroriffs is one thing, but I think for twenty 229 00:12:15,200 --> 00:12:20,040 Speaker 5: twenty six, the stars are really aligning for higher profit 230 00:12:20,120 --> 00:12:24,240 Speaker 5: for General Motors. So you got lower terrorists but lower 231 00:12:24,280 --> 00:12:27,880 Speaker 5: tariff costs for general motors and for the industry. Right, 232 00:12:28,080 --> 00:12:32,160 Speaker 5: you have actually the elimination of admission penalties. So a 233 00:12:32,200 --> 00:12:35,760 Speaker 5: lot of in the past automakers in the US had 234 00:12:35,800 --> 00:12:40,520 Speaker 5: to pay a penalty for selling these gas guzzling SUVs 235 00:12:40,600 --> 00:12:43,720 Speaker 5: and pickup trucks. Now they don't have to do that anymore. 236 00:12:43,960 --> 00:12:46,559 Speaker 5: So that's going to contribute to the bottom line, right, 237 00:12:46,600 --> 00:12:49,280 Speaker 5: and then they're gonna they're also not going to sell 238 00:12:49,320 --> 00:12:54,600 Speaker 5: as many evs. EV's are basically loss making for many 239 00:12:54,640 --> 00:12:57,640 Speaker 5: of the automakers, So you know, you get all these 240 00:12:58,080 --> 00:13:01,440 Speaker 5: contributors into the for the twenty twenty six earnings. 241 00:13:03,679 --> 00:13:06,079 Speaker 2: And Steve, maybe this is just me being a you know, 242 00:13:06,600 --> 00:13:08,920 Speaker 2: a cynical Wall Street guy, but reading between the lines, 243 00:13:09,000 --> 00:13:11,120 Speaker 2: I took away that message that they were backing up 244 00:13:11,400 --> 00:13:14,920 Speaker 2: as much as they possibly could from evs, and if 245 00:13:14,920 --> 00:13:17,760 Speaker 2: I'm an investor, that's a positive for me from a 246 00:13:17,800 --> 00:13:20,320 Speaker 2: profitability standpoint. Might is that too much reading between the lines? 247 00:13:20,400 --> 00:13:22,760 Speaker 2: Or do you think GM and maybe even Ford and 248 00:13:22,760 --> 00:13:24,240 Speaker 2: Stalantes are backing away. 249 00:13:24,520 --> 00:13:27,960 Speaker 5: Absolutely not, they are backing away. GM just took a 250 00:13:28,000 --> 00:13:31,800 Speaker 5: one point six billion dollar charge, most of it was 251 00:13:31,920 --> 00:13:36,079 Speaker 5: to rationalize ev production capacity in the US. I think 252 00:13:36,120 --> 00:13:39,560 Speaker 5: everybody is seeing that EV sales in the US in 253 00:13:39,600 --> 00:13:43,320 Speaker 5: the next quarter, maybe two quarters. Well, we'll be down 254 00:13:43,400 --> 00:13:46,920 Speaker 5: quite a bit after the poll heead demand. We'll see 255 00:13:46,960 --> 00:13:51,200 Speaker 5: how what the penetration is beyond that. But you know, 256 00:13:51,280 --> 00:13:54,839 Speaker 5: they're cutting capacity. They're going to have to revisit their portfolio. 257 00:13:55,080 --> 00:13:59,720 Speaker 5: Especially GM. They have launched more vehicles than you know, 258 00:13:59,760 --> 00:14:03,360 Speaker 5: they're Detroit Rivals, so they're gonna have to look at that. 259 00:14:03,920 --> 00:14:06,520 Speaker 6: So, you know, evs for GM. 260 00:14:06,600 --> 00:14:09,800 Speaker 5: You know, they call it variable profit, but at the 261 00:14:09,880 --> 00:14:12,199 Speaker 5: end of the day, the bottom line is still loss 262 00:14:12,200 --> 00:14:15,800 Speaker 5: making for these vehicles. And you know when when when 263 00:14:15,800 --> 00:14:19,640 Speaker 5: they sell less of them, uh, the mixshift improves. Uh, 264 00:14:19,800 --> 00:14:22,080 Speaker 5: you know, you get and then now you're they're probably 265 00:14:22,080 --> 00:14:26,320 Speaker 5: gonna even sell more uh, SUVs and and and pickup trucks. 266 00:14:26,360 --> 00:14:32,160 Speaker 5: Those are typically the highest margin business vehicles for them. 267 00:14:32,200 --> 00:14:34,640 Speaker 4: So what exactly did Mary Bot have to say about 268 00:14:34,680 --> 00:14:37,680 Speaker 4: the EV adoption? Does she give any specific numbers or 269 00:14:37,920 --> 00:14:38,720 Speaker 4: or dates? 270 00:14:38,720 --> 00:14:39,800 Speaker 2: Extend any dates? 271 00:14:40,000 --> 00:14:43,000 Speaker 5: Now she wouldn't. She didn't give any dates, but it 272 00:14:43,120 --> 00:14:47,960 Speaker 5: is still a priority quote unquote priority. She called it 273 00:14:48,000 --> 00:14:54,120 Speaker 5: the north Star for General motors. She thinks that long term, uh, 274 00:14:54,160 --> 00:14:56,840 Speaker 5: and she didn't really define what long term is is 275 00:14:56,840 --> 00:15:01,000 Speaker 5: that there's going to be a continued shift uh into evs. 276 00:15:01,160 --> 00:15:03,480 Speaker 5: And I think you know when you when you listen 277 00:15:03,600 --> 00:15:06,480 Speaker 5: to some of the consumers in the marketplace, you know 278 00:15:06,520 --> 00:15:10,120 Speaker 5: a lot of them who switched over to evs do 279 00:15:10,360 --> 00:15:13,240 Speaker 5: like them. I'm not sure if that the evs are 280 00:15:13,320 --> 00:15:15,720 Speaker 5: are going to be there, you know, their only vehicle. 281 00:15:15,880 --> 00:15:19,520 Speaker 5: I think it fits, especially in the US marketplace as 282 00:15:19,520 --> 00:15:24,480 Speaker 5: a second vehicle, a commuter vehicle. So I think you 283 00:15:24,520 --> 00:15:28,080 Speaker 5: know there will be there will be adoption of EV's. 284 00:15:28,120 --> 00:15:31,880 Speaker 5: I think even before the seventy five hundred dollars credit 285 00:15:32,040 --> 00:15:35,520 Speaker 5: was was was available, there was some you know, we 286 00:15:35,600 --> 00:15:37,480 Speaker 5: did see a start of ev adoption. 287 00:15:39,160 --> 00:15:41,600 Speaker 6: Stay with us. More from Bloomberg Intelligence coming. 288 00:15:41,480 --> 00:15:42,240 Speaker 2: Up after this. 289 00:15:45,760 --> 00:15:49,480 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 290 00:15:49,560 --> 00:15:52,080 Speaker 1: weekdays at ten a m. Eastern on Apple Cock Play 291 00:15:52,120 --> 00:15:55,080 Speaker 1: and Android Auto with the Bloomberg Business app. Listen on 292 00:15:55,160 --> 00:15:58,440 Speaker 1: demand wherever you get your podcasts, or watch us live 293 00:15:58,480 --> 00:15:59,120 Speaker 1: on YouTube. 294 00:16:00,000 --> 00:16:02,600 Speaker 2: A big, big day for earnings. We had industrial companies out. 295 00:16:02,880 --> 00:16:05,720 Speaker 2: We also had General Motors out. Get some consumer companies 296 00:16:05,720 --> 00:16:08,960 Speaker 2: coming out with earnings today as well, Philip Mars, Coca Cola, 297 00:16:09,680 --> 00:16:11,440 Speaker 2: and we'd go to Ken Che He covers all these 298 00:16:11,440 --> 00:16:15,400 Speaker 2: consumer facing companies for Bloomberg in intelligence. Hey can let's 299 00:16:15,760 --> 00:16:18,320 Speaker 2: start with Coca Cola. I am a Coca Cola person, 300 00:16:18,360 --> 00:16:20,280 Speaker 2: but again it's been widely reported that if you put 301 00:16:20,280 --> 00:16:21,760 Speaker 2: au PEPs in front of me, I'm just as happy. 302 00:16:21,800 --> 00:16:23,320 Speaker 2: But I'll talk to about Coca Cola. 303 00:16:23,360 --> 00:16:23,480 Speaker 7: Ken. 304 00:16:23,480 --> 00:16:25,720 Speaker 2: What what did you hear from them? Sure? 305 00:16:25,720 --> 00:16:29,240 Speaker 8: All right, Paul so Cola Cola. Today they reported numbers 306 00:16:29,280 --> 00:16:33,600 Speaker 8: that were slightly better than expected. The organic growth probably 307 00:16:33,600 --> 00:16:37,000 Speaker 8: the biggest metric of all is about six percent operating 308 00:16:37,000 --> 00:16:39,600 Speaker 8: margins wide and better than expected. EPs came in a 309 00:16:39,640 --> 00:16:42,920 Speaker 8: little better. So that's why I'd probably why the shares 310 00:16:42,920 --> 00:16:45,160 Speaker 8: are trading a little higher today. So it's good. They 311 00:16:45,200 --> 00:16:48,280 Speaker 8: reiterated their expectations for the full year. They gave a 312 00:16:48,320 --> 00:16:51,920 Speaker 8: hint for next year. They said, basically, they see lots 313 00:16:51,920 --> 00:16:55,880 Speaker 8: of opportunities in some product innovation, so look out for 314 00:16:55,960 --> 00:17:02,080 Speaker 8: things like more rollout of the zero colin sprites, zero sugar, 315 00:17:02,080 --> 00:17:07,240 Speaker 8: I should say, more fair life protein drinks, more enhanced 316 00:17:07,400 --> 00:17:12,240 Speaker 8: and low sugar sports drinks, and enhanced waters. So these 317 00:17:12,240 --> 00:17:16,320 Speaker 8: are really the franchise full beverage products that they're known 318 00:17:16,359 --> 00:17:19,359 Speaker 8: for and so they're going to continue to innovate next year. 319 00:17:19,440 --> 00:17:21,800 Speaker 8: I should ask one quick thing. Another big news with 320 00:17:21,920 --> 00:17:25,040 Speaker 8: Coke today is that they were successful in some of 321 00:17:25,040 --> 00:17:28,440 Speaker 8: their refranchising. Basically, what that means is they're monetizing a 322 00:17:28,480 --> 00:17:32,960 Speaker 8: lot of their bottling assets. They were instrumental in selling 323 00:17:33,160 --> 00:17:36,720 Speaker 8: some seventy five percent of their Coca Cola Africa unit today. 324 00:17:38,000 --> 00:17:41,160 Speaker 8: So anyway, what that does is streamlines and strengthens their 325 00:17:41,200 --> 00:17:43,679 Speaker 8: global bottling network. And so I think that was another 326 00:17:43,760 --> 00:17:45,919 Speaker 8: reason for investor encouragement today. 327 00:17:48,200 --> 00:17:50,199 Speaker 4: Yeah, that was some big news that came out earlier 328 00:17:50,200 --> 00:17:53,640 Speaker 4: before the earnings came out. Now, if we talk about earnings, 329 00:17:53,840 --> 00:17:55,600 Speaker 4: you said, the consumers are still buying the drinks, but 330 00:17:55,600 --> 00:17:57,240 Speaker 4: they're buying them at higher prices too. 331 00:17:57,320 --> 00:18:00,639 Speaker 8: No, they are for the most part. And that's one 332 00:18:00,680 --> 00:18:03,000 Speaker 8: of the things Coca Cola did mention today. He said, 333 00:18:03,040 --> 00:18:05,480 Speaker 8: you know, I mean again, a company that's this global, 334 00:18:05,480 --> 00:18:07,920 Speaker 8: you're going to have pockets of strength and weakness. And 335 00:18:08,000 --> 00:18:10,760 Speaker 8: so they said, you know, in some areas are doing well, 336 00:18:11,680 --> 00:18:16,439 Speaker 8: people are trading up and still favoring the premium products. Affordability, though, 337 00:18:16,560 --> 00:18:18,720 Speaker 8: was a key issue in other big markets. So Mexico, 338 00:18:18,800 --> 00:18:23,320 Speaker 8: for instance, is having a tough time macroeconomics. And by 339 00:18:23,320 --> 00:18:25,720 Speaker 8: the way, Mexico is also going to pass a big 340 00:18:25,720 --> 00:18:29,040 Speaker 8: sugar tax beginning next year, so they're a little wary 341 00:18:29,119 --> 00:18:30,600 Speaker 8: on that, and so they're going to be rolling out 342 00:18:30,600 --> 00:18:36,200 Speaker 8: a lot of affordability, universal bottles, returnable bottles, smaller package 343 00:18:36,200 --> 00:18:38,719 Speaker 8: of sizes. So the company, you know, it's been doing 344 00:18:38,800 --> 00:18:40,959 Speaker 8: us a long time though, so they've been through, you know, 345 00:18:41,200 --> 00:18:44,119 Speaker 8: some of these ebbs and flows of the markets. 346 00:18:44,440 --> 00:18:51,959 Speaker 2: It's well positioned, Philip marsh that this is the tobacco company. 347 00:18:52,000 --> 00:18:55,000 Speaker 2: They had some numbers out today, stopped trading down a 348 00:18:55,040 --> 00:18:55,760 Speaker 2: little bit here today. 349 00:18:57,320 --> 00:19:00,280 Speaker 8: Yeah, Paul Pilla Morris also hit their numbers. It was 350 00:19:00,320 --> 00:19:03,840 Speaker 8: a really strong quarter EPs on a comparable base of 351 00:19:03,920 --> 00:19:07,200 Speaker 8: seventeen percent, strong top line margin improvement. It was hard 352 00:19:07,200 --> 00:19:09,479 Speaker 8: to find any fault with the actual numbers that came in. 353 00:19:09,720 --> 00:19:12,960 Speaker 8: But I think what may we've got a little some 354 00:19:13,000 --> 00:19:15,240 Speaker 8: people a little nervous was that they lowered their guidance 355 00:19:15,240 --> 00:19:18,199 Speaker 8: for operating organic operating earnings and a lot of that 356 00:19:18,320 --> 00:19:20,879 Speaker 8: is just reinvestment in the business. One of the biggest 357 00:19:20,880 --> 00:19:25,120 Speaker 8: products successes in recent years has been this zin oral 358 00:19:25,240 --> 00:19:28,640 Speaker 8: nicotine product. It's a non tobacco pouch product. You put, 359 00:19:28,640 --> 00:19:30,640 Speaker 8: you know, put in your mouth, you don't spit, get 360 00:19:30,640 --> 00:19:34,280 Speaker 8: your nicked, your nicotine buzz that way. It's doing wonderful. 361 00:19:35,119 --> 00:19:38,920 Speaker 8: The company said that now that has recently edits some 362 00:19:39,000 --> 00:19:42,639 Speaker 8: manufacturing capacity and has some more supplies, it's going to 363 00:19:42,720 --> 00:19:45,600 Speaker 8: look to expand the market. How do you expand the market. 364 00:19:46,359 --> 00:19:49,760 Speaker 8: You convince smokers to move to a non combustible variety, 365 00:19:49,800 --> 00:19:52,240 Speaker 8: particularly in the US. So it's spent a quite a 366 00:19:52,240 --> 00:19:54,840 Speaker 8: bit of money to do that. And so for those 367 00:19:54,960 --> 00:19:57,280 Speaker 8: you know, with a short term mind, I guess they 368 00:19:57,320 --> 00:19:59,439 Speaker 8: were a little nervous about, you know, that lowered guidance 369 00:19:59,440 --> 00:20:02,639 Speaker 8: for operating earnings. But I think they're doing the smart 370 00:20:02,640 --> 00:20:04,399 Speaker 8: thing longer term thout, If you're a long term investor, 371 00:20:04,480 --> 00:20:08,399 Speaker 8: it's hard to find fault in that strategy. 372 00:20:09,720 --> 00:20:13,680 Speaker 4: How big is their smoke free business, it's now. 373 00:20:13,480 --> 00:20:16,159 Speaker 8: About forty one percent of their total business, and the 374 00:20:16,320 --> 00:20:19,960 Speaker 8: way of ahead of their competitors. Why I say smoke free, 375 00:20:20,000 --> 00:20:23,600 Speaker 8: you're talking about a combination of things, the so called 376 00:20:23,600 --> 00:20:26,560 Speaker 8: heat and not burn icoas family of products that contains 377 00:20:26,600 --> 00:20:30,160 Speaker 8: actually some nicotine in there that heats it, that doesn't 378 00:20:30,160 --> 00:20:34,760 Speaker 8: burn it. You have the revive e vapor product like 379 00:20:34,760 --> 00:20:38,520 Speaker 8: an eat cigarette, and then you also have these in 380 00:20:39,200 --> 00:20:42,160 Speaker 8: oral nicotine products. So it's combined. You have really three 381 00:20:42,400 --> 00:20:45,720 Speaker 8: really strong franchises, and they're at the point now where 382 00:20:46,119 --> 00:20:48,960 Speaker 8: they come on a combined basis, they're more profitable. I'm 383 00:20:49,000 --> 00:20:53,719 Speaker 8: an operating margin standpoint. Then they're conventional cigarette business. So 384 00:20:53,760 --> 00:20:55,919 Speaker 8: the faster this thing grows and it has a bigger 385 00:20:56,160 --> 00:20:59,240 Speaker 8: proportion of their business, it's all good from a margin standpoint. 386 00:21:00,160 --> 00:21:04,800 Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 387 00:21:05,000 --> 00:21:08,480 Speaker 1: and anywhere else you get your podcasts. Listen live each 388 00:21:08,480 --> 00:21:12,240 Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com, 389 00:21:12,359 --> 00:21:15,920 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 390 00:21:16,320 --> 00:21:19,280 Speaker 1: You can also watch us live every weekday on YouTube 391 00:21:19,640 --> 00:21:21,920 Speaker 1: and always on the Bloomberg terminal.