WEBVTT - Bloomberg Surveillance TV: October 21st, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.640 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amrie Hordernt. Join us each day 0:00:18.760 --> 0:00:22.320 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:37.320 Terminal and the Bloomberg Business app. We're stock centering lower 0:00:37.360 --> 0:00:39.639 with the slower earnings on Deck. Drew Madison met Life, 0:00:39.680 --> 0:00:42.519 writing in the absence of government data, the only information 0:00:42.640 --> 0:00:46.720 we have earnings mediocre. Nominal growth expectations are out of 0:00:46.760 --> 0:00:50.279 sync with earnings expectations. Drew joins us now for more, 0:00:50.360 --> 0:00:52.600 Drew good Mornick. Does something have to give? 0:00:53.080 --> 0:00:56.320 Something does have to give? Now what that's going to be? 0:00:56.920 --> 0:00:58.800 I'm going to guess it's going to be markets, because 0:00:58.840 --> 0:01:00.920 it's easier for markets to give than is for the 0:01:00.960 --> 0:01:04.120 economy to give. And if the economy gives, it's probably 0:01:04.120 --> 0:01:07.399 not giving. An unexpected acceleration and activity. 0:01:07.640 --> 0:01:09.720 This is just one contradiction. There are many more. We 0:01:09.800 --> 0:01:12.959 talked about lots of them. Employments dropped away, retail sales 0:01:12.959 --> 0:01:15.240 that's been really robust. People are still talking about a 0:01:15.280 --> 0:01:19.759 so called K shaped economy. Upper income okay, lower income struggling. 0:01:20.040 --> 0:01:21.920 Is one catching down to the other or the other 0:01:21.959 --> 0:01:23.280 going to catch up to the top. 0:01:23.560 --> 0:01:26.039 Well, just because someone's spending when they have money doesn't 0:01:26.040 --> 0:01:28.360 mean that they're doing fine. It doesn't mean that they 0:01:28.480 --> 0:01:31.280 feel like things are going to continue to be good. 0:01:31.520 --> 0:01:34.360 And when you look at the details of how income 0:01:34.480 --> 0:01:38.000 expectations are changing, particularly real income expectations, so accounting for 0:01:38.040 --> 0:01:40.920 the inflation component which you see, is actually that the 0:01:41.040 --> 0:01:43.000 upper income is beginning to feel a lot of pressure. 0:01:43.560 --> 0:01:45.319 I don't know whether it's what they're buying is just 0:01:45.360 --> 0:01:49.040 going up in price more aggressively, or whether they are 0:01:49.120 --> 0:01:50.960 beginning to worry about their jobs a little bit more. 0:01:51.000 --> 0:01:52.600 I suspect it's a combination of both. 0:01:52.840 --> 0:01:54.200 Where are you seeing this in particular? 0:01:54.320 --> 0:01:56.400 And I see this as we were looking at airline earnings, 0:01:56.400 --> 0:01:58.600 for example, and a lot of people are shelling out 0:01:58.640 --> 0:01:59.760 for those premium cabins. 0:02:00.680 --> 0:02:03.240 They show out for the premium cabins, but those premium 0:02:03.240 --> 0:02:08.200 cabins cost more, and so they're actually seeing their lifestyle 0:02:08.320 --> 0:02:13.600 requires a much more expensive payment structure now, and so 0:02:13.639 --> 0:02:15.440 then they have to give in other areas. And so 0:02:15.480 --> 0:02:17.760 what we're actually seeing is when you look at spending, 0:02:17.760 --> 0:02:22.080 for example, goods versus services, people are beginning to actually 0:02:22.080 --> 0:02:24.640 cut back on spending on services. And those are the 0:02:24.680 --> 0:02:27.840 things that you never cut back on. And so typically, 0:02:28.120 --> 0:02:30.320 if you're not buying a cup of coffee in the morning, 0:02:30.320 --> 0:02:31.519 you're not going to go out and buy a car 0:02:31.520 --> 0:02:33.760 in the afternoon. It just takes a little while for 0:02:33.800 --> 0:02:35.960 that to catch up across the income spectrum. And what 0:02:36.000 --> 0:02:38.440 we're beginning to see now is that upper income tier 0:02:38.639 --> 0:02:41.880 is beginning to feel pressure. They can still keep spending, 0:02:41.880 --> 0:02:44.760 but the pressure builds, and it means probably that you'll 0:02:44.800 --> 0:02:47.120 see the savings rate begin to decline, even though it 0:02:47.120 --> 0:02:49.880 probably should be rising based on where interest rates are. 0:02:49.919 --> 0:02:51.639 And maybe we'll get a holistic look at this when 0:02:51.680 --> 0:02:53.679 we get retail sales. Oh wait, we don't have any 0:02:53.760 --> 0:02:56.160 data coming out of the government. There is this feeling 0:02:56.240 --> 0:02:58.400 right now you need to parse through the earnings to 0:02:58.400 --> 0:03:01.240 get a better sense of it. Has there been anything 0:03:01.240 --> 0:03:04.440 in the earning so far that has ratified the view 0:03:04.520 --> 0:03:06.880 you have, or are there a couple of earnings reports 0:03:06.919 --> 0:03:09.640 that you're really keyed into to give you the ultimate 0:03:09.680 --> 0:03:12.560 sense of whether this really is the reality, this weakening 0:03:12.720 --> 0:03:15.080 in even the upper echelons of income owners. 0:03:15.120 --> 0:03:18.160 I mean to be frank, no, but I mean that's why, 0:03:18.280 --> 0:03:20.040 you know, That's why I get to do what I do, 0:03:20.200 --> 0:03:22.280 is because I have to make decisions based on kind 0:03:22.280 --> 0:03:24.840 of the limited amount of information that I have. What 0:03:25.400 --> 0:03:28.000 we are paying very close attention to our Federal Reserve surveys, 0:03:28.240 --> 0:03:29.799 you have to pay attention to the page book, You 0:03:29.880 --> 0:03:31.880 have to pay attention to the earnings reports. But even 0:03:31.919 --> 0:03:34.880 the earnings reports can see people transitting from one, you know, 0:03:34.960 --> 0:03:37.560 one kind of product to another, right from beef to 0:03:37.640 --> 0:03:41.320 chicken or from you know, who knows what people like anymore. 0:03:41.440 --> 0:03:44.080 I don't understand actually what people I am not the 0:03:44.120 --> 0:03:46.960 average consumer, and I am readily willing to admit it. 0:03:48.240 --> 0:03:52.280 And my tastes are not everyone's tastes. So it's hard 0:03:52.280 --> 0:03:55.760 to kind of figure out which direction everyone's heading. But 0:03:55.880 --> 0:03:58.360 I do know that people are shifting from what they're 0:03:58.480 --> 0:04:00.320 used to doing, and when people are ship thing from 0:04:00.360 --> 0:04:02.720 what they're used to doing that's happening because of a reason, 0:04:03.200 --> 0:04:06.480 and that reason typically isn't good. People are creatures of habit. 0:04:06.560 --> 0:04:08.040 They like to do what they did yesterday. 0:04:08.240 --> 0:04:10.480 If the high end consumers under pressure, what kind of 0:04:10.480 --> 0:04:13.440 economy are you describing, Because everyone continuously says we're in 0:04:13.520 --> 0:04:15.960 a K shaped economy. What you're describing does not sound 0:04:16.000 --> 0:04:17.160 like a K shaped economy. 0:04:17.320 --> 0:04:20.440 So when you do economics for long enough, which you 0:04:20.520 --> 0:04:23.080 realize is the top ten percent spends no matter what, 0:04:23.600 --> 0:04:26.920 the bottom ten percent spends no matter what, and there's 0:04:27.360 --> 0:04:29.159 the cohort in the middle is actually the one that 0:04:29.200 --> 0:04:32.120 moves around their spending because they've got some saving, some 0:04:32.160 --> 0:04:36.279 potential for savings. And so you really have to watch 0:04:36.360 --> 0:04:39.560 the movement into and out of the savings rate and 0:04:39.600 --> 0:04:41.920 whether or not people are feeling like they can spend 0:04:41.960 --> 0:04:44.880 money now. It gets complicated when inflation is present because 0:04:44.960 --> 0:04:48.200 oftentimes the way people make up for the increase in prices, 0:04:48.200 --> 0:04:51.760 at least initially is by cutting back on their savings, right, 0:04:51.839 --> 0:04:53.920 even if they're feeling a lot of pressure or worries 0:04:53.920 --> 0:04:56.680 about their job. And so things begin to break down. 0:04:56.760 --> 0:04:59.600 Those relationships begin to break down, and so you know, 0:04:59.680 --> 0:05:02.960 all the people using AI to model the economy right now, 0:05:03.400 --> 0:05:06.360 you know, it's a big new thing. Those models are 0:05:06.400 --> 0:05:09.000 incredibly complicated, and what you're going to see is that 0:05:09.080 --> 0:05:13.600 the coefficients on the front of each of each variable 0:05:13.640 --> 0:05:15.600 that you can use are probably shifting around, and they 0:05:15.640 --> 0:05:17.920 might be canceling each other out, and so your whole 0:05:17.920 --> 0:05:20.279 model might be breaking down. And you're probably not going 0:05:20.360 --> 0:05:22.440 to recognize that if you're using models that are to 0:05:22.560 --> 0:05:26.800 advance rather than looking at individual components of what's happening 0:05:27.240 --> 0:05:31.400 and the relationships between, for example, savings and interest rates. 0:05:31.480 --> 0:05:33.400 What are you most looking at this week next week 0:05:33.440 --> 0:05:35.840 when it comes to earning season to really understand how 0:05:35.920 --> 0:05:38.080 much that high end consumer is underpression. 0:05:38.560 --> 0:05:41.080 Well, as I said, it's difficult for us to kind 0:05:41.080 --> 0:05:43.000 of look at an individual company and figure out what's 0:05:43.040 --> 0:05:45.960 going on. Upper income consumers are going to continue to 0:05:46.000 --> 0:05:48.039 spend on things like airfare. They're going to continue to 0:05:48.040 --> 0:05:50.880 go on vacation. The question is are they going on 0:05:50.960 --> 0:05:55.400 vacation and instead of going to Europe, they're going to California, 0:05:55.640 --> 0:05:59.040 or instead of going you know, they're taking the slightly 0:05:59.200 --> 0:06:02.720 less expensive option. There are doubts. You know, everyone's got 0:06:02.760 --> 0:06:05.440 a lifestyle and certain things are downgrades for certain people, 0:06:05.480 --> 0:06:08.040 and it's easy for us to all kind of laugh 0:06:08.080 --> 0:06:10.480 about it, But for these people, it's actually a serious 0:06:10.560 --> 0:06:13.280 change in their lifestyle and it affects their perception of 0:06:13.320 --> 0:06:15.760 what it means to be rich. For example, what's it 0:06:15.839 --> 0:06:17.440 mean to be rich when you actually have to think 0:06:17.440 --> 0:06:18.320 about the airfare? 0:06:18.880 --> 0:06:19.120 Right? 0:06:19.200 --> 0:06:21.159 These are people who are not used to thinking about 0:06:21.240 --> 0:06:23.240 how much they spend on airfare. They're not used to 0:06:23.279 --> 0:06:26.080 thinking about, gee, you know, like I really like that hotel. 0:06:26.120 --> 0:06:27.840 It's in the center of the city, and it's my 0:06:27.960 --> 0:06:30.960 favorite hotel, because they have a favorite hotel in Europe, right, 0:06:31.200 --> 0:06:33.320 and now they're thinking, well, I can't afford my favorite 0:06:33.320 --> 0:06:37.240 hotel in Europe. I have to downgrade it. Actually, it 0:06:37.279 --> 0:06:39.359 comes with us as social costs. You don't have to 0:06:39.400 --> 0:06:41.920 cry for these people. Their lives are still really good 0:06:41.960 --> 0:06:44.920 and probably better than a lot of people's. But you know, 0:06:45.000 --> 0:06:46.719 it doesn't mean that they feel as good as they 0:06:46.800 --> 0:06:47.080 used to. 0:06:47.720 --> 0:06:49.160 Banks not failing as good as they used to. 0:06:49.200 --> 0:06:51.400 Often last week, let's talk about the financial with sion 0:06:51.680 --> 0:06:54.200 in the pre market is up by two point five percent. 0:06:54.600 --> 0:06:57.080 It was the focal point of a lot of people 0:06:57.160 --> 0:07:00.200 last week coming out and basically revealing some losts is 0:07:00.240 --> 0:07:03.440 tied to potential fraud. This isn't the first time we've 0:07:03.440 --> 0:07:05.479 seen this kind of thing. We've seen some other credit 0:07:05.520 --> 0:07:07.520 issues as well. You've got the credit issues on the 0:07:07.520 --> 0:07:10.000 one side and then radly robust standings on the other side, 0:07:10.000 --> 0:07:12.720 and we saw that from Zion overnight. How are you 0:07:13.160 --> 0:07:15.520 and what is your perspective on what is happening right 0:07:15.560 --> 0:07:16.320 now in this sector? 0:07:17.080 --> 0:07:21.320 Well, so people are nervous. If you look at credit markets, 0:07:21.360 --> 0:07:24.040 spreads are incredibly tight. So you're in this weird world 0:07:24.080 --> 0:07:27.200 where all in yields are okay. Right, you can get 0:07:27.240 --> 0:07:29.880 paid for is okay, but the actual premium you're getting 0:07:29.880 --> 0:07:32.400 paid to take risk is actually maybe a little too low. 0:07:32.440 --> 0:07:35.080 And so I think what you're seeing is just a 0:07:35.160 --> 0:07:39.600 nervousness around the economy that we don't really understand that 0:07:39.760 --> 0:07:42.840 everything's okay. We're waiting for that next shoe to drop. 0:07:42.920 --> 0:07:46.960 Jamie Diamond, you know, put it famously. What he's really 0:07:47.000 --> 0:07:49.880 expressing is not that he sees anything, but that he's 0:07:49.960 --> 0:07:51.920 expecting something. It's kind of like you live in an 0:07:51.920 --> 0:07:55.520 apartment in New York City and you might never see aproach, 0:07:55.720 --> 0:07:58.440 but they're there. You know they're in the wall, you 0:07:58.560 --> 0:08:00.680 know it, right, and so you don't food out. You 0:08:00.680 --> 0:08:02.160 do a whole bunch of different things when you live 0:08:02.200 --> 0:08:03.680 in New York. You know, there's things that you can 0:08:03.720 --> 0:08:05.680 do in suburban New Jersey where I live that are 0:08:05.720 --> 0:08:08.280 okay because you're not going to attract to animals act quickly. 0:08:09.000 --> 0:08:10.280 But if you do it in New York City, you're 0:08:10.320 --> 0:08:13.120 basically stunk. And I think the risk is is that 0:08:13.160 --> 0:08:17.800 people are really focused on, you know, what they're not seeing, 0:08:18.040 --> 0:08:20.000 And the fact of the matter is is with no 0:08:20.120 --> 0:08:24.240 economic data and with you know, earnings kind of you know, 0:08:24.440 --> 0:08:27.920 being okay for the most part, they're nervous that they're 0:08:27.960 --> 0:08:29.760 missing something, but they don't know what they're missing. 0:08:29.800 --> 0:08:30.920 It's actuary. Where are we? 0:08:31.080 --> 0:08:34.040 Are we in a grand house on Murray Hill infested 0:08:34.080 --> 0:08:36.960 we conchroaches? Are we in a nice Soho apartment? 0:08:37.200 --> 0:08:39.280 What is this? We might be trading down from a 0:08:39.280 --> 0:08:41.560 Soho apartment to something on the Upper East Side? 0:08:41.640 --> 0:08:43.920 Okay, does that mean you're de risking? 0:08:45.240 --> 0:08:45.600 We've been. 0:08:45.840 --> 0:08:47.679 We've been de risked for a while now. I mean 0:08:47.720 --> 0:08:49.560 to be honest with you. Since COVID, there have been 0:08:49.640 --> 0:08:51.760 kind of you know, there's been kind of one risk 0:08:51.840 --> 0:08:55.040 after another after another. Uh. And you know, to the 0:08:55.040 --> 0:08:56.720 extent that we've been able to kind of go up 0:08:56.720 --> 0:08:58.640 in credit, we've been going up in credit. I don't 0:08:58.679 --> 0:09:00.960 think that's a surprise to anyone. And I think you 0:09:01.000 --> 0:09:04.840 know everyone who's able to has been doing that. Or 0:09:04.880 --> 0:09:07.480 you've been looking to things like privates where you're taking 0:09:07.520 --> 0:09:10.359 maybe more liquidity risk which you can more easily define, 0:09:11.440 --> 0:09:14.600 but getting less credit risk on most sides of it, 0:09:14.640 --> 0:09:16.360 if you're doing your underwriting properly. 0:09:17.280 --> 0:09:20.800 Stay with us. More Bloomberg surveillance coming up after this. 0:09:30.000 --> 0:09:32.720 Let's turn back to warnings Chairs of General Motors jumping 0:09:33.000 --> 0:09:35.880 after the company be earnings and race guidance. The GM 0:09:36.160 --> 0:09:39.000 CFO Paul Jacobson joined us now for more all the 0:09:39.040 --> 0:09:41.000 stock is up by more than nine percent. We'll spend 0:09:41.000 --> 0:09:43.120 some time talking about the numbers, but I just wanted 0:09:43.160 --> 0:09:44.719 to take a step back with you, just for a 0:09:44.760 --> 0:09:50.079 brief moment. You've got real experience navigating volatile industries, experience 0:09:50.120 --> 0:09:53.520 in the airline business, and experience in the automaker business too. 0:09:53.760 --> 0:09:56.840 You took over a CFO in the pandemic. Can you 0:09:56.880 --> 0:09:59.760 talk to us about this year, Paul? Just how agile 0:09:59.760 --> 0:10:01.640 have you and the team needed to be and how 0:10:01.720 --> 0:10:03.200 volatile have things been too? 0:10:04.280 --> 0:10:06.240 Well, Jonathan, first of all, thank you very much for 0:10:06.280 --> 0:10:08.360 having us. It's a great day to be a GM 0:10:08.440 --> 0:10:11.800 and celebrate the success of all of our employees and 0:10:11.840 --> 0:10:15.480 partners worldwide. So really appreciate you being here today, having 0:10:15.559 --> 0:10:18.080 me today. So you know, at the end of the day, 0:10:18.160 --> 0:10:21.839 it's just another change. I mean, since coming to GM 0:10:22.200 --> 0:10:25.600 in twenty twenty, we've gone through COVID, we've gone through 0:10:25.679 --> 0:10:28.880 chip shortage, we've gone through tariffs, we've gone through ev 0:10:29.040 --> 0:10:31.920 pivots and so on. But what we've really tried to 0:10:32.000 --> 0:10:34.240 do is create a model that is resilient. And when 0:10:34.280 --> 0:10:35.960 you look at our balance sheet, you look at our 0:10:36.000 --> 0:10:39.600 inventory discipline and the way we've gone to market, there's 0:10:39.640 --> 0:10:41.320 a lot of things that have changed that allow us 0:10:41.360 --> 0:10:43.480 to be able to react to the world around us faster, 0:10:44.160 --> 0:10:46.680 and I think that's paid the way for us to 0:10:46.720 --> 0:10:49.080 have another really strong year in the face of a 0:10:49.080 --> 0:10:50.480 lot of macro changes. 0:10:50.280 --> 0:10:53.680 Pulled in order to increase resilience and maybe agility, Do 0:10:53.720 --> 0:10:55.679 you have to sacrifice long term planning? 0:10:56.080 --> 0:10:57.600 Is that something that becomes harder? 0:10:59.000 --> 0:11:01.680 Well, you know, I think what we've really done well 0:11:01.720 --> 0:11:03.760 as a team, I think is we've kept focus on 0:11:03.800 --> 0:11:06.760 that long term vision. So you know, for example, while 0:11:06.800 --> 0:11:10.080 we've taken a charge on reducing some of our ev 0:11:10.240 --> 0:11:13.160 capacity reflecting the demand that's out there, we still believe 0:11:13.200 --> 0:11:16.280 that evs are the future and we think that there's 0:11:16.280 --> 0:11:18.520 an opportunity for us to take a little bit of 0:11:18.600 --> 0:11:20.839 a pause in demand growth that we've seen over the 0:11:20.920 --> 0:11:24.920 last few years, structurally improve it, right size our capacity, 0:11:25.160 --> 0:11:27.040 and make sure that we can be successful as more 0:11:27.080 --> 0:11:30.680 and more customers adopted. So it's just an example of 0:11:30.720 --> 0:11:33.760 how we make sure that we're managing the short tem 0:11:33.800 --> 0:11:36.040 within the face of that longer term vision. 0:11:36.360 --> 0:11:38.320 So what of the big steps Paul, that you've taken 0:11:38.440 --> 0:11:42.200 in order to remain agile, particularly with supply chains and 0:11:42.240 --> 0:11:47.000 removing any kind of direct input from China in particular, 0:11:47.120 --> 0:11:50.640 how much have you rejiggered where you get your goods? 0:11:51.679 --> 0:11:54.440 Well, I think we learned a lot in industry from 0:11:54.480 --> 0:11:58.160 COVID and a focused supply chain that was really susceptible 0:11:58.200 --> 0:12:01.840 to individualized shocks, and I think we've taken the effort 0:12:01.880 --> 0:12:05.080 to try to make sure that we diversify our supply 0:12:05.160 --> 0:12:08.320 chain base We've made a number of investments, for example, 0:12:08.440 --> 0:12:12.360 in battery raw materials and other materials in the US, 0:12:12.840 --> 0:12:15.880 in addition to the four billion dollars that we've announced 0:12:15.880 --> 0:12:19.400 this year to increase our US manufacturing capacity. So I 0:12:19.480 --> 0:12:21.960 think it's been a case of making sure that that's balanced. 0:12:21.960 --> 0:12:24.560 And then when we went through the chip crisis of 0:12:24.679 --> 0:12:27.760 twenty twenty one, there were some more challenges about making 0:12:27.760 --> 0:12:29.760 sure that we expand the places where some of our 0:12:29.800 --> 0:12:32.840 chips are fabricated and our supply base that we use. 0:12:33.000 --> 0:12:35.760 So this has just been part of it. I think 0:12:35.760 --> 0:12:37.600 we've learned a lot of lessons over the last five 0:12:37.640 --> 0:12:39.760 years that have helped us and positioned us well to 0:12:39.800 --> 0:12:43.080 be able to thrive in ever changing circumstances like we 0:12:43.160 --> 0:12:43.839 see right now. 0:12:44.000 --> 0:12:45.920 All this costs a lot of money, and I'm just 0:12:46.240 --> 0:12:47.240 trying to get my head around. 0:12:47.240 --> 0:12:49.040 We've all been trying to get our head around. 0:12:48.840 --> 0:12:51.360 Where it comes from these extra costs in order to 0:12:51.480 --> 0:12:55.200 rejigger supply chains to offset any kind of increased costs 0:12:55.200 --> 0:12:56.960 that might come along the way. How much is coming 0:12:56.960 --> 0:13:01.600 from whether it's freezing labor forces or trimming around the edges, 0:13:01.679 --> 0:13:05.240 how much is coming from higher prices on consumer vehicles. 0:13:06.440 --> 0:13:09.240 Well, I think if you look at what GM has done, 0:13:09.520 --> 0:13:13.640 we've saved a lot of money by rationalizing our inventory balances. 0:13:13.679 --> 0:13:16.520 So we used to keep probably about forty percent more 0:13:16.520 --> 0:13:20.920 inventory on the ground at our dealerships around the country, 0:13:21.320 --> 0:13:24.160 and we've cut that down. That frees up a lot 0:13:24.200 --> 0:13:26.720 of working capital to be able to invest and redeploy 0:13:26.840 --> 0:13:29.440 back into the business. But it also makes sure that 0:13:29.480 --> 0:13:34.319 we can change much more quickly to changing demand around us. 0:13:34.400 --> 0:13:37.560 So our pricing has been stabilized, and I think that's 0:13:37.600 --> 0:13:40.520 given us a little bit more comfort to invest a 0:13:40.520 --> 0:13:43.079 little bit more than what we have historically, but still 0:13:43.120 --> 0:13:46.600 making sure that we're very disciplined with our capital allocation 0:13:46.760 --> 0:13:49.680 because we still have opportunities to pay down debt and 0:13:49.720 --> 0:13:53.040 also return capital to shareholders. So it's that balanced approach 0:13:53.320 --> 0:13:55.480 that I think has really paved the way for our success. 0:13:55.920 --> 0:13:58.560 Paul, you and your colleagues in the industry recently had 0:13:58.559 --> 0:14:00.880 a big win in Washington, a little of reprieve when 0:14:00.880 --> 0:14:03.760 it comes to the arrangement on the timeline for the 0:14:03.880 --> 0:14:07.920 tariff costs for imported auto parts. What else are you 0:14:08.120 --> 0:14:11.000 asking in terms of terrorfully from Washington? 0:14:12.520 --> 0:14:14.360 Well, you know, I think I want to praise the 0:14:14.400 --> 0:14:18.559 administration for really listening to the concerns of the industry 0:14:18.640 --> 0:14:21.560 and making sure that they're helping us to be positioned 0:14:21.600 --> 0:14:24.520 to be really successful as one of the largest US 0:14:24.640 --> 0:14:27.800 industrial producers that are out there. And the announcements that 0:14:27.840 --> 0:14:31.720 were made Friday essentially take what had already been done 0:14:31.760 --> 0:14:34.280 by the administration in the spring and expands it a 0:14:34.320 --> 0:14:37.560 little bit to be able to use those MSRP offsets 0:14:37.600 --> 0:14:40.640 on a wider variety of parts that we're bringing into 0:14:40.680 --> 0:14:42.560 the country. And as a result of that, we were 0:14:42.600 --> 0:14:45.680 able to lower our total tariff forecast for the year 0:14:46.040 --> 0:14:49.440 by about half a billion dollars from where we started 0:14:49.480 --> 0:14:52.560 the year. And I think it's that proactive partnership in 0:14:52.640 --> 0:14:55.640 terms of really making sure that we can remain competitive 0:14:56.280 --> 0:14:58.680 and help to drive more investment into the US, which 0:14:58.680 --> 0:14:59.360 we've done. 0:15:00.200 --> 0:15:02.760 Do you expect more reprieves, especially as the US goes 0:15:02.800 --> 0:15:06.800 into negotiations next year with Mexico and Canada. 0:15:06.880 --> 0:15:08.960 Well, I think what we're looking for is a little 0:15:08.960 --> 0:15:10.960 bit of stability. Obviously, this year has been a bit 0:15:11.000 --> 0:15:15.440 of a transition year for US. The handshake deal that 0:15:15.480 --> 0:15:18.600 we have with Korea. We're really eager to get that finalized. 0:15:19.320 --> 0:15:21.360 We do have some production of some of our lower 0:15:21.360 --> 0:15:24.680 cost models in Korea that help with some of the 0:15:24.680 --> 0:15:28.360 affordability concerns of our consumers here in the US, but 0:15:28.440 --> 0:15:30.960 also obviously Mexico and Canada are going to be really 0:15:31.000 --> 0:15:33.880 important to us. But as we look at those deals 0:15:33.920 --> 0:15:36.880 being finalized and we start to look into twenty twenty six, 0:15:37.200 --> 0:15:39.480 we think that there's actually an opportunity for us to 0:15:39.520 --> 0:15:41.440 do better in twenty twenty six and we've done in 0:15:41.480 --> 0:15:44.240 twenty twenty five and start to work our way back 0:15:44.320 --> 0:15:46.840 up to those eight to ten percent targeted margins that 0:15:46.880 --> 0:15:49.720 we set for ourselves before the tariffs were put in place. 0:15:50.000 --> 0:15:51.880 Well, just find me. Can we stay on Ja and 0:15:51.920 --> 0:15:52.760 finish on China? 0:15:53.400 --> 0:15:53.560 Pull? 0:15:53.600 --> 0:15:55.840 For a long time we've said on this program, this 0:15:55.920 --> 0:15:59.280 must be the most competitive market on the planet in 0:15:59.320 --> 0:16:02.200 any industry. How difficult is it to operate in that 0:16:02.320 --> 0:16:04.760 country right now? And how much hard is it going 0:16:04.800 --> 0:16:06.600 to get in the future for you as sort of 0:16:06.600 --> 0:16:07.520 make us like yourself. 0:16:08.720 --> 0:16:11.560 You know, about a year ago, Jonathan, we undertook a 0:16:11.600 --> 0:16:15.440 pretty ambitious restructuring program in China with the realization that 0:16:16.120 --> 0:16:18.040 you know, we were probably not going to be as 0:16:18.040 --> 0:16:20.840 big in China as we have been historically going forward 0:16:20.840 --> 0:16:23.640 with the amount of just tremendous competition that's in the 0:16:23.640 --> 0:16:27.040 country going forward. But you know, together with our partners, 0:16:27.520 --> 0:16:30.280 we were able to restructure that business and we've been 0:16:30.320 --> 0:16:33.720 profitable every quarter this year and look to be able 0:16:33.760 --> 0:16:36.920 to sustain that. So it's really about making sure that 0:16:36.960 --> 0:16:39.360 we're right size for where we are. We've got great 0:16:39.360 --> 0:16:42.080 products over there, we've got a long legacy, and we've 0:16:42.080 --> 0:16:44.760 got a good partnership that I think has really paved 0:16:44.800 --> 0:16:46.600 the way. And with that work that the team did 0:16:46.640 --> 0:16:49.360 in China, really proud of what they accomplished and think 0:16:49.400 --> 0:16:50.680 we can be sustainable there. 0:16:50.920 --> 0:17:03.560 Stay with us Multplomberg surveillance coming up after this, but 0:17:03.640 --> 0:17:06.480 it's around a table. Monica Querra of Moreke and Stanley Monica, 0:17:06.520 --> 0:17:09.360 good Mornic, good morning. China is flexed and is flexed, 0:17:09.359 --> 0:17:12.200 and the whole world has listened and arguably maybe even 0:17:12.280 --> 0:17:15.480 brought the likes of Australia and America closer together. Was 0:17:15.480 --> 0:17:18.280 that a strategic mistake going to get to negotiations like 0:17:18.359 --> 0:17:18.840 to this month. 0:17:19.160 --> 0:17:23.240 I think what's interesting about this deal is that China's 0:17:23.320 --> 0:17:27.000 response was actually constructive on paper, right. They were actually 0:17:27.040 --> 0:17:30.200 positive saying, you know, yeah, the join the party on 0:17:30.200 --> 0:17:33.240 on rare Earth. That was really surprising to me. That 0:17:33.320 --> 0:17:35.719 tells me that they're not worried that takes. It's going 0:17:35.760 --> 0:17:38.000 to take at least five to seven years, maybe longer 0:17:38.040 --> 0:17:40.480 to have this whole initiative ramp up. A lot can 0:17:40.600 --> 0:17:43.439 change in that time. Doesn't mean that this isn't going 0:17:43.480 --> 0:17:45.680 to be a positive for the US. I think more, 0:17:45.920 --> 0:17:49.000 you know, players at the table is ultimately long term 0:17:49.000 --> 0:17:52.360 of benefit. But this isn't a zero, you know, end 0:17:52.400 --> 0:17:52.880 game year. 0:17:53.240 --> 0:17:54.879 So going into this meeting, it sounds like do you 0:17:54.920 --> 0:17:55.760 think China has. 0:17:55.680 --> 0:18:00.280 To leverage I would say that both parties right each 0:18:00.320 --> 0:18:03.520 other when we're thinking about our combined economies. They don't 0:18:03.520 --> 0:18:06.480 want to one hundred percent tariff on all of their goods. 0:18:06.840 --> 0:18:09.560 That's an issue for them, but they don't really need 0:18:09.600 --> 0:18:12.240 to worry about this move on rar Earth. I think 0:18:12.280 --> 0:18:14.800 that they're going to be focusing on the other components. 0:18:15.200 --> 0:18:16.280 China is still. 0:18:17.880 --> 0:18:21.600 In charge of ninety percent or more right of that market, 0:18:21.960 --> 0:18:24.919 so this isn't a now issue. It's going to make 0:18:24.960 --> 0:18:26.760 them have to focus on all these other factors that 0:18:26.840 --> 0:18:29.320 could impact their import export relationship. 0:18:29.440 --> 0:18:30.800 To Jonathan's point, China. 0:18:30.640 --> 0:18:32.880 Though, flexing its muscles on rare earths, is it giving 0:18:32.880 --> 0:18:36.840 the Trump administration an excuse to continue making these deals 0:18:36.880 --> 0:18:39.840 where they take outright equity stakes in mining companies. 0:18:41.000 --> 0:18:43.680 I'm not going to speak to that right to that piece. 0:18:43.720 --> 0:18:45.560 I think you know, we were all surprised by the 0:18:45.640 --> 0:18:49.000 other outright stakes in US companies. Now, as far as 0:18:49.040 --> 0:18:53.119 the mining company component, we're going to continue to see 0:18:53.240 --> 0:18:55.960 foreign direct investment right directed out of the US in 0:18:56.080 --> 0:18:58.439 order to make these deals happen. What's going to be 0:18:58.440 --> 0:19:02.760 interesting is as we build out our relationship with Australia 0:19:03.040 --> 0:19:05.600 and China, it's like, where do we land on that 0:19:05.720 --> 0:19:08.399 on that final tariff number? And I think that again, 0:19:08.520 --> 0:19:10.560 when we go back to actually the beginning of the year, 0:19:10.840 --> 0:19:13.000