WEBVTT - UPS, Boeing Earnings, Tesla Profit Margins 0:00:02.080 --> 0:00:05.840 This is Bloomberg Intelligence with Alex Steinhl and Paul Sweeny. 0:00:06.000 --> 0:00:09.200 The real ap performance has been the US corporate high yield. 0:00:09.360 --> 0:00:11.680 Are the companies lean enough? Have they trimmed all the fats? 0:00:11.800 --> 0:00:15.360 The semiconductor business is a really cyclical business. 0:00:15.080 --> 0:00:18.680 Breaking market headlines and corporate news from across the globe. 0:00:18.720 --> 0:00:21.360 Do investors like the M and A that we've seen? 0:00:21.560 --> 0:00:24.640 These are two big time blue chip companies. 0:00:24.760 --> 0:00:28.400 The window between the peak and cut changing super fast. 0:00:28.560 --> 0:00:33.200 Bloomberg Intelligence with Alex Steinhl and Paulsweenye on Bloomberg Radio. 0:00:35.280 --> 0:00:37.840 On Today's Bloomberg Intelligence Show, we dig inside the big 0:00:37.880 --> 0:00:40.360 business stories impacting Wall Street and the global markets. 0:00:40.440 --> 0:00:42.480 Each and every week, we're going to provide in depth 0:00:42.479 --> 0:00:44.680 research and data on some of the two thousand companies 0:00:44.720 --> 0:00:47.400 and one hundred and thirty industries are analysts cover worldwide. 0:00:47.680 --> 0:00:50.199 Today we'll talk Tesla and how the company remains the 0:00:50.200 --> 0:00:52.120 Wilson was a valuable automaker. 0:00:51.800 --> 0:00:55.800 Plus our conversation with Rockwell Automation CEO Blake Morritt. But first, 0:00:56.040 --> 0:00:59.120 another week of earnings and another dismal forecast, this time 0:00:59.120 --> 0:01:02.360 from the likes of US, the company posting disappointing fourth 0:01:02.400 --> 0:01:05.840 quarter earnings and providing twenty twenty four guidance that missed 0:01:05.880 --> 0:01:06.280 the mark. 0:01:06.600 --> 0:01:08.520 For more in this co host John Tucker and I 0:01:08.560 --> 0:01:12.200 spoke with Bloomberg Intelligence senior transport logistics and shipping analysts 0:01:12.280 --> 0:01:15.119 Lea Clascow. I first asked them about why the results 0:01:15.160 --> 0:01:16.080 were so disappointing. 0:01:16.319 --> 0:01:20.160 They're really just reeling from the impact from the labor 0:01:20.240 --> 0:01:23.520 negotiations they had last year. So running up ahead of 0:01:23.520 --> 0:01:26.279 those negotiations, a lot of shippers were like, you know something, 0:01:26.520 --> 0:01:29.720 I'm not going to use UPS because I might want 0:01:29.720 --> 0:01:32.119 to use one of their competitors like FedEx or even 0:01:32.160 --> 0:01:34.880 the postal service, because I don't know if my stuff 0:01:34.920 --> 0:01:36.240 is going to be able to get where it needs 0:01:36.280 --> 0:01:39.240 to go on time. So a lot of that diverted freight, 0:01:39.319 --> 0:01:41.520 you know, is kind of deleveraging effect on the network, 0:01:41.560 --> 0:01:45.720 which really weighs on margins. And then you know, they 0:01:46.319 --> 0:01:49.080 had the negotiations. They have a contract in place, which 0:01:49.120 --> 0:01:52.360 is fantastic for UPS and also for the teams stairs, 0:01:52.600 --> 0:01:54.280 you know, but a lot of the costs, the initial 0:01:54.360 --> 0:01:57.760 costs of that new contract are in year one, and 0:01:57.840 --> 0:02:00.960 so that's like a real big hit to margins. That 0:02:01.080 --> 0:02:03.440 coupled with the fact it's taking some time for them 0:02:03.480 --> 0:02:06.360 to win back some of that share. Management noted that 0:02:06.400 --> 0:02:09.600 they've won back about sixty percent of that share. It's 0:02:09.639 --> 0:02:12.160 going to take time for them to get that share 0:02:12.240 --> 0:02:14.480 back to where it needs to be. And again, these 0:02:14.480 --> 0:02:17.520 are networks, and when you're talking about freight transportation, it's 0:02:17.520 --> 0:02:20.519 all about building density because the more stuff you can 0:02:20.560 --> 0:02:23.040 deliver at the same time, you know, the better the 0:02:23.080 --> 0:02:26.520 margins are. And that's what they're really working through right now. 0:02:27.120 --> 0:02:30.360 And you know, and what I thought was kind of 0:02:30.360 --> 0:02:32.680 one of the more interesting little tidbits is that they 0:02:32.720 --> 0:02:36.000 think that this year that the small package volume from 0:02:36.040 --> 0:02:39.280 an industry standpoint, is only going to increase like one percent, 0:02:40.080 --> 0:02:43.840 which to me I thought was a little pessimistic. But 0:02:43.960 --> 0:02:47.760 you know, all in all, they're really dealing with tepid demand, 0:02:48.080 --> 0:02:51.760 they're dealing with rising costs, and you know, they're obviously 0:02:51.760 --> 0:02:54.720 taking those costs pretty seriously. As you know, they're laying 0:02:54.760 --> 0:02:58.160 off or planning the layoff or reduce heads however nicely 0:02:58.160 --> 0:03:00.919 you want to say it, twelve thousand people. And then 0:03:01.000 --> 0:03:04.840 also they're looking to get there. They're putting their brokerage business, 0:03:04.840 --> 0:03:09.200 which is called Coyote under a strategic review. Coyote is 0:03:09.240 --> 0:03:13.560 the third largest freight broker out there. So one of 0:03:13.560 --> 0:03:18.120 the largest publicly traded ones are C. H. Robinson. People 0:03:18.200 --> 0:03:21.000 might not know that, might may know that name. Also 0:03:21.240 --> 0:03:25.000 r XO is another pure play brokerage as Landstar. There's 0:03:25.040 --> 0:03:28.200 a couple private ones. A lot of large companies like 0:03:28.320 --> 0:03:31.040 JB Hunt have their own brokerage business in house. 0:03:31.160 --> 0:03:34.560 You get sorry for a series of stupid questions, but 0:03:34.960 --> 0:03:37.760 this is who you're talking to. What is a freight 0:03:38.600 --> 0:03:41.480 what's their role on what do they do a freight brokerage? 0:03:41.960 --> 0:03:44.800 So it's they're pretty much get together buyers and sellers 0:03:44.840 --> 0:03:47.040 of freight. So if you think about it, so if 0:03:47.040 --> 0:03:48.760 you're a shipper and you have a load that you 0:03:48.960 --> 0:03:51.480 need to get from point A to point B, you 0:03:51.600 --> 0:03:54.520 might use a broker to find a truck to carry 0:03:54.560 --> 0:03:57.880 that load, and the broker kind of makes a spread 0:03:58.240 --> 0:04:01.080 in between what their charge the shipper and what they're 0:04:01.080 --> 0:04:04.360 paying the trucking company. What's happened is, you know, it's 0:04:04.400 --> 0:04:07.960 a very cyclical business. Uh, there's there's there's great highs 0:04:07.960 --> 0:04:10.760 and kind of depressing loads and margins can be very 0:04:10.840 --> 0:04:12.520 volatile during this like, so. 0:04:12.480 --> 0:04:15.760 This this just a backup of this brokerage that they 0:04:15.840 --> 0:04:18.160 own that they're now getting rid of. That you could 0:04:18.160 --> 0:04:19.720 have gone to them and they could have picked a 0:04:19.760 --> 0:04:24.200 shipper other than you know, the company that owns them UPS. 0:04:25.720 --> 0:04:29.360 Yeah, so you know, so UPS could potentially use its 0:04:29.360 --> 0:04:32.680 own in house brokerage to move a trailer load of 0:04:32.760 --> 0:04:36.720 freight between two of their sorting facilities. Or if you're 0:04:36.839 --> 0:04:39.960 Walmart and you know you have an extra load that 0:04:40.000 --> 0:04:42.800 you need to get from your DC to you know, 0:04:43.080 --> 0:04:46.039 your spring Lake Walmart. I don't think there's a spring 0:04:46.200 --> 0:04:50.560 Walmart and spring Lake Brick. You know, you might, you 0:04:50.600 --> 0:04:55.240 might use them because either the carriers that you're contracted 0:04:55.279 --> 0:04:58.560 with don't have the capacity, or you're trying to take 0:04:58.600 --> 0:05:01.200 advantage of cheap rates and spot market, and right now 0:05:01.279 --> 0:05:04.360 truckload rates are extremely cheap. They've been bouncing along the 0:05:04.360 --> 0:05:08.120 bottom for quite some time, and so shippers might like 0:05:08.200 --> 0:05:12.440 to leverage that. You know, intermodal is an example. So 0:05:12.720 --> 0:05:16.120 you know the intermodal space, which is railroads. You know 0:05:16.200 --> 0:05:18.720 that's when you see like two containers on top of 0:05:19.080 --> 0:05:22.800 a railroad. You know, they're facing increased competition because of 0:05:22.839 --> 0:05:25.960 the loose conditions that are on the spot market, and 0:05:26.080 --> 0:05:28.400 a lot of those shippers might use brokerage to try 0:05:28.400 --> 0:05:30.279 to find a carrier to carry their loads. 0:05:30.360 --> 0:05:33.320 Our Thanks to Bloomberg Intelligence senior Transport, Logistics and Shipping 0:05:33.360 --> 0:05:35.120 analysts Lea Clasico, let's turn. 0:05:35.000 --> 0:05:38.480 Out to Boeing posting fourth quarter earnings, cashul and revenue 0:05:38.480 --> 0:05:41.880 that surpassed analyst expectations, but the planemaker for gold guidance 0:05:41.920 --> 0:05:44.560 for twenty twenty four as it faces lapses in safety. 0:05:44.800 --> 0:05:47.040 To help recap the earnings, co host Emily Grafeo and 0:05:47.080 --> 0:05:50.480 I spoke with Bloomberg Intelligence Senior Aerospace, Defense and Airlines 0:05:50.480 --> 0:05:53.960 analysts George Ferguson. He began the conversation by discussing his 0:05:54.160 --> 0:05:56.359 key takeaways from fourth quarter earnings. 0:05:56.440 --> 0:05:59.280 I thought that the quarter's numbers looked pretty much in 0:05:59.320 --> 0:06:01.760 line with what we expected, maybe a little bit better. 0:06:01.839 --> 0:06:05.440 Commercial airplane. Some of the cash flow generation was a 0:06:05.480 --> 0:06:09.719 little bit better. A lot of it from deposits, you 0:06:09.760 --> 0:06:12.719 know that they're getting from airplanes as they move through production. 0:06:13.360 --> 0:06:15.280 So I wouldn't call that sort of I mean, it's 0:06:15.360 --> 0:06:18.280 good cash FLOWD what I wouldn't call it super high quality, 0:06:18.360 --> 0:06:20.720 right like when you're generating a lot of cash from 0:06:20.720 --> 0:06:26.520 your core operations. Their their global services business had some 0:06:26.640 --> 0:06:31.120 very nice margins, even better than we expected, and that's 0:06:31.160 --> 0:06:32.080 been a star performer. 0:06:32.120 --> 0:06:33.479 It's good to see that holding up. 0:06:35.240 --> 0:06:37.520 But yeah, I think the real story here is about 0:06:38.279 --> 0:06:41.320 going forward. How they, how they, you know, nip these 0:06:41.480 --> 0:06:44.520 quality problems in the bud. And so I do think 0:06:44.560 --> 0:06:47.920 that as I think about it more sort of pulling 0:06:47.960 --> 0:06:51.520 back guidance, I think that indicates that management is ready 0:06:51.520 --> 0:06:54.200 to do whatever it takes to get these. 0:06:54.120 --> 0:06:55.440 Quality problems in hand. 0:06:56.160 --> 0:06:58.120 And so, you know, my senses maybe they think, look, 0:06:58.120 --> 0:06:59.719 we we you know, we may not want to be 0:06:59.720 --> 0:07:03.159 whole to an exact number of airplanes in twenty twenty 0:07:03.200 --> 0:07:07.080 four as we dig through our manufacturing process and through 0:07:07.120 --> 0:07:10.880 the supply chain processes and make sure that we're getting 0:07:10.880 --> 0:07:13.680 a quality airplane out the door every single time. 0:07:14.200 --> 0:07:16.200 So if pulling guidance is all. 0:07:16.080 --> 0:07:19.240 About that and the efforts around that, at what it's 0:07:19.240 --> 0:07:23.320 going to take, and focusing again on quality over just 0:07:23.480 --> 0:07:27.120 management management metrics, I think that could be a very 0:07:27.240 --> 0:07:30.240 very good sign. You know, again the management team is 0:07:30.720 --> 0:07:33.440 crystal focused on this is what we have to do. 0:07:33.760 --> 0:07:36.680 How different is that than what the company has already 0:07:36.680 --> 0:07:40.240 been doing for the last few years. Were they not 0:07:40.480 --> 0:07:45.160 as focused on quality and safety beforehand? Like how much 0:07:45.240 --> 0:07:48.760 of this is truly a turnaround and a change for Boeing. 0:07:49.320 --> 0:07:52.400 So I think I think the business has just materially changed. 0:07:52.440 --> 0:07:57.239 I was at an aerospace defense conference last week, and 0:07:57.760 --> 0:07:59.440 you know, I didn't need the conference to tell me this, 0:07:59.520 --> 0:08:02.200 but I was prize that it was persistent and that 0:08:02.480 --> 0:08:05.280 and what I heard from people at the conference over 0:08:05.320 --> 0:08:10.400 and over again is that finding employees and employee turnover 0:08:10.640 --> 0:08:11.840 is still a problem. 0:08:11.560 --> 0:08:14.280 In this industry. It's still a problem now, you know. 0:08:14.320 --> 0:08:16.280 I think that the higher you up in the tiers, 0:08:16.360 --> 0:08:20.280 like a Boeing or an RTX or a GE, it's 0:08:20.360 --> 0:08:23.600 easier to retain employees because you provide great benefit packages. 0:08:23.680 --> 0:08:25.880 Everybody wants to be there. But even they have had 0:08:25.880 --> 0:08:26.720 a lot of turnover. 0:08:27.080 --> 0:08:29.720 And so I think pre pandemic, you could you could 0:08:30.000 --> 0:08:32.960 potentially fall back on the thought and in the manufacturing 0:08:33.000 --> 0:08:36.160 process of Boeing that you had very, very seasoned. 0:08:35.720 --> 0:08:38.400 Folks on the line that have been well. 0:08:38.160 --> 0:08:41.079 Trained, seen years in and years out of the business 0:08:41.559 --> 0:08:44.000 and we're always going to get it done right. But 0:08:44.040 --> 0:08:46.640 I think with the amount of turnover they've had. They 0:08:46.679 --> 0:08:50.160 really need to go back and rethink, you know, how 0:08:50.200 --> 0:08:54.040 they supervise the line, how they train the employees, and 0:08:54.120 --> 0:08:56.280 they have to they have to create more stability by 0:08:56.880 --> 0:08:59.560 investing in those people. And so I think this business 0:08:59.600 --> 0:09:01.880 has been to rely changed since the pandemic. I will 0:09:01.920 --> 0:09:05.000 also say that, you know, Bowling has been sort of 0:09:05.000 --> 0:09:08.040 pushing this outsourcing of the business again. They were doing 0:09:08.040 --> 0:09:10.680 this pre pandemic, and this is all about, you know, 0:09:10.679 --> 0:09:12.600 they want to sort of turn it into the auto industry, 0:09:12.880 --> 0:09:15.760 where you outsource subcomponents, you bring it together and rent 0:09:15.800 --> 0:09:18.880 and you put together an airplane. And that's turned the 0:09:18.920 --> 0:09:22.559 supply chain into a much bigger, you know, portion of 0:09:22.840 --> 0:09:25.920 of what you're doing. And it's global as well, right 0:09:25.920 --> 0:09:28.840 You're making some of these doors in Malaysia. Things are 0:09:28.840 --> 0:09:31.680 coming from all over the world into renting to turn 0:09:31.720 --> 0:09:34.400 into an airplane. And I think that's making it more 0:09:34.440 --> 0:09:37.840 difficult to keep track of the supply chain and the 0:09:37.920 --> 0:09:40.560 quality and the supply chain and what folks are doing 0:09:40.559 --> 0:09:43.520 down at those factories. And so I think it's terially changed. 0:09:43.640 --> 0:09:46.040 That's the problem, So George, and that sounds like a 0:09:46.040 --> 0:09:50.120 problem to me. That was probably decades in the making, 0:09:50.240 --> 0:09:53.360 i e. You know, going more to subcontractors and and 0:09:53.800 --> 0:09:59.200 you know, as part of globalization. Perhaps is there a 0:09:59.280 --> 0:10:02.320 sense that this is a really a long term fix 0:10:02.679 --> 0:10:06.800 that investors should not expect anything months. Maybe it's gonna 0:10:06.800 --> 0:10:07.440 take years here. 0:10:08.480 --> 0:10:09.880 Well, so I mean, I don't think they're going to 0:10:09.920 --> 0:10:13.240 stop production. I do think they're going to dig through 0:10:13.240 --> 0:10:16.800 the supply chain, you know, sort of hopefully methodically, and 0:10:17.120 --> 0:10:19.960 figure out where there could be sources of problem. But 0:10:20.120 --> 0:10:22.520 I think what it means is that you're just not 0:10:22.600 --> 0:10:25.360 going to see potentially the margin and the cash flow 0:10:25.360 --> 0:10:28.079 out of this business that you saw a pre pandemic 0:10:28.520 --> 0:10:32.559 for years. While they spend more money and more time 0:10:32.600 --> 0:10:34.520 and invest in people and go down and make sure 0:10:34.520 --> 0:10:37.599 that everything works. Some stuff may need to be reconsolidated 0:10:37.640 --> 0:10:40.960 back at sub tier suppliers or even at Boeing if 0:10:41.000 --> 0:10:42.959 they can't get comfortable that they're going to get the 0:10:43.040 --> 0:10:45.360 quality out of it. I think it drags. Like I 0:10:45.360 --> 0:10:48.600 said in Earnings, Cash Generation two years from now. 0:10:48.720 --> 0:10:51.640 At the same time, what I hear from you and 0:10:51.679 --> 0:10:54.520 from others in the airline businesses, there's a big demand 0:10:54.520 --> 0:10:56.800 for new aircraft out there. So how do they balance 0:10:57.080 --> 0:10:59.040 maybe slowing down the line a little bit with the 0:10:59.040 --> 0:11:01.920 fact that they're customers need more and more of their product. 0:11:02.400 --> 0:11:04.280 So I think it I think it hurts. I think 0:11:04.320 --> 0:11:07.240 you'd like to be breaking to higher build rates. Now 0:11:07.720 --> 0:11:10.800 air Bus will and air Bus will get market share, 0:11:11.040 --> 0:11:13.160 but I think in the long term if you don't, 0:11:13.400 --> 0:11:16.240 if you don't fix the quality problem here, you'll lose 0:11:16.600 --> 0:11:20.360 long term share and competitiveness and that and that would 0:11:20.400 --> 0:11:22.120 be really really bad. 0:11:22.800 --> 0:11:26.200 What does this mean for Boeing stock price? Because compare 0:11:26.200 --> 0:11:29.640 it to air Bus, it's underperforming on a year basis 0:11:29.679 --> 0:11:33.720 Boeing versus Airbus. So is this enough to bring investors 0:11:33.840 --> 0:11:37.600 new money into Boeing or is Airbus still going to 0:11:37.640 --> 0:11:38.880 be the outperformer here? 0:11:39.559 --> 0:11:41.800 So I mean, I think you know, Boeing investors are 0:11:41.800 --> 0:11:43.439 going to have to take the long view here, right 0:11:43.480 --> 0:11:48.600 because again I don't see any quick fix, you know, 0:11:48.800 --> 0:11:52.760 quick leaping to much higher build rates, much better cash generation, 0:11:52.800 --> 0:11:54.800 because I think they need to invest back in their business. 0:11:55.280 --> 0:11:58.839 Airbus apparent doesn't apparently have this problem. I think more 0:11:58.880 --> 0:12:01.880 of the supply chain is bill in house at Airbus 0:12:01.960 --> 0:12:04.839 or at least better controlled, And so I think you're 0:12:04.880 --> 0:12:08.120 going to see that Airbus is going to perform fundamentally better. 0:12:07.960 --> 0:12:11.360 Here thanks to Bloomberg Intelligence. Senior Aerospace, Defense and Airlines 0:12:11.400 --> 0:12:13.040 analyst George ferguson. 0:12:12.679 --> 0:12:16.120 Coming up why Tesla's profit margin may deserve more appreciation 0:12:16.160 --> 0:12:17.079 than it's actually getting. 0:12:17.240 --> 0:12:20.120 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:20.120 --> 0:12:22.320 depth research and data on two thousand companies and one 0:12:22.400 --> 0:12:25.240 hundred and thirty industries. You can access Bloomberg Intelligence via 0:12:25.320 --> 0:12:26.520 b I go on the terminal. 0:12:26.600 --> 0:12:29.600 I'm Paul Sweeney, Ana Malex Steel, and this is Bloomberg. 0:12:38.040 --> 0:12:41.920 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:42.000 --> 0:12:43.760 weekdays at ten am Eastern on. 0:12:43.720 --> 0:12:47.120 Apocarplay and Android Auto with the Bloomberg Business App. Listen 0:12:47.200 --> 0:12:50.280 on demand wherever you get your podcasts, or watch us 0:12:50.320 --> 0:12:52.079 live on YouTube. 0:12:53.120 --> 0:12:55.280 Let's turn out a Tesla, who stock has tumbled so 0:12:55.320 --> 0:12:58.760 far this year, the auto industry warns a plunging ed demand, 0:12:58.880 --> 0:13:01.520 and Wall Street analyst scale back on expectations. 0:13:01.800 --> 0:13:04.120 Co host Emliker Feel joined me as we spoke with 0:13:04.160 --> 0:13:07.240 Bloomberg News Editor in chief Emeritus Matt Winkler on this 0:13:07.559 --> 0:13:10.679 He discussed why Tesla's profit margin deserves more appreciation than 0:13:10.679 --> 0:13:11.160 it's getting. 0:13:11.640 --> 0:13:17.000 After losing fifty percent of shareholder worth since November twenty 0:13:17.040 --> 0:13:23.120 twenty one, Tesla still is, surprise, surprise, the tenth most 0:13:23.200 --> 0:13:28.600 valuable company, and it has the greatest market capitalization of 0:13:30.000 --> 0:13:33.160 any maker of cars and trucks in the world. And 0:13:33.200 --> 0:13:36.079 there's a reason for that why that is so today, 0:13:36.520 --> 0:13:41.079 and it's because Tesla's margins of profit profit margins are 0:13:41.160 --> 0:13:47.520 superior to any automaker, including by the way, you could 0:13:47.559 --> 0:13:54.240 say its most interesting competitor, BYD from China, which if 0:13:54.280 --> 0:13:57.520 you look at the last quarter, became the global sales 0:13:57.600 --> 0:14:00.800 leader for zero mission vehicles, which of course it's the 0:14:00.840 --> 0:14:05.520 Tesla space, which it has owned. And with all of that, 0:14:05.800 --> 0:14:09.480 with all of that, if you like bad news, Tesla 0:14:09.679 --> 0:14:13.200 still is holding its value. And I will say this 0:14:13.360 --> 0:14:17.240 that if you looked at bid over the past six months, 0:14:18.160 --> 0:14:23.640 it's actually trading it it's low. It's declined significantly since August. 0:14:24.720 --> 0:14:28.840 So if there was if you like a reevaluation in 0:14:28.880 --> 0:14:33.000 the market, if anything, Tesla is more than holding its 0:14:33.000 --> 0:14:38.680 own and if anything, BYD is depreciating, and the rest 0:14:38.680 --> 0:14:41.040 of the auto industry, of course doesn't have anything close 0:14:41.080 --> 0:14:44.560 to the profit margins of Tesla. So that's the story. 0:14:44.600 --> 0:14:47.080 I kind of like it, only because after last week, 0:14:47.120 --> 0:14:50.080 everybody seemed to be going in one direction if you 0:14:50.200 --> 0:14:54.400 read the narrative. The prevailing narrative was, you know, Tesla's 0:14:54.480 --> 0:14:57.480 days are numbered not so fast. 0:14:57.600 --> 0:15:01.200 So why are people overlooking? And is the fact that 0:15:01.240 --> 0:15:04.640 Tesla is down more than fifty percent from its all 0:15:04.680 --> 0:15:08.440 time high? Does that mean to you that this profitability 0:15:08.480 --> 0:15:10.480 is actually not priced in yet? 0:15:11.280 --> 0:15:16.400 Tesla has been a volatile stock, and remember we're talking 0:15:16.440 --> 0:15:21.480 about an adolescent here when public in twenty ten, and 0:15:21.920 --> 0:15:28.160 it's had many periods like this one where it has 0:15:28.280 --> 0:15:35.280 retreated significantly, only to rebound with greater fervor. You've seen 0:15:35.280 --> 0:15:38.120 that time and again. You know we're likely to see 0:15:38.120 --> 0:15:40.960 it again. But here's an example. If you were to 0:15:41.000 --> 0:15:46.680 go right now to the say Fortune magazine most admired Companies, 0:15:48.480 --> 0:15:51.200 Tesla isn't there. Now, Think about that for a second. 0:15:51.560 --> 0:15:54.960 This is a company that has completely transformed the auto 0:15:55.040 --> 0:15:59.160 industry as we know it. It has essentially convinced people 0:15:59.200 --> 0:16:03.520 that zero omission vehicles or the future, and even the 0:16:03.640 --> 0:16:07.520 very traditional auto giants that competes against have conceded that 0:16:07.560 --> 0:16:10.560 they have to make evs, and you would have thought 0:16:10.680 --> 0:16:13.640 that would be in and of itself significant enough to 0:16:13.720 --> 0:16:17.200 be admired, But no, it's not there. So there's a 0:16:17.320 --> 0:16:21.480 lot of, if you will, noise that's associated with Tesla 0:16:21.600 --> 0:16:26.480 because of its co founder, Elon Musk, and often the 0:16:26.520 --> 0:16:29.960 noise obscures the signal, which is the vehicle itself. 0:16:30.120 --> 0:16:32.480 Hey, Matt, I know you've been a long time owner 0:16:32.640 --> 0:16:35.480 of the Tesla automobile, so you follow this industry probably 0:16:35.480 --> 0:16:38.680 as close as anyone, just because I suspect it's always 0:16:38.680 --> 0:16:41.560 been of interest to you. I think the issue now 0:16:41.640 --> 0:16:45.280 for investors, not just for Tesla investors, is what is 0:16:45.320 --> 0:16:48.640 the ultimate demand for evs out there? And now there's 0:16:48.680 --> 0:16:51.520 a question. We saw Ford pull back the production of 0:16:51.520 --> 0:16:53.920 the Ford F one fifty Lightning, which I've test driven. 0:16:53.960 --> 0:16:56.720 It is an awesome vehicle at ninety four thousand dollars, 0:16:56.840 --> 0:16:59.720 or better be, what is your sense as to the 0:17:00.120 --> 0:17:02.680 man picture for electric vehicles in this country? 0:17:02.760 --> 0:17:07.040 Okay, so you're quite right. I do own a Tesla models. 0:17:07.320 --> 0:17:10.199 I never owned the shares for obvious reasons, because it 0:17:10.200 --> 0:17:13.359 would be a conflict of interest. In Bloomberg. Being Bloomberg, 0:17:13.760 --> 0:17:17.000 we're very careful about such things. But I am at 0:17:17.000 --> 0:17:23.520 the one hundred thousand threshold on my Tesla and there's 0:17:23.520 --> 0:17:26.359 no sign of any kind of deterioration. And I would 0:17:26.359 --> 0:17:30.359 say that many people who write about Tesla probably don't 0:17:30.359 --> 0:17:33.159 have the experience of the people who own Tesla's and 0:17:33.200 --> 0:17:37.520 if you ask people who own Tesla's pretty much the 0:17:37.840 --> 0:17:40.840 satisfaction there is right near the top. And actually Consumer 0:17:40.920 --> 0:17:45.119 Report spares that out. So I would say that the 0:17:45.200 --> 0:17:48.600 demand for evs is only going to increase. There was 0:17:48.680 --> 0:17:54.680 recently a story on Bloomberg about more competition in California, 0:17:54.720 --> 0:17:56.760 which has been the same that has led. 0:17:56.840 --> 0:17:58.560 But that's California. It's like a different country. 0:17:58.640 --> 0:17:59.240 Let's be honest. 0:18:00.440 --> 0:18:04.920 It's a case of yeah, there are more people buying evs, 0:18:05.119 --> 0:18:09.320 and they're not buying as just Tesla as anymore. Tesla 0:18:09.400 --> 0:18:12.160 had a seventy percent market share and now it's down 0:18:12.200 --> 0:18:15.920 to sixty something percent. But Tesla's still growing. And that's 0:18:15.920 --> 0:18:18.199 the whole point, is that the pie is getting bigger, 0:18:18.800 --> 0:18:21.400 and Tesla's piece of the pie is going to get biggers. 0:18:21.400 --> 0:18:24.280 From people say I want to buy a Tesla, I 0:18:24.280 --> 0:18:26.040 don't want to buy an ev you know, it's like 0:18:26.080 --> 0:18:28.280 I want to buy a Tesla because a teslacas it's 0:18:28.280 --> 0:18:31.119 such a cool car core brand, But I'm not buying 0:18:31.119 --> 0:18:32.800 it because per se, because it's an EV. 0:18:33.000 --> 0:18:33.280 Yeah. 0:18:33.320 --> 0:18:37.760 And look, here's the thing. Tesla makes only zero mission vehicles. 0:18:38.119 --> 0:18:43.120 It's competing against companies outside of BYD and a handful 0:18:43.119 --> 0:18:48.400 of others that make all these other fossil fuel machines. 0:18:48.560 --> 0:18:52.280 That's a very complicated equation, which is why the profitability 0:18:52.280 --> 0:18:56.480 in the auto industry is inferior compared to Tesla. Tesla 0:18:56.560 --> 0:18:58.960 only has to focus on one thing, and so far, 0:18:59.080 --> 0:19:01.520 if you look at it, it's done very well. You know, 0:19:01.600 --> 0:19:04.239 first there was the models, and then there was the 0:19:04.280 --> 0:19:08.479 Model X, and then there's the Model Why you know, 0:19:08.600 --> 0:19:12.320 the Model three. All of these vehicles actually have made 0:19:12.359 --> 0:19:16.560 Tesla a very formidable company, and there's more to come. 0:19:16.640 --> 0:19:18.440 I mean, the reason why the stock fell as much 0:19:18.440 --> 0:19:21.840 as it did is because Elon Musk actually said we're 0:19:21.880 --> 0:19:25.119 going to take a pause, so to speak, to get 0:19:25.200 --> 0:19:29.199 an even cheaper EV model in front of people in 0:19:29.240 --> 0:19:30.000 the years to come. 0:19:30.240 --> 0:19:32.560 What do you think that China's situation is for Elon 0:19:32.640 --> 0:19:35.240 must from a competitive standpoints, selling those Teslas into China, 0:19:35.359 --> 0:19:38.040 visav byd and some of the other Chinese manufacturers. 0:19:38.119 --> 0:19:41.480 The vehicle speaks for itself, and to the extent that 0:19:41.720 --> 0:19:45.520 consumers make that choice, it's a good thing for Tesla 0:19:45.640 --> 0:19:46.439 to be in China. 0:19:46.760 --> 0:19:50.240 Our thanks to Bloomberg News Editor in Chief Emeritus Matt Winkler. 0:19:50.320 --> 0:19:53.680 Amazon dot Com abandoning its plan one point four billion 0:19:53.720 --> 0:19:56.880 dollar acquisition of rumba maker I Robana. This comes after 0:19:56.920 --> 0:19:59.480 a clash with European Union regulators who had threatened to 0:19:59.480 --> 0:19:59.800 block that. 0:20:00.600 --> 0:20:03.040 Co host Molly Smith and I spoke about this and 0:20:03.080 --> 0:20:06.320 the latest and anti trust enforcement with Bloomberg Intelligence senior 0:20:06.440 --> 0:20:10.479 litigation antitrust analyst Jennifer ree I first asked Jennifer if 0:20:10.520 --> 0:20:13.280 she was surprised the deal between Amazon and I Robot 0:20:13.359 --> 0:20:13.879 fell apart. 0:20:14.160 --> 0:20:16.240 It wasn't at all, because back in July, the EU 0:20:16.280 --> 0:20:18.360 said we have concerns about this deal. I mean they're 0:20:18.359 --> 0:20:21.320 concerned about competition in the market for robot vacuums. I 0:20:21.359 --> 0:20:24.160 think there's this idea that anti trust is only interested 0:20:24.200 --> 0:20:26.160 in really big deals. But at the end of the day, 0:20:26.280 --> 0:20:28.880 no matter how small the business is or how few 0:20:28.880 --> 0:20:31.479 consumers it might impact, if there's an anti trust problem, 0:20:31.640 --> 0:20:34.680 they still have concerns and it's still an illegal deal 0:20:34.880 --> 0:20:37.679 in the eyes of regulators. So here they said in 0:20:37.720 --> 0:20:40.119 a couple different countries in Europe that Amazon was a 0:20:40.160 --> 0:20:45.800 particularly important distributor for robot vacuums and they could foreclose competitors. 0:20:46.040 --> 0:20:49.280 I mean, but Amazon's in the market for everything obviously, 0:20:49.320 --> 0:20:52.720 not just you know, the robo vacuum market. So and 0:20:52.800 --> 0:20:56.000 surely there must be other real competitors out there that 0:20:56.119 --> 0:20:59.320 have a more narrowed focus on the robo vacuum space 0:20:59.359 --> 0:20:59.920 than Amazon. 0:21:00.280 --> 0:21:02.520 Well likely, and that's probably what they argued. But the 0:21:02.560 --> 0:21:04.840 thing is, the European Commission said, but this is a 0:21:04.840 --> 0:21:08.000 particularly important channel because you won't only own the vacuum, 0:21:08.000 --> 0:21:10.840 but you're going to own distribution. An important distribution is 0:21:10.880 --> 0:21:13.800 like a vertical acquisition, right. It's an integration that they 0:21:13.800 --> 0:21:15.560 had a problem with because that would give them the 0:21:15.600 --> 0:21:18.639 ability to foreclose some of these other smaller makers of 0:21:18.680 --> 0:21:21.879 these vacuums that need to sell on Amazon. And apparently 0:21:21.960 --> 0:21:25.199 in some countries there wasn't enough other competition, so they 0:21:25.240 --> 0:21:28.000 had some concerns. There could have been a remedy offered, 0:21:28.040 --> 0:21:30.200 but the company decided not to do that. So it 0:21:30.240 --> 0:21:32.560 was kind of a stalemate and honestly they were going 0:21:32.640 --> 0:21:34.800