WEBVTT - Intel Returns to Profitability in Third Quarter 

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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<v Speaker 2>Getting back to earnings, Intel, our good friends out there

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<v Speaker 2>in southern California and out in the valley. They reported

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<v Speaker 2>some pretty darn good numbers in the stocks rallying, and

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<v Speaker 2>I was just looking at Intel as a stock, and

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<v Speaker 2>I guess when the government invests in you and Nvidia

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<v Speaker 2>invests in you, that's a pretty good sign of support.

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<v Speaker 2>And stock is up about seven tens to one percent today,

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<v Speaker 2>but it's up ninety two percent year to date. Punjohn Sobani,

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<v Speaker 2>he follows Intel. He's a senior analys he covers the

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<v Speaker 2>Semis for Bloomberg Intelligence.

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<v Speaker 3>He's based out there in our San Francisco office. Have

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<v Speaker 3>you been to our San Francisco office?

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<v Speaker 4>I have.

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<v Speaker 3>It is awesome. P You're six, I think or Peer three.

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<v Speaker 2>I can't remember which one it is, but it's awesome

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<v Speaker 2>out there right out into the bay.

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<v Speaker 3>It's very cool. Kunjan talk to us about Intel here,

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<v Speaker 3>what's happening with their business?

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<v Speaker 4>Yeah, I mean the results yesterday sort of seemed start

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<v Speaker 4>of a turnaround for US. Fundamentally, the stock rally you

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<v Speaker 4>mentioned over the last few months has not been driven

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<v Speaker 4>by any fundamental improvements. It was all purely driven by

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<v Speaker 4>the deals that the three deals, the US government in

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<v Speaker 4>media and the soft bank deal, which all together brought

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<v Speaker 4>in somewhere between sixteen to eighteen billion dollars to them.

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<v Speaker 4>That brings in long term secular tail winds or not

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<v Speaker 4>secular but strategic tail winds, but doesn't do anything to

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<v Speaker 4>improve the near term fundamental businesses and address the challenges. However,

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<v Speaker 4>the results yesterday showed a step in the right direction

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<v Speaker 4>where improving their demand for their AIPC and the server

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<v Speaker 4>CPU products improved, which we have been wanting to see

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<v Speaker 4>for a while. There were some structural changes that they're

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<v Speaker 4>doing which will help with gross profit improvement gross profit

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<v Speaker 4>dollars improvement going forward, even though the gross margin will

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<v Speaker 4>still have headwinds next year. But we like the structural

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<v Speaker 4>changes they are doing, bringing more wafers into Intel, you know,

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<v Speaker 4>ramping up the Arizona foundry with their newest Intel eighteen

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<v Speaker 4>A node, which is which just has better cost structure

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<v Speaker 4>than any other sites that they have. So they're doing

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<v Speaker 4>many steps in the right direction, improving op X discipline

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<v Speaker 4>as well. So all of that seems to be start

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<v Speaker 4>of a good turnaround. And you know, there's still a

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<v Speaker 4>long way to go. Yeahcution still needs to be done

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<v Speaker 4>for many quarters, but this is a good news.

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<v Speaker 5>I'm so glad you brought up the investments from the

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<v Speaker 5>US government. Nvidian softwarek is something that helps certainly short

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<v Speaker 5>the balance sheet, But how does it translate into operational gains?

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<v Speaker 5>I mean, do customers decide to buy Intel's chips in

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<v Speaker 5>meaningful volumes as a result.

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<v Speaker 4>I mean not directly, not implicitly, the deals don't come

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<v Speaker 4>with that, but you know there is some indirect influence, right,

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<v Speaker 4>or you might want to call it a validity that

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<v Speaker 4>now you know the risk of liquidity risk with Intel,

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<v Speaker 4>which was there until a few quarters ago, the risk

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<v Speaker 4>of sort of failing the foundry business failing or not

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<v Speaker 4>investing goes away. So customers, big customers would gain some trust,

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<v Speaker 4>right that when you have backing of such such key

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<v Speaker 4>players in the industry, they must believe in you.

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<v Speaker 3>So Kunjun about competitive environment here.

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<v Speaker 2>So Intel's made you know, some nice inroads here, but

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<v Speaker 2>there's a lot of competition out there in their inner

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<v Speaker 2>chip fab business.

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<v Speaker 3>Talk to us about the competitive landscape, Yeah.

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<v Speaker 4>I mean the competition for them, both on the foundry

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<v Speaker 4>side and the product side is intense. Frankly speaking, they've

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<v Speaker 4>really missed out on the AI accelerator and the really

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<v Speaker 4>AI in the data center ramp, which which all of

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<v Speaker 4>their peers, like in Media AMD are enjoying. So they're

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<v Speaker 4>playing catch up when it comes to most areas. The

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<v Speaker 4>second issue in competition has been that they've been losing

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<v Speaker 4>share significantly in the data center side. Again, this is

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<v Speaker 4>the most profitable, highest spend side. This is where you

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<v Speaker 4>really don't want to lose share. But you know, slowly

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<v Speaker 4>we have seen the share loss pace reduce almost coming

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<v Speaker 4>sort of staying share lost heady quarter over quarter. So

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<v Speaker 4>now they need to work on improving which the changes

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<v Speaker 4>that they're doing going forward, which is moving the capacity

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<v Speaker 4>to serve the data center customers at the expense of

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<v Speaker 4>low end PC customers, we think is the right step

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<v Speaker 4>to you know, not you don't want to lose share

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<v Speaker 4>in that market anymore.

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<v Speaker 5>Right, So how different is Libputan the CEO strategy versus

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<v Speaker 5>Pat Goelsing or his predecessor who was let Go.

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<v Speaker 3>Is there a meaningful difference as a.

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<v Speaker 4>Huge difference, I think from a personality, communication strategy perspective,

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<v Speaker 4>it's the two opposite ends, you know. Lib Boo seems

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<v Speaker 4>to be more practical come you know, sort of under

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<v Speaker 4>promising and over delivering, which which usually the street likes.

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<v Speaker 4>You know, Pat on the other hand, was visionary, but

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<v Speaker 4>was you know, trying to get to the stars before

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<v Speaker 4>focusing on the moon. So very different styles. You know,

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<v Speaker 4>lib bu is focused, has done a lot of cultural changes,

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<v Speaker 4>significant restructure in middle management, you know, getting everyone back

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<v Speaker 4>to the office, which he really believes will bring significant

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<v Speaker 4>culture and working changes. So a lot of different opinions,

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<v Speaker 4>different styles. It's too soon to say which style is

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<v Speaker 4>going to win, but at least we're seeing some good

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<v Speaker 4>proof points of the new culture ship.

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<v Speaker 3>Stay with us more from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

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<v Speaker 1>weekdays at ten am Eastern on Apple, Cocklay and Android

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<v Speaker 1>Auto with the Bloomberg Business app. Listen on demand wherever

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<v Speaker 1>you get your podcasts, or watch us live on YouTube.

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<v Speaker 2>Let's talk about the auto business here forward. Can They

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<v Speaker 2>had some good numbers, and I think the auto maker

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<v Speaker 2>sured kind of saying, we're focusing on the on the units,

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<v Speaker 2>the models that make us a lot of money.

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<v Speaker 3>And they're not evs, No, they're not.

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<v Speaker 2>They're kind of dialing back that rhetoric a little bit

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<v Speaker 2>in response to I guess what they're seeing in the market.

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<v Speaker 2>Craig Chudell, he's a Bloomberg Global Autos editor. Craig talked

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<v Speaker 2>to us about Ford. They had some some some good numbers,

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<v Speaker 2>but I'm also seeing some layoff discussion out there.

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<v Speaker 3>Talk to us about Detroit. What's happening.

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<v Speaker 6>Yeah, it's been quite a week. It's hard to parse

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<v Speaker 6>because you're seeing GM and Ford have these, you know,

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<v Speaker 6>strong earnings reports, huge moves in the stock. President Trump

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<v Speaker 6>is taking victory laps over this on true Social and

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<v Speaker 6>yet this morning our colleague David Welchin in Detroit had

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<v Speaker 6>the scoop that GM is laying off hundreds of workers.

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<v Speaker 6>So you have this this situation where as you say

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<v Speaker 6>the amount of sales these companies are are pulling off

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<v Speaker 6>with full size SUVs, you know, the the Ford expeditions,

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<v Speaker 6>the Chevy Tahos, those sorts of vehicles are really hot

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<v Speaker 6>and in some cases, you know, as as good as

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<v Speaker 6>these companies have seen in something on the order of

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<v Speaker 6>two decades. And and yet also with that, you know,

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<v Speaker 6>real costs issues in terms of tariffs. I think maybe

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<v Speaker 6>not the worst case scenario that they were concerned about

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<v Speaker 6>months ago, but absolutely those were still still had wins.

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<v Speaker 6>I think there is a concerted effort on the part

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<v Speaker 6>of these two companies, however, to sort of, you know,

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<v Speaker 6>really thank Trump for these sort of incremental bits of

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<v Speaker 6>relief that he's taken off from of the measures that

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<v Speaker 6>that were put in place earlier this year.

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<v Speaker 3>Is that part of it done? Is that part of

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<v Speaker 3>the story over.

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<v Speaker 5>Are they still working to kind of continue to whittle

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<v Speaker 5>weigh at some of the costs imposed by the President's policies.

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<v Speaker 6>I think it's still very much a live issue. And interestingly,

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<v Speaker 6>you know, some of the the attempts to sort of

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<v Speaker 6>curry favor with the White House seems to be around

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<v Speaker 6>actually sort of a plot his move to put new

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<v Speaker 6>tariffs in place on medium and heavy trucks. And the

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<v Speaker 6>reason that they are appreciating that is because their rival,

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<v Speaker 6>Stalantis makes RAM big RAM pickups down in Mexico. So

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<v Speaker 6>it's a case of actually two players in Detroit kind

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<v Speaker 6>of ganging up on the third and sort of you know,

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<v Speaker 6>praising Trump. And I think that was one of the

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<v Speaker 6>interesting storylines out of last night's earnings that Ford sees,

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<v Speaker 6>you know, sort of some incremental opportunity to take advantage

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<v Speaker 6>of the fact that one of their big competitors now

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<v Speaker 6>faces much more of a tariff bill on those larger

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<v Speaker 6>pickups that are made down in Mexico.

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<v Speaker 2>Craig reading between the lines from the GM release and

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<v Speaker 2>then the Ford results, it feels like that these companies

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<v Speaker 2>are stepping back on the margin from EV's and EV investments,

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<v Speaker 2>and that seems to be one of the things that

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<v Speaker 2>the street is applauding here.

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<v Speaker 3>How do you read it?

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<v Speaker 6>Yeah, I think it's a little different across these these

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<v Speaker 6>two companies where you have GM has is much further along,

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<v Speaker 6>I would say, and standing up battery capacity, standing up

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<v Speaker 6>EV capacity as well. So they, I would say, on

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<v Speaker 6>the other hand, have you know, kind of on one hand,

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<v Speaker 6>have more more EV potential and more battery potential to

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<v Speaker 6>work with and haven't quite sort of cut to the

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<v Speaker 6>bone in terms of you know, what the they have

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<v Speaker 6>to offer. And yet I would say, you know, it's

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<v Speaker 6>also been the case that you know, it's it's fair

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<v Speaker 6>to look at sort of what they've managed in terms

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<v Speaker 6>of how many evs they're they're selling, and and fair

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<v Speaker 6>to say that it's been a real disappointment.

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<v Speaker 3>It has.

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<v Speaker 6>We've not seen the ramp up in demand that that

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<v Speaker 6>was hoped for, you know, even in the times when

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<v Speaker 6>we were able to take advantage of seventy five hundred

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<v Speaker 6>dollars federal tax credits. As we know that those days

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<v Speaker 6>are now gone, and so you're seeing you know, GM

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<v Speaker 6>cut back. I think Ford's cutting back sort of pre

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<v Speaker 6>dated some of these policy changes, and it's more to

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<v Speaker 6>do with the fact that they've just been losing so

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<v Speaker 6>much money on that side of the business and have

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<v Speaker 6>a little bit less to work with in terms of

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<v Speaker 6>progress in scaling up the business and bringing down costs

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<v Speaker 6>thanks to that scale.

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<v Speaker 5>Craig, did we learn anything from GM or Ford's financing

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<v Speaker 5>divisions about consumers and how much they're able to how

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<v Speaker 5>much debt they're able to take on? And I ask,

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<v Speaker 5>because of course we had the subprime lender Prima Lend

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<v Speaker 5>enter bankruptcy this week. That followed Treecolor entering bankruptcy a

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<v Speaker 5>few weeks ago. So there are a lot of questions

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<v Speaker 5>about credit quality, particularly for low end consumers or low

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<v Speaker 5>income consumers.

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<v Speaker 6>Excuse me, this absolutely came up, you know, with Ford

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<v Speaker 6>in particular, because Ford mortor credit is a pretty you know, big,

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<v Speaker 6>big part of that company's business. They did emphasize just

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<v Speaker 6>sort of how small sort of amount of exposure they

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<v Speaker 6>have from a subprime perspective. I think that's not necessarily

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<v Speaker 6>a shock where you have a situation where there's a

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<v Speaker 6>lot of subprime let lenders willing to sort of you know,

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<v Speaker 6>go after that business, and the captive lenders at Ford

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<v Speaker 6>and GM tend not to play in that necessarily. I

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<v Speaker 6>think there was a lot of concern years ago when GM,

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<v Speaker 6>around the time that they were coming back from bankruptcy,

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<v Speaker 6>acquired a subprime lender and everybody said, hey, wait a minute, here,

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<v Speaker 6>didn't isn't this kind of what you know, put GM

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<v Speaker 6>in the ditch back in two thousand and eight, two

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<v Speaker 6>thousand and nine. But really they've they've also turned a

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<v Speaker 6>GM Financial into you know, a captive lender that does

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<v Speaker 6>a lot of you know, sort of higher, higher credit

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<v Speaker 6>scores and not necessarily targeting that that subprime segment that

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<v Speaker 6>everybody rightfully is concerned about given the events of the

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<v Speaker 6>last couple of months.

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<v Speaker 3>Stay with us. More from Bloomberg Intelligence coming up after this.

0:11:58.160 --> 0:12:01.840
<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

0:12:01.920 --> 0:12:05.000
<v Speaker 1>weekdays at ten am Eastern on Apple, Cocklay and Android

0:12:05.040 --> 0:12:08.360
<v Speaker 1>Auto with the Bloomberg Business App. Listen on demand wherever

0:12:08.400 --> 0:12:11.520
<v Speaker 1>you get your podcasts, or watch us live on YouTube.

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<v Speaker 2>Back in the US, in the stock market, company news,

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<v Speaker 2>Target cutting some people here, us cutting some headcount in

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<v Speaker 2>the corporate levels, in the salaried levels, in corporate HQ.

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<v Speaker 2>Let's see what's happening with Target and with the broader

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<v Speaker 2>retail space in general. We can go to Jen Bartasha's

0:12:31.440 --> 0:12:36.640
<v Speaker 2>senior retail staples and package food analysts for Bloomberg Intelligence. So, Jen,

0:12:37.200 --> 0:12:40.560
<v Speaker 2>so it looks like Target is announcing some corporate job cuts.

0:12:40.600 --> 0:12:41.520
<v Speaker 3>What do you make of it here?

0:12:42.400 --> 0:12:44.920
<v Speaker 7>Yeah, Hi, Paul, So when we look at Target, these

0:12:44.960 --> 0:12:48.120
<v Speaker 7>are corporate jobs. As you said, it's about eighteen hundred

0:12:48.160 --> 0:12:51.319
<v Speaker 7>in total from one thousand existing and eight hundred postings

0:12:51.320 --> 0:12:54.199
<v Speaker 7>that haven't been filled. And really this is to us,

0:12:54.200 --> 0:12:56.920
<v Speaker 7>signals that they're finally really looking at how to streamline

0:12:56.920 --> 0:13:00.560
<v Speaker 7>the organization, tighten things up and hopefully in shape change

0:13:00.559 --> 0:13:02.640
<v Speaker 7>a little bit faster than they have to kind of

0:13:02.640 --> 0:13:03.800
<v Speaker 7>get things back on track.

0:13:04.120 --> 0:13:06.719
<v Speaker 2>So this is this an issue for the company, I e.

0:13:07.160 --> 0:13:09.600
<v Speaker 2>Maybe they are a little bloated, maybe their profit margins

0:13:09.640 --> 0:13:11.000
<v Speaker 2>aren't up to snuff.

0:13:11.040 --> 0:13:13.400
<v Speaker 3>Is that something that's been identified?

0:13:14.400 --> 0:13:16.760
<v Speaker 7>You know, I think that the bloat is something that

0:13:17.080 --> 0:13:20.120
<v Speaker 7>has been identified by the company, and they're not alone.

0:13:20.160 --> 0:13:22.480
<v Speaker 7>If you think about as we came out of the pandemic,

0:13:22.840 --> 0:13:25.319
<v Speaker 7>you know, a lot of companies introduced a lot more

0:13:25.360 --> 0:13:28.720
<v Speaker 7>redundancy in their processes, in their things like that, just

0:13:28.760 --> 0:13:30.600
<v Speaker 7>in order to make sure that they would have enough

0:13:30.600 --> 0:13:34.480
<v Speaker 7>supply of goods for everybody. And as the overall supply

0:13:34.600 --> 0:13:37.480
<v Speaker 7>chain is stabilized, now it's time to go back and

0:13:37.520 --> 0:13:40.880
<v Speaker 7>trim that fat that they put on just after the pandemic.

0:13:40.920 --> 0:13:44.120
<v Speaker 7>And you know, again Target's not alone. Walmart, you know,

0:13:44.360 --> 0:13:47.440
<v Speaker 7>earlier this year has also announced corporate headcuts and so

0:13:48.440 --> 0:13:50.280
<v Speaker 7>I think this is a normal course of business. But

0:13:50.320 --> 0:13:52.920
<v Speaker 7>it's a good time for Target to do so.

0:13:52.920 --> 0:13:56.240
<v Speaker 2>So let's all right, assuming that's as a due course

0:13:56.320 --> 0:13:57.880
<v Speaker 2>of business, here, let's step back and take a look

0:13:57.880 --> 0:14:01.040
<v Speaker 2>at their core fundamentals of the business, whether it's Target

0:14:01.280 --> 0:14:03.760
<v Speaker 2>or Walmart. Here, as we go into this, you know,

0:14:03.920 --> 0:14:07.160
<v Speaker 2>holiday shopping season, what's the what are the key drivers

0:14:07.360 --> 0:14:10.200
<v Speaker 2>or the key levers that you're looking at to gauge

0:14:10.240 --> 0:14:12.440
<v Speaker 2>success or you know, maybe some challenges.

0:14:13.600 --> 0:14:15.400
<v Speaker 7>Yeah, I think one of the things that needs to

0:14:15.480 --> 0:14:18.679
<v Speaker 7>be kind of reiterated about Target's decision is that it

0:14:18.720 --> 0:14:21.600
<v Speaker 7>doesn't impact the client facing part of the business, and

0:14:21.640 --> 0:14:24.320
<v Speaker 7>so that won't affect their seasonal hires, it won't affect

0:14:24.360 --> 0:14:27.160
<v Speaker 7>their number of employees and stores. And when you're looking

0:14:27.200 --> 0:14:31.040
<v Speaker 7>at broader retail coming into that holiday season, success is

0:14:31.080 --> 0:14:33.480
<v Speaker 7>really going to hinge on making sure they have enough

0:14:33.600 --> 0:14:36.920
<v Speaker 7>of the inventory in stock, that they've made good calls

0:14:37.000 --> 0:14:40.240
<v Speaker 7>on what the items are that they're carrying, but also

0:14:40.400 --> 0:14:44.000
<v Speaker 7>that customer support and experience and so you know, those

0:14:44.200 --> 0:14:45.800
<v Speaker 7>those are the things that we're going to be looking

0:14:45.800 --> 0:14:49.080
<v Speaker 7>for as we get closer to the holiday season. And

0:14:49.480 --> 0:14:52.240
<v Speaker 7>we had Mattel and we had Hasbro report earlier this

0:14:52.320 --> 0:14:55.320
<v Speaker 7>week and they didn't have great results, and you know,

0:14:55.400 --> 0:14:57.480
<v Speaker 7>part of that is reading into toy demand for the

0:14:57.520 --> 0:15:01.720
<v Speaker 7>holidays and the orders that weren't at actually the dinection materialized,

0:15:01.760 --> 0:15:04.000
<v Speaker 7>So we'll be watching that very carefully when it comes

0:15:04.040 --> 0:15:06.800
<v Speaker 7>to these retailers that really specialize in those kind of

0:15:07.120 --> 0:15:09.200
<v Speaker 7>products for consumers around the holidays.

0:15:09.800 --> 0:15:12.560
<v Speaker 3>So what is Walmart, what is Target?

0:15:12.600 --> 0:15:15.360
<v Speaker 2>What are they saying about the upcoming holiday season, which

0:15:15.400 --> 0:15:15.920
<v Speaker 2>is such an.

0:15:15.760 --> 0:15:19.240
<v Speaker 3>Important part for you know, the overall retail chain.

0:15:20.000 --> 0:15:22.200
<v Speaker 7>Yeah, it is the the most important part of the

0:15:22.280 --> 0:15:24.720
<v Speaker 7>year for these companies. And both of you know, both

0:15:24.720 --> 0:15:27.680
<v Speaker 7>of these companies as well as others like Costco, they

0:15:27.680 --> 0:15:30.760
<v Speaker 7>all say that they're well positioned for the holidays. You know,

0:15:30.880 --> 0:15:33.920
<v Speaker 7>if you think about the procurement process, most of the

0:15:34.080 --> 0:15:37.600
<v Speaker 7>orders for holiday goods were placed back in January or February.

0:15:38.320 --> 0:15:40.680
<v Speaker 7>A lot of the goods started to arrive in July

0:15:40.880 --> 0:15:44.120
<v Speaker 7>and August, so they should have their goods, you know

0:15:44.200 --> 0:15:47.040
<v Speaker 7>here in the US kind of ready to go. And

0:15:47.120 --> 0:15:49.800
<v Speaker 7>so I think, but with the state of the consumer

0:15:50.240 --> 0:15:53.480
<v Speaker 7>spending patterns in the US, although people are still spending money,

0:15:53.760 --> 0:15:56.760
<v Speaker 7>they're still looking for value. So when we're looking forward

0:15:56.800 --> 0:15:58.800
<v Speaker 7>to the holiday season, we think we're going to see

0:15:59.120 --> 0:16:02.040
<v Speaker 7>much more spread out deals and people spending you know,

0:16:02.360 --> 0:16:04.160
<v Speaker 7>on a on a spread out basis. So that they

0:16:04.200 --> 0:16:07.440
<v Speaker 7>don't get hit hard by big credit card bills in January,

0:16:08.080 --> 0:16:10.040
<v Speaker 7>So watch for lots of small deals that kind of

0:16:10.120 --> 0:16:11.200
<v Speaker 7>lead up into the holidays.

0:16:11.320 --> 0:16:14.640
<v Speaker 2>And will prices that we pay at the retail at

0:16:14.680 --> 0:16:16.240
<v Speaker 2>the target level, at the Walmart level, are they going

0:16:16.280 --> 0:16:17.680
<v Speaker 2>to be influenced by tariffs?

0:16:17.680 --> 0:16:18.080
<v Speaker 3>Do we think?

0:16:19.280 --> 0:16:21.400
<v Speaker 7>I think there will be certain categories that will be

0:16:21.520 --> 0:16:25.200
<v Speaker 7>that will be influenced by tariffs. And so, you know,

0:16:25.280 --> 0:16:27.880
<v Speaker 7>all the retailers are saying they're they're they're using price

0:16:27.920 --> 0:16:31.840
<v Speaker 7>increases as the last possible resort. And I think actually

0:16:31.880 --> 0:16:34.280
<v Speaker 7>one of the interesting things is that when they talk

0:16:34.320 --> 0:16:37.480
<v Speaker 7>about pushing back on suppliers or sharing the cost of suppliers,

0:16:38.280 --> 0:16:40.480
<v Speaker 7>some of the commentary that we heard this week from

0:16:40.480 --> 0:16:44.680
<v Speaker 7>Mattel and Hasbro sort of illustrate that, you know, you know,

0:16:45.240 --> 0:16:49.160
<v Speaker 7>there were lower orders, there's you know, less expectation for

0:16:49.160 --> 0:16:53.040
<v Speaker 7>for quick refills. So it'll be interesting to see, you know,

0:16:53.120 --> 0:16:57.680
<v Speaker 7>where that you know, how effective those companies are negotiating

0:16:57.800 --> 0:17:00.520
<v Speaker 7>other ways to to to to manage tariffs before they

0:17:00.560 --> 0:17:03.040
<v Speaker 7>put price increases in. But in some areas it's going

0:17:03.120 --> 0:17:05.000
<v Speaker 7>to be impossible not to pass something through.

0:17:06.640 --> 0:17:11.280
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