Speaker 1: This is Bloomberg Wall Street Week.
Speaker 2: The global push into infrastructure, breaking the IPO logjam in text.
Speaker 3: The financial stories that shape.
Speaker 2: Our work, cutting inflation without losing jobs. Do we need
Speaker 2: rate cuts and if so? How many? Investing in the
Speaker 2: time of geopolitical turmoil.
Speaker 1: Through the eyes of the most influential voices.
Speaker 2: Ten Rogueff Economists of Harvard, former FDIC had Shiela Beert
Speaker 2: g E CEO Larry Kulp, San Francisco FED President Mary
Speaker 2: Daily Bloomberg.
Speaker 1: Wall Street Week with David Weston from Bloomberg Radio.
Speaker 2: Big elections in Mexico and India. In Europe, the ECB
Speaker 2: cuts rates, and in the US all eyes are on
Speaker 2: the jobs numbers. This is Bloomberg Wall Street Week. I'm
Speaker 2: David Weston. This week we're Alph Schlostein of Evercore on
Speaker 2: getting deals back on track or actually.
Speaker 3: In a period of returning activity.
Speaker 2: Ragaram Rajin of the Booth School on what the Indian
Speaker 2: election means for investors.
Speaker 4: Hopefully a more democratic to India, which is what this
Speaker 4: election means actually into some of them.
Speaker 2: And Ford CEO Jim Farley on the return of Detroit
Speaker 2: and the US auto industry.
Speaker 5: Were in a different era where Detroit is growing after decades.
Speaker 2: We begin with the markets and their reaction to those
Speaker 2: US jobs numbers out on Friday. Once again, the labor
Speaker 2: market surprised thep side, adding another two hundred and seventy
Speaker 2: two thousand jobs with earnings increasing four tenths of a percent,
Speaker 2: both well above what was expected, and at the same time,
Speaker 2: the unemployment rate paradoxically ticked up to four percent. The
Speaker 2: bond market reacted with a vengeance, as the yield shot
Speaker 2: up fourteen basis points to four point four to three
Speaker 2: percent at the end of the week that until Friday
Speaker 2: was all about falling yields. The stock market, though once again,
Speaker 2: seemed to take it pretty much in strive. For the week,
Speaker 2: the S and P five hundred was up one point
Speaker 2: three percent to close at fifty three forty seven, and
Speaker 2: that is nicely above that median number our Bloomberg ls
Speaker 2: have for the year end of fifty two hundred, and
Speaker 2: the NASDAC it was up two point four percent for
Speaker 2: the week. To take us through all us Now, welcome
Speaker 2: to Sarah Ketter of Causeway Capitals. So, Sarah, thank you
Speaker 2: so much for being back with this really appreciated. So
Speaker 2: explain exactly what the market reaction was this week, because
Speaker 2: the stock market really didn't react too vigorously, although the
Speaker 2: bond market did to these jobs numbers.
Speaker 6: Well, thanks David.
Speaker 7: That stock market is likely taking its queue from earnings
Speaker 7: more than it is any of these potential underlying impetus
Speaker 7: for changes and interest rates.
Speaker 6: The likely most investors.
Speaker 7: Recognize that the FED is in a difficult position and
Speaker 7: lowering rates might be tough with this sort of strong data.
Speaker 7: On the other hand, earnings coming out of some of
Speaker 7: the market leaders still looks really good, and that's probably
Speaker 7: what's keeping the market aflut So.
Speaker 2: I wonder about this question of interest rate. There's a
Speaker 2: lot of speculation about what's going to happen this year
Speaker 2: for the fad we winning the year with six six
Speaker 2: rate cuts blood baked in. We're way off of that
Speaker 2: now at this point. But what about for the longer term?
Speaker 2: Are we is getting a sense maybe the longer term
Speaker 2: intry some people call the nutro rate will be higher
Speaker 2: And if so, what does that mean for you as
Speaker 2: an equity investor?
Speaker 7: Well, if you care about valuation, you have to use
Speaker 7: tools like discount rates. In other words, as stock is
Speaker 7: just worth the present value of all the cash that
Speaker 7: can generate into perpetuity discounted to present, and the higher
Speaker 7: that discount rate goes, the less the cash flow stream
Speaker 7: is worth, or they give it another way that the
Speaker 7: valuation multiples need to come down.
Speaker 6: So prolonged higher.
Speaker 7: Rates is a kind of a sobering effect for markets
Speaker 7: and investors.
Speaker 6: We have to be very careful about what we pay.
Speaker 7: And it also makes fixed income a very viable alternative
Speaker 7: to equities, so there's competition out there. So higher rates,
Speaker 7: if they're sustained, also have economic impacts.
Speaker 6: That we have to take into account when we do
Speaker 6: valuation work.
Speaker 7: Old myriad of reasons why sustained higher rates can lead
Speaker 7: to a tougher environment for stocks, not just because companies'
Speaker 7: earnings may be under pressure, but also because investors might
Speaker 7: want to go elsewhere or.
Speaker 2: For any reasonable period of time. The stock market has
Speaker 2: done pretty well, take the S and PO five hundred,
Speaker 2: for example, but there are a few stocks that have
Speaker 2: really driven it disproportionately. Some of those big tech stacks
Speaker 2: at AI stacks. Can I keep going?
Speaker 6: They could.
Speaker 7: It's very hard to call the tops of any of
Speaker 7: these stocks that have so much momentum behind them. And
Speaker 7: have sold their product like Nvidia far out into the future.
Speaker 7: They look so certain, and yet as the price rises,
Speaker 7: it gets closer to something that approximates fair value. And
Speaker 7: we're not seeing the big earnings upgrades any longer. Let
Speaker 7: pace of that is slowed. So it's very likely that
Speaker 7: these big market leaders, at least for the time being
Speaker 7: the next twelve months, have seen the bulk of their returns.
Speaker 6: Now is what's the next set of stocks?
Speaker 7: It will benefit from the same theme that propelled these
Speaker 7: big these big market leaders. And if it's not Gpu,
Speaker 7: it's not the chips, and it's not the servers or
Speaker 7: the data centers, than what and there are some fascinating
Speaker 7: great stocks in that layer beneath who should benefit from,
Speaker 7: for example, the demand for much more memory. So that's
Speaker 7: DRAM memory, not just the high bendwidth memory that an
Speaker 7: SK Micron has and Samsung Electronics soon will have, and
Speaker 7: Micron in the US, but even the commodity memory will
Speaker 7: be more in demand because there's only so much factory
Speaker 7: floor space. There's almost only so much room to make
Speaker 7: these high bandwidth memory chips. They're faster, they're they're more
Speaker 7: less power consumptive. So memory is so interesting, and stocks
Speaker 7: like Samsung traded very reasonable multiple.
Speaker 2: What about some of the stocks that have actually taken
Speaker 2: something of a hit taking the information tech services area
Speaker 2: and the assumption that perhaps AI generative AI really hurt
Speaker 2: their business. Is it possible the market's overreacted with some
Speaker 2: of those.
Speaker 7: Oh, those stocks had a terrible time when Cloud was
Speaker 7: first transitioning because enterprises say, oh, we can do it ourselves,
Speaker 7: and they very much can't. First of all, for most companies,
Speaker 7: they need to build the infrastructure to adopt AI tools,
Speaker 7: So infrastructure comes first and then application second. And there
Speaker 7: are you can look across almost all IT services companies
Speaker 7: and find that the market is very negative on them,
Speaker 7: but they have good based businesses and without doubt, and
Speaker 7: says companies like Cognizant, for example in the US or
Speaker 7: Fujitsu in Japan, the orders will have to pick up
Speaker 7: because enterprises we're going to need help.
Speaker 6: They'll have to work.
Speaker 7: Enterprises will have to work with their IT services companies
Speaker 7: in ways they'd never done before in order to implement AI.
Speaker 2: Sarah, it's always such a pleasure to have you with us.
Speaker 2: Thank you so much. That is Sarah Kutter of Causeway
Speaker 2: Capital Higher rates and greater uncertainty have put a damper
Speaker 2: on corporate deals coming off of what had been record years.
Speaker 2: To fill us in on where things stand today, we
Speaker 2: welcome back now Ralph Schlostein evercore chairman Emeritis. So Relph,
Speaker 2: great to have you back with us. Where are we
Speaker 2: right now on deal flow?
Speaker 3: Well, we're actually in a period of returning activity. So
Speaker 3: if you look, particularly in the US, announced transactions in
Speaker 3: the first half of the first five months of the
Speaker 3: year are about forty percent of last year. The last
Speaker 3: two years have been a period of low activity, driven
Speaker 3: by predominantly by uncertainty rather than economic uncertainty, because that
Speaker 3: is the enemy of M and A activity. And if
Speaker 3: you look back over the last forty five years, go
Speaker 3: back to nineteen eighty, m and A has generally been
Speaker 3: characterized by five to eight year up cycles and two
Speaker 3: to three year down cycles. And we're kind of at
Speaker 3: the end of that two to three year down cycle
Speaker 3: and at the beginning of what I suspect will be
Speaker 3: an extended period of increased activity, twenty four being better
Speaker 3: than twenty three and twenty five being better than twenty four.
Speaker 2: So, as you know, here a Bloomberg repay. A lot
Speaker 2: of attention to the FED. Are they going to cut it?
Speaker 2: They're not going to cut it, They're going to raise
Speaker 2: what's going to happen. At the beginning of the year
Speaker 2: there was something like six great cuts priced in. Now
Speaker 2: we're down to maybe one. Does that affect CEOs thing
Speaker 2: about doing deals? It really doesn't.
Speaker 3: What they care more about is the availability of debt
Speaker 3: capital rather than the cost. And I think we're at
Speaker 3: a period right now where the cost of debt capital
Speaker 3: the risks are asymmetric. The risk that it goes up
Speaker 3: is lower than the risk that it stays where it
Speaker 3: is or drifts down. So that's kind of off the
Speaker 3: table today. In terms of transaction activity, economic uncertainty and
Speaker 3: political uncertainty now are not unimportant in having people think
Speaker 3: hard about whether they do transactions.
Speaker 2: If you talk to private credit people, is I know
Speaker 2: you do all the time? They say, Yes, we're lending
Speaker 2: a lot of money, but we're much more careful about it.
Speaker 2: We put a lot more restrictions and covenants and things
Speaker 2: like that on it.
Speaker 3: Is that true in your experience? No, To be honest,
Speaker 3: I think there's this thing called the credit cycle that
Speaker 3: we've heard about for many years and credit. There are
Speaker 3: periods of time like right now, where people feel some
Speaker 3: amount of pressure to put assets on the books, whether
Speaker 3: they're private credit or banking, and that tends to weaken
Speaker 3: a little bit. The underwriting discipline not thrown away, because
Speaker 3: I think we all learned from two thousand and eight
Speaker 3: that discipline and credit is really really important. But I
Speaker 3: recall once when I was at Blackrock, we were hired
Speaker 3: by Xerox to make a decision about what they should
Speaker 3: do with their insurance business. And one of the things
Speaker 3: we did is we visited five of the smarter people
Speaker 3: in the insurance property and casualty business, one of whom
Speaker 3: was Warren Buffett. So we flew out to Omaha and
Speaker 3: we met with him, and he talked about the property
Speaker 3: and casualty business. He said, you know, I've bought every
Speaker 3: single one of my underwriters a golf club membership, and
Speaker 3: the only thing that I do is I tell them
Speaker 3: when they must use their golf club membership and when
Speaker 3: they can't. And his point was, there's sometimes when the
Speaker 3: underwriting cycle is really bad, and I want you all
Speaker 3: to play golf, and there are times when it's really
Speaker 3: attractive and that's when I want you to not play
Speaker 3: golf and write lots of policies. And you know, bankers
Speaker 3: and private credit don't have that same luxury. So you know,
Speaker 3: discipline not in major ways, but in minor ways. Ebbs
Speaker 3: and flows and pricing, the tightening of spreads. So we've
Speaker 3: had a period where longer term interest rates have risen
Speaker 3: that has been largely offset by a tightening of spreads
Speaker 3: versus the treasury market. So a double B borrower today
Speaker 3: can borrow more cheaply than they could a year ago,
Speaker 3: notwithstanding the fact the treasury rates are up eighty ninety
Speaker 3: basis points.
Speaker 2: Cycles and M and A. Are there also trends because
Speaker 2: most recently some of the deals we've seen have not
Speaker 2: been conglomerations really bringing together bigger companies, but actually focus
Speaker 2: spinning off. If you look at g you look at DuPont.
Speaker 2: Is that a trend right now? Are people more interesting focusing?
Speaker 3: I would say, you know, over forty to fifty years,
Speaker 3: you've seen a period of time when conglomerates were overvalued
Speaker 3: relative to the sum of their parts and period when
Speaker 3: they are undervalued. We're in one of those periods where
Speaker 3: in companies that are in multiple disconnected business lines. The
Speaker 3: value of the whole company is generally less than the
Speaker 3: value of its constituent parts. Ralph s Losneger is.
Speaker 2: Going to be staying with us. As returned from the
Speaker 2: business climate for merchants and acquisitions to the political climate
Speaker 2: as next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Wall Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Wall Street Week. I'm David western Evercourt chairman
Speaker 2: of Meritis. Ralph last nine has stayed with us. So, Ralph,
Speaker 2: you were good enough to tell us about the business
Speaker 2: climate for Emine And let's talk about the political climate
Speaker 2: where we are right now, particularly as we're looking toward
Speaker 2: an election come November. What are the things that might
Speaker 2: affect actually the level of deals that get done well.
Speaker 3: First of all, you have to recognize that anti trust
Speaker 3: is driven predominantly by the law. The law has not changed.
Speaker 3: There are people at the FTC and obviously the Assistant
Speaker 3: Attorney General for Anti trust who may have a more
Speaker 3: aggressive or less aggressive posture within the confines of the law,
Speaker 3: and sometimes not within the confines of the law. So
Speaker 3: there's no question that the Biden administration has tried to,
Speaker 3: you know, reasonably aggressively slowed down activity almost any transaction
Speaker 3: of consequence. There is a discussion of that, and what
Speaker 3: you're finding increasingly, where there's a judgment that the anti
Speaker 3: trust law is not being violated, companies are willing to
Speaker 3: go ahead and basically say, let them take me to court.
Speaker 2: So you worked for President Carter, as I recall, in
Speaker 2: the Carter White House, and you've been identified with democratic
Speaker 2: causes through the years. At the same time, you're very
Speaker 2: much a part of Wall Street. There's sort of a
Speaker 2: prevailing sense right now among some of Wall Street right
Speaker 2: now that it just makes sense for them personally to
Speaker 2: have Trump in the White House because they'll make more money,
Speaker 2: they'll be richer.
Speaker 3: Is that wrong? Well, it's interesting. I once got asked
Speaker 3: what was the very best piece of advice I received
Speaker 3: in my entire forty five year professional career was actually
Speaker 3: the first day of my very first job, when I
Speaker 3: was an economist on the Joint Economic Committee, and the
Speaker 3: staff director had this sort of welcome talk that he
Speaker 3: gave to, you know, kids right out of graduate school,
Speaker 3: and the gist of it was listen to people. This
Speaker 3: was a Joint committee bipartisan committee. You're going to have
Speaker 3: disagreements on substance, but never question someone's motives. So I
Speaker 3: do believe certainly that there are some people in the
Speaker 3: Wall Street community, the financial community, who probably are driven
Speaker 3: to a certain extent by what's best for their pocketbooks.
Speaker 2: But I'm also.
Speaker 3: I think, open minded enough to say that there are
Speaker 3: certainly some of them who may support President Trump who
Speaker 3: do so because they have, you know, particular policy agreements
Speaker 3: with him or disagreements with the current administration. So I
Speaker 3: don't think it's purely financial. And I happen to be,
Speaker 3: as you say, very democratically inclined. But in this election, honestly,
Speaker 3: I think the stakes and policy are really important, but
Speaker 3: the stakes on support of our democratic institutions are even
Speaker 3: more important. And the idea that our judiciary deserves to
Speaker 3: be truly independent, the idea that our federal reserve should
Speaker 3: be truly independent, the idea that our Justice Department should
Speaker 3: be free to investigate independently, the idea that our press
Speaker 3: should feel unencumbered by fear of reprisal if they report,
Speaker 3: you know, unhappily on the current administration. Those are things
Speaker 3: to me that are so important that to me, that's
Speaker 3: a really critical part of this selection.
Speaker 2: I didn't mean to suggest it's wrong to be considered
Speaker 2: a pocketbook because it's generally thought in most elections, most
Speaker 2: voters in part are voting their pocketbook. It's perfectly understandable.
Speaker 2: But when it comes to a Trump administration, one of
Speaker 2: the differences potentially with the Bide administration is taxes, the excise,
Speaker 2: which is taxation, and it's closely I think related to
Speaker 2: a concern that some people express that just the Biden administration,
Speaker 2: for whatever reason, has gotten the government just involved in
Speaker 2: a lot more of business and that that's not in
Speaker 2: the long term healthy.
Speaker 3: What do you make of that, well, I think attractiveness
Speaker 3: of generally Republican policies in terms of a little, you know,
Speaker 3: somewhere between a little and a lot less regulation, I'm
Speaker 3: not negative on that, to be very honest. I think
Speaker 3: the most critical thing for narrowing the economic gap in
Speaker 3: this country is economic growth and regulation. Sometimes over regulation
Speaker 3: can certainly constrain economic growth. So I think there are
Speaker 3: elements of what would be considered traditional Republican policy that
Speaker 3: I think are very supportive of economic growth and helping
Speaker 3: those who are in need in our society. Tax policy,
Speaker 3: I think two things are really important. One is the
Speaker 3: share of our GDP that goes to federal taxes. Today
Speaker 3: it's around sixteen percent. That's down from about nineteen percent.
Speaker 3: We're not paying for the government that we want and
Speaker 3: that's a long term, non sustainable situation. So that has
Speaker 3: to be corrected one way or other. And the second
Speaker 3: thing is, I think you know, the tax policy has
Speaker 3: been significantly responsible for the widening in the wealth gap
Speaker 3: in this country. I'm one of these very rare people
Speaker 3: in finance who believes that capital gains and dividends should
Speaker 3: be taxed like ordinary income rather than at half the rate,
Speaker 3: because there's no reason on the planet that when I
Speaker 3: make a private equity investment the tax rate should be
Speaker 3: less than somebody who's making a couple hundred thousand dollars
Speaker 3: a year and working forty fifty sixty seventy hours a week.
Speaker 3: I'm a minority. I probably even am a minority in
Speaker 3: my own party in that regard. But look, I think
Speaker 3: if you look back over centuries and centuries, great societies
Speaker 3: failed because the have had too much relative to the
Speaker 3: have nots, and that's not a healthy thing for America
Speaker 3: in my view.
Speaker 2: Okay, well, thank you so very much. It's really great
Speaker 2: Davy with us. That's Ralph Shlstein of Evercore. India completed
Speaker 2: its national elections this week and to the surprise of many,
Speaker 2: President Modi did not receive the overwhelming majority that had
Speaker 2: been expected. For an early sense of what this may
Speaker 2: mean for the Indian economy and for investors, welcome now
Speaker 2: rogarram Rogen. He is the former governor of the Reserve
Speaker 2: Bank of India. Mister Rogin is now professor of finance
Speaker 2: at Chicago's Boost School. So, professor, thank you so much
Speaker 2: for joining us. I know it's early going, but obviously
Speaker 2: Premiseermody was known for his economic reforms, his economic projects.
Speaker 2: What do you think is made of those enlighted this
Speaker 2: narrow victory.
Speaker 4: Well, first, he doesn't have a majority anymore with his party,
Speaker 4: so he needs coalition partners, which means he needs to
Speaker 4: develop more consensus as he goes along. I think that's
Speaker 4: good news actually, because part of what was going on
Speaker 4: with this guy government was it had a lot of
Speaker 4: reforms in its first term, but the second term has
Speaker 4: been more focused on the social agenda of the government.
Speaker 4: Sometimes the majority in agenda, while the few attempts at
Speaker 4: economic reforms, including the change in agricultural laws, were done
Speaker 4: without developing a broad consensus and essentially were withdrawn after
Speaker 4: tremendous pushback by the farmers. So this may actually mean
Speaker 4: that the reforms that are proposed going forward have more
Speaker 4: consensus and therefore more sticking power.
Speaker 2: Did the reforms in your opinion? Are they likely to
Speaker 2: focus on some of the lower income families, because the
Speaker 2: reports at least of the politics of this election were
Speaker 2: that many of the lower income voters did not back
Speaker 2: mister motive.
Speaker 8: Yeah.
Speaker 4: I think a big problem which the government hadn't paid
Speaker 4: enough attention to was growing levels of unemployment, especially amongst
Speaker 4: educated youth, a growing sense of insecureity amongst poorer households.
Speaker 4: The small and medium enterprises were also suffering, so essentially
Speaker 4: the government was looking at the big you know, capital
Speaker 4: intensive enterprises which comprise much of the stock market. No
Speaker 4: wonder the stock market took fright after the early election
Speaker 4: results has come back a little bit, But really the
Speaker 4: government has to pay more attention to these groups and
Speaker 4: it actually may help even enhance growth over the short
Speaker 4: to medium term because consumption hasn't been strong. As these
Speaker 4: households feel anxious, you know, a revival in consumption could
Speaker 4: help the economic grow faster.
Speaker 2: One of the things that investors have paid attention to
Speaker 2: is inflation in India, which is still has inflation, but
Speaker 2: it's more out of control than it has been in
Speaker 2: the past. Is there are risk trying to address some
Speaker 2: of the needs from the voters who did that well
Speaker 2: for mister Bildy, that you actually have more physical stimulus
Speaker 2: and you actually have more problems with inflation going forward.
Speaker 4: Well, one of the sort of hallmarks of the Modi
Speaker 4: administration has been fiscal restraint, and I don't see why
Speaker 4: they should suddenly abandon that. Yes, there needs to be
Speaker 4: a repurposing of resources. As you know in a recent book,
Speaker 4: Breaking the Mold, I argue that you know, we need
Speaker 4: more jobs in areas like services, and that requires killing
Speaker 4: the workforce. That requires some redeployment of resources away from,
Speaker 4: for example, massive subsidies to manufacturing, to actually investing in
Speaker 4: colleges and schools in skilling programs. But I think this
Speaker 4: is something that can be done without breaking the budget. Yes,
Speaker 4: there will be some more fiscal spending given the nature
Speaker 4: of the verdict, but I think it will help, you know,
Speaker 4: solidify the economy and actually remove household anxiety, which I
Speaker 4: think would be a big win.
Speaker 2: What do you think this election may mean for the
Speaker 2: relationship with the central government and the individual states? Understand it? In India,
Speaker 2: the states have a fair amount of power. The Prime
Speaker 2: Minister can't do certain things without this before the states.
Speaker 2: Is that going to shift now because mister Modi has
Speaker 2: perceived its being somewhat less powerful.
Speaker 4: It should, but I think in the right direction. One
Speaker 4: of the problems in the mood the administration has been
Speaker 4: the appointment of governors who have stood in the way
Speaker 4: of state governments doing what they wanted to do uh
Speaker 4: and not playing out as constitutional sort of impartial governors.
Speaker 4: And as a result, I think some of the states
Speaker 4: have not been able to sort of conduct the kinds
Speaker 4: of programs that they wanted. I think that should be
Speaker 4: ameliorated in a new administration where there are checks and
Speaker 4: bounces on the government and where the press is a
Speaker 4: lot more inviegorated in pointing out some of these problems.
Speaker 4: I think in the last two administrations of the Modi government,
Speaker 4: the press was cowed, was un willing to point out problems.
Speaker 8: I think.
Speaker 4: With the press more alive, I think we'll get stronger
Speaker 4: debate and hopefully debate leads to better economic as well
Speaker 4: as political policy.
Speaker 2: Professor, thank you so very much for being with us.
Speaker 2: It's terribly helpful. As Raghuram Rajan of Chicago's Booth School
Speaker 2: coming up the highs and lows of the US auto
Speaker 2: industry and the motor city it created, we go to
Speaker 2: Detroit for the story of the rise and fall and
Speaker 2: rise again of a proud city and automaker.
Speaker 5: The train station felt like the right kind of challenge
Speaker 5: for four to be part of, so that we could
Speaker 5: be part of the revitalization of Detroit.
Speaker 2: That's next on Wall Street Week on Bloomberg.
Speaker 1: This is Bloomberg Well Street Week with David Weston from
Speaker 1: Bloomberg Radio.
Speaker 2: This is Wall Street Weeek. I'm David Weston. This week,
Speaker 2: the city of Detroit went back to its past on
Speaker 2: the way to its future with a grand reopening of
Speaker 2: Michigan Central Station, once a proud icon of the motor city,
Speaker 2: then a derelict hulk that was nearly torn down, and
Speaker 2: now restored to its former grandeur with the help of
Speaker 2: the Ford Motor Company and the dedication of a mayor
Speaker 2: who just wouldn't give up. Our Bloomberg Radio colleague Michael
Speaker 2: Barr is a native Detroiter who watched the city burn
Speaker 2: during the Riots of the late sixties.
Speaker 9: I'm going to give away my age because that happened
Speaker 9: in sixty seven and I was three years old, and
Speaker 9: I was in southwest Detroit and at the time I
Speaker 9: saw the National Guard in a jeep go by. Now,
Speaker 9: being a stupid kid, I'm thinking, oh, Gi Joe, I
Speaker 9: didn't realize that the dagon city is burning down. It's
Speaker 9: sad and out between that, how the auto industry really
Speaker 9: took a hard nosedive.
Speaker 2: What was Detroit's lowest point do you think?
Speaker 10: Oh, I think probably bankruptcy in twenty thirteen was rock bottom.
Speaker 8: But we had a lot of bad years before that.
Speaker 10: And I said, I'm sixty five years old and the
Speaker 10: city of Detroit has lost population every year. I've been
Speaker 10: alive until last year. So that was a lot of
Speaker 10: years of auto plants moving out, restaurants moving out, movie
Speaker 10: theaters moving out, people moving out.
Speaker 2: The story of Detroit has long been a story of
Speaker 2: the auto companies that helped make it, sometimes for better
Speaker 2: and sometimes for worse.
Speaker 5: I think World War Two is a big challenge for
Speaker 5: the company. And when Henry Ford the second led the
Speaker 5: company back to a revitalized state, you know, we went
Speaker 5: through the whiz kids. We hired all these logistics experts
Speaker 5: from the army after the World War Two, and they
Speaker 5: really created this kind of bureaucratic but an incredibly efficient machine.
Speaker 5: And the company was back in the sixties, and then
Speaker 5: the energy crisis came. The company didn't have efficient vehicles,
Speaker 5: it wasn't competitive amount quality, and it really low this
Speaker 5: way in the seventies as well as the city of
Speaker 5: Detroit after the riots, and you know, we were lost in.
Speaker 2: Less than twenty five years.
Speaker 4: Henry Ford, the son of I the America dualism and
Speaker 4: freedom of enterprise.
Speaker 2: It wasn't always this way. As the twentieth century began,
Speaker 2: Henry Ford started mass producing a new mode of transportation,
Speaker 2: the automobile. In Detroit. Ford invited the first moving assembly
Speaker 2: line in the world, and by the nineteen twenties had
Speaker 2: produced some twenty million model tees.
Speaker 5: My grandfather's a good example. You know, he was an
Speaker 5: educated man, but he had a great job.
Speaker 3: At Ford and built his family.
Speaker 5: As kids went to college, eventually, and just like your family,
Speaker 5: you know, there are millions of people around our country,
Speaker 5: around the world, have been infected by Ford. And at
Speaker 5: that time Ford was the pinnacle. We had eighty percent
Speaker 5: market share globally of the car business.
Speaker 2: The Michigan Central Railway station was a result of that
Speaker 2: automotive success, built in nineteen thirteen when the mythic Ford
Speaker 2: Rouge plant was still under construction. At its peak, over
Speaker 2: two hundred passenger trains a day left the station, carrying
Speaker 2: over four thousand passengers, and another three thousand people worked
Speaker 2: in the office tower above the station.
Speaker 10: But again, I see Detroit through the eyes of a
Speaker 10: kid who remembers a beautiful city.
Speaker 8: I remembered a beautiful train station.
Speaker 2: But in the end, the auto industry that helped build
Speaker 2: Michigan Central was also a central cause of its fall.
Speaker 2: As people moved away from passenger trains and took to
Speaker 2: the cars, Detroit was churning out for the entire country.
Speaker 2: By the nineteen eighties, it was the domestic auto industry's turn,
Speaker 2: as US sales of the big three automakers peaked in
Speaker 2: nineteen seventy nine and then declined steadily ever since, falling
Speaker 2: victim to a rising tide of foreign cars, and with it,
Speaker 2: the entire state of Michigan's contribution to National GDP fell
Speaker 2: from over four percent to less than two point four percent.
Speaker 10: It was heartbreaking over the years to see Dodge Main.
Speaker 8: It was to see Cadillac Fleetwood close, and.
Speaker 10: The jobs went with them, and they went to the suburbs,
Speaker 10: and eventually they went to Mexico.
Speaker 2: By the start of this century, what was once a
Speaker 2: glorious building had been abandoned, its windows broken, its roof
Speaker 2: open to the sky, its marble scavenged.
Speaker 8: With the windows gone, the air blowing through.
Speaker 10: It was depressing every single time it came into town
Speaker 10: on the freeway.
Speaker 2: By twenty thirteen, the Detroit City Council had voted to
Speaker 2: tear Michigan Central down, and it took a Detroit backed
Speaker 2: by Dan Gilbert's real estate investments, a determined Mayor Duggan,
Speaker 2: and a Bill Ford, whose family had helped build Detroit,
Speaker 2: to reclaim it and restore Michigan Central to what as
Speaker 2: of this week it is again.
Speaker 10: So from my first day in office, getting that train
Speaker 10: station reoccupied was a central focus. There was no way
Speaker 10: it was going to be a demolished just meant too
Speaker 10: much to too many generations. And so my first month,
Speaker 10: Matt Moron and the owner, was in my office had
Speaker 10: a list of things that they wanted and I said,
Speaker 10: I want one thing.
Speaker 8: I want you to put windows in that abandoned train station.
Speaker 10: And he looked to me like I was crazy, and
Speaker 10: I said, all people see when they look at the
Speaker 10: train station is blake.
Speaker 8: I remember when it was beautiful.
Speaker 10: And so we made a deal on some other things
Speaker 10: where they spend a million dollars to put in windows.
Speaker 10: And when the windows started to go in, it hit
Speaker 10: an electric effect in the city.
Speaker 8: Everybody driving by in the freeway said, oh my god.
Speaker 2: For Michigan Central and for Detroit to come back, Ford
Speaker 2: and the rest of the auto industry had to come
Speaker 2: back as well, once again showing their mutual dependence, which
Speaker 2: is why Ford stepped up with nearly a billion dollars
Speaker 2: to rebuild a train station from nineteen thirteen that hadn't
Speaker 2: been used in nearly forty years.
Speaker 5: I think it's you know, obviously it's a family company.
Speaker 5: He builds vision, but also for the train station is
Speaker 5: very much a symbol, a kind of a along our
Speaker 5: journey to to create a great company, and we avoided bankruptcy,
Speaker 5: which was amazing in the early two thousands, mid two thousands,
Speaker 5: but to build a vibrant company, you know, in the
Speaker 5: ev world, the digital vehicle world, the train station felt
Speaker 5: like the right kind of challenger project to afford to
Speaker 5: be part of, so that we could be part of
Speaker 5: the you know, revitalization.
Speaker 2: Of Detroit, which had really.
Speaker 5: Been kind of used by almost the national media as
Speaker 5: a you know, example of the decay of the country.
Speaker 5: And this felt like the kind of project that would
Speaker 5: be emblematic of our recovery as a company. It's a
Speaker 5: very American story really of starts and stops, of great
Speaker 5: leadership at moments, but at other moments a loss of
Speaker 5: focus on the customer. I mean this is this is
Speaker 5: the truism of an industrial company. You have to have
Speaker 5: cost and quality pettiveness and that changes. The benchmark changes.
Speaker 5: Oh at many points of the you know, we almost
Speaker 5: went banquet with the model t If you look at
Speaker 5: the company, this has happened many, many times. It's a
Speaker 5: company that's been through a lot. But it's a company
Speaker 5: though that when it gets is back against the wall,
Speaker 5: something magical happens.
Speaker 2: Where are you on the roadback. How far along that
Speaker 2: road are you?
Speaker 5: Our backs are off the stovepipes. We're well into the
Speaker 5: messy middle of the most transformational time other than the
Speaker 5: Model T. You know, we've never gone through this electrification
Speaker 5: transition for low CO two drive trains. We've never had
Speaker 5: a digital product before. We never could give people time
Speaker 5: back like we will with level three autonomy. We're investing
Speaker 5: in all that enabling technology. We're very profitable with our
Speaker 5: pro business and our combustion business. We have vehicles like
Speaker 5: Bronco Mustang they're doing n F one fifty that are
Speaker 5: doing so well, but we still have a lot of
Speaker 5: execution to do. I'd say, you know, we're just a
Speaker 5: few years away from another vibrant period for the company,
Speaker 5: and as leaders, we see it before everyone else sees it,
Speaker 5: and so it's it's exciting for us, but we feel
Speaker 5: a tremendous amount of responsibility for your parents, for you,
Speaker 5: for my grandparents.
Speaker 2: As Ford and the other Detroit automakers have fought their
Speaker 2: way back, they've brought jobs with them. Michigan unemployment peaked
Speaker 2: apart from the pandemic in nineteen eighty three at sixteen
Speaker 2: point five percent, well above the national average, and now
Speaker 2: it's all the way down to three point nine percent,
Speaker 2: right at that national average.
Speaker 10: But when I started, I sat with Bill Ford, I
Speaker 10: sat with Mary Barr, and I sat then with Sergio Marcioni,
Speaker 10: who was running Fiat Chrysler, and I said, look, if
Speaker 10: Detroit's going to come back, we've got to come back
Speaker 10: on our strength. We're not going to be the tech
Speaker 10: hobb the biomedical hibe. The next time use site of
Speaker 10: parts plant, please ask them to come talk to me first.
Speaker 2: William Faulkner famously wrote that the past is never dead.
Speaker 2: It's not even passed. This week we had our fair
Speaker 2: share of reminders of the past remaining very much with
Speaker 2: us in Detroit. The iconic Michigan Central Station came back
Speaker 2: from the near dead and emerged as a gleaming new
Speaker 2: home for Google and high tech mobility.
Speaker 5: This is going to be an innovation hub with software
Speaker 5: engineers and our Ford pro business and many non forward
Speaker 5: people in the building.
Speaker 2: Memestocks like GameStop, which seemed oh so twenty twenty one,
Speaker 2: came roaring back to life, with Keith Gill posting on
Speaker 2: social media what appeared to be a one hundred and
Speaker 2: sixteen million dollar position in the stock, together with a
Speaker 2: green reverse unocard, which seems a bit retro in and
Speaker 2: of itself.
Speaker 11: The only people that I really dislike and loathe in
Speaker 11: this entire situation are the people who pretend that buying
Speaker 11: Game Stop or buying AMC is some sort of like
Speaker 11: revolutionary actor, like sticking it to the man, or like
Speaker 11: that it makes no sense, there's no like, there's no
Speaker 11: there there.
Speaker 2: And speaking of social media, this week, former President Trump
Speaker 2: returned to the question of TikTok, but came up with
Speaker 2: a very different answer. This time. When he was president,
Speaker 2: he wanted to ban it. Now that he's on a
Speaker 2: quest to attract young voters, he decided, you'd rather join it.
Speaker 3: The president is now on TikTok's in my honor.
Speaker 2: And when it comes to politics, what could be more
Speaker 2: nostalgic than a rematch of Trump and Biden, something we
Speaker 2: saw most recently only four years ago. I have never
Speaker 2: tried to forecast the outcome of an election where you
Speaker 2: had the current incumbent running against the former incumbent in
Speaker 2: big media. This week we saw two very different examples
Speaker 2: of the past, not ever fully going away. As Rupert
Speaker 2: Murdock got married for the fifth time at the mature
Speaker 2: age of ninety three, to a woman twenty six years
Speaker 2: his junior. But mister Murdoch's marriage may have been eclipsed
Speaker 2: by a bigger union in the media world, as Paramount
Speaker 2: moved toward merging with David Ellison's Sky and Studio, something
Speaker 2: that's been in the works for a while now, and
Speaker 2: that is very much driven by the media revolution of streaming,
Speaker 2: which is yet another example of the past never being
Speaker 2: entirely behind us. We've had periodic upsets in the media
Speaker 2: world that almost always bring corporate shakeups. When I went
Speaker 2: to Cap Cities ABC in nineteen ninety one, broadcast television
Speaker 2: was in the process of being turned upside down by
Speaker 2: what we used to call basic cable, a new way
Speaker 2: to get better reception of network reruns that turned into
Speaker 2: a powerhouse of original programming tailor made for particular audiences,
Speaker 2: everything from drama to sports, to news to cooking. And
Speaker 2: as much as we talked about it, too many of
Speaker 2: us at the network told ourselves that this upstart cable
Speaker 2: could never challenge the strength of the networks. But it's
Speaker 2: safe to say that was a simpler and occasionally more
Speaker 2: ridiculous time.
Speaker 10: The decision has been passed down to make Veronica or
Speaker 10: co anchor.
Speaker 2: Now, let's hope that as big media makes the big
Speaker 2: transition this time, we can leave some of the past
Speaker 2: truly behind us.
Speaker 3: That does it.
Speaker 2: For this episode of Wall Street Week, I'm David Weston.
Speaker 2: This is Bloomberg. See you next week.