1 00:00:02,920 --> 00:00:07,280 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,600 --> 00:00:14,400 Speaker 2: This is Bloomberg Intelligence with Alex Steina and Paul'sweenye. 3 00:00:14,520 --> 00:00:17,720 Speaker 1: The real app performance has been in US corporate high yield. 4 00:00:17,880 --> 00:00:19,040 Speaker 3: Are the companies lean enough? 5 00:00:19,040 --> 00:00:20,280 Speaker 4: Have they trimmed all the fats? 6 00:00:20,320 --> 00:00:23,880 Speaker 1: The semiconductor business is a really cyclical business. 7 00:00:23,600 --> 00:00:27,200 Speaker 2: Breaking market headlines and corporate news from across the globe. 8 00:00:27,240 --> 00:00:29,880 Speaker 4: Do investors like the M and A that we've seen? 9 00:00:30,080 --> 00:00:33,159 Speaker 1: These are two big time blue chip companies. 10 00:00:33,320 --> 00:00:36,920 Speaker 3: The window between the peak and cut changing super fast. 11 00:00:37,080 --> 00:00:41,680 Speaker 2: Bloomberg Intelligence with Alex Steinall and Paul's Wheenie on Bloomberg Radio. 12 00:00:42,960 --> 00:00:45,159 Speaker 1: On Today's Bloomberg Intelligence Show, we dig inside the big 13 00:00:45,159 --> 00:00:47,440 Speaker 1: business stories impacting Wall Street and the global markets. 14 00:00:47,479 --> 00:00:49,440 Speaker 3: Each and every week we provide in depth research and 15 00:00:49,520 --> 00:00:51,320 Speaker 3: data on some of the two thousand companies and one 16 00:00:51,360 --> 00:00:53,880 Speaker 3: hundred and thirty industries our analysts cover worldwide. 17 00:00:53,920 --> 00:00:56,400 Speaker 1: Today, we'll look at why Tesla's first quarter deliveries missed 18 00:00:56,440 --> 00:00:57,480 Speaker 1: Wall Street expectations. 19 00:00:57,560 --> 00:00:59,240 Speaker 4: Let's we'll look at why things are looking up for 20 00:00:59,280 --> 00:01:00,640 Speaker 4: the shipping company ups. 21 00:01:00,840 --> 00:01:02,800 Speaker 1: But first we begin with the Walt Disney Company. This 22 00:01:02,840 --> 00:01:05,520 Speaker 1: week's shareholders handed CEO Bob Biger, a big vote of 23 00:01:05,560 --> 00:01:07,199 Speaker 1: confidence at the company's annual meeting. 24 00:01:07,360 --> 00:01:10,760 Speaker 3: The shareholders rejected activist investor Nelson Peltz's bid for a 25 00:01:10,760 --> 00:01:13,360 Speaker 3: board seat and elected all of Disney's choices for the board. 26 00:01:13,600 --> 00:01:16,280 Speaker 3: Peltz's Tree On Fund Management holds a Disney stake both 27 00:01:16,319 --> 00:01:18,160 Speaker 3: more than three and a half billion dollars and has 28 00:01:18,200 --> 00:01:21,320 Speaker 3: been pushing for seats to address lagging shareholder returns. 29 00:01:21,600 --> 00:01:24,280 Speaker 1: Also, when the news, Paramount Global, the parent of CBS 30 00:01:24,280 --> 00:01:26,760 Speaker 1: and MTV, is getting closer to a deal to merge 31 00:01:26,760 --> 00:01:30,040 Speaker 1: with independent producer David Ellison's Skydance Media. For more and 32 00:01:30,120 --> 00:01:31,600 Speaker 1: all of this, we were joined by Githa Rong and 33 00:01:31,640 --> 00:01:35,280 Speaker 1: Nathan Bloomberg, intelligence analyst on media. We first asked Githa 34 00:01:35,400 --> 00:01:37,040 Speaker 1: for her take on this week's news. 35 00:01:37,280 --> 00:01:41,200 Speaker 5: Definitely a huge sigh of relief for both Bob Biger 36 00:01:41,200 --> 00:01:43,080 Speaker 5: and the management team. I mean, it would have been, 37 00:01:43,160 --> 00:01:46,120 Speaker 5: I think a very very publicly embarrassing thing for him 38 00:01:46,160 --> 00:01:49,680 Speaker 5: if Pelts had had won. So this is definitely I 39 00:01:49,680 --> 00:01:53,520 Speaker 5: think gives them some something to cheer about, at least 40 00:01:53,520 --> 00:01:55,400 Speaker 5: in the near term. So I think it's really business 41 00:01:55,400 --> 00:01:57,600 Speaker 5: as usual, right. They had their work cut out for them. 42 00:01:57,960 --> 00:02:00,000 Speaker 5: They know exactly what they need to do, whether it's 43 00:02:00,040 --> 00:02:03,840 Speaker 5: it's finding a proper good ESPN digital strategy, whether it's 44 00:02:03,840 --> 00:02:06,880 Speaker 5: getting the streaming business to profits, and more importantly for 45 00:02:06,920 --> 00:02:10,200 Speaker 5: the board, whether it's chalking out a really bullet proof 46 00:02:10,320 --> 00:02:11,960 Speaker 5: succession plan this time around. 47 00:02:12,720 --> 00:02:16,480 Speaker 1: And on that succession plan, is the expectation getha that 48 00:02:17,080 --> 00:02:20,359 Speaker 1: they will hire from within or will they try to 49 00:02:20,400 --> 00:02:22,639 Speaker 1: make a big splash by hiring an outsider. 50 00:02:22,720 --> 00:02:24,280 Speaker 6: How do you think Disney would like to proceed? 51 00:02:24,600 --> 00:02:27,520 Speaker 5: Disney has always kind of looked within, Paul, and you 52 00:02:27,560 --> 00:02:29,280 Speaker 5: know this well. I mean the last time that they 53 00:02:29,320 --> 00:02:33,040 Speaker 5: went external was back in nineteen eighty four. That's when 54 00:02:33,080 --> 00:02:36,960 Speaker 5: they hired you know, Michael Eisner, right, the Barry Diller protege. 55 00:02:37,200 --> 00:02:39,799 Speaker 5: But after that, it's always been internal, right, whether it's 56 00:02:40,280 --> 00:02:42,440 Speaker 5: Bob Bieger, I mean it was Barb Biger after that 57 00:02:42,520 --> 00:02:44,919 Speaker 5: for almost fifteen years, and then of course you had 58 00:02:45,040 --> 00:02:47,440 Speaker 5: Bob Japek for a couple of years, and then you know, 59 00:02:47,480 --> 00:02:50,920 Speaker 5: we have Bob Bieger two point zero back again. So 60 00:02:51,040 --> 00:02:53,760 Speaker 5: they've always kind of had, you know more, they've always 61 00:02:53,800 --> 00:02:57,520 Speaker 5: looked internal, and they do have four solid candidates, so 62 00:02:57,600 --> 00:03:04,240 Speaker 5: all the division chiefs kind of emerge as potential successor candidates. 63 00:03:03,840 --> 00:03:07,440 Speaker 5: It's just going to be up to how they groomed them. 64 00:03:07,960 --> 00:03:09,760 Speaker 5: Is Barbiger going to do something very similar to what 65 00:03:09,760 --> 00:03:11,560 Speaker 5: he did with you know, Tom's tags and Jay Rizzulo 66 00:03:11,919 --> 00:03:15,560 Speaker 5: kind of have that coo position for somebody whom he's 67 00:03:15,880 --> 00:03:17,280 Speaker 5: kind of looking to to elevate. 68 00:03:17,400 --> 00:03:20,120 Speaker 4: What's the time frame here, KEITHA for this, it. 69 00:03:20,080 --> 00:03:24,520 Speaker 5: Has to happen pretty quickly, Alex. I mean barb Biger's term, 70 00:03:24,800 --> 00:03:26,960 Speaker 5: which was initially when he came back in November twenty 71 00:03:27,040 --> 00:03:29,240 Speaker 5: twenty two, was supposed to be two years. They extended 72 00:03:29,280 --> 00:03:31,480 Speaker 5: that out to four years, so we have until the 73 00:03:31,560 --> 00:03:32,680 Speaker 5: end of twenty twenty six. 74 00:03:33,040 --> 00:03:36,560 Speaker 1: Yeah, and he's been known to extend extend extent. I mean, 75 00:03:36,640 --> 00:03:38,320 Speaker 1: he could do that because most shareholders are like Bob 76 00:03:38,320 --> 00:03:40,400 Speaker 1: Biger's better than anybody else out there, will stick with that. 77 00:03:40,400 --> 00:03:42,360 Speaker 1: All right, So things seem to be settling down a 78 00:03:42,400 --> 00:03:45,120 Speaker 1: little bit of stability. Returning to Mickey Mouse, how about 79 00:03:45,320 --> 00:03:46,240 Speaker 1: a Paramount Global? 80 00:03:46,240 --> 00:03:48,440 Speaker 6: It's almost the opposite. Are they going to sell the. 81 00:03:48,480 --> 00:03:51,440 Speaker 1: Entire company parts of the company super voting stock? 82 00:03:51,920 --> 00:03:52,880 Speaker 6: What's going on there? 83 00:03:53,120 --> 00:03:55,840 Speaker 5: Yeah, So it looks like now they have or they've 84 00:03:55,960 --> 00:03:59,600 Speaker 5: entered this period of exclusive talks with Skydance Media, and 85 00:03:59,600 --> 00:04:02,839 Speaker 5: Skydance Media has kind of been this on again, off 86 00:04:02,880 --> 00:04:06,480 Speaker 5: again interested party in the Paramount company, but of course 87 00:04:06,480 --> 00:04:08,240 Speaker 5: they didn't want to come out with a bid for 88 00:04:08,280 --> 00:04:10,000 Speaker 5: the entire company at least up until this point. They 89 00:04:10,040 --> 00:04:12,120 Speaker 5: always kind of wanted to do it in a slightly 90 00:04:12,160 --> 00:04:14,880 Speaker 5: different way by kind of taking control of the voting 91 00:04:14,920 --> 00:04:18,680 Speaker 5: stock with through National Amusements and the red Stone family. 92 00:04:19,240 --> 00:04:21,960 Speaker 5: Now it looks like they're kind of going to engineer 93 00:04:22,160 --> 00:04:24,240 Speaker 5: like a two step process where they first take control 94 00:04:24,279 --> 00:04:26,960 Speaker 5: of National Amusements and then go about and merge sky 95 00:04:27,080 --> 00:04:30,800 Speaker 5: Dance with the entire company with Paramount. So still, I mean, 96 00:04:30,839 --> 00:04:34,320 Speaker 5: there's just more unknowns than knowns at this point. There 97 00:04:34,360 --> 00:04:36,920 Speaker 5: seems to be some report out there suggesting that they 98 00:04:36,960 --> 00:04:38,839 Speaker 5: would need to do an equity deal raise of at 99 00:04:38,960 --> 00:04:41,360 Speaker 5: least three billion dollars. That's going to be really dilutive 100 00:04:41,520 --> 00:04:44,760 Speaker 5: for the current shareholders. Again, we don't know exactly how 101 00:04:44,839 --> 00:04:48,200 Speaker 5: much Sherry Redstone is demanding for her voting stock. There 102 00:04:48,240 --> 00:04:50,800 Speaker 5: are rumors out there suggesting it's upwards of about two 103 00:04:50,880 --> 00:04:53,119 Speaker 5: to two and a half billion dollars. She also owns 104 00:04:53,160 --> 00:04:56,360 Speaker 5: about close to almost a billion dollars in economic stake 105 00:04:56,360 --> 00:04:59,120 Speaker 5: in Paramount. So again, too many unknowns right now, Paul, 106 00:04:59,600 --> 00:05:02,479 Speaker 5: But you know, we do definitely have concrete talks. That 107 00:05:02,560 --> 00:05:03,280 Speaker 5: much is for sure. 108 00:05:03,640 --> 00:05:06,560 Speaker 3: So is the Apollo thing like off the table, right, 109 00:05:06,640 --> 00:05:10,280 Speaker 3: because that would be more of a piecemeal approach to Paramount, right, 110 00:05:10,320 --> 00:05:12,159 Speaker 3: even though the cash deal was better. 111 00:05:12,720 --> 00:05:15,960 Speaker 5: So the Apollo thing was actually initially it was it 112 00:05:16,000 --> 00:05:18,080 Speaker 5: was piecemeals. So, but they only was really interested in 113 00:05:18,120 --> 00:05:21,480 Speaker 5: the film studio. They did not want the TV networks, 114 00:05:21,520 --> 00:05:23,599 Speaker 5: They did not want the streaming asset. But it looks 115 00:05:23,640 --> 00:05:26,600 Speaker 5: like when reports emerge about the Skydance deal, they said 116 00:05:26,600 --> 00:05:30,320 Speaker 5: that Apollo actually had made a twenty six billion offer, 117 00:05:30,360 --> 00:05:33,880 Speaker 5: an all cash deal for the entire company, which Sherry 118 00:05:33,920 --> 00:05:36,279 Speaker 5: Redstone for some reason basically said note. 119 00:05:36,160 --> 00:05:38,520 Speaker 1: To So, what's the future. I mean, this is the 120 00:05:38,560 --> 00:05:41,359 Speaker 1: Paramount studio, geeth that this is one of the prize 121 00:05:41,480 --> 00:05:44,880 Speaker 1: jewels in Hollywood. I mean, what happens to this company? 122 00:05:44,920 --> 00:05:47,640 Speaker 1: I mean, is it can remain a publicly traded company? 123 00:05:47,800 --> 00:05:48,880 Speaker 6: Is it going to be taken private? 124 00:05:49,080 --> 00:05:50,880 Speaker 5: I think the most likely out come at this point, Paul, 125 00:05:50,920 --> 00:05:53,039 Speaker 5: is that it still very much remains a public company. 126 00:05:53,640 --> 00:05:56,080 Speaker 5: You know, we know that David Ellison is really only 127 00:05:56,160 --> 00:05:58,320 Speaker 5: interested in the studio portion of the business, and you're 128 00:05:58,320 --> 00:06:01,680 Speaker 5: absolutely right. It's an iconic studio, there's no doubt about it. 129 00:06:01,680 --> 00:06:05,240 Speaker 5: They have a very, very valuable studio lot right in 130 00:06:05,240 --> 00:06:07,840 Speaker 5: the heart of la that's worth maybe upwards of one 131 00:06:07,880 --> 00:06:10,480 Speaker 5: point five two billion dollars. So obviously there's a lot 132 00:06:10,480 --> 00:06:12,960 Speaker 5: of assets that he likes, but only with the studio business. 133 00:06:13,000 --> 00:06:15,599 Speaker 5: So again the question is, yes, he can keep it 134 00:06:15,600 --> 00:06:17,680 Speaker 5: a public company, but he might really kind of trim 135 00:06:17,720 --> 00:06:20,919 Speaker 5: it down, try and find some buyers for the TV network, 136 00:06:20,920 --> 00:06:24,080 Speaker 5: for probably the streaming platform, and just make this like 137 00:06:24,120 --> 00:06:28,080 Speaker 5: a pure play kind of a film studio with production 138 00:06:28,160 --> 00:06:31,520 Speaker 5: and licensing operations, very similar to what lions Gate is doing. 139 00:06:31,800 --> 00:06:34,719 Speaker 1: Our thanks to Githa Ranganath and Bloomberg Intelligence senior annals 140 00:06:34,760 --> 00:06:35,599 Speaker 1: covering media. 141 00:06:35,640 --> 00:06:38,200 Speaker 3: Back in January, Bloomberg Intelligence came up with a list 142 00:06:38,240 --> 00:06:40,560 Speaker 3: of fifty companies to watch in twenty twenty four, and 143 00:06:40,600 --> 00:06:43,400 Speaker 3: now they're back with a list of ten companies specifically 144 00:06:43,440 --> 00:06:44,279 Speaker 3: for the second quarter. 145 00:06:44,680 --> 00:06:47,320 Speaker 1: This is based on scenarios from our bi analysts who 146 00:06:47,320 --> 00:06:49,479 Speaker 1: sort of threw the barrel to find the good apples 147 00:06:49,520 --> 00:06:51,160 Speaker 1: across sectors and regions. 148 00:06:51,520 --> 00:06:51,840 Speaker 7: For more. 149 00:06:51,839 --> 00:06:54,520 Speaker 1: We were join by Tim craigkh Heat, Bloomberg Intelligence Research 150 00:06:54,560 --> 00:06:57,159 Speaker 1: Director for Content. We first asked him to talk about 151 00:06:57,160 --> 00:06:58,600 Speaker 1: the companies on this list. 152 00:06:58,720 --> 00:07:00,200 Speaker 7: A couple of things to keep in mind. We are 153 00:07:00,320 --> 00:07:04,240 Speaker 7: top ten or two Q. These are part of a 154 00:07:04,279 --> 00:07:07,360 Speaker 7: broader set of focus ideas that we've got. There's roughly 155 00:07:07,360 --> 00:07:09,720 Speaker 7: seventy five to eighty of them right now, across sectors, 156 00:07:09,760 --> 00:07:15,000 Speaker 7: across regions. These specifically have important catalysts coming up into 157 00:07:15,160 --> 00:07:18,120 Speaker 7: Q that we think can bring the market around to 158 00:07:18,280 --> 00:07:21,360 Speaker 7: our perspective. All of these focus ideas have really strong, 159 00:07:21,760 --> 00:07:25,400 Speaker 7: high conviction fundamental views that we think are different from 160 00:07:25,440 --> 00:07:29,000 Speaker 7: the market, and these catalysts should bring that awareness around. 161 00:07:29,480 --> 00:07:33,200 Speaker 7: It's a group of US companies. There's four of them, 162 00:07:33,480 --> 00:07:36,920 Speaker 7: there's three in Europe, three in Asia, and they span 163 00:07:37,280 --> 00:07:44,080 Speaker 7: the gamut from healthcare, medtech products to big financials to tires. 164 00:07:44,480 --> 00:07:46,040 Speaker 7: So interesting group. 165 00:07:45,960 --> 00:07:48,400 Speaker 1: And Tim, one of the ones that you know, I've 166 00:07:48,400 --> 00:07:50,520 Speaker 1: been kind of thinking about. I just think these Olympics 167 00:07:50,560 --> 00:07:52,840 Speaker 1: in Parish are going to be just huge, and I'm 168 00:07:52,840 --> 00:07:55,160 Speaker 1: thinking that ways to play it. You guys have one 169 00:07:55,200 --> 00:07:57,280 Speaker 1: of them in the lodging space. Talk to us about 170 00:07:57,320 --> 00:07:58,080 Speaker 1: that opportunity. 171 00:07:58,320 --> 00:08:02,679 Speaker 7: Yeah, we do at Core. It's a big French hotel company. 172 00:08:02,720 --> 00:08:06,400 Speaker 7: You might not know Akor, but you probably know some 173 00:08:06,480 --> 00:08:10,880 Speaker 7: of their underlying brands. And you know, anybody who's made 174 00:08:10,920 --> 00:08:14,600 Speaker 7: a hotel booking as of late knows that the prices 175 00:08:14,640 --> 00:08:20,760 Speaker 7: seem to be really high. Surprisingly, so that's feeding Akor's 176 00:08:21,360 --> 00:08:25,400 Speaker 7: rev par they're pricing, which is playing through into profit margins. 177 00:08:25,760 --> 00:08:30,000 Speaker 7: And the catalyst for these guys is, in fact, Paris Olympics. 178 00:08:30,040 --> 00:08:33,120 Speaker 7: We should start to see early booking data over the 179 00:08:33,160 --> 00:08:35,800 Speaker 7: course of two Q heading into Summer Olympics. No, Paris 180 00:08:35,960 --> 00:08:38,560 Speaker 7: is only one part of their portfolio. They're across Europe 181 00:08:38,600 --> 00:08:41,960 Speaker 7: and Asia, and we're seeing a strong sustained travel recovery 182 00:08:42,120 --> 00:08:44,480 Speaker 7: story that we think is better than consensus expects. 183 00:08:44,720 --> 00:08:46,440 Speaker 4: But apparently they have to like clean out the send. 184 00:08:46,440 --> 00:08:48,360 Speaker 3: Did you read that that there's so much to you, 185 00:08:49,440 --> 00:08:51,640 Speaker 3: Like can you imagine being Olympic swimmer and like those 186 00:08:51,679 --> 00:08:53,200 Speaker 3: garbage hitting you in the end. I mean they're working 187 00:08:53,200 --> 00:08:53,360 Speaker 3: on it. 188 00:08:53,400 --> 00:08:54,319 Speaker 6: They're definitely working on it. 189 00:08:54,920 --> 00:08:57,520 Speaker 4: Okay, you your second one is in retail chow Tai fuk. 190 00:08:58,000 --> 00:08:59,920 Speaker 3: No one's going to know this company here in the US, 191 00:09:00,000 --> 00:09:02,080 Speaker 3: So tell us about it and why this makes the outlook. 192 00:09:02,440 --> 00:09:04,560 Speaker 7: That and the next one on the list from an 193 00:09:04,559 --> 00:09:09,120 Speaker 7: alphabetical perspective are both sort of interesting twists on the 194 00:09:09,160 --> 00:09:12,400 Speaker 7: same underlying theme, and that's China. We all know that 195 00:09:12,440 --> 00:09:15,720 Speaker 7: there's problems in China from the standpoint of the property market, 196 00:09:15,720 --> 00:09:19,080 Speaker 7: and now that's playing through in terms of sentiment, the 197 00:09:19,160 --> 00:09:23,400 Speaker 7: wealth effect on spending plans, et cetera. Chautai Fuk is 198 00:09:23,880 --> 00:09:28,040 Speaker 7: arguably the best known Chinese retailer when it comes to jewelry, 199 00:09:28,320 --> 00:09:32,400 Speaker 7: and it's a big market historically for tourists and travelers 200 00:09:32,440 --> 00:09:36,040 Speaker 7: coming into Hong Kong and to make those purchases. In fact, 201 00:09:36,080 --> 00:09:39,280 Speaker 7: what we're seeing right now is Hong kongers are going 202 00:09:39,520 --> 00:09:42,120 Speaker 7: out of Hong Kong across the border in the mainland 203 00:09:42,200 --> 00:09:45,800 Speaker 7: China to shop for pretty much everything because it's cheaper. 204 00:09:46,040 --> 00:09:49,120 Speaker 7: So you combine that with negative sentiment, we think Hong 205 00:09:49,200 --> 00:09:51,720 Speaker 7: Kong retail sales are going to disappoint and Chautai Fuk 206 00:09:52,000 --> 00:09:56,640 Speaker 7: is a poster child. The other one, CSC Financial is 207 00:09:57,080 --> 00:10:00,559 Speaker 7: one of the largest Chinese brokerages you know good old fashion, 208 00:10:01,080 --> 00:10:05,280 Speaker 7: you know wealth management, and they are the investment banking business. 209 00:10:05,280 --> 00:10:08,240 Speaker 7: We think is set for disappointment because IPOs and other 210 00:10:08,360 --> 00:10:12,920 Speaker 7: new stock listings are way underwater. You know, we think 211 00:10:13,400 --> 00:10:16,240 Speaker 7: you're going to see investment banking revenue disappoint You. 212 00:10:16,160 --> 00:10:17,560 Speaker 1: Know, I was looking through the list here, Tim, and 213 00:10:17,800 --> 00:10:20,480 Speaker 1: I was looking for a name from Michael Dean and 214 00:10:20,520 --> 00:10:22,880 Speaker 1: the European Autos team, and I think I found one 215 00:10:22,920 --> 00:10:24,320 Speaker 1: in Perelli Tires. 216 00:10:24,880 --> 00:10:27,640 Speaker 7: Yes, indeed, I started to say, if you're an F 217 00:10:27,720 --> 00:10:30,560 Speaker 7: one fan, but that's more from a European perspective than 218 00:10:30,640 --> 00:10:34,800 Speaker 7: NASCAR in the US. But Perelli is a well known 219 00:10:34,840 --> 00:10:38,880 Speaker 7: tire maker and what they're doing is twofold number one 220 00:10:39,520 --> 00:10:40,520 Speaker 7: upgrading their mix. 221 00:10:40,600 --> 00:10:41,360 Speaker 6: They're getting rid. 222 00:10:41,240 --> 00:10:44,120 Speaker 7: Of some of their lower end products. And number two, 223 00:10:44,320 --> 00:10:47,559 Speaker 7: they've taken on a pretty big initiative to shift production 224 00:10:48,200 --> 00:10:51,679 Speaker 7: from core Europe to places like Romania over here in 225 00:10:51,679 --> 00:10:56,200 Speaker 7: Mexico over there, all of which is driving better margins. 226 00:10:56,360 --> 00:10:58,760 Speaker 7: And we think that this is going to continue more 227 00:10:58,800 --> 00:11:00,560 Speaker 7: than what consensus currently he bakes in. 228 00:11:00,880 --> 00:11:03,160 Speaker 1: Plus, it's from one of my favorite analysts over in 229 00:11:03,160 --> 00:11:06,240 Speaker 1: our London office, Gillian Davis, doing some good work there, 230 00:11:06,280 --> 00:11:06,960 Speaker 1: so good stuff. 231 00:11:07,280 --> 00:11:09,800 Speaker 4: Home building Taylor Morrison made the list. 232 00:11:09,840 --> 00:11:11,520 Speaker 3: That's not normally the company you think of when you 233 00:11:11,559 --> 00:11:14,480 Speaker 3: think of like a homebuilder, right you're thinking lenar KB homes, 234 00:11:14,480 --> 00:11:16,320 Speaker 3: et cetera. How does one make a list. 235 00:11:16,520 --> 00:11:20,880 Speaker 7: They're continuing to expand, specifically in some larger developments in 236 00:11:20,920 --> 00:11:24,680 Speaker 7: Florida and Texas, and it just seems to be a 237 00:11:24,800 --> 00:11:29,000 Speaker 7: case of good old fashioned running the numbers with those 238 00:11:29,240 --> 00:11:34,280 Speaker 7: expansion plans feeding through and their order book coming through 239 00:11:34,360 --> 00:11:37,440 Speaker 7: better than anticipated, where we think their positive surprises ad 240 00:11:37,920 --> 00:11:40,880 Speaker 7: but it is a classic story from the standpoint of 241 00:11:41,400 --> 00:11:43,840 Speaker 7: expanding order books, expanding volumes. 242 00:11:44,040 --> 00:11:46,560 Speaker 1: You know one name that's on here that surprising, but 243 00:11:46,640 --> 00:11:50,640 Speaker 1: I think it's a potential rule opportunity is Tencent talks 244 00:11:50,640 --> 00:11:52,720 Speaker 1: about that big Chinese e commerce because for a lot 245 00:11:52,760 --> 00:11:54,920 Speaker 1: of people, Tim as you well know, China's kind of 246 00:11:54,920 --> 00:11:55,600 Speaker 1: taboot right now. 247 00:11:55,640 --> 00:11:57,200 Speaker 6: From an investment perspective. 248 00:11:56,960 --> 00:11:59,880 Speaker 7: It is, especially when it comes to technology and regulat 249 00:12:00,040 --> 00:12:03,800 Speaker 7: where he concerns and you know, Beijing focusing in on 250 00:12:04,120 --> 00:12:06,800 Speaker 7: you know what the big tech companies are doing. You know, 251 00:12:07,080 --> 00:12:12,520 Speaker 7: historically these have ten cents driven by online gaming and 252 00:12:13,480 --> 00:12:18,079 Speaker 7: that growth rate is still somewhat muted, but there's more 253 00:12:18,200 --> 00:12:23,000 Speaker 7: video that's coming through. There's AI assisted advertising that is growing. 254 00:12:23,080 --> 00:12:26,400 Speaker 7: Both of those are drivers of their income statement that 255 00:12:26,480 --> 00:12:30,280 Speaker 7: we think are underappreciated. We think it's mid team's growth 256 00:12:30,320 --> 00:12:32,800 Speaker 7: going forward, but if you do the math, the market 257 00:12:32,800 --> 00:12:37,520 Speaker 7: seems to be discounting basically static to maybe low single 258 00:12:37,520 --> 00:12:40,360 Speaker 7: digit growth rates. And so there it's just a it's 259 00:12:40,440 --> 00:12:43,880 Speaker 7: just a case where we think the market doesn't realize 260 00:12:43,880 --> 00:12:47,080 Speaker 7: that they're back to having good, solid forward growth. 261 00:12:47,240 --> 00:12:49,600 Speaker 1: Our thanks to Tim Craik, he had Bloomberg Intelligence Research 262 00:12:49,640 --> 00:12:50,560 Speaker 1: director for content. 263 00:12:50,640 --> 00:12:52,480 Speaker 3: All right, coming up, we're going to discuss with Tesla's 264 00:12:52,480 --> 00:12:55,319 Speaker 3: first quarter delivery mis means for the EV space. 265 00:12:55,679 --> 00:12:58,720 Speaker 1: Listening to Bloomberg Intelligence on Bloomberg Radio, providing end up 266 00:12:58,760 --> 00:13:00,880 Speaker 1: research and data on two thousand and companies and one. 267 00:13:00,840 --> 00:13:01,880 Speaker 6: Hundred and thirty industries. 268 00:13:02,120 --> 00:13:05,080 Speaker 1: You can access Bloomberg Intelligence via big on the terminal. 269 00:13:05,200 --> 00:13:07,079 Speaker 4: I'm Paul Sweeney and I'm Alex Steele, and. 270 00:13:07,080 --> 00:13:08,079 Speaker 3: This is Bloomberg. 271 00:13:13,000 --> 00:13:16,880 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 272 00:13:16,960 --> 00:13:19,679 Speaker 2: weekdays at ten am Eastern on Apple car Playing and 273 00:13:19,800 --> 00:13:22,680 Speaker 2: Broud Auto with the Bloomberg Business App. Listen on demand 274 00:13:22,720 --> 00:13:27,040 Speaker 2: wherever you get your podcasts, or watch us live on YouTube. 275 00:13:28,120 --> 00:13:30,000 Speaker 4: We look next at the EVS space. 276 00:13:30,080 --> 00:13:32,760 Speaker 3: So this week Tesla reported first quarter vehicle deliveries it 277 00:13:32,800 --> 00:13:35,920 Speaker 3: felt fourteen percent short of analyst expectations, and this also 278 00:13:36,240 --> 00:13:39,240 Speaker 3: represented Tesla's first year over year decline and delivery since 279 00:13:39,280 --> 00:13:40,000 Speaker 3: twenty twenty. 280 00:13:40,240 --> 00:13:41,600 Speaker 6: This comes to us to EV maker. 281 00:13:41,679 --> 00:13:44,560 Speaker 1: Rivian reported that it delivered more EV's last quarter than 282 00:13:44,600 --> 00:13:46,880 Speaker 1: Wall Street expected. For more on all of this, we 283 00:13:46,880 --> 00:13:50,400 Speaker 1: were joined by Steve Man, Global Autos and Industrials Research analysts. 284 00:13:50,520 --> 00:13:53,280 Speaker 1: We first asked Steve what Tesla's miss means for the 285 00:13:53,280 --> 00:13:54,240 Speaker 1: company going forward. 286 00:13:54,600 --> 00:13:56,200 Speaker 8: I mean, it's a bad time. You know, they just 287 00:13:56,240 --> 00:13:59,560 Speaker 8: actually raise prices on their cars, puts in the question 288 00:13:59,679 --> 00:14:03,000 Speaker 8: about that strategy. There's a lot of questions out there, 289 00:14:03,040 --> 00:14:05,880 Speaker 8: you know, with you know, the end market, the consumer 290 00:14:06,440 --> 00:14:10,040 Speaker 8: hesitating a bit on buying evs. So what's going to 291 00:14:10,120 --> 00:14:13,439 Speaker 8: be for Tesla going forward? Definitely their one point million 292 00:14:14,080 --> 00:14:18,199 Speaker 8: target sales target for the year is definitely at risk. 293 00:14:18,559 --> 00:14:19,480 Speaker 4: Do we know why? 294 00:14:19,720 --> 00:14:21,640 Speaker 3: Like, what's the why behind it? They're going to talk 295 00:14:21,640 --> 00:14:25,120 Speaker 3: about production misses in terms of supply chain issues, et cetera. 296 00:14:25,600 --> 00:14:28,760 Speaker 3: But then Ruvian kind of crushed it, So so what's 297 00:14:28,800 --> 00:14:29,840 Speaker 3: the real reason here? 298 00:14:30,280 --> 00:14:34,720 Speaker 8: Yeah, they actually you know, TESTA attributed to the RESC hostilities, 299 00:14:35,280 --> 00:14:37,240 Speaker 8: and you know that's that's partly right, because a lot 300 00:14:37,280 --> 00:14:40,160 Speaker 8: of their Model three and Model why they're most the 301 00:14:40,200 --> 00:14:43,520 Speaker 8: best selling vehicles actually come from China. And you know, 302 00:14:43,880 --> 00:14:45,840 Speaker 8: you know, you would assume a lot of these vehicles 303 00:14:45,840 --> 00:14:48,920 Speaker 8: are shipped through the Pacific Ocean, avoiding the Red Sea. 304 00:14:49,360 --> 00:14:51,520 Speaker 8: But we'll give them benefit of the doubt that it 305 00:14:51,680 --> 00:14:57,640 Speaker 8: had some impact. Maybe it's not necessarily the shipment of vehicles. 306 00:14:57,640 --> 00:15:00,440 Speaker 8: Maybe the shipment of parts right through the Red Sea 307 00:15:00,480 --> 00:15:04,200 Speaker 8: that's impacted the production in China. And remember they actually 308 00:15:04,280 --> 00:15:07,920 Speaker 8: cut some of the some production in China recently as well, 309 00:15:08,360 --> 00:15:11,640 Speaker 8: so you know that could be the reason. But like 310 00:15:11,680 --> 00:15:14,000 Speaker 8: you said, Rivian sales have gone up. You know, is 311 00:15:14,040 --> 00:15:18,080 Speaker 8: there anything specific to Tesla? I don't. I don't really 312 00:15:18,080 --> 00:15:18,480 Speaker 8: think so. 313 00:15:18,680 --> 00:15:18,880 Speaker 9: One. 314 00:15:19,040 --> 00:15:21,320 Speaker 8: You know, one quarter is not gonna tell us the 315 00:15:21,760 --> 00:15:24,720 Speaker 8: trend for the long term. I think Tesla vehicles are 316 00:15:24,760 --> 00:15:27,880 Speaker 8: still you know, liked by a lot of consumer. We 317 00:15:27,960 --> 00:15:31,960 Speaker 8: just did a survey actually recently, a buying intention survey. 318 00:15:32,360 --> 00:15:35,800 Speaker 8: You know, Tesla has the greatest rand loyalty still amongst 319 00:15:35,840 --> 00:15:38,360 Speaker 8: all brands in the in the auto industry. 320 00:15:38,720 --> 00:15:42,080 Speaker 1: Yes, the big question on investors' minds is what is 321 00:15:42,480 --> 00:15:45,800 Speaker 1: the real demand for evs in general? 322 00:15:45,800 --> 00:15:46,760 Speaker 6: And Tesla in particular. 323 00:15:47,160 --> 00:15:49,440 Speaker 1: Look in I guess the near and intermediate term. 324 00:15:49,480 --> 00:15:50,280 Speaker 6: Do you have a view on that. 325 00:15:51,000 --> 00:15:54,160 Speaker 8: Yeah, I mean I've always thought that not only Tesla, 326 00:15:54,320 --> 00:15:56,760 Speaker 8: but the entire eating market is going through a rough 327 00:15:56,760 --> 00:16:00,160 Speaker 8: patch this year and likely into the next year. My 328 00:16:00,200 --> 00:16:04,080 Speaker 8: long term view is still optimistic about EV's. I think 329 00:16:04,200 --> 00:16:09,720 Speaker 8: there's enough policies out there to push greener vehicles, more 330 00:16:09,760 --> 00:16:13,640 Speaker 8: greener vehicles on the road. I think the issue today 331 00:16:13,760 --> 00:16:19,000 Speaker 8: is aboutffordability. There's actually not enough affordable EV's out there 332 00:16:19,480 --> 00:16:23,400 Speaker 8: for the masses currently. A lot of vehicles are expensive. 333 00:16:23,840 --> 00:16:26,920 Speaker 8: They're over fifty thousand dollars. A lot of people can 334 00:16:26,920 --> 00:16:31,160 Speaker 8: buy them, especially during high interest rate environments. 335 00:16:31,480 --> 00:16:34,400 Speaker 3: That has been the rhetoric really for a bit, and 336 00:16:34,480 --> 00:16:36,360 Speaker 3: Elon Musk seems to say, Okay, we're going to do 337 00:16:36,400 --> 00:16:38,040 Speaker 3: the lower cost, but give us a second. 338 00:16:38,120 --> 00:16:38,240 Speaker 2: Right. 339 00:16:38,280 --> 00:16:41,400 Speaker 3: We had this wave of Model Y, Model three, et cetera, 340 00:16:41,520 --> 00:16:43,600 Speaker 3: and now we're going to have another wave of. 341 00:16:43,560 --> 00:16:46,120 Speaker 4: More affordable EV's. Well, when does that wave happen. 342 00:16:46,560 --> 00:16:48,360 Speaker 8: A lot of it actually comes online at the end 343 00:16:48,400 --> 00:16:50,880 Speaker 8: of twenty twenty five. Starts coming online at at the 344 00:16:50,960 --> 00:16:53,760 Speaker 8: end of twenty twenty five. That's when you have a 345 00:16:53,800 --> 00:16:58,880 Speaker 8: Model two. GM is also relaunching the more affordable Bolt. 346 00:16:59,400 --> 00:17:02,840 Speaker 8: All of them are you know, thirty thousand or less. 347 00:17:03,720 --> 00:17:06,080 Speaker 8: And then you have you know, GM will continue to 348 00:17:06,119 --> 00:17:10,240 Speaker 8: roll out cheaper vehicles, and you have Rivian also launching 349 00:17:10,280 --> 00:17:13,200 Speaker 8: the R two and R three, you know, in twenty 350 00:17:13,240 --> 00:17:14,720 Speaker 8: twenty six and twenty twenty seven. 351 00:17:14,880 --> 00:17:16,760 Speaker 3: So it doesn't want a car Nambar two by the way, 352 00:17:17,320 --> 00:17:20,160 Speaker 3: total side note, I mean everyone, but go ahead. 353 00:17:20,680 --> 00:17:22,359 Speaker 8: Yeah, but you know, a lot a lot of more 354 00:17:22,400 --> 00:17:25,040 Speaker 8: affordable EV's coming in and the hope is that, you know, 355 00:17:25,160 --> 00:17:28,800 Speaker 8: the addressable market for the EV, market for the EV 356 00:17:28,960 --> 00:17:32,640 Speaker 8: industry expands as the cheaper cars come on the road 357 00:17:32,680 --> 00:17:34,399 Speaker 8: and are available to consumers. 358 00:17:34,600 --> 00:17:37,040 Speaker 1: If I were an investor in this company, I'd be saying, Okay, 359 00:17:37,160 --> 00:17:39,840 Speaker 1: you need to bring in a cheaper priced car for 360 00:17:39,880 --> 00:17:43,439 Speaker 1: the mash market, but I'm not sure you can convince 361 00:17:43,480 --> 00:17:45,360 Speaker 1: me that you could do it at a profit. 362 00:17:45,560 --> 00:17:46,800 Speaker 6: What's the expectation of. 363 00:17:46,760 --> 00:17:49,840 Speaker 1: Their ability to turn out lower price models on a 364 00:17:49,880 --> 00:17:51,800 Speaker 1: per unit profitable basis. 365 00:17:51,640 --> 00:17:55,240 Speaker 8: That That's a very good question. I think scale is 366 00:17:55,280 --> 00:17:57,560 Speaker 8: the most important thing. I mean, this is a scale 367 00:17:57,720 --> 00:18:00,520 Speaker 8: volume game in the auto industry has has been like 368 00:18:00,560 --> 00:18:04,480 Speaker 8: that for one hundred years. So the question is are 369 00:18:04,520 --> 00:18:07,680 Speaker 8: the cheaper vehicles going to resonate as you push more 370 00:18:07,760 --> 00:18:11,119 Speaker 8: production through an assembly plant. In the auto industry, the 371 00:18:11,200 --> 00:18:16,960 Speaker 8: unicost does fall significantly in a logarithmic kind of trend, 372 00:18:17,080 --> 00:18:21,520 Speaker 8: so we're hoping that it will cut. But specifically to Tesla, 373 00:18:21,760 --> 00:18:24,600 Speaker 8: I would have also mention that they've done a really 374 00:18:24,600 --> 00:18:29,520 Speaker 8: good job in vertically integrating their processes throughout the whole 375 00:18:29,600 --> 00:18:34,160 Speaker 8: value chain, right, and that actually does cut costs, especially 376 00:18:34,359 --> 00:18:38,080 Speaker 8: in newer tech like this. You know, if I look 377 00:18:38,119 --> 00:18:41,639 Speaker 8: at over one hundred years ago, Henry Ford basically did 378 00:18:41,680 --> 00:18:45,679 Speaker 8: the same thing. You know, switching everybody from horse carriages 379 00:18:46,080 --> 00:18:50,720 Speaker 8: to automobiles actually required vertical required Ford to be to 380 00:18:50,800 --> 00:18:55,400 Speaker 8: vertically integrate and able to manage costs and manage design 381 00:18:55,960 --> 00:18:59,880 Speaker 8: and be nimble and flexible to react to consumers. 382 00:19:00,640 --> 00:19:03,680 Speaker 1: Our thanks to Steve Man Global Autos and Industrial Research Jonalysts. 383 00:19:03,880 --> 00:19:06,200 Speaker 3: Earlier in the week, we were joined by Matt Winkler, 384 00:19:06,320 --> 00:19:09,159 Speaker 3: Editor in chief Emeritus at Bloomberg News. He's also been 385 00:19:09,160 --> 00:19:12,280 Speaker 3: writing a series of opinion pieces on key swing states 386 00:19:12,320 --> 00:19:13,280 Speaker 3: in the US. 387 00:19:13,280 --> 00:19:16,240 Speaker 1: And that's latest piece. His research focused on Georgia. His 388 00:19:16,359 --> 00:19:19,040 Speaker 1: economy has been booming over the last few decades. We 389 00:19:19,080 --> 00:19:21,840 Speaker 1: began our conversation with Matt by asking him to discuss 390 00:19:21,840 --> 00:19:23,359 Speaker 1: his findings in Georgia. 391 00:19:23,480 --> 00:19:26,600 Speaker 10: Georgia population of more than eleven million makes it the 392 00:19:26,600 --> 00:19:29,800 Speaker 10: eighth largest state, and it's booming right now like it 393 00:19:29,880 --> 00:19:33,280 Speaker 10: never did before Joe Biden became the forty sixth president. 394 00:19:33,440 --> 00:19:37,880 Speaker 10: And we know this because not since data was initially 395 00:19:37,920 --> 00:19:40,480 Speaker 10: collected in nineteen ninety has there been a three year 396 00:19:40,560 --> 00:19:45,080 Speaker 10: period when growth in the Peach States manufacturing payrolls came 397 00:19:45,160 --> 00:19:49,439 Speaker 10: close to matching the eleven point nine percent increase in 398 00:19:49,560 --> 00:19:53,080 Speaker 10: jobs since twenty twenty one, or its rate of employment 399 00:19:53,080 --> 00:19:56,800 Speaker 10: gains compared with the US overall. And that's according to 400 00:19:56,880 --> 00:19:59,879 Speaker 10: data compiled by Bloomberg. So we are seeing a man 401 00:20:00,000 --> 00:20:04,000 Speaker 10: manufacturing boom, job boom in Georgia the likes of which 402 00:20:04,080 --> 00:20:07,960 Speaker 10: Georgia has never seen. And by the way, this is 403 00:20:08,520 --> 00:20:12,800 Speaker 10: counter to the trend in the twenty first century. Every 404 00:20:12,840 --> 00:20:16,280 Speaker 10: presidency in the New century except Biden's has seen a 405 00:20:16,320 --> 00:20:20,040 Speaker 10: decline in manufacturing jobs. So this is a departure. 406 00:20:20,520 --> 00:20:22,800 Speaker 3: So how much of that do you attribute to the 407 00:20:22,880 --> 00:20:25,399 Speaker 3: Chips Act and the Inflation Reduction Act, Because something that 408 00:20:25,480 --> 00:20:27,480 Speaker 3: gets lost in all this messaging is with the IRA 409 00:20:27,640 --> 00:20:30,000 Speaker 3: for example, so much of that money is actually going 410 00:20:30,040 --> 00:20:34,040 Speaker 3: to Red States because they have the space to build stuff. 411 00:20:34,840 --> 00:20:38,119 Speaker 10: Well, there's no question that actually Red states are a 412 00:20:38,119 --> 00:20:41,399 Speaker 10: big beneficiary. But it's not just the American Rescue Act 413 00:20:41,480 --> 00:20:46,240 Speaker 10: of twenty twenty one. It's also the Infrastructure Investment Jobs Act, 414 00:20:46,320 --> 00:20:50,160 Speaker 10: the Chips and Science Act again, the Inflation Reduction Act, 415 00:20:50,960 --> 00:20:56,159 Speaker 10: all of which have helped Biden make a legitimate claim, 416 00:20:56,280 --> 00:21:00,000 Speaker 10: which is he created close to eight hundred thousand manufacturing 417 00:21:00,119 --> 00:21:02,399 Speaker 10: jobs since he took office. And we know this is 418 00:21:02,440 --> 00:21:07,080 Speaker 10: not an idle boast because those very careful fact checkers 419 00:21:07,080 --> 00:21:10,960 Speaker 10: called PolitiFact actually took a look at this claim and 420 00:21:11,119 --> 00:21:15,680 Speaker 10: they showed that the nation's manufacturing rebound is the strongest 421 00:21:15,720 --> 00:21:19,800 Speaker 10: at this point after a recession since nineteen fifty one. 422 00:21:20,200 --> 00:21:24,199 Speaker 1: Is Georgia per se doing anything right versus I mean, 423 00:21:24,280 --> 00:21:27,000 Speaker 1: is this all just the largest of the federal government 424 00:21:27,000 --> 00:21:30,960 Speaker 1: met or does Georgia have just better incentives better tax incentives? 425 00:21:30,960 --> 00:21:33,080 Speaker 6: Are they doing something maybe some other states aren't doing well. 426 00:21:33,280 --> 00:21:37,920 Speaker 10: Well, there's no question that some of the credit has 427 00:21:38,000 --> 00:21:41,040 Speaker 10: to go to, as I said, these acts, because the 428 00:21:41,119 --> 00:21:47,840 Speaker 10: investments include, for example, South Korea's Hanwa Solutions Corp. Expansion 429 00:21:47,880 --> 00:21:51,160 Speaker 10: of solar panel and manufacturing. They were already there. They 430 00:21:51,200 --> 00:21:53,639 Speaker 10: got incentives to do a lot more than what they 431 00:21:53,680 --> 00:21:58,680 Speaker 10: were doing. The same thing with Hyundai with EV vehicles, 432 00:21:58,880 --> 00:22:02,640 Speaker 10: they're already there doing more. And then there's this battery 433 00:22:02,640 --> 00:22:06,240 Speaker 10: company from Norway, freyer Or Battery, which is going to 434 00:22:06,320 --> 00:22:12,040 Speaker 10: make clean battery manufacturing in Coueda County in Georgia. So 435 00:22:12,800 --> 00:22:16,720 Speaker 10: those things are definitely tied to the incentives that come 436 00:22:16,720 --> 00:22:20,879 Speaker 10: out of these acts. There's no question state and local 437 00:22:20,920 --> 00:22:25,239 Speaker 10: officials have been supportive. But interestingly enough, the governor of 438 00:22:25,280 --> 00:22:28,920 Speaker 10: Georgia voted against or would have voted against, the Inflation 439 00:22:29,040 --> 00:22:33,320 Speaker 10: Reduction Act. All of the Republicans in Congress voted against 440 00:22:33,359 --> 00:22:36,080 Speaker 10: the Inflation Reduction Act, which is a big part of 441 00:22:36,400 --> 00:22:39,480 Speaker 10: why Georgia is doing well. But they're not ready to 442 00:22:39,480 --> 00:22:42,679 Speaker 10: give the money back. Of course, they're very happy that 443 00:22:42,720 --> 00:22:43,560 Speaker 10: it's all happening. 444 00:22:43,920 --> 00:22:46,600 Speaker 3: We have seen with some of these acts that we 445 00:22:46,640 --> 00:22:49,840 Speaker 3: get all excited about the money that's being spent, but 446 00:22:49,920 --> 00:22:52,240 Speaker 3: then getting the shovel in the ground and actually doing 447 00:22:52,240 --> 00:22:55,240 Speaker 3: the hiring in the manufacturing gets delayed a little bit 448 00:22:55,359 --> 00:22:58,680 Speaker 3: and gets pushed out or the plans get scaled back 449 00:22:58,720 --> 00:23:01,760 Speaker 3: a bit. Are we seeing any this in Georgia or 450 00:23:01,840 --> 00:23:03,880 Speaker 3: is the outlook particularly rosy. 451 00:23:04,400 --> 00:23:06,639 Speaker 10: It's more of the latter, you know. And then again 452 00:23:06,680 --> 00:23:10,000 Speaker 10: the proof of that is that if you look at 453 00:23:10,040 --> 00:23:15,960 Speaker 10: the unemployment rate in Georgia, it actually declined most recently 454 00:23:16,600 --> 00:23:19,639 Speaker 10: and is several percentage points, you know, less than the 455 00:23:19,760 --> 00:23:24,160 Speaker 10: national average. So you know, unemployment in the US actually 456 00:23:24,240 --> 00:23:27,040 Speaker 10: has ticked up a bit. In Georgia, it's gone the 457 00:23:27,119 --> 00:23:31,320 Speaker 10: other way. And that's an example that the boom is 458 00:23:31,480 --> 00:23:34,400 Speaker 10: very much underway and shows no signs of abating. 459 00:23:34,600 --> 00:23:36,919 Speaker 1: You know, you have to remind yourself, I mean, how 460 00:23:36,960 --> 00:23:40,520 Speaker 1: the economy in the South has really changed from you know, 461 00:23:40,600 --> 00:23:46,199 Speaker 1: agricultural textiles, you know, very low technology touch types of 462 00:23:46,240 --> 00:23:49,199 Speaker 1: industries to now it seems like every new autoplant that 463 00:23:50,119 --> 00:23:53,320 Speaker 1: you know, international automakers, they want to build them in 464 00:23:53,359 --> 00:23:57,320 Speaker 1: the movie studios. So much investments going to the Southeast. 465 00:23:57,320 --> 00:23:59,600 Speaker 1: And that's again been a twenty third thirty year story. 466 00:24:00,080 --> 00:24:03,080 Speaker 1: What's next on your state? 467 00:24:03,280 --> 00:24:03,480 Speaker 2: Yeah? 468 00:24:03,480 --> 00:24:04,560 Speaker 6: What state is? Next year? 469 00:24:04,640 --> 00:24:11,640 Speaker 10: We'll probably get to Nevada. So we've done Pennsylvania, Michigan, 470 00:24:12,640 --> 00:24:15,720 Speaker 10: now Georgia, and we're working through the list. 471 00:24:16,600 --> 00:24:21,520 Speaker 1: So if you were advising President Biden his campaign about 472 00:24:21,840 --> 00:24:24,239 Speaker 1: the messaging here, what would you say in terms of 473 00:24:24,280 --> 00:24:27,320 Speaker 1: because I would argue that the messaging has not been effective, 474 00:24:27,320 --> 00:24:30,960 Speaker 1: that this message of economic success has not been told. 475 00:24:31,040 --> 00:24:33,520 Speaker 10: Well, I'd say, actually, their messaging has been pretty good. 476 00:24:33,560 --> 00:24:36,440 Speaker 10: A lot of this data that we've compiled at Bloomberg 477 00:24:37,200 --> 00:24:41,600 Speaker 10: is available in various announcements from either the White House 478 00:24:41,720 --> 00:24:44,639 Speaker 10: or the Treasury. But the saying is, you know, you 479 00:24:44,680 --> 00:24:47,160 Speaker 10: can lead a horse to water, but you can't get 480 00:24:47,200 --> 00:24:50,080 Speaker 10: the horse to drink. The horse in this case is 481 00:24:50,119 --> 00:24:54,200 Speaker 10: our profession, the media, and it's pretty much ignored what's 482 00:24:54,240 --> 00:24:56,240 Speaker 10: in front of its nose, which are the facts. So 483 00:24:57,080 --> 00:25:04,000 Speaker 10: unless reporters find this relevant, I do uh for it. 484 00:25:04,160 --> 00:25:07,360 Speaker 10: You know, they'd rather focus on polls, and so that's 485 00:25:07,400 --> 00:25:08,800 Speaker 10: perception not reality. 486 00:25:08,960 --> 00:25:10,840 Speaker 1: Before we went on the area, you made a comment 487 00:25:10,880 --> 00:25:13,879 Speaker 1: about California. How big is that economy now? Because I 488 00:25:14,000 --> 00:25:15,280 Speaker 1: used to to me it was the seventh or y 489 00:25:15,320 --> 00:25:16,600 Speaker 1: largest economy, it's number four. 490 00:25:16,760 --> 00:25:20,920 Speaker 10: It's now numbers and it's poised to overtake Germany. And 491 00:25:21,320 --> 00:25:24,320 Speaker 10: that's because you know, you keep talking about the Magnificent 492 00:25:24,400 --> 00:25:28,160 Speaker 10: seven on this show. Ye if you look at Corporate California. 493 00:25:28,400 --> 00:25:33,760 Speaker 10: Corporate California just dwarfs Corporate Anywhere, dwarfs Corporate Texas. It 494 00:25:33,880 --> 00:25:39,360 Speaker 10: dwarfs Corporate Germany. Corporate California is still a juggernaut. And 495 00:25:39,400 --> 00:25:41,520 Speaker 10: you know who those companies are. But it's not just 496 00:25:41,600 --> 00:25:44,879 Speaker 10: the big companies. It's big and small companies alike in 497 00:25:44,920 --> 00:25:48,640 Speaker 10: the Russell three thousand that make California unique. 498 00:25:48,800 --> 00:25:50,960 Speaker 1: Our thanks to Matt Winkler, editor in Chief Emeritus at 499 00:25:50,960 --> 00:25:51,680 Speaker 1: Bloomberg News. 500 00:25:51,840 --> 00:25:53,280 Speaker 3: Coming up on the program, we're going to take a 501 00:25:53,280 --> 00:25:56,040 Speaker 3: look at the expanded partnership between UPS and the United 502 00:25:56,040 --> 00:25:57,080 Speaker 3: States Postal Service. 503 00:25:57,200 --> 00:26:00,440 Speaker 1: You're listening to Bloomberg Intelligence on Bloomberg Radio, aidding into 504 00:26:00,520 --> 00:26:03,080 Speaker 1: research and data. Are two thousand companies in one hundred 505 00:26:03,080 --> 00:26:05,840 Speaker 1: and thirty industries. You can access Boomberg Intelligence b ab 506 00:26:05,960 --> 00:26:07,080 Speaker 1: I go on the terminal of. 507 00:26:07,119 --> 00:26:10,800 Speaker 3: Paul Sweeney atamlex Deal and this is Bloomberg. 508 00:26:14,320 --> 00:26:18,200 Speaker 2: You're listening to the Bloomberg Intelligence podcast. Catch us live 509 00:26:18,280 --> 00:26:22,199 Speaker 2: weekdays at ten am Eastern on Applecarplay and Android Auto 510 00:26:22,200 --> 00:26:25,000 Speaker 2: with the Bloomberg Business app. You can also listen live 511 00:26:25,080 --> 00:26:28,280 Speaker 2: on Amazon Alexa from our flagship New York station. Just 512 00:26:28,320 --> 00:26:30,960 Speaker 2: say Alexa Play Bloomberg eleven thirty. 513 00:26:32,840 --> 00:26:34,880 Speaker 4: We turn now to the logistics industry. 514 00:26:35,200 --> 00:26:37,240 Speaker 3: UPS announced this week that it had been awarded a 515 00:26:37,280 --> 00:26:41,520 Speaker 3: significant air cargo contract by the United States Postal Service. 516 00:26:41,560 --> 00:26:44,760 Speaker 3: This comes after FedEx said its agreement to provide domestic 517 00:26:44,800 --> 00:26:48,560 Speaker 3: transportation services for USPS we'll expire on September twenty ninth. 518 00:26:48,840 --> 00:26:51,440 Speaker 1: For more, we were joined by Lee Classical Bloomberg Intelligence 519 00:26:51,480 --> 00:26:54,959 Speaker 1: senior Transport, Logistics and shipping analysts. We first asked Lee 520 00:26:55,000 --> 00:26:57,919 Speaker 1: for his reaction to UPS becoming the primary air cargo 521 00:26:57,960 --> 00:27:00,000 Speaker 1: provider for USPS. 522 00:27:00,119 --> 00:27:01,240 Speaker 11: This is somewhat of a surprise. 523 00:27:01,280 --> 00:27:03,920 Speaker 12: I think most people were expecting the FedEx would lose 524 00:27:03,960 --> 00:27:06,240 Speaker 12: maybe about half of that business, but they ended up 525 00:27:06,280 --> 00:27:09,159 Speaker 12: losing all of it. It's about one point seven to 526 00:27:09,280 --> 00:27:12,399 Speaker 12: one point nine billion dollars in revenue, makes up roughly 527 00:27:12,440 --> 00:27:15,120 Speaker 12: around four to five percent of their express business, maybe 528 00:27:15,160 --> 00:27:16,720 Speaker 12: two percent of their total business. 529 00:27:17,400 --> 00:27:18,280 Speaker 9: So it's a. 530 00:27:18,200 --> 00:27:21,600 Speaker 12: Big loss for fed X. And you know, while FedEx 531 00:27:21,680 --> 00:27:24,919 Speaker 12: is losing, UPS is gaining. What's great about this is 532 00:27:24,960 --> 00:27:27,639 Speaker 12: maybe not so much the revenue and the yields that 533 00:27:27,680 --> 00:27:31,400 Speaker 12: it provides. It's the stability of the freight that it's 534 00:27:31,440 --> 00:27:33,600 Speaker 12: going to be getting into its network, And when you 535 00:27:33,640 --> 00:27:37,159 Speaker 12: have any sort of freight network, you want equilibrium. You 536 00:27:37,200 --> 00:27:39,000 Speaker 12: want to be able to predict what you're going to 537 00:27:39,800 --> 00:27:42,840 Speaker 12: need in terms of resources, and this provides a good 538 00:27:42,960 --> 00:27:45,960 Speaker 12: level set of predictability for them and they can build 539 00:27:46,000 --> 00:27:50,560 Speaker 12: density onto these routes where the US Postal Service will 540 00:27:50,600 --> 00:27:51,120 Speaker 12: be leveraging. 541 00:27:51,680 --> 00:27:54,159 Speaker 6: Why is the Postal Service making the switch? 542 00:27:55,359 --> 00:27:57,879 Speaker 11: That's a great question. They were negotiating with fed X. 543 00:27:57,920 --> 00:28:01,439 Speaker 12: I guess the two parties couldn't come to a conclusion 544 00:28:01,520 --> 00:28:05,880 Speaker 12: in terms of an agreement, so therefore they just decided 545 00:28:05,920 --> 00:28:08,840 Speaker 12: to part ways. You know, one would guess that this 546 00:28:08,960 --> 00:28:13,080 Speaker 12: is maybe not the most high margin business for whether 547 00:28:13,119 --> 00:28:15,840 Speaker 12: it's UPS or FedEx. But again, I think there is 548 00:28:15,880 --> 00:28:18,159 Speaker 12: a benefit to having this because it does create a 549 00:28:18,200 --> 00:28:19,439 Speaker 12: lot of density in their network. 550 00:28:19,560 --> 00:28:20,760 Speaker 6: Let me ask a silly question. 551 00:28:21,320 --> 00:28:24,119 Speaker 1: When I'm looking to mail package, the United States Postal 552 00:28:24,119 --> 00:28:27,600 Speaker 1: Service does not even come into my mindset? Oh god, no, no, 553 00:28:28,440 --> 00:28:31,840 Speaker 1: who still uses the US Postal Service versus FedEx? Or 554 00:28:32,359 --> 00:28:34,399 Speaker 1: or you know a UPS store that's right next to 555 00:28:34,440 --> 00:28:36,560 Speaker 1: the Starbucks in town. I can go, you know, get 556 00:28:36,560 --> 00:28:37,800 Speaker 1: my cafe mocha there. 557 00:28:38,600 --> 00:28:40,320 Speaker 6: I'm not going to the post office. Who uses a 558 00:28:40,320 --> 00:28:41,440 Speaker 6: post office these days. 559 00:28:41,960 --> 00:28:44,480 Speaker 11: I mean I do. I guess I'm you do, but 560 00:28:46,000 --> 00:28:49,120 Speaker 11: I do sometimes. But but the reality is the postal service. 561 00:28:49,200 --> 00:28:52,400 Speaker 12: You know, obviously you were not sending letters to Grandma anymore. 562 00:28:53,160 --> 00:28:55,840 Speaker 11: But you know what we are doing is we're. 563 00:28:55,720 --> 00:28:59,320 Speaker 12: Ordering stuff online and the US Postal Service provides a 564 00:28:59,320 --> 00:29:01,720 Speaker 12: lot of the final mile delivery. So you might be 565 00:29:02,240 --> 00:29:06,640 Speaker 12: ordering from a department store or a dot com etailer, 566 00:29:07,040 --> 00:29:10,080 Speaker 12: and you know, they might be using UPS and FedEx 567 00:29:10,480 --> 00:29:14,600 Speaker 12: for the line haul, but they might be leveraging the 568 00:29:14,640 --> 00:29:17,040 Speaker 12: postal service for that final mile deliver because the postal 569 00:29:17,080 --> 00:29:19,120 Speaker 12: service at the end of the day has to go 570 00:29:19,160 --> 00:29:22,080 Speaker 12: to everyone's address, and it's a cheap way to do it. 571 00:29:22,120 --> 00:29:24,200 Speaker 12: And as more and more people are willing maybe don't 572 00:29:24,240 --> 00:29:26,200 Speaker 12: need that T shirt overnight, you can wait a couple 573 00:29:26,240 --> 00:29:29,040 Speaker 12: of days, you know, injecting that freight into the postal 574 00:29:29,080 --> 00:29:32,000 Speaker 12: service that makes sense. And Amazon's is a big user 575 00:29:32,160 --> 00:29:33,920 Speaker 12: of that final mile delivery as well. 576 00:29:34,520 --> 00:29:37,120 Speaker 4: My daughter does send letters to her grandmother. I'm just 577 00:29:37,120 --> 00:29:37,600 Speaker 4: putting that. 578 00:29:37,560 --> 00:29:39,640 Speaker 3: Out there on the flip side, and I should point 579 00:29:39,680 --> 00:29:41,520 Speaker 3: out they mentioned the margin part of it. So we 580 00:29:41,600 --> 00:29:44,920 Speaker 3: talked to the UPS CEO last week on television and 581 00:29:44,960 --> 00:29:47,640 Speaker 3: their whole pitch is that going forward, they want to 582 00:29:47,880 --> 00:29:51,720 Speaker 3: focus on margin and pricing over volume. Does this fit 583 00:29:51,800 --> 00:29:52,720 Speaker 3: into that strategy? 584 00:29:53,200 --> 00:29:56,440 Speaker 12: Yes and no, so yes, because so what they're going 585 00:29:56,480 --> 00:29:59,440 Speaker 12: to be focusing on are verticals like small to mid 586 00:29:59,480 --> 00:30:04,000 Speaker 12: size shippers, and those shippers come with very high margins 587 00:30:04,040 --> 00:30:08,640 Speaker 12: relative to you know, large enterprise companies that are out there, 588 00:30:08,680 --> 00:30:10,720 Speaker 12: so they're going to be really focused on that type 589 00:30:10,760 --> 00:30:13,760 Speaker 12: of business. But you know what the volumes from the 590 00:30:13,800 --> 00:30:17,160 Speaker 12: postal service brings is a level of density that you 591 00:30:17,200 --> 00:30:19,600 Speaker 12: can leverage because it's all about operational. 592 00:30:19,160 --> 00:30:19,720 Speaker 9: Leverage, right. 593 00:30:19,800 --> 00:30:23,120 Speaker 12: You know, no matter what you are in transportation, operational 594 00:30:23,240 --> 00:30:26,120 Speaker 12: leverage is pretty high. Because you add like one more 595 00:30:26,360 --> 00:30:29,080 Speaker 12: piece of freight, that piece of freight tends to have 596 00:30:29,160 --> 00:30:32,040 Speaker 12: higher margins than the first twenty pieces of freight. And 597 00:30:32,120 --> 00:30:34,480 Speaker 12: so what this will do is this will probably help 598 00:30:34,520 --> 00:30:37,920 Speaker 12: them provide a base level of cost coverage and you 599 00:30:37,920 --> 00:30:40,640 Speaker 12: know what a profitable cost coverage at that and then 600 00:30:40,800 --> 00:30:44,040 Speaker 12: all these additional volumes that they're getting from higher margin 601 00:30:44,360 --> 00:30:49,080 Speaker 12: might even carry higher incremental margins for ups. So long term, 602 00:30:49,200 --> 00:30:52,640 Speaker 12: it could have a very positive impact on margins. Near term, 603 00:30:52,720 --> 00:30:55,920 Speaker 12: it might have a negative mixshift, if you will, but 604 00:30:56,040 --> 00:30:57,600 Speaker 12: you know, we think that it. 605 00:30:57,520 --> 00:30:59,719 Speaker 11: Does make sense for them to take this volume. 606 00:31:00,120 --> 00:31:03,000 Speaker 12: Other verticals also that they talked about during their analyst day, 607 00:31:03,320 --> 00:31:06,360 Speaker 12: or the healthcare vertical, which tends to be highly profitable 608 00:31:06,480 --> 00:31:08,960 Speaker 12: just because of the high touch nature and the high 609 00:31:09,040 --> 00:31:11,800 Speaker 12: service level of that freight that goes through their network. 610 00:31:12,120 --> 00:31:14,800 Speaker 1: So Lee looking at the air freight companies to the 611 00:31:14,840 --> 00:31:17,000 Speaker 1: FedEx toups, how is business? 612 00:31:17,000 --> 00:31:18,800 Speaker 6: How are volumes these days? 613 00:31:18,800 --> 00:31:20,920 Speaker 1: Are they kind of peeled off from the pandemic or 614 00:31:20,960 --> 00:31:21,680 Speaker 1: how is volume? 615 00:31:22,480 --> 00:31:24,640 Speaker 12: Yeah, so you know, we're coming off those highs that 616 00:31:24,680 --> 00:31:27,120 Speaker 12: we reached during the pandemic when everyone was sitting at 617 00:31:27,120 --> 00:31:30,040 Speaker 12: home and ordering toilet paper online or at least trying 618 00:31:30,040 --> 00:31:31,720 Speaker 12: to get some toilet paper online. 619 00:31:32,200 --> 00:31:35,280 Speaker 11: You know, we're back to a more normalized level. 620 00:31:35,520 --> 00:31:38,440 Speaker 12: You know, the reality is what the pandemic has done, 621 00:31:38,520 --> 00:31:41,880 Speaker 12: is it really increased that e commerce penetration. Kind of 622 00:31:41,880 --> 00:31:45,240 Speaker 12: brought the penetration forward by three to five years, which is. 623 00:31:45,160 --> 00:31:46,120 Speaker 11: A net positive. 624 00:31:46,320 --> 00:31:47,840 Speaker 12: But you know, we have to go back to this 625 00:31:48,000 --> 00:31:51,760 Speaker 12: quote unquote normalization process, which feels like a negative, but 626 00:31:51,800 --> 00:31:55,040 Speaker 12: it's really not. Because once we get this space, which 627 00:31:55,040 --> 00:31:57,160 Speaker 12: I think we're building right now, you know, we should 628 00:31:57,200 --> 00:31:59,080 Speaker 12: see positive growth from. 629 00:31:58,960 --> 00:32:01,480 Speaker 3: Here on out O thanks to Lee Klaska, a Bloomberg 630 00:32:01,520 --> 00:32:04,040 Speaker 3: Intelligence senior Transport, Logistics and shipping analysts. 631 00:32:04,320 --> 00:32:06,040 Speaker 1: This week we took a look at the Big Take 632 00:32:06,200 --> 00:32:09,560 Speaker 1: story Huber's at Hurts doomed its massive bet on one 633 00:32:09,600 --> 00:32:12,920 Speaker 1: hundred thousand Teslas. It's about how two finance veterans bought 634 00:32:13,000 --> 00:32:14,840 Speaker 1: Hertz out of bankruptcy to save it. 635 00:32:15,000 --> 00:32:17,080 Speaker 3: The Big Take piece takes an inside look at how 636 00:32:17,120 --> 00:32:19,320 Speaker 3: their big idea to go all in on EV's and 637 00:32:19,360 --> 00:32:22,440 Speaker 3: Tesla went wrong in almost every way. We were joined 638 00:32:22,440 --> 00:32:25,280 Speaker 3: by Eric Shasker, Bloomberg New Economy editorial director, who co 639 00:32:25,360 --> 00:32:27,600 Speaker 3: wrote the Big Take piece, and we first asked Eric 640 00:32:27,640 --> 00:32:28,720 Speaker 3: for some context. 641 00:32:29,040 --> 00:32:34,320 Speaker 13: The experience of a Tesla owner is very different from 642 00:32:34,360 --> 00:32:38,239 Speaker 13: the experience of a Tesla renter, and going into this 643 00:32:38,280 --> 00:32:41,240 Speaker 13: big bet on one hundred thousand Tesla's they placed in 644 00:32:41,360 --> 00:32:43,640 Speaker 13: order for one hundred thousand Teslas. In fact, back in 645 00:32:43,640 --> 00:32:47,800 Speaker 13: twenty twenty one, the new owners at Hurtz didn't appreciate 646 00:32:47,880 --> 00:32:51,040 Speaker 13: that there were no data to be fair on what 647 00:32:51,080 --> 00:32:53,520 Speaker 13: it was like for our rental car company to have 648 00:32:53,640 --> 00:32:57,880 Speaker 13: evs in the fleet, because none did. Hertz was going 649 00:32:57,920 --> 00:33:00,479 Speaker 13: to be the first, and so they did look at 650 00:33:00,480 --> 00:33:05,280 Speaker 13: the data how to Tesla's perform when they're owned by individuals, 651 00:33:05,280 --> 00:33:08,120 Speaker 13: And generally speaking, Tesla's perform well. They don't require a 652 00:33:08,120 --> 00:33:12,240 Speaker 13: lot of maintenance. Obviously, refueling the car, so to speak, 653 00:33:13,080 --> 00:33:14,960 Speaker 13: is a matter of plugging it in. But if it's 654 00:33:14,960 --> 00:33:17,480 Speaker 13: your Tesla, it probably sits in your garage, or it 655 00:33:17,520 --> 00:33:19,480 Speaker 13: sits in your driveway, or maybe if you live in 656 00:33:19,520 --> 00:33:22,440 Speaker 13: a city like New York, it's at a parking garage 657 00:33:22,480 --> 00:33:25,520 Speaker 13: and you've had a charger put in. That's all fine, 658 00:33:25,560 --> 00:33:27,360 Speaker 13: and these people tend not to get into a lot 659 00:33:27,400 --> 00:33:30,680 Speaker 13: of accidents, and they don't have range anxiety because they 660 00:33:30,760 --> 00:33:33,800 Speaker 13: own the car, they made the decision to buy it. 661 00:33:33,800 --> 00:33:38,720 Speaker 13: It's a totally different story when you get off of 662 00:33:38,760 --> 00:33:44,000 Speaker 13: a Red Eye flight and stroll up to the Hertz 663 00:33:44,040 --> 00:33:47,520 Speaker 13: counter and are told that no, I'm sorry, the car 664 00:33:47,600 --> 00:33:50,680 Speaker 13: you reserved is not available, but we're giving you a Tesla. 665 00:33:51,720 --> 00:33:53,800 Speaker 13: If you've never been behind the wheel of an EV 666 00:33:54,560 --> 00:33:56,400 Speaker 13: it can be a terrifying experience. 667 00:33:56,440 --> 00:33:56,920 Speaker 9: You don't know. 668 00:33:57,000 --> 00:33:58,960 Speaker 13: You don't want to have to find a charger in 669 00:33:59,000 --> 00:34:02,400 Speaker 13: the wild. You don't know what this instantaneous breaking is like. 670 00:34:02,600 --> 00:34:03,480 Speaker 4: Turn the car. 671 00:34:03,840 --> 00:34:07,560 Speaker 13: You don't realize that it has rocket like acceleration, and 672 00:34:07,640 --> 00:34:10,600 Speaker 13: as a result, Hurts with its Tesla fleet, started running 673 00:34:10,640 --> 00:34:14,160 Speaker 13: into all kinds of problems. They were crashing and it's 674 00:34:14,239 --> 00:34:17,480 Speaker 13: very expensive to repair a Tesla. In many cases they 675 00:34:17,520 --> 00:34:21,640 Speaker 13: have to be junked because insurance companies are worried about 676 00:34:21,640 --> 00:34:22,600 Speaker 13: the damage that might have. 677 00:34:22,560 --> 00:34:24,000 Speaker 9: Occurred to the battery. 678 00:34:24,080 --> 00:34:27,240 Speaker 13: People didn't want to rent them, so the demand wasn't there, 679 00:34:27,719 --> 00:34:30,239 Speaker 13: And then of course Elon Musk cut Tesla prices by 680 00:34:30,320 --> 00:34:33,560 Speaker 13: thirty percent and kind of blew a hole into Hurts's 681 00:34:33,600 --> 00:34:34,239 Speaker 13: balance sheet. 682 00:34:34,320 --> 00:34:38,359 Speaker 1: Economic mod How did Hurts get into this position, It's 683 00:34:38,400 --> 00:34:39,200 Speaker 1: a good question. 684 00:34:39,360 --> 00:34:42,720 Speaker 13: This was a rental car company, the only major rental 685 00:34:42,760 --> 00:34:45,840 Speaker 13: car company that went bankrupt in the early days of 686 00:34:45,840 --> 00:34:46,320 Speaker 13: the pandemic. 687 00:34:46,360 --> 00:34:48,719 Speaker 6: I'm a gold circle member of Hurts. By the way, 688 00:34:48,920 --> 00:34:50,560 Speaker 6: I just strolled right up to my car, John. 689 00:34:50,680 --> 00:34:55,680 Speaker 13: Some people have very good experiences with Hertz, including Paul Sweeney. Evidently, 690 00:34:56,680 --> 00:34:59,400 Speaker 13: so Hurts went bankrupt. It was bought at a bankruptcy 691 00:34:59,400 --> 00:35:02,839 Speaker 13: in June one by two professional investors. 692 00:35:02,880 --> 00:35:05,760 Speaker 9: Tom Wagner runs Nighthead Capital and. 693 00:35:06,000 --> 00:35:10,319 Speaker 13: Greg O'Hara is the founding partner at Satari's Management. They 694 00:35:10,400 --> 00:35:12,800 Speaker 13: raised a billion and a half dollar fund. They wanted 695 00:35:12,800 --> 00:35:16,160 Speaker 13: to find travel and leisure companies that had been crushed 696 00:35:16,200 --> 00:35:19,840 Speaker 13: by the pandemic, but of course which in theory would 697 00:35:19,880 --> 00:35:22,600 Speaker 13: soar once the economy reopened, and Hurts seemed like a 698 00:35:22,600 --> 00:35:26,480 Speaker 13: great candidate. And actually that part of the thesis played 699 00:35:26,480 --> 00:35:30,000 Speaker 13: out perfectly once the economy reopened. In fact, before the 700 00:35:30,040 --> 00:35:33,480 Speaker 13: economy reopened, when people realized getting into a car and 701 00:35:33,560 --> 00:35:36,280 Speaker 13: driving somewhere doesn't put me at risk of COVID at all, 702 00:35:36,760 --> 00:35:41,160 Speaker 13: demand for rentals went sky high, and so coming out 703 00:35:41,320 --> 00:35:44,840 Speaker 13: of this acquisition from bankruptcy, Hurts was crushing it. But 704 00:35:44,880 --> 00:35:48,799 Speaker 13: they had a transformational plan to turn it into a 705 00:35:48,960 --> 00:35:53,479 Speaker 13: largely electrified rental car company, and that's where everything went 706 00:35:54,080 --> 00:35:57,680 Speaker 13: pear shaped. I talked about it, the demand, the damage, 707 00:35:57,840 --> 00:36:02,120 Speaker 13: the price cuts, and we say it's a tale of hubris, 708 00:36:02,160 --> 00:36:04,920 Speaker 13: because in many respects it is. 709 00:36:05,000 --> 00:36:06,319 Speaker 9: Of course, everything looks clear. 710 00:36:06,320 --> 00:36:09,920 Speaker 13: In hindsight, it did sound like an incredibly good idea 711 00:36:09,960 --> 00:36:12,239 Speaker 13: of the time, and I think for the sake of 712 00:36:12,280 --> 00:36:15,040 Speaker 13: the planet, it would be nice if you could electrify 713 00:36:15,280 --> 00:36:20,320 Speaker 13: a rental car company and save you know, the environment 714 00:36:20,400 --> 00:36:23,320 Speaker 13: from all the gasoline that gets poured into rental cars. 715 00:36:23,840 --> 00:36:29,000 Speaker 13: But it just doesn't work in practice, and whether it's arrogance, 716 00:36:29,080 --> 00:36:32,480 Speaker 13: whether it's hubris, whether it's blind optimism, it could be 717 00:36:32,520 --> 00:36:35,120 Speaker 13: a combination of all those three. These new owners, these 718 00:36:35,160 --> 00:36:37,719 Speaker 13: professional investors, one who runs a hedge fund, the other 719 00:36:37,760 --> 00:36:40,799 Speaker 13: who runs a private equity firm, thought that they had 720 00:36:40,840 --> 00:36:43,759 Speaker 13: an answer for this industry that the industry itself had 721 00:36:43,800 --> 00:36:45,080 Speaker 13: ignored for years. 722 00:36:46,320 --> 00:36:48,960 Speaker 9: And the truth of the matter is running any company in. 723 00:36:49,200 --> 00:36:54,279 Speaker 13: The industry is tough, right, requires some experience maybe, And. 724 00:36:54,239 --> 00:36:56,080 Speaker 3: The funny thing is, well, not for them, but is 725 00:36:56,120 --> 00:36:58,840 Speaker 3: that they could be right just either a little earlier, 726 00:36:58,880 --> 00:37:00,680 Speaker 3: a little late, depending on how you look at it. 727 00:37:00,760 --> 00:37:03,080 Speaker 13: Like you know, whenever we talk about it early right, 728 00:37:03,360 --> 00:37:06,000 Speaker 13: it's the broken clock thing, right, broken clock is right 729 00:37:06,080 --> 00:37:07,040 Speaker 13: two times a day. 730 00:37:07,080 --> 00:37:08,799 Speaker 9: And the case of being early. 731 00:37:10,640 --> 00:37:12,279 Speaker 1: I thought it was a great strategy when I first 732 00:37:12,440 --> 00:37:15,839 Speaker 1: heard it. Just sound to hit so many buttons there. 733 00:37:16,200 --> 00:37:17,600 Speaker 1: But I guess it kind of goes to the bigger 734 00:37:17,680 --> 00:37:20,359 Speaker 1: question which we asked the auto industry have we seen 735 00:37:20,440 --> 00:37:21,880 Speaker 1: peak interest in evs? 736 00:37:21,960 --> 00:37:23,640 Speaker 3: But this is why I found the article so interesting, 737 00:37:23,680 --> 00:37:25,480 Speaker 3: because there were things that I didn't think about, in 738 00:37:25,520 --> 00:37:28,360 Speaker 3: that they don't have dealerships, right, they don't have a 739 00:37:28,400 --> 00:37:31,040 Speaker 3: relationship with dealerships. So like when my super retire gets, 740 00:37:31,160 --> 00:37:33,279 Speaker 3: you know, messed up, I did just drive it in 741 00:37:33,320 --> 00:37:35,120 Speaker 3: and then they fix it and then we drive out. 742 00:37:35,200 --> 00:37:35,640 Speaker 3: Kind of thing. 743 00:37:35,880 --> 00:37:37,480 Speaker 4: You can't do that with a Tesla. 744 00:37:37,560 --> 00:37:40,040 Speaker 3: I never thought of that. For example, I never thought 745 00:37:40,080 --> 00:37:41,440 Speaker 3: of how difficult it would be to all of a 746 00:37:41,440 --> 00:37:43,360 Speaker 3: sudden get off a plane and go sit in a Tesla. 747 00:37:43,560 --> 00:37:46,040 Speaker 3: It's weird enough getting in the morning to a Tesla 748 00:37:46,080 --> 00:37:47,799 Speaker 3: and getting in the back seat. I can't imagine just 749 00:37:47,800 --> 00:37:49,759 Speaker 3: being shoved into the front seat and having to drive 750 00:37:49,800 --> 00:37:51,920 Speaker 3: it at the same time. And these little details I 751 00:37:51,960 --> 00:37:53,400 Speaker 3: found to be very provocative. 752 00:37:53,800 --> 00:37:57,239 Speaker 13: Well, they are, as you say, something of an indication 753 00:37:57,360 --> 00:38:00,360 Speaker 13: as to why demand for EV's right now is slowing. 754 00:38:00,520 --> 00:38:00,880 Speaker 9: Hurts. 755 00:38:02,120 --> 00:38:04,040 Speaker 13: You know, we can play on the fact that it 756 00:38:04,080 --> 00:38:07,480 Speaker 13: even has yellows. Part of its logo was the canary 757 00:38:07,480 --> 00:38:10,759 Speaker 13: in the coal mine for the EV industry. True what 758 00:38:10,880 --> 00:38:13,279 Speaker 13: began to happen it hurts is what the rest of 759 00:38:13,320 --> 00:38:15,560 Speaker 13: the industry is beginning to wake up to that all 760 00:38:15,600 --> 00:38:18,000 Speaker 13: of the evs that are being cranked out right now 761 00:38:18,160 --> 00:38:22,399 Speaker 13: may not have a natural buyer because people aren't enough 762 00:38:22,520 --> 00:38:26,160 Speaker 13: chargers out there. People haven't gotten over this idea that 763 00:38:26,200 --> 00:38:27,960 Speaker 13: it's a different driving experience. 764 00:38:28,120 --> 00:38:29,399 Speaker 9: People, as we all know. 765 00:38:29,480 --> 00:38:34,239 Speaker 13: Are very personal about their cars. Right, It's an extension 766 00:38:34,800 --> 00:38:39,360 Speaker 13: of themselves. And you don't want your arm to feel 767 00:38:39,360 --> 00:38:41,480 Speaker 13: like it doesn't belong on your body, and that's in 768 00:38:41,520 --> 00:38:44,760 Speaker 13: some respects how people feel about getting behind the wheel 769 00:38:44,760 --> 00:38:45,040 Speaker 13: of an. 770 00:38:44,920 --> 00:38:45,920 Speaker 9: EV all Right. 771 00:38:45,920 --> 00:38:48,800 Speaker 3: Thanks Eric Shasker, Bloomberg New Economy Editorial Director. 772 00:38:49,239 --> 00:38:53,759 Speaker 2: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, 773 00:38:53,960 --> 00:38:56,880 Speaker 2: and anywhere else you will get your podcasts. Listen live 774 00:38:56,960 --> 00:38:59,920 Speaker 2: each weekday, ten am to noon Eastern on Bloomberg Dot, 775 00:39:00,680 --> 00:39:04,080 Speaker 2: the iHeartRadio app, tune In, and the Bloomberg Business app. 776 00:39:04,200 --> 00:39:07,200 Speaker 2: You can also watch us live every weekday on YouTube 777 00:39:07,400 --> 00:39:09,280 Speaker 2: and always on the Bloomberg terminal.