WEBVTT - Anthropic Finalizing $15 Billion Pre-IPO Credit Facility 

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<v Speaker 5>There is going to be a lot of attention on

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<v Speaker 5>the tech space. Always is the march to highly anticipated

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<v Speaker 5>initial public offerings for both Anthropic and OpenAI continues. Who's

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<v Speaker 5>going to blink first? Who's going to get on the

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<v Speaker 5>initial public offering going forward? Let's bring in Bailey Lipschultz

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<v Speaker 5>to talk more about this because there has been some

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<v Speaker 5>news as far as Anthropic's upcoming IPO is concerned. Bailey

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<v Speaker 5>is a senior equities reporter for Bloomberg News. Nice to

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<v Speaker 5>see you once again, Bailey. So the news is that

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<v Speaker 5>Anthropic is set to expand its revolving credit facility from

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<v Speaker 5>a target of $ 10 billion to $ 15 billion. Why is

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<v Speaker 5>this important ahead of the.

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<v Speaker 3>IPO?

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<v Speaker 2>It's important because... It shows that this IPO is going

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<v Speaker 2>to happen sooner than later. And it's also important because

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<v Speaker 2>as we broke out last night, not only is it

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<v Speaker 2>a very large revolving credit facility, as you had mentioned,

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<v Speaker 2>they'd been targeting $ 10 billion. We put that out last month.

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<v Speaker 2>When you compare it to SpaceX's, it's larger than what

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<v Speaker 2>they had, which was $ 5 billion before their IPO. So

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<v Speaker 2>three times as large.

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<v Speaker 1>So that's a big deal. It's also a big deal because.

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<v Speaker 2>Now you're getting a lay of the land of what

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<v Speaker 2>the IPO mandates should be. So this deal was led

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<v Speaker 2>by Morgan Stanley, Goldman Sachs, JP Morgan, Citigroup had key

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<v Speaker 2>roles in it. Barclays and Wells Fargo also had key

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<v Speaker 2>roles in it. So that's notable if you're at those

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<v Speaker 2>banks or you have relationships with those banks from an

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<v Speaker 2>IPO perspective. And as we broke out, it kind of

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<v Speaker 2>expands in the so-called second line, B of A, Deutsche Bank, RBC,

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<v Speaker 2>and UBS. And again, that does matter because now people

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<v Speaker 2>can kind of get a sense where their sales relationships

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<v Speaker 2>are going to pay off if they're trying to get

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<v Speaker 2>a piece of this IPO. And also from those banks,

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<v Speaker 2>it's a big step for what will be a potentially

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<v Speaker 2>record-setting fee event from their ECM desk. So again, this was,

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<v Speaker 2>as we reported last night, being finalized, probably is finalized

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<v Speaker 2>by now since ECM. It's about noon on Friday, and

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<v Speaker 2>that sets the table really for this offering.

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<v Speaker 5>The memories are still fresh of the competition, the touting

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<v Speaker 5>around the SpaceX IPO. There were mock-up rockets in the

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<v Speaker 5>lobbies of Goldman Sachs and Morgan Stanley with the banners.

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<v Speaker 5>I mean, talk about the anticipation going into Anthropic here,

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<v Speaker 5>potentially the first of the big chatbot startups to go public.

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<v Speaker 2>No, there's a lot of excitement. And you referenced those

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<v Speaker 2>spaceships that we saw. And I remember going through Morgan

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<v Speaker 2>Stanley's offices and kind of laughing because it's just huge.

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<v Speaker 2>And it seemed like a beauty pageant as opposed to

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<v Speaker 2>the normal, like, welcome to X company sign. It's like

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<v Speaker 2>a three foot by three foot sign. This was an

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<v Speaker 2>entire branding event. And we saw that promotion from Goldman

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<v Speaker 2>Sachs that they were lead left. And Morgan Stanley saying, oh, well,

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<v Speaker 2>we're stabilization agent, which means something if you are in

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<v Speaker 2>the IPO world, but for the rest of the world

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<v Speaker 2>really means nothing. This is highly anticipated, Nathan, because again,

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<v Speaker 2>to your point, the first relative to the other LLMs,

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<v Speaker 2>namely OpenAI, and again, why it matters is the scale

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<v Speaker 2>of growth that we've seen and reported on this company,

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<v Speaker 2>and we'll see when they publicly file, where you're talking

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<v Speaker 2>about ARR, as much as that can be debated, over

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<v Speaker 2>$ 65 billion. There aren't many companies in the world that

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<v Speaker 2>really generate that kind of growth when you look at

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<v Speaker 2>where Anthropic was three months ago, a year ago. And

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<v Speaker 2>so there's so much excitement, so much of anticipation around

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<v Speaker 2>what the valuation target will be, what the ultimate filings

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<v Speaker 2>even will show, and how people can kind of position

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<v Speaker 2>around what, again, is going to be another likely record-setting

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<v Speaker 2>event when it seems like just a few months ago

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<v Speaker 2>we were only talking about SpaceX and how that is

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<v Speaker 2>going to impact the entire market.

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<v Speaker 5>Yeah, so many zeros behind these IPO numbers, potentially. And

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<v Speaker 5>at the same time, you know, Anthropic has been butting

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<v Speaker 5>heads with the federal government. We just talked with Commerce

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<v Speaker 5>Secretary Howard Lutnick saying that Anthropic's found religion since then. And,

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<v Speaker 5>you know, hearing from OpenAI CEO Sam Altman as well,

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<v Speaker 5>talking about the potential PR issues that artificial intelligence has

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<v Speaker 5>as well. Maybe they need to sell the benefits of

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<v Speaker 5>AI a little better to the public as opposed to investors.

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<v Speaker 5>How does that potentially affect an IPO?

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<v Speaker 2>Well, I think it's a big discussion. And obviously, we

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<v Speaker 2>saw this with a number of companies, depending on the industry,

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<v Speaker 2>sometimes under scrutiny, other times under scrutiny. kind of riding

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<v Speaker 2>the high of what the administration maybe is pushing forward.

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<v Speaker 2>And I think it'll be an interesting discussion when we

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<v Speaker 2>do see them formally on the road. So something that'll

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<v Speaker 2>probably take place, call it late September, maybe into early October,

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<v Speaker 2>where they're able to really craft the narrative. Because right now,

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<v Speaker 2>so much of these conversations are happening behind closed doors

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<v Speaker 2>and it's about positioning when they're ultimately on the road.

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<v Speaker 2>And when we do see IPOs being priced, what does

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<v Speaker 2>that bring from some of the members of Congress hypothetically?

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<v Speaker 2>And what does it ultimately mean for individual investors to Again,

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<v Speaker 2>it kind of goes back to the debate of Wall

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<v Speaker 2>Street isn't emblematic of the rest of the nation. Same

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<v Speaker 2>thing with D.C. So it'll be interesting to see how

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<v Speaker 2>these different themes can be kind of either put against

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<v Speaker 2>each other or layered over one another.

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<v Speaker 1>Stay with us. More from Bloomberg Intelligence coming up after this.

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<v Speaker 4>You're listening to the Bloomberg Intelligence Podcast. Catch us live

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<v Speaker 4>weekdays at 10 a.m. Eastern on Apple CarPlay and Android

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<v Speaker 4>Auto with the Bloomberg Business app. Listen on demand wherever

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<v Speaker 4>you get your podcasts or watch us live on YouTube.

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<v Speaker 5>All right. Well, let's move on to one of the

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<v Speaker 5>big stock stories that we're watching this morning. That would

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<v Speaker 5>be Adobe. The creative software maker reports earnings next week

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<v Speaker 5>before the inflation data come out. But We also saw

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<v Speaker 5>a long-awaited leadership change that now has that stock down

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<v Speaker 5>nearly 7%. Let's bring in Anurag Rana to talk more

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<v Speaker 5>about what's going on with Adobe. Anurag is Senior Tech

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<v Speaker 5>Analyst for Bloomberg Intelligence. Great to speak with you, Anurag.

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<v Speaker 5>Of course, we've been waiting for this announcement for quite

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<v Speaker 5>some time here, and it looks like maybe there's a

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<v Speaker 5>sense that one of the contenders for Shantar Narayan's job

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<v Speaker 5>is may have been passed over with Anil Chakravarty, the

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<v Speaker 5>marketing analytics software guy, getting the nod. What do you

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<v Speaker 5>make of the decision here and the stock reaction?

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<v Speaker 6>So you go back and let me see the history

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<v Speaker 6>of Adobe of what's happened in the last two years.

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<v Speaker 6>This is the poster child of a software company being,

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<v Speaker 6>you know, hurt by free AI tools. Now that hasn't happened,

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<v Speaker 6>but the market obviously has written it off that Adobe

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<v Speaker 6>is going to be one of the casualties of new

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<v Speaker 6>AI models. And that's the reason we think Shantanu decided

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<v Speaker 6>to step down and, you know, move on and appoint

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<v Speaker 6>a new CEO. Now, the two contenders that we have is,

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<v Speaker 6>as you mentioned, it was David Valdwani on one side

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<v Speaker 6>and it was Anil Chakraborty on the other side. Now,

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<v Speaker 6>Anil runs the smaller of the bigger two divisions of Adobe,

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<v Speaker 6>and the division is not Creative Cloud, the one where

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<v Speaker 6>we have the most of the disruption. It's just like

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<v Speaker 6>what happens in a particular boardroom. One of them got

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<v Speaker 6>the job and the other one didn't. I think all

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<v Speaker 6>of us or a lot of us in the market

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<v Speaker 6>thought that the executive that was running the Creative Cloud

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<v Speaker 6>portfolio would get it because that's where the disruption risk is. Now,

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<v Speaker 6>it's very much likely when the board looked at everything,

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<v Speaker 6>you know, Anil has experience of running a public or

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<v Speaker 6>a big, large company before. He was the CEO of

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<v Speaker 6>Informatica before he came over to Adobe. So that could

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<v Speaker 6>have been reasons or some other reason. But I think

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<v Speaker 6>there is a little bit of disappointment with investors. Now,

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<v Speaker 6>you know, I would also want to mention that it's

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<v Speaker 6>possible that somebody was expecting somebody from outside to come in.

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<v Speaker 6>Maybe that's the reason. But one of the other things

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<v Speaker 6>is that the stocks actually had a 35%, 40% run previously.

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<v Speaker 6>from its lows over the last few months, ever since

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<v Speaker 6>we have seen kind of a reversal between the semi

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<v Speaker 6>and the software trade. So this could be another sellout

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<v Speaker 6>because of that. So there are multiple factors here.

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<v Speaker 3>Okay.

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<v Speaker 7>Anirag, what is Adobe in the AI world in terms

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<v Speaker 7>of their business?

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<v Speaker 6>So, so far, we have not seen any deterioration in

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<v Speaker 6>their fundamentals because of free AI tools. Now, that is

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<v Speaker 6>going to happen really in our view on the lower

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<v Speaker 6>end of it. So if there is somebody on the

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<v Speaker 6>lower end, let's say if I was using their Lightroom,

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<v Speaker 6>which is $ 9. 99 a month for a period of 12 months,

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<v Speaker 6>I may decide, you know what, the Google tools are

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<v Speaker 6>free enough and that's good. But so far, what we

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<v Speaker 6>have not seen is serious photographers, seriously creative people are

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<v Speaker 6>abandoning Adobe's tools and going out for free tools. So

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<v Speaker 6>that's the first thing. What Adobe has done to counter

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<v Speaker 6>this threat is it has its own AI tools that

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<v Speaker 6>people can use. And then as they use a lot

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<v Speaker 6>of it, they can move on to the higher subscription

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<v Speaker 6>package where they can do Creative Cloud. You can store

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<v Speaker 6>that document. You can do a lot more with it

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<v Speaker 6>on the cloud. So there are elements of usage for

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<v Speaker 6>them using AI tools themselves that they are really pushing aggressively.

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<v Speaker 6>And we will see how that shapes up over the

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<v Speaker 6>next couple of years.

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<v Speaker 1>Stay with us. More from Bloomberg Intelligence coming up after this.

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<v Speaker 4>You're listening to the Bloomberg Intelligence Podcast. Catch us live

0:09:54.530 --> 0:09:57.570
<v Speaker 4>weekdays at 10 a.m. Eastern on Apple CarPlay and Android

0:09:57.630 --> 0:10:00.920
<v Speaker 4>Auto with the Bloomberg Business App. Listen on demand wherever

0:10:00.960 --> 0:10:04.060
<v Speaker 4>you get your podcasts or watch us live on YouTube.

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<v Speaker 5>You are listening to Bloomberg Intelligence. Paul Sweeney is taking

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<v Speaker 5>a much deserved long Labor Day weekend off. Scarlett Fu

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<v Speaker 5>is going to be back shortly. So it's me, Nathan

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<v Speaker 5>Hager in Washington. along with Caroline Hepker taking you through

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<v Speaker 5>the rest of the hour. And Caroline, I'm not going

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<v Speaker 5>to ask you what you wear at the gym. That

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<v Speaker 5>would be inappropriate. But it seems like a number of

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<v Speaker 5>consumers or not enough consumers are taking Lululemon with them

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<v Speaker 5>to the yoga mats. The Athleisure company, the Yoga Wear company,

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<v Speaker 5>has cut its full year outlook for the second straight quarter.

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<v Speaker 5>Shares right now down more than 17%. That's actually off

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<v Speaker 5>session lows. Tough job ahead on this Jobs Friday for

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<v Speaker 5>incoming CEO Heidi O'Neill to turn this company around. Let's

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<v Speaker 5>bring in Poonam Goyal to talk more about this. Poonam,

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<v Speaker 5>the senior U.S. e-commerce and retail analyst for Bloomberg Intelligence,

0:11:03.320 --> 0:11:08.020
<v Speaker 5>who covers this company so ably quarter to quarter. Poonam,

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<v Speaker 5>The struggle continues to be real at Lululemon. What's it

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<v Speaker 5>going to take to turn this company around?

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<v Speaker 3>It's going to take a lot of work, and it's

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<v Speaker 3>not a guaranteed turnaround. As Heidi steps in next week,

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<v Speaker 3>there's a lot to fix here, starting with product, innovation, traffic,

0:11:28.620 --> 0:11:33.020
<v Speaker 3>brand heat, and getting the customer the right assortment. So

0:11:33.160 --> 0:11:36.790
<v Speaker 3>there's a lot of moving pieces. She also has some

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<v Speaker 3>holes to fill in terms of her executive team because

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<v Speaker 3>there were some recent departures. So a lot of moving pieces.

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<v Speaker 3>I don't see how this will happen immediately. I'm skeptical

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<v Speaker 3>that it will happen in the next six months and

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<v Speaker 3>we'll have to see what plan she puts forward. She

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<v Speaker 3>is a product person, right? She comes from Nike, but

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<v Speaker 3>Nike and Lululemon are very different yet alike. So we'll

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<v Speaker 3>have to see what she has plans for, but it

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<v Speaker 3>will not be an easy climb. Yeah.

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<v Speaker 7>Lululemon's shares dropping to an eight year low. I just

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<v Speaker 7>had to look up the cost of those famous yoga

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<v Speaker 7>pants between 88 bucks and 128 bucks. Oh, is that all?

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<v Speaker 7>And there's a lot of competition. And in Europe, you know,

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<v Speaker 7>where I sit most of the time, Adidas and Nike,

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<v Speaker 7>they've seen this kind of cycle also of trying to

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<v Speaker 7>grab the consumer, having the zeitgeist.

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<v Speaker 3>What does it take?

0:12:35.400 --> 0:12:38.209
<v Speaker 7>I mean, I was looking at the tennis this week.

0:12:38.350 --> 0:12:40.830
<v Speaker 7>It was all about, you know, have the right shoe,

0:12:40.910 --> 0:12:46.650
<v Speaker 7>the right fashion. Is actually at leisure high fashion now?

0:12:48.080 --> 0:12:51.540
<v Speaker 3>So there's a few things that you have to look at. One, yes, absolutely,

0:12:51.600 --> 0:12:53.480
<v Speaker 3>you have to get the right performance. So when you

0:12:53.500 --> 0:12:56.340
<v Speaker 3>think about yoga wear and you think about performance wear,

0:12:56.660 --> 0:12:58.520
<v Speaker 3>there's two ways to look at it. When you're looking

0:12:58.580 --> 0:13:02.580
<v Speaker 3>at it for women specifically, it's about performance, it's about fit,

0:13:02.760 --> 0:13:05.100
<v Speaker 3>and it's about style. All three of them need to

0:13:05.140 --> 0:13:08.500
<v Speaker 3>come together. And they did for Lululemon several years ago.

0:13:08.970 --> 0:13:13.770
<v Speaker 3>That's not the case today. Nike and Adidas, largely male-dominated brands,

0:13:14.070 --> 0:13:17.770
<v Speaker 3>are also now... making a much bigger push into women's.

0:13:18.330 --> 0:13:21.410
<v Speaker 3>And they have done a good job, but they focus

0:13:21.470 --> 0:13:26.260
<v Speaker 3>on performance first. Nike Skims was its first attempt to

0:13:26.300 --> 0:13:30.500
<v Speaker 3>really focus on the fashion per se cycle of yoga

0:13:30.540 --> 0:13:33.230
<v Speaker 3>wear or athletic wear, as you call it. And I

0:13:33.270 --> 0:13:37.130
<v Speaker 3>think the competition is just getting deeper and smarter. And

0:13:37.670 --> 0:13:41.270
<v Speaker 3>It's harder to differentiate between product today than it was

0:13:41.290 --> 0:13:44.780
<v Speaker 3>a long time ago. The other thing is people want

0:13:44.860 --> 0:13:48.400
<v Speaker 3>things that aren't stuck to them, right? So the away

0:13:48.480 --> 0:13:52.540
<v Speaker 3>from body trend is rising and it's not big enough

0:13:52.620 --> 0:13:57.339
<v Speaker 3>to offset what had been the legging trend. So there's

0:13:57.520 --> 0:14:00.210
<v Speaker 3>a lot of moving pieces here. And I think it's

0:14:00.250 --> 0:14:04.570
<v Speaker 3>a combination of macro micro that's really driving the shortfall.

0:14:05.880 --> 0:14:07.680
<v Speaker 5>It gets to one of the issues that I think

0:14:07.780 --> 0:14:10.060
<v Speaker 5>a lot of consumers, maybe a lot of investors had

0:14:10.200 --> 0:14:13.760
<v Speaker 5>about Lululemon over the last couple of years, the see-through

0:14:13.920 --> 0:14:18.090
<v Speaker 5>leggings issue. Has Lululemon gotten past that? And if not,

0:14:18.350 --> 0:14:19.010
<v Speaker 5>how can it?

0:14:20.110 --> 0:14:22.450
<v Speaker 3>Yeah, it's definitely moved past that. And you're talking about

0:14:22.490 --> 0:14:25.410
<v Speaker 3>the Align leggings and when they were see-through several years ago,

0:14:25.830 --> 0:14:28.650
<v Speaker 3>they moved past that. We saw that in the results

0:14:28.690 --> 0:14:31.910
<v Speaker 3>with double-digit gains for several years past that. That's not

0:14:31.930 --> 0:14:35.570
<v Speaker 3>the issue today. The issue is how is Lululemon better

0:14:35.850 --> 0:14:37.910
<v Speaker 3>than what's out there? And I don't have an answer

0:14:37.950 --> 0:14:40.130
<v Speaker 3>for that. I don't think they are. So how did

0:14:40.150 --> 0:14:42.730
<v Speaker 3>they get better? And that's what Heidi has to answer.

0:14:42.890 --> 0:14:45.450
<v Speaker 3>What is she going to fix? And are customers going

0:14:45.510 --> 0:14:50.290
<v Speaker 3>to come back with that same enthusiasm? When you walk

0:14:50.340 --> 0:14:52.520
<v Speaker 3>the mall several years ago, and this is when malls

0:14:52.560 --> 0:14:55.739
<v Speaker 3>were kind of falling and traffic was weak, the two

0:14:55.800 --> 0:14:58.800
<v Speaker 3>stores that were always crowded, or three stores, I should say,

0:14:58.840 --> 0:15:01.420
<v Speaker 3>in the mall whenever I went, was the Apple store,

0:15:01.980 --> 0:15:06.960
<v Speaker 3>the Sephora store, and the Lululemon store. Today, Sephora's still crowded,

0:15:07.140 --> 0:15:09.960
<v Speaker 3>Apple's still crowded, but Lululemon is not. So how do

0:15:09.980 --> 0:15:10.500
<v Speaker 3>we fix that?

0:15:10.850 --> 0:15:11.660
<v Speaker 6>Yeah.

0:15:11.730 --> 0:15:14.690
<v Speaker 7>Well, I was in all of those stores in Manhattan

0:15:14.730 --> 0:15:18.670
<v Speaker 7>this week. This is nuts. And I was also in

0:15:18.710 --> 0:15:21.410
<v Speaker 7>the Nike store, in fact, and saw the skims, the

0:15:21.450 --> 0:15:23.989
<v Speaker 7>kind of... And it was interesting. They are still in

0:15:24.030 --> 0:15:28.630
<v Speaker 7>the kind of skin-tight... mold, aren't they? And sort of

0:15:28.650 --> 0:15:32.650
<v Speaker 7>high fashion, very bright colors. Anyway, what about the global business?

0:15:32.710 --> 0:15:36.080
<v Speaker 7>What about China for Lululemon? I mean, China is surely

0:15:36.140 --> 0:15:40.220
<v Speaker 7>massively important for so many US businesses. It's been tough there.

0:15:41.440 --> 0:15:45.420
<v Speaker 3>It is absolutely important for Lululemon and everyone else. So

0:15:45.540 --> 0:15:49.160
<v Speaker 3>a 4% increase in China, not what anyone had expected,

0:15:49.480 --> 0:15:52.750
<v Speaker 3>down in constant currency. They're blaming it on the Tmall

0:15:52.810 --> 0:15:55.860
<v Speaker 3>promotions that they had and the comparisons with that. They

0:15:55.900 --> 0:15:59.270
<v Speaker 3>do expect China to accelerate and so do we on

0:15:59.310 --> 0:16:02.550
<v Speaker 3>the heels of following that promotion and not having the compares.

0:16:03.070 --> 0:16:05.230
<v Speaker 3>But that said, it's not accelerating as it was. So

0:16:05.270 --> 0:16:08.300
<v Speaker 3>there is some slowdown there. And I wonder if the

0:16:08.340 --> 0:16:11.860
<v Speaker 3>slowdown is to blame on just the carryover from North

0:16:11.900 --> 0:16:15.690
<v Speaker 3>America where the product isn't good enough. And we also

0:16:15.730 --> 0:16:18.750
<v Speaker 3>have to remember that there's another thing happening in athleisure, right?

0:16:19.350 --> 0:16:21.390
<v Speaker 3>And this is something that we haven't talked about as much,

0:16:21.430 --> 0:16:24.550
<v Speaker 3>but it's the GLP-1s. So as more and more consumers

0:16:24.610 --> 0:16:28.960
<v Speaker 3>are taking GLP-1s, they're not going to the gym as much, right?

0:16:29.040 --> 0:16:31.520
<v Speaker 3>They're not exercising as much. So does that mean that

0:16:31.540 --> 0:16:37.750
<v Speaker 3>they need fewer athleisure wardrobes? And that's just something that

0:16:37.770 --> 0:16:40.100
<v Speaker 3>we're looking at very early on. But that could be

0:16:40.380 --> 0:16:43.800
<v Speaker 3>a very small part of just the shortfall that we've

0:16:43.840 --> 0:16:46.240
<v Speaker 3>seen in athleisure, not just at Little Lemon, but broadly.

0:16:46.870 --> 0:16:49.710
<v Speaker 1>Stay with us. More from Bloomberg Intelligence coming up after this.

0:16:53.830 --> 0:16:57.550
<v Speaker 4>You're listening to the Bloomberg Intelligence Podcast. Catch us live

0:16:57.610 --> 0:17:00.650
<v Speaker 4>weekdays at 10 a.m. Eastern on Apple CarPlay and Android

0:17:00.710 --> 0:17:04.010
<v Speaker 4>Auto with the Bloomberg Business App. Listen on demand wherever

0:17:04.050 --> 0:17:07.120
<v Speaker 4>you get your podcasts or watch us live on YouTube.

0:17:08.550 --> 0:17:11.170
<v Speaker 7>I want to talk about a major story out of Europe.

0:17:11.210 --> 0:17:16.440
<v Speaker 7>This is VW slashing jobs, Volkswagen, the board backing a

0:17:16.500 --> 0:17:22.260
<v Speaker 7>sweeping restructuring. How is it really going to play out, though?

0:17:22.359 --> 0:17:26.020
<v Speaker 7>Where are those jobs cuts going to come? Craig Trudell

0:17:26.080 --> 0:17:30.220
<v Speaker 7>is Bloomberg's Managing Editor of Global Business Coverage. Really lovely

0:17:30.260 --> 0:17:32.820
<v Speaker 7>to have you on the program. So this is the

0:17:32.859 --> 0:17:36.040
<v Speaker 7>big question, isn't it? It's thousands of job cuts, but

0:17:36.100 --> 0:17:38.270
<v Speaker 7>are they really going to happen in Germany or is

0:17:38.330 --> 0:17:39.900
<v Speaker 7>it going to be outside of Germany?

0:17:40.140 --> 0:17:43.270
<v Speaker 8>That is sort of the perpetual question with Volkswagen. And

0:17:43.330 --> 0:17:47.629
<v Speaker 8>it's long been a well-established fact that this is a

0:17:47.670 --> 0:17:50.670
<v Speaker 8>company that has way more employees than any other major

0:17:50.869 --> 0:17:54.949
<v Speaker 8>auto manufacturer. And that so many of those employees are

0:17:55.010 --> 0:17:58.780
<v Speaker 8>concentrated in Germany. And that sort of perpetuates in part

0:17:58.840 --> 0:18:02.030
<v Speaker 8>because you have a situation where the Works Council and

0:18:02.050 --> 0:18:05.230
<v Speaker 8>the German state of Lower Saxony have this very powerful

0:18:06.210 --> 0:18:10.409
<v Speaker 8>labor political alliance and that sort of adds up to

0:18:10.450 --> 0:18:15.340
<v Speaker 8>this exercising of unique sort of veto over management when

0:18:15.359 --> 0:18:19.280
<v Speaker 8>they do choose to act, which we're seeing Oliver Bluma,

0:18:19.440 --> 0:18:22.750
<v Speaker 8>the current CEO, at least making yet another attempt.

0:18:24.190 --> 0:18:26.979
<v Speaker 5>Of course, this company has been at the center of

0:18:27.040 --> 0:18:31.540
<v Speaker 5>the automotive industry, arguably throughout Europe for decades in a

0:18:31.600 --> 0:18:35.360
<v Speaker 5>country that's the economic powerhouse of Europe. To have this

0:18:35.440 --> 0:18:39.030
<v Speaker 5>kind of retrenchment now, this slim down, what does it

0:18:39.140 --> 0:18:42.850
<v Speaker 5>say about the overall automotive industry in Europe, Craig?

0:18:43.490 --> 0:18:46.550
<v Speaker 8>I think the big thing that's sort of hanging over

0:18:46.609 --> 0:18:49.910
<v Speaker 8>everybody's heads in Europe at the moment is just the

0:18:50.070 --> 0:18:54.439
<v Speaker 8>sort of unending rise of the Chinese manufacturers. You've already

0:18:54.520 --> 0:18:58.140
<v Speaker 8>had a situation where this is an extremely crowded market.

0:18:59.700 --> 0:19:03.500
<v Speaker 8>Decades ago with the Japanese companies, the Toyotas and Hondas

0:19:03.540 --> 0:19:07.790
<v Speaker 8>and Nissans moving in, and the Koreans following suit, you've

0:19:07.810 --> 0:19:13.869
<v Speaker 8>had Chinese companies like BYD, like Geely come in quickly.

0:19:13.890 --> 0:19:17.530
<v Speaker 8>There was some pushback with an attempt to try and

0:19:17.790 --> 0:19:22.050
<v Speaker 8>tariff electric vehicles, but that was a fairly narrow application

0:19:22.290 --> 0:19:26.129
<v Speaker 8>of higher duties. And what you've seen those manufacturers do

0:19:26.280 --> 0:19:28.739
<v Speaker 8>in response to that is say, OK, we won't come

0:19:28.780 --> 0:19:31.040
<v Speaker 8>in with fully electric vehicles. We'll come in with plug-in

0:19:31.060 --> 0:19:34.980
<v Speaker 8>hybrid vehicles that aren't subject to those tariffs. And so

0:19:35.020 --> 0:19:39.100
<v Speaker 8>it's a sort of one-two punch of you're not achieving

0:19:39.119 --> 0:19:43.930
<v Speaker 8>your environmental goals and you're not being effective in really

0:19:43.970 --> 0:19:45.890
<v Speaker 8>keeping those manufacturers at bay.

0:19:46.210 --> 0:19:48.929
<v Speaker 7>Yeah, look at Cherry's J.Coup. I mean, they're everywhere on

0:19:48.950 --> 0:19:52.700
<v Speaker 7>the streets of London, aren't they? In a remarkably short

0:19:52.740 --> 0:19:56.459
<v Speaker 7>space of time. And they're also a very affordable price

0:19:56.540 --> 0:20:02.920
<v Speaker 7>point for consumers. What is VW's car makeup looking like now?

0:20:02.980 --> 0:20:05.359
<v Speaker 7>Because the other thing that we have to layer into

0:20:05.400 --> 0:20:08.010
<v Speaker 7>this are the regulations in the EU and the UK.

0:20:08.680 --> 0:20:11.810
<v Speaker 7>looking to phase out the sale of petrol and diesel

0:20:12.030 --> 0:20:15.570
<v Speaker 7>only vehicles. There's a bit of a wrangle about when

0:20:15.590 --> 0:20:16.590
<v Speaker 7>they're going to do it.

0:20:16.990 --> 0:20:20.250
<v Speaker 8>Absolutely. I think that's part of another sort of aspect

0:20:20.310 --> 0:20:24.600
<v Speaker 8>of how and why we get to this place of

0:20:24.619 --> 0:20:27.740
<v Speaker 8>this company having so many employees and so much layers.

0:20:27.920 --> 0:20:33.200
<v Speaker 8>You haven't necessarily seen the really sort of difficult, painful

0:20:33.320 --> 0:20:36.500
<v Speaker 8>cuts that you would need to make to do away

0:20:36.580 --> 0:20:40.780
<v Speaker 8>with the combustion engine aspects of the business. And meanwhile,

0:20:40.820 --> 0:20:44.400
<v Speaker 8>you've had all of this addition of attempts to stand

0:20:44.500 --> 0:20:48.900
<v Speaker 8>up a battery division within the company, software as well.

0:20:49.840 --> 0:20:52.900
<v Speaker 8>And despite the fact that you've seen failures on both

0:20:52.920 --> 0:20:56.129
<v Speaker 8>of those fronts, you haven't necessarily seen and ability on

0:20:56.150 --> 0:20:59.270
<v Speaker 8>this company to be able to sort of address the

0:20:59.310 --> 0:21:01.770
<v Speaker 8>fact that they've kind of swung and miss. And so

0:21:01.810 --> 0:21:05.550
<v Speaker 8>you have a lot of employees at divisions like Cariad,

0:21:05.590 --> 0:21:09.210
<v Speaker 8>which is on the software side, but also the sales

0:21:09.260 --> 0:21:11.840
<v Speaker 8>business that has a lot of staff and yet not

0:21:12.160 --> 0:21:14.780
<v Speaker 8>much to show for it in terms of output or

0:21:14.920 --> 0:21:16.399
<v Speaker 8>things actually going into these vehicles.

0:21:17.500 --> 0:21:21.090
<v Speaker 5>You know, there is, as Caroline mentioned, that push away

0:21:21.420 --> 0:21:26.410
<v Speaker 5>from gasoline-powered vehicles toward electrics. It's almost the opposite side

0:21:26.450 --> 0:21:30.790
<v Speaker 5>of the coin in this country. I've been thinking about

0:21:30.930 --> 0:21:34.990
<v Speaker 5>the difficulty that the ID.Buzz, a car that I was

0:21:35.030 --> 0:21:38.350
<v Speaker 5>really looking forward to test driving, has had in this

0:21:38.430 --> 0:21:41.070
<v Speaker 5>country gaining traction here. Talk a little bit about the

0:21:41.109 --> 0:21:45.030
<v Speaker 5>challenge in the U.S. for VW when it comes to

0:21:45.600 --> 0:21:47.300
<v Speaker 5>what drivers in this country are looking for.

0:21:47.320 --> 0:21:48.919
<v Speaker 7>Are you going to have to tell me what the

0:21:48.940 --> 0:21:53.520
<v Speaker 7>vehicle is? Yeah.

0:21:53.920 --> 0:21:57.280
<v Speaker 1>So, so I think it's the old VW bus, VW bus. Yeah.

0:21:57.400 --> 0:21:58.080
<v Speaker 3>Yeah.

0:21:58.140 --> 0:22:00.980
<v Speaker 8>Came to market and it looked really neat, but the

0:22:01.050 --> 0:22:05.270
<v Speaker 8>range was, was pretty disappointing. They had an embarrassing recall

0:22:05.310 --> 0:22:07.510
<v Speaker 8>right off the bat, having to do with like seatbelts

0:22:07.590 --> 0:22:10.530
<v Speaker 8>that didn't go far enough across the back seats, which seemed,

0:22:10.550 --> 0:22:13.290
<v Speaker 8>you know, really hard to believe that, that a manufacturer

0:22:13.310 --> 0:22:17.960
<v Speaker 8>could get that so wrong. But absolutely, I think Volkswagen

0:22:17.980 --> 0:22:20.540
<v Speaker 8>is far from alone, I should say, in really having

0:22:20.940 --> 0:22:25.840
<v Speaker 8>a very difficult time with keeping straight what does the U.S.

0:22:25.980 --> 0:22:31.470
<v Speaker 8>want in terms of regulation, because we couldn't have had

0:22:31.510 --> 0:22:35.250
<v Speaker 8>a more extreme swing from Trump 1 to Trump. where

0:22:35.270 --> 0:22:39.270
<v Speaker 8>he was slashing fuel economy rules to Biden, who put

0:22:39.330 --> 0:22:43.770
<v Speaker 8>in place the Inflation Reduction Act, really wanted manufacturers to

0:22:44.030 --> 0:22:49.300
<v Speaker 8>go sort of no holds barred and 50-50 electric and combustion.

0:22:49.710 --> 0:22:52.020
<v Speaker 8>Now we're going all the way back to, and then

0:22:52.040 --> 0:22:55.520
<v Speaker 8>some actually, to just completely eviscerating the rules. And it's

0:22:55.580 --> 0:22:57.699
<v Speaker 8>really hard to keep up with that as a manufacturer

0:22:57.720 --> 0:23:02.380
<v Speaker 8>that operates over, makes these product decisions with the next

0:23:02.460 --> 0:23:03.160
<v Speaker 8>decade in mind.

0:23:03.880 --> 0:23:08.690
<v Speaker 4>This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

0:23:08.850 --> 0:23:12.750
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0:23:12.750 --> 0:23:18.050
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0:23:18.190 --> 0:23:21.379
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0:23:21.500 --> 0:23:25.620
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