WEBVTT - Apple iPhone, Boeing Troubles, EV Charging 0:00:02.920 --> 0:00:11.799 Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Intelligence 0:00:11.840 --> 0:00:13.600 with Alex steel and Paul Sweeney. 0:00:13.720 --> 0:00:16.919 The real app performance has been the US corporate high yield. 0:00:17.079 --> 0:00:19.480 Are the companies lean enough? Have they trimmed all the fats? 0:00:19.520 --> 0:00:23.320 The semiconductor business is a really cyclical business. 0:00:22.800 --> 0:00:26.400 Breaking market headlines and corporate news from across the globe. 0:00:26.440 --> 0:00:29.080 Do investors like the M and A that we've seen? 0:00:29.280 --> 0:00:32.360 These are two big time blue chip companies. 0:00:32.520 --> 0:00:36.120 The window between the peak and cut changing super fast. 0:00:36.280 --> 0:00:40.880 Bloomberg Intelligence with Alex Steinel and Paul Sweeney on Bloomberg Radio. 0:00:42.240 --> 0:00:44.760 On Today's Bloomberg Intelligence Show, we dig inside the big 0:00:44.800 --> 0:00:47.519 business stories impacting Wall Street and the global markets. 0:00:47.600 --> 0:00:49.800 Each and every week we provide you in depth research 0:00:49.840 --> 0:00:51.720 and data on some of the two thousand companies and 0:00:51.760 --> 0:00:54.560 one hundred and thirty industries our analysts cover worldwide. 0:00:54.640 --> 0:00:56.960 Today, we'll look at how Boing seven three seven Max 0:00:57.040 --> 0:00:58.680 crisis is weighing on deliveries. 0:00:58.760 --> 0:01:00.840 Plus we'll talk about how many countries are building their 0:01:00.840 --> 0:01:03.440 own killer technology based on Iranian designs. 0:01:03.600 --> 0:01:06.399 But first we dive into big tech and Apple. We 0:01:06.480 --> 0:01:09.440 heard that Apple assembled fourteen billion dollars of iPhones in 0:01:09.440 --> 0:01:12.520 India for the last fiscal year, doubling its production. 0:01:12.720 --> 0:01:14.840 It's a sign that Apple is accelerating a push to 0:01:14.880 --> 0:01:17.600 diversify beyond China. So for more we were drawn by 0:01:17.640 --> 0:01:21.280 anirag Rana Bloomberg Intelligence technology analyst, and we asked Aniraq 0:01:21.360 --> 0:01:24.080 why Apple has been cutting its reliance on China. 0:01:24.120 --> 0:01:26.000 One of the things we have seen that over the 0:01:26.080 --> 0:01:28.720 last two and a half three years, Apple has been 0:01:28.760 --> 0:01:31.800 assembling its phone outside and you know, for us, the 0:01:31.840 --> 0:01:34.319 real reason for that is a couple of years ago, 0:01:34.400 --> 0:01:37.319 there was a COVID big issue in China. It had 0:01:37.319 --> 0:01:40.320 an impact on some of the phones coming out, that 0:01:40.360 --> 0:01:43.520 had an impact on sales and so forth. Now having 0:01:43.560 --> 0:01:47.080 said that, that was one reason. Second Apple, prior to 0:01:47.160 --> 0:01:49.840 the you know, you could say the COVID issue was 0:01:50.040 --> 0:01:54.760 completely dependent on China for all the assembly and their pots. 0:01:55.160 --> 0:01:57.360 Now what we are seeing is they are moving out 0:01:57.360 --> 0:02:01.200 of the assembly from China into other eights, mostly India. 0:02:01.600 --> 0:02:03.960 But one of the things I tell everybody at the 0:02:04.000 --> 0:02:07.040 same time, they still make most of the parts, so 0:02:07.080 --> 0:02:09.120 it's you know, if we ever get into a problem 0:02:09.120 --> 0:02:13.400 with China in terms of geopolitical issues, we still lean 0:02:13.480 --> 0:02:15.720 those parts to assemble the phone. It's not as if 0:02:15.919 --> 0:02:18.280 you know, those parts are available all over the world, 0:02:18.800 --> 0:02:19.240 an rag. 0:02:19.400 --> 0:02:22.639 I just wonder how you know investors in Apple view 0:02:22.680 --> 0:02:25.200 this China risk? Are they of the opinion I assume 0:02:25.200 --> 0:02:27.280 that if they own stock in the company there they 0:02:27.320 --> 0:02:29.440 have some level of comfort with the China risk here? 0:02:29.680 --> 0:02:31.680 Did they just believe it's hey, you know, it's kind 0:02:31.720 --> 0:02:35.320 of a mutually beneficial relationship Apple and China that at 0:02:35.360 --> 0:02:37.240 the end of the day, that's what's going to keep 0:02:37.320 --> 0:02:38.000 everything moving. 0:02:38.680 --> 0:02:41.440 Well, I've seen two people, I mean two different buckets. 0:02:41.440 --> 0:02:44.560 One is, people are extremely concerned about the US China 0:02:44.639 --> 0:02:47.640 relationship in the long run. They obviously have you know, 0:02:47.639 --> 0:02:50.639 they don't want to deal with Apple or any other 0:02:50.680 --> 0:02:53.760 companies that you know, fall into that bucket. But the 0:02:53.800 --> 0:02:56.160 others said, listen, this is spart and parcel of the 0:02:56.160 --> 0:03:00.200 global world chain, supply chains, and most manufacturing companies are 0:03:00.200 --> 0:03:02.880 dependent on China. Like it or not. They seem to 0:03:02.919 --> 0:03:07.639 be okay with it, you know from our side, you know, yes, absolutely. 0:03:07.720 --> 0:03:11.000 The biggest risk that Apple faces from a stock point 0:03:11.040 --> 0:03:12.960 of view, from a revenue point of view, from a 0:03:12.960 --> 0:03:15.840 supply chain point of view, is if something happens between 0:03:15.880 --> 0:03:18.000 the US and China, and we've talked about that quite 0:03:18.040 --> 0:03:20.640 a bit, but from a sales point of view, I 0:03:20.639 --> 0:03:23.040 think it is to me that's a bigger issue right 0:03:23.080 --> 0:03:27.200 now in the medium term, because China accounts for eighteen 0:03:27.200 --> 0:03:30.520 to twenty percent of total of Apple sale and frankly speaking, 0:03:30.760 --> 0:03:33.360 that is the big growth engine, and we have seen 0:03:33.440 --> 0:03:36.240 over the last twelve months of problems in that growth 0:03:36.240 --> 0:03:37.480 engine because of huahweh. 0:03:37.960 --> 0:03:41.000 How much do they make these phones for in India 0:03:41.160 --> 0:03:43.640 versus China versus other areas, and trying to get a 0:03:43.640 --> 0:03:45.640 sense of where the margins are and what they look like. 0:03:46.440 --> 0:03:48.920 That's a very good question. And frankly speaking, we thought 0:03:48.960 --> 0:03:51.720 when they started making more phones in India or we 0:03:51.800 --> 0:03:54.320 started seeing new phones coming out of that, that would 0:03:54.400 --> 0:03:56.560 have an impact on their gross margins. But they have 0:03:56.640 --> 0:03:59.320 managed it very well. And remember one of these things, 0:03:59.360 --> 0:04:01.960 it's the fact increase that they outsourced their stuff to 0:04:02.800 --> 0:04:05.520 and you know, it's kind of somebody else's headache. But 0:04:05.760 --> 0:04:07.680 in the end, you know, Apple will have to make 0:04:07.760 --> 0:04:11.440 some you could say, concessions. But at the same time, 0:04:11.560 --> 0:04:14.840 so far we have not seen any impact on Apple's 0:04:14.840 --> 0:04:17.400 gross margins. I mean surprisingly we have seen them you know, 0:04:17.440 --> 0:04:19.480 hold up very nicely over the last two years. 0:04:19.640 --> 0:04:22.479 Can you just kind of characterize a competitive landscape for 0:04:23.040 --> 0:04:27.240 Apple in China visa the Huawei and other phones here 0:04:27.279 --> 0:04:30.880 are they maintaining share, losing share, gaining share? How's Apple doing? 0:04:31.440 --> 0:04:31.520 So? 0:04:31.680 --> 0:04:34.520 Apple has not done the same number of sales as 0:04:34.560 --> 0:04:37.039 Wawe over the last twelve months. Now, there are two 0:04:37.040 --> 0:04:40.120 elements of it. One is the competitive landscape. People are 0:04:40.160 --> 0:04:43.280 choosing Chinese phone so over a foreign brand, So that's 0:04:43.320 --> 0:04:46.880 one aspect. The second aspect, which I'm hoping is probably 0:04:47.080 --> 0:04:49.400 you know correct in the long run for Apple's sake, 0:04:49.800 --> 0:04:52.080 is that Wahwei didn't have a very you know, brand 0:04:52.080 --> 0:04:54.440 new phone for several years, and this is their first 0:04:54.480 --> 0:04:57.440 big new refresh, which is why people who have been 0:04:57.800 --> 0:04:59.840 using Quawei phones in the past are going out and 0:05:00.000 --> 0:05:02.720 refreshing their phone at a much faster clip. So that 0:05:02.760 --> 0:05:06.279 could be the second reason Apple is it doesn't have 0:05:06.400 --> 0:05:09.560 that same you know I would say, I mean, the 0:05:09.560 --> 0:05:12.280 cache is still there. But typically what I would do 0:05:12.400 --> 0:05:14.480 is if I have an Apple phone, you know, I'm 0:05:14.520 --> 0:05:17.200 doing everything on it, you know, chat and the pictures. 0:05:17.240 --> 0:05:19.400 But in China, what happens is you do a whole 0:05:19.440 --> 0:05:23.200 lot of your transactions using the apps that you have 0:05:23.480 --> 0:05:26.200 or the super apps, and for that you can download 0:05:26.200 --> 0:05:29.040 those app in any ecosystem. So I would say, on 0:05:29.040 --> 0:05:31.360 a on a you know, competitive basis, you are less 0:05:31.400 --> 0:05:33.919 prone to be an Apple customer than you are in 0:05:33.960 --> 0:05:34.719 the Western world. 0:05:34.760 --> 0:05:37.440 Well that's interesting. So and then to that point, is 0:05:37.480 --> 0:05:40.200 that what the regulation or the penalties in the EU 0:05:40.240 --> 0:05:42.039 and the US is going to force Apple to do 0:05:42.120 --> 0:05:45.560 an essence, so it won't become that ecosystem in the 0:05:45.600 --> 0:05:46.080 same way. 0:05:47.160 --> 0:05:48.919 Well, there is no super app in the US that 0:05:49.040 --> 0:05:50.800 is very much like v chat. I mean you could 0:05:50.839 --> 0:05:52.760 you could say WhatsApp could be one of them. But 0:05:53.240 --> 0:05:55.720 frankly speaking, I mean Apple's done such a good job 0:05:55.800 --> 0:05:59.240 of uh you know, I would say, maintaining their customer 0:05:59.279 --> 0:06:02.880 base in the US and in Europe. That I mean, 0:06:03.000 --> 0:06:05.080 I don't I don't see that happening. That certainly a 0:06:05.120 --> 0:06:07.680 new app comes in and people start using that over 0:06:07.960 --> 0:06:10.000 what's going on with Apple or the habits that they 0:06:10.080 --> 0:06:10.720 have right now. 0:06:10.920 --> 0:06:12.600 So what's the next catalyst now for Apple? What are 0:06:12.600 --> 0:06:14.560 you looking at? Well, any catalyst I guess would. 0:06:14.320 --> 0:06:16.560 Be a big ate the tune I mean that's it's 0:06:16.640 --> 0:06:20.479 Tune's Worldwide Developers conference where they are supposed to talk 0:06:20.480 --> 0:06:23.560 about AI and what's a of Apple's AI strategy. That 0:06:23.720 --> 0:06:26.599 is the only thing that can actually put some fire 0:06:26.640 --> 0:06:28.880 in this because other than that, I mean, we don't 0:06:28.880 --> 0:06:31.640 see China bouncing back this year. We don't see any 0:06:31.680 --> 0:06:35.240 major new product announcement, and obviously Apple Vision pro is 0:06:35.279 --> 0:06:38.120 not going to drive the overall growth rate of the company. 0:06:38.360 --> 0:06:41.599 So it's the iPhone and if there is anything that's 0:06:41.600 --> 0:06:43.839 out there that can force Paul to go out and 0:06:43.880 --> 0:06:45.760 buy a new phone, I think that's going to drive 0:06:45.800 --> 0:06:46.440 the next cycle. 0:06:46.600 --> 0:06:50.240 Our Thanks to anor Ad Rana, Bloomberg Intelligence technology analyst. 0:06:50.320 --> 0:06:52.919 We next look at the Bloomberg Big Take story titled 0:06:52.960 --> 0:06:57.680 Iran's Better Stealthier Drones are remaking global warfare. It's about 0:06:57.680 --> 0:07:00.880 how countries from Central Asia to South America are building 0:07:00.920 --> 0:07:03.919 their own killer technology based on Iranian designs, and the 0:07:03.960 --> 0:07:06.400 tech often has US components. 0:07:06.680 --> 0:07:08.719 For more, we were joined by the story's co author 0:07:08.839 --> 0:07:12.840 Sheridan Prosso. She's a Bloomberg News senior investigations writer. We 0:07:12.960 --> 0:07:16.360 first asked Sheridan what she learned from her investigation process. 0:07:16.640 --> 0:07:19.600 We took a look at how US technology flows are 0:07:20.120 --> 0:07:23.720 going into Iran's drone program, and what we found is 0:07:24.040 --> 0:07:27.920 just an incredible proliferation of Iranian drones now spreading throughout 0:07:27.960 --> 0:07:30.920 the world in ways that surprised even me from when 0:07:30.920 --> 0:07:33.000 I first started looking into this. You know, we obviously 0:07:33.120 --> 0:07:37.200 know about Iran's drone proliferation in the Middle East contexts 0:07:37.320 --> 0:07:41.440 right through Syria, I Rock, including now into Yemen, and 0:07:41.480 --> 0:07:44.720 then in the Middle East, you know, conflict in Gaza 0:07:44.800 --> 0:07:48.400 now as well. We're seeing kind of use of Iranian 0:07:48.480 --> 0:07:52.440 drones in the periphery of that conflict as well. But 0:07:52.560 --> 0:07:55.080 what also was surprising to us we found is that, 0:07:55.360 --> 0:07:59.600 you know, Iranian drones are now being manufactured in Russia. 0:07:59.640 --> 0:08:03.840 There's a program for six thousand Iranian drones there that 0:08:04.160 --> 0:08:06.840 are starting to turn up now in the battlefields of Ukraine. 0:08:07.040 --> 0:08:10.560 They're increasing proliferation in places like Central Asia and in 0:08:10.600 --> 0:08:13.240 South America as well, So it really is quite an 0:08:13.440 --> 0:08:15.280 enormous spread around the world. 0:08:15.720 --> 0:08:18.600 How is the technology, How advanced is the technology is 0:08:18.640 --> 0:08:21.000 just a model airplane with a lawnmower engine on the 0:08:21.000 --> 0:08:23.000 back or are they going something further? 0:08:23.840 --> 0:08:28.440 It essentially is, and really it's fairly low tech. But 0:08:29.200 --> 0:08:33.280 what's been really successful about these programs is that they 0:08:33.280 --> 0:08:37.880 are increasingly developing them and learning from experiences on the battlefield, 0:08:37.880 --> 0:08:41.520 for example in Ukraine. So what is now believed to 0:08:41.520 --> 0:08:46.160 be the case is that Iran learned from the way 0:08:46.240 --> 0:08:49.400 that Iranian drones were now being able to get into 0:08:49.520 --> 0:08:52.400 Ukraine had increased their effectiveness in the Middle East context. 0:08:52.480 --> 0:08:55.679 So it's increasingly battlefield experience and more and more use 0:08:55.720 --> 0:08:59.240 of these drones that are allowing them to make more 0:08:59.440 --> 0:09:02.400 deadly str actually and in these conflicts we're seeing them, 0:09:02.559 --> 0:09:06.040 especially in the Red Sea. And also there was the 0:09:06.160 --> 0:09:10.520 particular case of the three servicemen who were killed in 0:09:10.640 --> 0:09:14.319 Jordan earlier this year. It was a fairly low tech 0:09:14.480 --> 0:09:16.920 small drone, but what it was able to do is 0:09:17.480 --> 0:09:20.280 we learned in the course of this reporting that it 0:09:20.320 --> 0:09:24.200 was kind of drafting in behind a US drone that 0:09:24.240 --> 0:09:25.959 was attempting to land at the same time. And those 0:09:26.040 --> 0:09:28.920 drafting techniques are something that they've been working on improving 0:09:29.440 --> 0:09:32.679 in the Russian and Ukrainian context. So this kind of 0:09:33.000 --> 0:09:37.760 learning growing, proliferating using low tech technology but actually improving 0:09:37.800 --> 0:09:39.920 its effectiveness is actually proving very deadly. 0:09:40.320 --> 0:09:41.400 What can we do about this. 0:09:41.880 --> 0:09:45.360 So the US has export controls where we try to 0:09:45.400 --> 0:09:49.360 stop US technology from going into these drones and into 0:09:49.400 --> 0:09:52.880 the manufacturing of these drones. The issue though, is that 0:09:53.600 --> 0:09:56.760 Iran in particular has become a master of circumventing over 0:09:56.840 --> 0:10:00.440 forty years of sanctions, there are very developed network where 0:10:00.480 --> 0:10:02.600 front companies from all over the world are able to 0:10:02.640 --> 0:10:05.800 acquire this low tech technology. A lot of our export 0:10:05.840 --> 0:10:08.360 controls are aimed at stopping sort of the higher end 0:10:08.400 --> 0:10:11.040 you know, chips now going to China for example, for 0:10:11.120 --> 0:10:14.560 their AI, but in fact the proliferation of kind of 0:10:14.679 --> 0:10:17.400 lower tech you know, you need like maybe a few 0:10:17.520 --> 0:10:20.560 hundred low tech chips, the kind that go into your 0:10:20.679 --> 0:10:25.280 you know, lawnmower or blender, any kind of regular household equipment. 0:10:25.400 --> 0:10:28.000 That low tech stuff is actually what's powering the drones 0:10:28.040 --> 0:10:30.600 as well. And a lot of that is just available. 0:10:30.679 --> 0:10:35.520 It's recycled from old products, it's available from suppliers in Asia. 0:10:35.760 --> 0:10:39.640 China in particular has not been willing to enforce our 0:10:39.840 --> 0:10:45.120 US export controls against Russia, for example, so there's actually 0:10:45.160 --> 0:10:47.880 a very big loophole, particularly in Asia, for US tech 0:10:47.920 --> 0:10:52.320 flowing now into Russia into I runs drone program in Russia. 0:10:52.480 --> 0:10:54.560 So there are a bunch of concerted efforts now to 0:10:54.600 --> 0:10:55.640 try to make that stop. 0:10:56.280 --> 0:10:59.600 Sheridan, do we know how effective these drones are. 0:11:00.160 --> 0:11:03.080 So they've been very deadly in particular instances. What we've 0:11:03.120 --> 0:11:06.559 seen is a halt to I forget the percentage, maybe 0:11:06.600 --> 0:11:09.320 more than fifty percent of shipping in the Red Sea 0:11:09.400 --> 0:11:12.439 has been halted by some drone attacks. In the past 0:11:12.440 --> 0:11:15.679 few months. We've saw the deadly attack in Lebanon and 0:11:15.720 --> 0:11:18.680 several other very effective drone strikes as well, and so 0:11:19.120 --> 0:11:23.120 it's really cause for alarm in Washington. You know, we're 0:11:23.160 --> 0:11:25.520 wondering how far this is going to go, how effective 0:11:26.040 --> 0:11:28.520 our efforts at stopping it are going to be. You know, 0:11:28.559 --> 0:11:32.680 we're considering kind of how do you actually get US 0:11:32.720 --> 0:11:35.400 companies to stop allowing their technology to go there. And 0:11:35.600 --> 0:11:38.840 the companies that we talk to, for example, Texas Instruments, 0:11:38.920 --> 0:11:42.440 Analog Devices, a lot of their staff at least eighty 0:11:42.480 --> 0:11:45.280 percent of the drones that are turning up in Ukraine 0:11:45.640 --> 0:11:49.000 or containing this US technology from in particularly these companies 0:11:49.280 --> 0:11:52.440 and a few others as well, how do you get 0:11:52.480 --> 0:11:56.600 that to stop and therefore decrease Iran's ability to proliferate 0:11:56.679 --> 0:11:58.360 and that's the biggest question. 0:11:58.240 --> 0:11:59.720 Right now, what did those companies say. 0:12:00.080 --> 0:12:03.360 The companies say that we buy by US export controls, 0:12:03.400 --> 0:12:06.600 we have our insisted our suppliers do so as well. 0:12:06.920 --> 0:12:09.120 The issue is that there's so many loopholes, and in 0:12:09.160 --> 0:12:12.840 particular Hong Kong is proving to be a very difficult place. 0:12:12.960 --> 0:12:15.679 It used to be maybe ten, twelve or fifteen years ago, 0:12:15.720 --> 0:12:18.360 we had much better relations with Hong Kong. They would 0:12:18.360 --> 0:12:21.640 have been a lot closer to Western interests. And now 0:12:21.720 --> 0:12:24.000 with the changes that have happened in Hong Kong in 0:12:24.040 --> 0:12:28.120 the last three four years, we have seen less willingness 0:12:28.120 --> 0:12:31.160 on the part of Hong Kong officials to actually enforce 0:12:31.520 --> 0:12:34.480 US export controls, particularly going towards Russia, and so we've 0:12:34.480 --> 0:12:39.360 seen a big uptick in proliferation from equipment going via 0:12:39.400 --> 0:12:42.720 Hong Kong into Russia, for example. It is much better 0:12:42.880 --> 0:12:46.000 though at enforcing UN sanctions against Iran, and so it 0:12:46.000 --> 0:12:48.120 has successfully stopped a lot of technology going to run. 0:12:48.160 --> 0:12:50.640 But still there are quite a few kind of leaks 0:12:50.679 --> 0:12:53.840 in the dam basically, so it's happening all around. 0:12:53.800 --> 0:12:57.400 Our Thanks to Sheridan Prosso Bloomberg News senior investigations writer. 0:12:57.760 --> 0:12:59.480 Coming up, we're going to break down my Boeing seven 0:12:59.559 --> 0:13:02.000 thirty seven Max crisis is weighing on deliveries. 0:13:02.200 --> 0:13:05.240 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:13:05.320 --> 0:13:07.440 depth research and data on two thousand companies and one 0:13:07.520 --> 0:13:10.520 hundred and thirty industries. You can access Bloomberg Intelligence via 0:13:10.600 --> 0:13:11.760 Bigo on the terminal. 0:13:11.920 --> 0:13:14.680 I'm Paul Sweeney and am Alex Steel, and this is Bloomberg. 0:13:17.920 --> 0:13:21.800 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:13:21.880 --> 0:13:25.240 weekdays at ten am Eastern on Applecarplay and enbroud Auto 0:13:25.320 --> 0:13:28.240 with the Bloomberg Business App. Listen on demand wherever you 0:13:28.320 --> 0:13:31.760 get your podcasts, or watch us live on YouTube. 0:13:32.840 --> 0:13:35.920 We move next to the aerospace industry and Boeing. This week, 0:13:35.960 --> 0:13:39.120 Boeing log the lowest deliveries in the first quarter since 0:13:39.160 --> 0:13:41.360 mid twenty twenty one, and it shows just how far 0:13:41.440 --> 0:13:43.840 the planemaker has to go on its road to recovery 0:13:44.000 --> 0:13:46.680 from a near catastrophic accident early in January. 0:13:47.080 --> 0:13:49.839 For more, we were joined by George ferguson Bloomberg Intelligence, 0:13:49.880 --> 0:13:53.720 senior Aerospace, Defense and Airlines analyst. We first asked George 0:13:53.760 --> 0:13:55.960 what the latest quarter means in terms of deliveries for 0:13:56.000 --> 0:13:57.319 Boeing going forward. 0:13:57.280 --> 0:13:58.599 For the year, I think this is going to be 0:13:58.640 --> 0:14:01.080 the bottom. So i'd expect this was the worst quarter. 0:14:01.559 --> 0:14:03.680 You know, the fa was in there doing their review 0:14:03.880 --> 0:14:06.720 of Boeing's manufacturing. Boeing's got to come up for a 0:14:06.720 --> 0:14:09.400 plan for the FAA. Imagine that takes some hands as well, 0:14:10.040 --> 0:14:13.400 and manufacturing probably isn't moving very fast while they're in 0:14:13.440 --> 0:14:16.880 the middle of this process of figuring out how to stabilize, 0:14:17.160 --> 0:14:20.480 you know, the production of the airplanes. And so I 0:14:20.480 --> 0:14:22.520 think for the year, this will be the worst quarter, 0:14:22.880 --> 0:14:25.480 and I would expect that things would get better second, third, 0:14:25.560 --> 0:14:26.720 and fourth into the end. 0:14:26.600 --> 0:14:27.000 Of the year. 0:14:27.120 --> 0:14:28.680 There's a couple of ways to break it down, so 0:14:28.760 --> 0:14:31.080 let's just take it maybe piece by piece. First of all, 0:14:31.120 --> 0:14:33.240 supply chain stuff that like Boeing will be a part 0:14:33.240 --> 0:14:35.240 of and Airbus will be a part of too, Like, 0:14:35.280 --> 0:14:38.440 how are the supply chain impacting their deliveries? 0:14:39.120 --> 0:14:41.840 Well, I mean, right now, I think the biggest problem 0:14:41.880 --> 0:14:43.800 is up at Boeing and not in the supply chain. 0:14:43.880 --> 0:14:46.240 So the supply chain stuff is fixed, No, not at all. 0:14:46.280 --> 0:14:48.560 So I meant for the number of deliveries we've seen 0:14:48.800 --> 0:14:52.080 this quarter and the constriction in that number of deliveries. 0:14:52.120 --> 0:14:54.320 This is all Boeing issue, right, This is all Boeing's 0:14:54.800 --> 0:14:59.320 FAA review, their manufacturing review. Their supply chain, I think 0:14:59.400 --> 0:15:02.040 is producing at at a higher rate than they are 0:15:02.120 --> 0:15:04.720 right now. So Spirit Aero Systems would be an important 0:15:04.760 --> 0:15:08.480 part of their supply chain. They're building somewhere around thirty 0:15:08.480 --> 0:15:11.400 eight or they were building around thirty eight seven thirty 0:15:11.400 --> 0:15:14.160 seven Maxes a month when we heard from them at 0:15:14.200 --> 0:15:15.800 the end of the year, you know, for their four 0:15:15.920 --> 0:15:19.720 Q earnings call. We understand from Spirit that their suppliers 0:15:20.120 --> 0:15:22.840 were even building at higher rates than them in some 0:15:22.920 --> 0:15:26.040 cases maybe even up at sort of forty two numbers. 0:15:26.440 --> 0:15:28.800 And they're already thinking about Spirit moving to a forty 0:15:28.840 --> 0:15:31.440 two number for the Max. Again we're talking Max, which 0:15:31.480 --> 0:15:34.680 is the highest volume airplane. They were talking about Spirit 0:15:34.720 --> 0:15:37.760 moving to a forty two number just prior to the 0:15:37.800 --> 0:15:41.560 Alaska door panel incident, and that's when everything sort of 0:15:41.600 --> 0:15:43.080 hit the skids. But I think most of it hit 0:15:43.120 --> 0:15:46.480 the skids up at Boeing, which has to do manage 0:15:46.480 --> 0:15:50.800 all the FAA, you know, inquiries and their manufacturing review. 0:15:51.240 --> 0:15:54.280 George, if I guess from the company I don't want 0:15:54.280 --> 0:15:57.560 to go too fast. I think, you know, I can't 0:15:57.560 --> 0:16:02.240 have any more mishaps here. Almost like if I'm an investor, 0:16:02.280 --> 0:16:03.800 I'm not sure I'm knocking on the door saying, hey, 0:16:03.840 --> 0:16:05.640 you guys can't get back to thirty eight or forty 0:16:06.000 --> 0:16:07.800 kind of do it when you can kind of thing. 0:16:08.000 --> 0:16:09.880 Yeah, I mean, do it when you can. But I 0:16:09.920 --> 0:16:12.520 mean in the long term interest of Boeing, they have 0:16:12.600 --> 0:16:15.760 to increase build rates here and that's going to drive 0:16:15.840 --> 0:16:18.560 better cash flow and better products. Okay, I mean, look, 0:16:18.560 --> 0:16:22.320 their competitor across the Atlantic, right, which has, by the way, 0:16:22.360 --> 0:16:24.840 has you know, final assembly facilities all around the world, 0:16:25.080 --> 0:16:26.760 including one in Mobile, Alabamas. 0:16:26.800 --> 0:16:28.880 Really Airbus has a thing in Mobile. 0:16:28.960 --> 0:16:32.160 Absolutely, wow, absolutely, I don't know so. But their competitor 0:16:32.360 --> 0:16:35.480 is operating up in the forty five range per month 0:16:35.520 --> 0:16:38.720 for their A three twenty, the major competitor. If Boeing 0:16:38.760 --> 0:16:41.920 wants to be in this business long term, they have 0:16:42.000 --> 0:16:44.840 to stabilize production. You're right, but they've got to stabilize 0:16:44.840 --> 0:16:47.200 it at much higher levels. Prior to the pandemic, they 0:16:47.200 --> 0:16:49.640 were going close to sixty a month for the seven 0:16:49.720 --> 0:16:52.680 thirty seven max. It can be done. Their job is 0:16:52.720 --> 0:16:53.880 to make sure it happens. 0:16:54.320 --> 0:16:56.400 So what's the timeline here? When do you think, like 0:16:56.520 --> 0:16:58.480 year end, where would you like to see them? 0:16:58.600 --> 0:17:01.280 So year end, what we've model the Bloomberg intelligence is 0:17:01.320 --> 0:17:04.160 we think Boeing will be building thirty eight seven thirty 0:17:04.200 --> 0:17:07.880 sevens a month by four Q, which should have been 0:17:07.920 --> 0:17:10.840 where they started this year out at thirty eight. We 0:17:10.880 --> 0:17:12.920 think they were looking to break to forty two by 0:17:12.920 --> 0:17:13.600 the end of the year. 0:17:13.920 --> 0:17:16.680 So do we ever get back to the sixty? Should 0:17:16.720 --> 0:17:17.760 they ever get back to the sixty? 0:17:17.880 --> 0:17:19.040 Well, I mean, if you again, if you look at 0:17:19.040 --> 0:17:22.080 their competitor, their competitor says they're shooting for seventy five 0:17:22.119 --> 0:17:24.480 a month on the A three twenty. So if their 0:17:24.520 --> 0:17:27.719 competitor is breaking to those kind of rates, when you 0:17:27.800 --> 0:17:30.679 break to higher rates on your primary narrow body, you 0:17:30.760 --> 0:17:33.399 have the opportunity to go out to your customers and 0:17:33.520 --> 0:17:36.399 non customers, people that might be upset at Boeing and 0:17:36.520 --> 0:17:39.439 sell more airplanes. Right So, right now, what we're seeing is, 0:17:39.880 --> 0:17:41.880 you know, United has expressed an interest in A three 0:17:41.920 --> 0:17:45.440 twenty One's airbus is sort of constricted again, They've got 0:17:45.480 --> 0:17:48.880 you know, the backlog is full. There's airlines that want 0:17:48.880 --> 0:17:51.560 all those deliveries for the next number of years. We've 0:17:51.600 --> 0:17:54.479 seen Jet Blue pop up and Spear Airlines pop up 0:17:54.480 --> 0:17:56.639 and say, hey, we might be willing to give up 0:17:56.640 --> 0:17:58.480 some of our airplanes. We think that's a function of 0:17:58.520 --> 0:18:01.600 Airbus going out to those customers saying we have another 0:18:01.880 --> 0:18:04.399 potential customer that would like a three twenty one's do 0:18:04.440 --> 0:18:06.560 you definitely want everything you've got in the books for 0:18:06.560 --> 0:18:07.399 the next couple of years. 0:18:07.720 --> 0:18:09.560 This might be a very silly question, but how do 0:18:09.680 --> 0:18:12.640 we get to the point where we got two airplane makers? 0:18:13.119 --> 0:18:14.240 And how does that make sense? 0:18:14.840 --> 0:18:19.360 This is not volume like automobiles, right, you sell right? 0:18:19.400 --> 0:18:21.080 I mean a good year in this business is what 0:18:21.440 --> 0:18:24.160 a little bit over one thousand airplanes a year? Right, 0:18:24.240 --> 0:18:28.320 So it's not necessarily an industry that would support five 0:18:28.480 --> 0:18:32.000 or six manufacturers with the right pricing and you know, 0:18:32.119 --> 0:18:34.200 in the right margins. And then you've got to put 0:18:34.240 --> 0:18:36.840 money into R and D and into development while you're 0:18:37.000 --> 0:18:38.520 you know, so you've got to earn a decent return 0:18:38.600 --> 0:18:41.520 so you can invest for the future. We did have 0:18:41.640 --> 0:18:43.760 more right in the US. We had Boeing, we had 0:18:43.800 --> 0:18:47.959 McDonald Douglas, Lockeed used to build a commercial aircraft, but 0:18:48.119 --> 0:18:50.760 you know, I think over time it's slimmed down to 0:18:50.840 --> 0:18:53.520 where you could make them profitable. And at the same time, 0:18:53.680 --> 0:18:56.879 airbus was growing in Europe because the Europeans wanted to 0:18:56.920 --> 0:18:59.080 be in this business. Right, This is a is a 0:18:59.119 --> 0:19:04.280 good margin, strong manufacturing kind of industry which really supports 0:19:04.320 --> 0:19:08.040 great jobs. They were rising and that meant some of 0:19:08.080 --> 0:19:11.240 the US manufacturers had to go away to create room 0:19:11.359 --> 0:19:14.119 for a European competitor. And what we have in the 0:19:14.119 --> 0:19:17.440 horizon someday, I think it's probably five or six years 0:19:17.440 --> 0:19:19.639 away at least, is the Chinese that want to be 0:19:19.680 --> 0:19:22.000 in the business. So either the pie has to grow 0:19:22.280 --> 0:19:27.760 even maybe fifty percent larger, or someone's got a dwindle 0:19:27.800 --> 0:19:29.000 in that whole thing, right. 0:19:28.920 --> 0:19:32.479 Our thanks to George ferguson Bloomberg Intelligence, Senior Aerospace, Defense 0:19:32.520 --> 0:19:35.639 and Airlines analyst on Bloomberg Intelligence Radio, we bring you 0:19:35.760 --> 0:19:37.800 all of the top analysts providing in depth research and 0:19:37.880 --> 0:19:40.440 data on two thousand companies and one hundred and thirty industries. 0:19:40.520 --> 0:19:42.639 We also have something here at Bloomberg called Bloomberg New 0:19:42.720 --> 0:19:45.000