1 00:00:02,920 --> 00:00:07,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:10,560 --> 00:00:14,400 Speaker 2: This is Bloomberg Intelligence with Alex Steinhl 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 --> 00:00:20,240 Speaker 3: Are the companies lean enough? Have they trimmed all the fats? 5 00:00:20,320 --> 00:00:23,880 Speaker 1: The semiconductor business is a really cyclical business. 6 00:00:23,600 --> 00:00:27,200 Speaker 2: Breaking market headlines and corporate news from across the globe. 7 00:00:27,240 --> 00:00:29,880 Speaker 3: Do investors like the M and A that we've seen? 8 00:00:30,080 --> 00:00:31,000 Speaker 4: These are two. 9 00:00:31,040 --> 00:00:33,159 Speaker 1: 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 Steinhl and Paul'sweenye on Bloomberg Radio. 12 00:00:43,400 --> 00:00:45,720 Speaker 1: On Today's Bloomberg Intelligence Show, we dig inside the big 13 00:00:45,720 --> 00:00:48,120 Speaker 1: business stories impacting Wall Street and the global markets. 14 00:00:48,320 --> 00:00:50,240 Speaker 3: Each and every week, we provide in depth research and 15 00:00:50,320 --> 00:00:52,080 Speaker 3: data on some of the two thousand companies and one 16 00:00:52,159 --> 00:00:54,800 Speaker 3: hundred and thirty industries our analysts cover worldwide. 17 00:00:54,840 --> 00:00:56,840 Speaker 1: Today, we'll look at a potential bank takeover that could 18 00:00:56,880 --> 00:00:58,320 Speaker 1: reshape Europe's banking landscape. 19 00:00:58,360 --> 00:01:01,200 Speaker 3: Plus we'll discuss why German automake are now sinking deeper 20 00:01:01,240 --> 00:01:03,000 Speaker 3: into an industry wide crisis. 21 00:01:03,280 --> 00:01:06,280 Speaker 1: For first, we dive into US politics, Vice President Kamala 22 00:01:06,280 --> 00:01:09,040 Speaker 1: Harris and former President Donald Trump are in a closely 23 00:01:09,080 --> 00:01:11,640 Speaker 1: contested race to be president, and we're now less than 24 00:01:11,680 --> 00:01:13,160 Speaker 1: two months away from election day. 25 00:01:13,319 --> 00:01:16,160 Speaker 3: Recently, Bloomberg Intelligence took another deep dive into the US 26 00:01:16,240 --> 00:01:19,279 Speaker 3: presidential election. The research looked at how a potential Harris 27 00:01:19,360 --> 00:01:22,360 Speaker 3: or Trump presidency could impact different sectors and policies in 28 00:01:22,400 --> 00:01:22,840 Speaker 3: the US. 29 00:01:23,000 --> 00:01:24,840 Speaker 1: For more on this, we were joined by Nathan Dean, 30 00:01:24,920 --> 00:01:27,040 Speaker 1: Bloomberg Intelligence Senior policy analyst. 31 00:01:27,280 --> 00:01:29,160 Speaker 3: We first asked Nathan to break down some of the 32 00:01:29,200 --> 00:01:31,440 Speaker 3: sectors that could be impacted after the US election. 33 00:01:31,880 --> 00:01:33,680 Speaker 5: In some of our key sectors to watch where we're 34 00:01:33,680 --> 00:01:36,360 Speaker 5: like renewables tied to the Inflation Reduction Act. There's a 35 00:01:36,400 --> 00:01:38,679 Speaker 5: lot of tax carrots, if you will, in there that 36 00:01:38,760 --> 00:01:41,600 Speaker 5: are spurring renewable investment, especially in cap backs and a 37 00:01:41,600 --> 00:01:44,560 Speaker 5: lot of up states. Others involved the banks, you know, 38 00:01:44,640 --> 00:01:47,000 Speaker 5: the Basel three end game, a proposal that would increase 39 00:01:47,040 --> 00:01:49,640 Speaker 5: capper requirements around nine percent for the investment banks. 40 00:01:49,640 --> 00:01:51,960 Speaker 6: If President Trump wins, that may not go forward. 41 00:01:52,200 --> 00:01:54,920 Speaker 5: Other things are global manufacturers due to the tax change's 42 00:01:55,080 --> 00:01:58,000 Speaker 5: healthcare there are twenty five billion dollars in Obamacare subsidies 43 00:01:58,160 --> 00:02:00,960 Speaker 5: that are up for renewal next year. Only big tech 44 00:02:01,320 --> 00:02:03,280 Speaker 5: you know, whether if you be Kamala Harris, wins, are 45 00:02:03,280 --> 00:02:06,240 Speaker 5: gonna have a continuation of the very stringent M and 46 00:02:06,280 --> 00:02:09,040 Speaker 5: a anti trust authority that the Biden era regulators are 47 00:02:09,040 --> 00:02:09,919 Speaker 5: putting on big tech. 48 00:02:10,080 --> 00:02:10,760 Speaker 6: But if JD. 49 00:02:10,840 --> 00:02:13,760 Speaker 5: Vance's idea of economic populism gets into the White House, 50 00:02:13,960 --> 00:02:15,720 Speaker 5: you could see a Republican president. 51 00:02:15,360 --> 00:02:18,079 Speaker 6: Also be very skeptical of big tech. So a lot 52 00:02:18,120 --> 00:02:19,519 Speaker 6: of what ifs, but a lot of. 53 00:02:19,400 --> 00:02:21,880 Speaker 5: You know, you know, scenarios in which those industries could 54 00:02:21,880 --> 00:02:22,720 Speaker 5: be heavily impacted. 55 00:02:22,880 --> 00:02:26,240 Speaker 1: You know, I listened to former President Trump's economic planeting 56 00:02:26,400 --> 00:02:29,480 Speaker 1: Economic Club of New York. I don't know hard time 57 00:02:29,480 --> 00:02:31,120 Speaker 1: making heads or tails out of it, but I guess 58 00:02:31,120 --> 00:02:34,160 Speaker 1: it was lower taxes, higher tariffs. Is that kind of 59 00:02:34,240 --> 00:02:37,760 Speaker 1: the basis of his economic I guess platform. 60 00:02:38,120 --> 00:02:38,360 Speaker 6: Yeah. 61 00:02:38,440 --> 00:02:41,520 Speaker 5: I think that's the really good point to point out, 62 00:02:41,560 --> 00:02:43,760 Speaker 5: because I think it's almost like a phase one, phase 63 00:02:43,760 --> 00:02:45,520 Speaker 5: two type of deal with President Trump. 64 00:02:45,560 --> 00:02:45,800 Speaker 6: Wins. 65 00:02:45,840 --> 00:02:48,080 Speaker 5: Phase one is tariffs. You know, this is something that 66 00:02:48,120 --> 00:02:49,639 Speaker 5: he can do. The power of the presidency is a 67 00:02:49,680 --> 00:02:52,400 Speaker 5: lot more powerful there, and so sorry the first half 68 00:02:52,440 --> 00:02:54,079 Speaker 5: of twenty twenty five, you could see a lot more 69 00:02:54,120 --> 00:02:54,760 Speaker 5: tariffs coming in. 70 00:02:54,840 --> 00:02:56,480 Speaker 6: Now. I would argue that a lot. 71 00:02:56,320 --> 00:02:59,200 Speaker 5: Of these tariffs are negotiation ploys. You know, if he 72 00:02:59,240 --> 00:03:01,320 Speaker 5: holds up an execut order and says I'm going to 73 00:03:01,400 --> 00:03:03,840 Speaker 5: sign a tariff, there's probably a language in that executive 74 00:03:03,880 --> 00:03:05,679 Speaker 5: order saying two hundred and seventy days from now, it 75 00:03:05,720 --> 00:03:08,320 Speaker 5: won't go into fruition until then, because you're gonna give 76 00:03:08,320 --> 00:03:11,320 Speaker 5: the opposite side multiple times to negotiate. But it's certainly 77 00:03:11,320 --> 00:03:13,160 Speaker 5: something that he's comfortable with and I think, you know, 78 00:03:13,320 --> 00:03:15,920 Speaker 5: would easily put out if he feels that it's necessary. 79 00:03:16,080 --> 00:03:18,000 Speaker 5: But then the tax reform debate is what's going to 80 00:03:18,040 --> 00:03:20,080 Speaker 5: come next, because at the end of twenty twenty five, 81 00:03:20,360 --> 00:03:23,720 Speaker 5: those Trump Ara tax cuts for individuals expire. Now President 82 00:03:23,760 --> 00:03:26,280 Speaker 5: Trump has said fifteen percent corporate tax rate. I'm not 83 00:03:26,280 --> 00:03:27,840 Speaker 5: sure he'll be able to get that. You know, he's 84 00:03:27,880 --> 00:03:29,519 Speaker 5: gonna have to negotiate. We've seen a little bit of 85 00:03:29,560 --> 00:03:32,480 Speaker 5: statements from House Republicans saying, yeah, maybe we should go 86 00:03:32,520 --> 00:03:35,160 Speaker 5: down to twenty or nineteen or eighteen percent. But being 87 00:03:35,200 --> 00:03:37,160 Speaker 5: able to pay for that fifteen percent it's going to 88 00:03:37,200 --> 00:03:40,240 Speaker 5: be somewhat difficult for these deficit hawks. So but you know, 89 00:03:40,280 --> 00:03:42,320 Speaker 5: there's a lot of provisions of the Trump are tax 90 00:03:42,360 --> 00:03:44,720 Speaker 5: cuts that have already expired for industry, and I think 91 00:03:44,760 --> 00:03:46,920 Speaker 5: President Trump is going to try and institute those though 92 00:03:47,040 --> 00:03:49,360 Speaker 5: at a large level, think Trump two point zero is 93 00:03:49,400 --> 00:03:51,240 Speaker 5: going to do another version of the same tax cut. 94 00:03:51,400 --> 00:03:54,840 Speaker 3: I literally remember having the exact same conversation in twenty fifteen, 95 00:03:54,920 --> 00:03:57,600 Speaker 3: twenty sixteen, like the phase to how you get it done, 96 00:03:58,240 --> 00:04:00,960 Speaker 3: et cetera. So what's an interesting to me, though, is 97 00:04:01,000 --> 00:04:04,280 Speaker 3: the lack of response though in say, high tax companies 98 00:04:04,760 --> 00:04:07,120 Speaker 3: versus low tax companies, like the things that would make 99 00:04:07,200 --> 00:04:10,560 Speaker 3: sense because those policies are so different, say on corporate taxes. 100 00:04:10,760 --> 00:04:13,080 Speaker 3: Are we seeing that reflected within market moves? 101 00:04:14,160 --> 00:04:14,360 Speaker 4: You know? 102 00:04:14,880 --> 00:04:16,840 Speaker 5: I think so, But you know a lot I've been 103 00:04:16,880 --> 00:04:19,159 Speaker 5: talking to a lot of investors over the last few weeks, 104 00:04:19,160 --> 00:04:21,160 Speaker 5: and a lot of folks come to me and they say, 105 00:04:21,480 --> 00:04:23,560 Speaker 5: we just really don't know what's going to happen on 106 00:04:23,640 --> 00:04:26,560 Speaker 5: tax until we know the makeup of Congress. And the 107 00:04:26,600 --> 00:04:29,080 Speaker 5: reason being is is that if President Trump wins but 108 00:04:29,160 --> 00:04:32,039 Speaker 5: the Democrats take the House, pretty much all of his 109 00:04:32,279 --> 00:04:36,440 Speaker 5: tax vision, if you will, is going to be curtailed, negotiated, 110 00:04:36,480 --> 00:04:38,719 Speaker 5: and a lot more restricted. Now, if he ends up 111 00:04:38,760 --> 00:04:41,440 Speaker 5: winning the House and the Senate, they can use reconciliation 112 00:04:41,520 --> 00:04:44,719 Speaker 5: to essentially bypass the Democrats, and they have a very 113 00:04:44,720 --> 00:04:47,159 Speaker 5: broad net that they can cast. So a lot of 114 00:04:47,200 --> 00:04:49,120 Speaker 5: people that I've been talking to you of saying, look, 115 00:04:49,160 --> 00:04:53,039 Speaker 5: we understand the Trump era desires and we understand that 116 00:04:53,120 --> 00:04:57,240 Speaker 5: these broads deficit inducing tax cuts potentially could be on 117 00:04:57,279 --> 00:04:59,920 Speaker 5: the horizon, but we're not excited about it. Just yes, 118 00:05:00,160 --> 00:05:01,919 Speaker 5: because we need to see how the House and Senate 119 00:05:02,000 --> 00:05:03,120 Speaker 5: races play out. 120 00:05:03,400 --> 00:05:07,360 Speaker 1: What is the thinking currently in Washington, Nathan about how 121 00:05:07,360 --> 00:05:08,880 Speaker 1: that will play out in Congress? 122 00:05:09,560 --> 00:05:11,320 Speaker 5: Well, look, I mean, you know, if you go to 123 00:05:11,320 --> 00:05:14,160 Speaker 5: the function on the terminal WSL election, you can see 124 00:05:14,160 --> 00:05:16,240 Speaker 5: all the data there. But I think you know when 125 00:05:16,279 --> 00:05:18,359 Speaker 5: it comes to the Senate, that's going to be somewhat 126 00:05:18,480 --> 00:05:20,719 Speaker 5: very difficult for the Democrats to control because right now 127 00:05:20,760 --> 00:05:22,880 Speaker 5: it's fifty one to forty nine. You're gonna lose West 128 00:05:22,960 --> 00:05:25,960 Speaker 5: Virginia because Senator Joe Manchin is retiring, So now you're 129 00:05:25,960 --> 00:05:28,080 Speaker 5: at a fifty fifty and the Democrats essentially have to 130 00:05:28,160 --> 00:05:30,679 Speaker 5: run the board just to keep that fifty to fifty. 131 00:05:30,760 --> 00:05:33,559 Speaker 5: Think of Senator Shery Brown in Ohio, Senator John Tester, 132 00:05:33,640 --> 00:05:36,880 Speaker 5: and Montana Senator Jackie Rose in Nevada. So assuming that 133 00:05:36,920 --> 00:05:39,479 Speaker 5: if the Democrats lose one, the Republicans are most likely 134 00:05:39,520 --> 00:05:41,880 Speaker 5: going to take the Senate. And if President Trump wins, 135 00:05:42,080 --> 00:05:44,200 Speaker 5: then obviously allow him the ability to put in. 136 00:05:44,200 --> 00:05:46,960 Speaker 6: Judges and his regulatory leadership when it comes to the House. 137 00:05:46,960 --> 00:05:48,279 Speaker 6: I've seen pulling up both sides. 138 00:05:48,320 --> 00:05:50,599 Speaker 5: But my general view, and this is just my personal view, 139 00:05:50,839 --> 00:05:52,880 Speaker 5: is that whoever wins the President also wins the House. 140 00:05:53,200 --> 00:05:56,159 Speaker 1: Our thanks to Nathan Dean, Bloomberg Intelligence Senior Policy Analyst. 141 00:05:56,520 --> 00:05:58,760 Speaker 3: We next take a look at the coffee chains Starbucks. 142 00:05:58,839 --> 00:06:02,120 Speaker 3: Starbucks CEO Brian Nicchol officially took office this week, and 143 00:06:02,200 --> 00:06:03,880 Speaker 3: expectations for him are high. 144 00:06:04,040 --> 00:06:06,720 Speaker 1: The company shares sort of eighteen percent after it named 145 00:06:06,800 --> 00:06:10,080 Speaker 1: Nicol CEO, and this comes after two consecutive quarters of 146 00:06:10,200 --> 00:06:13,200 Speaker 1: sales slumps. For more, we were joined by Michael Halen, 147 00:06:13,279 --> 00:06:15,920 Speaker 1: Bloomberg Intelligence Senior Restaurant and Food service centerals. 148 00:06:16,080 --> 00:06:18,360 Speaker 3: We first asked Michael just how long the market gives 149 00:06:18,440 --> 00:06:19,760 Speaker 3: Nicol before judging him. 150 00:06:20,160 --> 00:06:22,839 Speaker 7: It's tough to say, right, you know, I think really 151 00:06:23,520 --> 00:06:25,760 Speaker 7: it's going to take some time. You know, you don't 152 00:06:25,760 --> 00:06:28,120 Speaker 7: turn around an aircraft carrier on a dime, you know, 153 00:06:28,200 --> 00:06:31,680 Speaker 7: Starbucks is a behemoth of a company, so I think 154 00:06:31,720 --> 00:06:34,040 Speaker 7: the market gives him some time. He's got a phenomenal 155 00:06:34,080 --> 00:06:37,320 Speaker 7: track record, right what he's done at Taco Bell and 156 00:06:37,320 --> 00:06:41,240 Speaker 7: then Chipotle, obviously we're very impressive, you know, and he's 157 00:06:41,279 --> 00:06:43,719 Speaker 7: really you know, the first thing he's going to do, 158 00:06:43,760 --> 00:06:45,720 Speaker 7: I think is just try to change that culture, right, 159 00:06:45,760 --> 00:06:49,640 Speaker 7: bringing in a culture of transparency, accountability. He's going to 160 00:06:49,720 --> 00:06:53,720 Speaker 7: talk about hard work and compensating his employees for doing 161 00:06:53,760 --> 00:06:56,719 Speaker 7: a good job, because you know, those are some of 162 00:06:56,720 --> 00:07:00,479 Speaker 7: the things he talked about changing at Chipotle on his 163 00:07:00,560 --> 00:07:02,960 Speaker 7: first earnings call there. So you know, all that stuff's 164 00:07:02,960 --> 00:07:04,320 Speaker 7: going to take a little bit of time, and because 165 00:07:04,360 --> 00:07:07,239 Speaker 7: of his track record he'll get he'll get a pretty 166 00:07:07,240 --> 00:07:07,680 Speaker 7: long leash. 167 00:07:07,720 --> 00:07:10,560 Speaker 1: I think, what are the challenges facing this company? Because 168 00:07:10,680 --> 00:07:13,560 Speaker 1: just as a consumer, I mean the Starbucks and Route 169 00:07:13,560 --> 00:07:15,520 Speaker 1: thirty five in Wall Township, New Jersey, they do a 170 00:07:15,560 --> 00:07:18,320 Speaker 1: great job. People are great. It just works like a 171 00:07:18,400 --> 00:07:20,920 Speaker 1: charm stores in great shape. The one in Summit's good, 172 00:07:20,960 --> 00:07:23,120 Speaker 1: it's always packed. What do they need to do here? 173 00:07:23,200 --> 00:07:24,239 Speaker 1: I don't think anything's broken. 174 00:07:24,600 --> 00:07:26,720 Speaker 7: You know, it sounds like that location is doing pretty well. 175 00:07:26,720 --> 00:07:29,800 Speaker 7: But they have of thousands and thousands of locations across 176 00:07:29,840 --> 00:07:32,360 Speaker 7: the globe. I mean, you know, in the US, operations 177 00:07:32,440 --> 00:07:35,679 Speaker 7: is a big issue. You know, drink orders have become 178 00:07:35,720 --> 00:07:41,640 Speaker 7: more complicated. Digital orders have kind of changed the experience 179 00:07:41,680 --> 00:07:46,080 Speaker 7: for the in cafe customer, right, Like it was it 180 00:07:46,200 --> 00:07:49,480 Speaker 7: became popular because the briests new your name, right, and 181 00:07:50,280 --> 00:07:53,160 Speaker 7: the level of service was phenomenal for a chain of 182 00:07:53,200 --> 00:07:58,960 Speaker 7: that size, right, and through digital ordering and these very 183 00:07:59,000 --> 00:08:02,680 Speaker 7: complicated orders, you know, they've lost some of that, right, 184 00:08:02,760 --> 00:08:05,680 Speaker 7: and so so operations, you know, they're losing a lot 185 00:08:05,680 --> 00:08:07,640 Speaker 7: of orders because people are trying to place them on 186 00:08:07,680 --> 00:08:10,560 Speaker 7: the app and the wait times are are kind of 187 00:08:10,560 --> 00:08:15,000 Speaker 7: obnoxious at times, right, And so I think operations is 188 00:08:15,040 --> 00:08:19,000 Speaker 7: going to be his primary focus. Running the best cafes 189 00:08:19,080 --> 00:08:22,280 Speaker 7: possible is really going to be job number one. But 190 00:08:22,320 --> 00:08:24,880 Speaker 7: there's a bunch of different issues, you know, operations is 191 00:08:24,960 --> 00:08:28,480 Speaker 7: just one of them. Politics has been an issue, right. 192 00:08:28,960 --> 00:08:32,199 Speaker 7: Starbucks has always been a brand that kind of puts 193 00:08:32,240 --> 00:08:35,280 Speaker 7: their politics in your face, and I think Brian Nichol 194 00:08:35,360 --> 00:08:37,280 Speaker 7: is going to want to step back from that, right 195 00:08:37,360 --> 00:08:39,719 Speaker 7: because you know, all the issues they've had with their 196 00:08:39,760 --> 00:08:43,200 Speaker 7: customer base, right, people haven't been happy with you know, 197 00:08:43,200 --> 00:08:46,640 Speaker 7: there's been some boycott talks online about their stance on 198 00:08:46,640 --> 00:08:50,040 Speaker 7: the Israel Hamas War, about their stance and how they've 199 00:08:50,080 --> 00:08:53,559 Speaker 7: handled the union negotiations. You know, So that's a big thing. 200 00:08:53,640 --> 00:08:56,520 Speaker 7: And then you know, we think eventually, once they have 201 00:08:56,559 --> 00:08:59,320 Speaker 7: the stores running really really well, they're going to start 202 00:08:59,360 --> 00:09:01,840 Speaker 7: spending some more money on marketing. Maybe not a ton 203 00:09:01,880 --> 00:09:05,880 Speaker 7: of money, but we would expect them to start spending 204 00:09:06,320 --> 00:09:07,120 Speaker 7: on marketing. 205 00:09:07,400 --> 00:09:07,640 Speaker 1: You know. 206 00:09:08,000 --> 00:09:11,040 Speaker 7: It's not something that that Starbucks has traditionally done. But 207 00:09:11,080 --> 00:09:14,360 Speaker 7: it also wasn't something that Chipotle had traditionally done, and 208 00:09:14,400 --> 00:09:17,600 Speaker 7: it's been paying them dividends now for a handful of years. 209 00:09:17,720 --> 00:09:19,920 Speaker 3: So I think with Chipottle though, we just maybe Paul 210 00:09:19,960 --> 00:09:23,160 Speaker 3: can attest. Is it like there's a menu and it's basic, 211 00:09:23,320 --> 00:09:25,760 Speaker 3: like they're add ons, right, but like it's a basic menu. 212 00:09:25,840 --> 00:09:29,600 Speaker 3: Starbucks menu is like explosive, Like they can't even have 213 00:09:29,800 --> 00:09:32,280 Speaker 3: all the options up on the ordering board because they're 214 00:09:32,320 --> 00:09:35,000 Speaker 3: just too many. So it is working with operations and 215 00:09:35,040 --> 00:09:36,800 Speaker 3: getting that better. I mean, they have to pair back 216 00:09:36,840 --> 00:09:37,880 Speaker 3: their menu and get back. 217 00:09:37,720 --> 00:09:39,720 Speaker 8: To their base. Yeah. 218 00:09:39,760 --> 00:09:40,240 Speaker 1: Probably. 219 00:09:40,400 --> 00:09:43,560 Speaker 7: You know, we had been critical of the previous management 220 00:09:43,600 --> 00:09:47,920 Speaker 7: team because they kept rolling out new menu platforms and 221 00:09:47,960 --> 00:09:50,920 Speaker 7: then in the in the next breath talking about improving throughput. 222 00:09:51,000 --> 00:09:53,840 Speaker 7: But you can't have baths, so we we fully expect 223 00:09:53,840 --> 00:09:56,440 Speaker 7: them to pair back this menu, make it easier to 224 00:09:56,480 --> 00:10:00,960 Speaker 7: execute in the cafes, right, make lie it's easier for 225 00:10:01,600 --> 00:10:05,120 Speaker 7: their employees and get the orders out faster. So yeah, 226 00:10:05,160 --> 00:10:07,760 Speaker 7: I think that's going to be a major part of 227 00:10:07,840 --> 00:10:09,120 Speaker 7: what they do going forward. 228 00:10:09,840 --> 00:10:13,559 Speaker 1: I mean, Bloomberg had a story from last in twenty 229 00:10:13,559 --> 00:10:16,199 Speaker 1: twenty three where I mean the variations. If you add 230 00:10:16,360 --> 00:10:19,280 Speaker 1: all the potential options, there's like billions of different types 231 00:10:19,320 --> 00:10:21,240 Speaker 1: of drinks that could be oh yeah, yeah, you know. 232 00:10:21,320 --> 00:10:23,320 Speaker 3: So it's just at it and there's like the cold drink, 233 00:10:23,320 --> 00:10:25,840 Speaker 3: there's the tea, there's the refreshers. Then there's the frozen 234 00:10:25,840 --> 00:10:28,640 Speaker 3: refreshers and the blended refreshers. And I know those because 235 00:10:28,640 --> 00:10:30,800 Speaker 3: my daughter likes those things. But sometimes you get them 236 00:10:30,800 --> 00:10:33,319 Speaker 3: frozen and sometimes they're not. It's very complicated. 237 00:10:33,400 --> 00:10:36,080 Speaker 1: I know how they do it, and my power, you know, 238 00:10:36,280 --> 00:10:38,360 Speaker 1: my hats off to them. All Right, let's step back 239 00:10:38,440 --> 00:10:41,200 Speaker 1: and look at the restaurant space in general. Here, You've 240 00:10:41,200 --> 00:10:44,319 Speaker 1: got some research out recently restaurant promotions marketing heat up. 241 00:10:44,520 --> 00:10:46,360 Speaker 1: That's not what shareholders want to hear, do. 242 00:10:46,400 --> 00:10:49,920 Speaker 7: They no, But restaurants are kind of desperate right now 243 00:10:49,920 --> 00:10:53,680 Speaker 7: to get some traffic into their stores. Low income consumers 244 00:10:54,080 --> 00:10:57,160 Speaker 7: spending has been very weak. This seems to be spreading 245 00:10:57,200 --> 00:11:00,199 Speaker 7: to the middle income consumers, right, based on the industry 246 00:11:00,280 --> 00:11:04,320 Speaker 7: data that we've seen, which showed an improvement you know, 247 00:11:04,520 --> 00:11:07,719 Speaker 7: last month in August, but it was still negative at 248 00:11:07,880 --> 00:11:12,360 Speaker 7: casual dining restaurants, at family dining restaurants, and at quick service, right, 249 00:11:12,400 --> 00:11:15,720 Speaker 7: and so they bounce from that horrific July numbers that 250 00:11:15,800 --> 00:11:19,880 Speaker 7: we saw, but still are negative. And so yeah, restaurants 251 00:11:20,120 --> 00:11:23,480 Speaker 7: are trying to do whatever they can to bring you know, 252 00:11:23,880 --> 00:11:27,160 Speaker 7: those low income consumers and middle income consumers back into 253 00:11:27,160 --> 00:11:29,160 Speaker 7: their restaurants. You know, just for example, it was you know, 254 00:11:29,240 --> 00:11:31,640 Speaker 7: I think it's thirty five out of the last thirty 255 00:11:31,679 --> 00:11:35,760 Speaker 7: seven quarters quick service chains have had negative traffic, right, 256 00:11:35,800 --> 00:11:39,120 Speaker 7: And so that's that's not a sustainable type of situation 257 00:11:39,160 --> 00:11:41,480 Speaker 7: when you have same source sales rising because your prices 258 00:11:41,520 --> 00:11:45,000 Speaker 7: are going up, but traffic can continues to decline. Eventually 259 00:11:45,040 --> 00:11:48,120 Speaker 7: there's a tipping point, and that's what we've seen this year. 260 00:11:48,559 --> 00:11:51,320 Speaker 3: So to that point, then, which ones are do you 261 00:11:51,360 --> 00:11:53,640 Speaker 3: have faith that can maintain some kind of margin and 262 00:11:53,760 --> 00:11:55,960 Speaker 3: also grow their top line. 263 00:11:56,200 --> 00:11:59,120 Speaker 7: You know, it's some of these chains that have a 264 00:11:59,160 --> 00:12:03,040 Speaker 7: big gas on pricing, you know, in terms of you know, 265 00:12:03,320 --> 00:12:04,400 Speaker 7: they've been pricing less. 266 00:12:04,280 --> 00:12:05,079 Speaker 9: Than their competitors. 267 00:12:05,120 --> 00:12:07,880 Speaker 7: Right, So if you you're providing a lot of value, 268 00:12:08,280 --> 00:12:10,600 Speaker 7: and value can be two ways. It can be a 269 00:12:10,640 --> 00:12:12,760 Speaker 7: better price, but it also can be a lot more 270 00:12:12,800 --> 00:12:16,160 Speaker 7: food for what you pay. But some of these companies 271 00:12:16,200 --> 00:12:21,080 Speaker 7: that people see value at, you know, Winkstop, Chipotle, Texas Roadhouse, 272 00:12:21,120 --> 00:12:23,679 Speaker 7: these are all of the chains that have been outperforming. 273 00:12:23,720 --> 00:12:25,520 Speaker 7: These all of the chains that have been able to 274 00:12:25,640 --> 00:12:28,120 Speaker 7: drive traffic, and a big part of it is being 275 00:12:28,200 --> 00:12:32,600 Speaker 7: priced below competitors. You know, Winkstops raise prices about half 276 00:12:32,640 --> 00:12:35,600 Speaker 7: as much as their competitors, and on their last earnings call, 277 00:12:35,640 --> 00:12:39,080 Speaker 7: they credited that as a big reason for their phenomenal 278 00:12:39,200 --> 00:12:40,040 Speaker 7: qorder our. 279 00:12:40,080 --> 00:12:43,480 Speaker 1: Thanks to Michael Halen Bloomberg Intelligence, senior restaurant and food service. 280 00:12:43,280 --> 00:12:45,920 Speaker 3: Centers coming up will break down Apples rise into the 281 00:12:46,000 --> 00:12:48,200 Speaker 3: most valuable company in the world. 282 00:12:48,360 --> 00:12:51,160 Speaker 1: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 283 00:12:51,200 --> 00:12:53,679 Speaker 1: depth research and data on two thousand companies in one 284 00:12:53,760 --> 00:12:56,959 Speaker 1: hundred and thirty industries. You can access Bloomberg Intelligence via 285 00:12:57,040 --> 00:12:58,840 Speaker 1: b I go on the terminal on Paul. 286 00:12:58,720 --> 00:13:01,240 Speaker 3: Sweeney and a Malex Steele. This is Bloomberg. 287 00:13:06,800 --> 00:13:10,720 Speaker 2: This is Bloomberg Intelligence with now like Steele and Paul 288 00:13:10,760 --> 00:13:13,120 Speaker 2: Sweeney on Bloomberg Radio. 289 00:13:14,120 --> 00:13:16,800 Speaker 3: We look next at European banks. This week we heard 290 00:13:16,840 --> 00:13:18,800 Speaker 3: that Unit Credit has built a nine percent stake in 291 00:13:18,840 --> 00:13:21,400 Speaker 3: Commerce Bank and plans to enter into talks with the lender. 292 00:13:21,800 --> 00:13:24,240 Speaker 1: This raises the possibility of a full takeover that could 293 00:13:24,240 --> 00:13:27,360 Speaker 1: reshape Europe's banking landscape for more. We were joined by 294 00:13:27,440 --> 00:13:30,520 Speaker 1: Philip Richards, Bloomberg Intelligence, senior analysts for European banks. 295 00:13:30,559 --> 00:13:32,880 Speaker 3: We first asked Philip to break down the possibility Commerce 296 00:13:32,920 --> 00:13:34,240 Speaker 3: Bank will actually be taken over. 297 00:13:34,600 --> 00:13:36,280 Speaker 10: It's an interesting one. As you say, this is not 298 00:13:36,320 --> 00:13:38,959 Speaker 10: a new boombed deal. It's been going on for literally 299 00:13:39,000 --> 00:13:41,280 Speaker 10: well over a decade now in terms of big cross 300 00:13:41,280 --> 00:13:43,480 Speaker 10: bordered deals. But the simple case of mains, any big 301 00:13:43,520 --> 00:13:46,920 Speaker 10: cross border transaction among European banks so hasn't happened in 302 00:13:46,960 --> 00:13:49,760 Speaker 10: the last fifteen years since the clasis. Will it happen now? Yes, 303 00:13:49,800 --> 00:13:52,240 Speaker 10: it's possibility, but there's still a lot of hurdles on 304 00:13:52,400 --> 00:13:55,560 Speaker 10: left in terms of the German government allow and specifically 305 00:13:56,120 --> 00:13:58,520 Speaker 10: when it would flag. The German market is very different 306 00:13:58,520 --> 00:14:01,480 Speaker 10: to all the other European markets, very big cooperative or 307 00:14:01,520 --> 00:14:04,360 Speaker 10: mutual society. They've got the Sparcasm and the Landers banks. 308 00:14:04,480 --> 00:14:06,880 Speaker 10: So actually the private banks Deutsche Bank and Commerce Bank 309 00:14:07,040 --> 00:14:10,040 Speaker 10: are a much smaller part of the overall market. And 310 00:14:10,080 --> 00:14:12,640 Speaker 10: therefore could they take out the second biggest germin Bank? 311 00:14:12,800 --> 00:14:14,800 Speaker 10: I think it is possible on our front. 312 00:14:14,960 --> 00:14:17,319 Speaker 1: Would it be a good deal for Unit Credit? I 313 00:14:17,360 --> 00:14:19,880 Speaker 1: guess what I'm asking is how good of a management team, 314 00:14:19,920 --> 00:14:22,080 Speaker 1: how good of a franchise is UniCredit? 315 00:14:22,800 --> 00:14:23,040 Speaker 4: Well? 316 00:14:23,160 --> 00:14:24,680 Speaker 10: Is it a good deal? I mean that will come 317 00:14:24,720 --> 00:14:26,720 Speaker 10: down to the price. And one good thing about Commerce 318 00:14:26,720 --> 00:14:29,840 Speaker 10: Bank is is pricing is a low level in terms 319 00:14:29,840 --> 00:14:31,760 Speaker 10: of what you get for it. Yes, the earnings have 320 00:14:31,840 --> 00:14:34,280 Speaker 10: been very very weak for the last fifteen years, one 321 00:14:34,280 --> 00:14:36,680 Speaker 10: of the lowest return and equity of all banks in Europe, 322 00:14:36,760 --> 00:14:39,640 Speaker 10: but they have increased massively with rate risers across Europe. 323 00:14:39,920 --> 00:14:41,400 Speaker 10: But of course the flip tide to that, of course, 324 00:14:41,480 --> 00:14:44,400 Speaker 10: is interest rates now going down. So the question becomes 325 00:14:44,440 --> 00:14:46,600 Speaker 10: what will happen to Commerce Bank's earning is going forward? 326 00:14:47,040 --> 00:14:49,360 Speaker 10: And frankly they're probably going to be going down and 327 00:14:49,400 --> 00:14:51,480 Speaker 10: therefore that's where the pressure on them will lie. So 328 00:14:51,520 --> 00:14:53,880 Speaker 10: are they getting a good deal or they're paying almost 329 00:14:53,760 --> 00:14:55,960 Speaker 10: at the top in terms of their earning potential? 330 00:14:56,400 --> 00:14:58,880 Speaker 3: What company would that make UniCredit like, would this be 331 00:14:59,600 --> 00:15:02,880 Speaker 3: a gient investment bank and a giant retail bank. 332 00:15:03,520 --> 00:15:07,200 Speaker 10: Well, they will become the third largest European bank if 333 00:15:07,200 --> 00:15:09,480 Speaker 10: they did the deal in terms of a market cap basis. 334 00:15:10,000 --> 00:15:12,560 Speaker 10: Obviously Commerce Bank is almost entirely now a retail and 335 00:15:12,600 --> 00:15:15,360 Speaker 10: commercial bank is sold or the investment banking operations that 336 00:15:15,520 --> 00:15:18,160 Speaker 10: had after the financial crisis, So this is amount of 337 00:15:18,160 --> 00:15:20,680 Speaker 10: the case of expanding in terms of that retail commercial space. 338 00:15:21,000 --> 00:15:23,720 Speaker 10: UniCredit have a big presence in Germany already through hyper 339 00:15:23,800 --> 00:15:26,120 Speaker 10: Variant Bank, so one of the attractions to sort of 340 00:15:26,200 --> 00:15:28,720 Speaker 10: deal for them would be combining that so Commerce Bank 341 00:15:28,760 --> 00:15:30,920 Speaker 10: and hyper viands and therefore trying to get the constand 342 00:15:30,960 --> 00:15:32,720 Speaker 10: news out of them. But say, it's veryment on a 343 00:15:32,720 --> 00:15:35,240 Speaker 10: commercial retail side rather than investment banking. 344 00:15:35,680 --> 00:15:38,120 Speaker 1: So Philip talk to us about I mean, just the 345 00:15:38,200 --> 00:15:41,840 Speaker 1: German banking market. Does there need to be consolidation. 346 00:15:41,680 --> 00:15:44,280 Speaker 10: Does they? Yes? I mean it's probably the least consolidated 347 00:15:44,360 --> 00:15:46,760 Speaker 10: market in Europe in terms of as you said, you've 348 00:15:46,760 --> 00:15:49,720 Speaker 10: got this huge number of coopertive banks or sparkasms, et cetera. 349 00:15:50,480 --> 00:15:53,200 Speaker 10: So it is a very difficult and diluted market. But 350 00:15:53,240 --> 00:15:55,160 Speaker 10: the fact is, you know, Commerce Bank itself has got 351 00:15:55,160 --> 00:15:57,640 Speaker 10: a sub ten percent market share. So even if you 352 00:15:57,800 --> 00:15:59,880 Speaker 10: got it, did buy it and combined hyper virans with it, 353 00:16:00,200 --> 00:16:03,080 Speaker 10: they're still probably just getting over about that ten percent mark. 354 00:16:03,720 --> 00:16:06,280 Speaker 10: So will it change the dial in Germany not at all, 355 00:16:06,440 --> 00:16:09,120 Speaker 10: you know, because we're only talking in a thirty percent subsector. 356 00:16:09,160 --> 00:16:11,720 Speaker 10: In terms of the private banks, we're seventy percent or 357 00:16:11,720 --> 00:16:14,880 Speaker 10: so off the market you know, is in this mutual side. 358 00:16:15,160 --> 00:16:17,000 Speaker 3: So you were talking earlier that this has been rumored 359 00:16:17,040 --> 00:16:18,880 Speaker 3: for ten years. I remember talking about this at least 360 00:16:18,920 --> 00:16:21,880 Speaker 3: six plus years ago. Also, why do you think that 361 00:16:22,120 --> 00:16:24,240 Speaker 3: now could be actually the moment. 362 00:16:24,560 --> 00:16:26,080 Speaker 10: Well, you asked us about you know, what they get 363 00:16:26,120 --> 00:16:27,920 Speaker 10: in terms of the Commerce Bank. We heard your CEO 364 00:16:28,000 --> 00:16:30,120 Speaker 10: of Commerce Bank said he will not renew a tenor 365 00:16:30,160 --> 00:16:31,920 Speaker 10: which I missed fires at the end of next year. 366 00:16:32,240 --> 00:16:34,000 Speaker 10: So you know that does open a hole at the 367 00:16:34,080 --> 00:16:36,240 Speaker 10: top of the bank would obviously be in traction for them. 368 00:16:36,880 --> 00:16:39,200 Speaker 10: There's one potential way of doing it. Who would have 369 00:16:39,200 --> 00:16:41,760 Speaker 10: bought Commerce Bank given the excessive risks they had, say 370 00:16:41,800 --> 00:16:44,000 Speaker 10: three or four years ago, where we had the commercial 371 00:16:44,040 --> 00:16:46,000 Speaker 10: real estate risks, we had the bank trading at point 372 00:16:46,080 --> 00:16:49,200 Speaker 10: three times book value. We had earnings are very very low. 373 00:16:49,400 --> 00:16:51,360 Speaker 10: So in a way the risk has gone away a 374 00:16:51,360 --> 00:16:53,960 Speaker 10: lot of Commerce Bank because simply because the earnings are 375 00:16:54,040 --> 00:16:56,880 Speaker 10: much stronger now because of those rate rises. Also, the 376 00:16:56,920 --> 00:16:59,040 Speaker 10: German government took a big stake in the bank, so 377 00:16:59,120 --> 00:17:01,760 Speaker 10: as they sell that than further down. That's part of 378 00:17:01,760 --> 00:17:05,200 Speaker 10: the way Unichledate built their state. Today that obviously becomes 379 00:17:05,200 --> 00:17:07,520 Speaker 10: more and more attractive because it comes more into the private sector. 380 00:17:08,040 --> 00:17:10,160 Speaker 10: So there are numbers more reasons why it could happen, 381 00:17:10,240 --> 00:17:13,160 Speaker 10: but doesn't mean anything will happen then, No, is. 382 00:17:13,080 --> 00:17:15,320 Speaker 1: This going to ignite maybe a little bit more discussion 383 00:17:15,359 --> 00:17:18,080 Speaker 1: about more across M and A trades just broadly defined 384 00:17:18,160 --> 00:17:19,360 Speaker 1: across Europe. 385 00:17:19,359 --> 00:17:22,160 Speaker 10: Without any doubt it will trigger more emine spectation today, 386 00:17:22,160 --> 00:17:23,680 Speaker 10: And I think the fact that you said they build 387 00:17:23,720 --> 00:17:26,200 Speaker 10: a temperate stake and yet the share then rally twenty 388 00:17:26,240 --> 00:17:28,399 Speaker 10: percent shows that the market doesn't think this is the 389 00:17:28,440 --> 00:17:30,000 Speaker 10: end of the story and there's going to be more 390 00:17:30,000 --> 00:17:32,800 Speaker 10: of a deal and the potential by bid for Commerce 391 00:17:32,840 --> 00:17:35,240 Speaker 10: Bank is possible. That said, you know, why has there 392 00:17:35,320 --> 00:17:37,400 Speaker 10: been no big m and A across the sector now 393 00:17:37,400 --> 00:17:40,000 Speaker 10: for fifteen years? And because a number of the regularly 394 00:17:40,080 --> 00:17:42,240 Speaker 10: hurdles are main You know, there's not a single rule 395 00:17:42,240 --> 00:17:45,479 Speaker 10: book across Europe, government interference, people don't want to leave 396 00:17:45,480 --> 00:17:48,120 Speaker 10: their biggest banks and be taken over by a foreign institution, 397 00:17:48,560 --> 00:17:51,359 Speaker 10: et cetera. All these hurdles and nothing's actually changed on 398 00:17:51,400 --> 00:17:54,399 Speaker 10: that front. So you know, no big deals have happened. 399 00:17:54,440 --> 00:17:56,879 Speaker 10: Could this be the first, Yes, but it's by no 400 00:17:56,960 --> 00:17:58,159 Speaker 10: means certain it will. 401 00:17:58,119 --> 00:18:02,000 Speaker 3: Thirty seconds if the deal does happen. Would the bank 402 00:18:02,080 --> 00:18:04,080 Speaker 3: be able to lend more and do stuff? 403 00:18:04,880 --> 00:18:06,640 Speaker 10: I would have said yes three years ago just because 404 00:18:06,640 --> 00:18:08,679 Speaker 10: of the week of financial position that Commerce Bank was in. 405 00:18:08,880 --> 00:18:10,879 Speaker 10: I think because of the eaight hikes. Now is in 406 00:18:10,880 --> 00:18:13,960 Speaker 10: a much stronger position. It's got a service capital position itself, 407 00:18:14,119 --> 00:18:16,680 Speaker 10: so there's no real bowriers in terms of the supply side, 408 00:18:16,720 --> 00:18:19,840 Speaker 10: their potential to lend more. What's restraining them from growing 409 00:18:19,920 --> 00:18:22,359 Speaker 10: actually more the weaker Germany economy, and we're hearing more 410 00:18:22,359 --> 00:18:24,760 Speaker 10: about that over the press, and that's what's being holding 411 00:18:24,760 --> 00:18:27,400 Speaker 10: them back and Franklly, nothing changes with his unique credit 412 00:18:27,440 --> 00:18:30,280 Speaker 10: deal there those heard will still remain. So no, I 413 00:18:30,280 --> 00:18:31,800 Speaker 10: don't think this would really help in terms of the 414 00:18:31,840 --> 00:18:34,120 Speaker 10: lending or the growth potential. It's much more I think 415 00:18:34,119 --> 00:18:36,520 Speaker 10: about the synergies in terms of the cost takeout potential. 416 00:18:36,840 --> 00:18:37,080 Speaker 6: All right. 417 00:18:37,080 --> 00:18:40,680 Speaker 1: Thanks to Philip Richards, Bloomberg Intelligence Senior analyst for European Banks, 418 00:18:40,800 --> 00:18:41,280 Speaker 1: we now. 419 00:18:41,160 --> 00:18:44,199 Speaker 3: Turned to big tech and Apple. Apple was the subject 420 00:18:44,240 --> 00:18:46,680 Speaker 3: of a Bloomberg Big Take piece this week titled How 421 00:18:46,720 --> 00:18:48,080 Speaker 3: Apple Rules the World. 422 00:18:48,280 --> 00:18:51,320 Speaker 1: It discussed how Apple ascended from a scrappy tech underdog 423 00:18:51,359 --> 00:18:53,399 Speaker 1: to the most valuable company in the world. 424 00:18:53,640 --> 00:18:53,919 Speaker 6: From More. 425 00:18:54,000 --> 00:18:56,720 Speaker 1: We were joined by Austin Karr, Bloomberg News technology reporter. 426 00:18:56,920 --> 00:18:59,199 Speaker 3: We first asked Austin to connect all the dots for 427 00:18:59,280 --> 00:19:01,560 Speaker 3: Apple from the nineteen eighties until now. 428 00:19:02,080 --> 00:19:04,440 Speaker 9: You want me to summarize forty years and can you 429 00:19:05,720 --> 00:19:06,080 Speaker 9: go up? 430 00:19:06,760 --> 00:19:07,080 Speaker 10: Okay? 431 00:19:07,160 --> 00:19:09,840 Speaker 9: Well, well, really, what this story does is chart why 432 00:19:10,160 --> 00:19:13,359 Speaker 9: and how Apple found in its position today, facing a 433 00:19:13,400 --> 00:19:17,880 Speaker 9: big antitrust lawsuit in the US, a lot of regulatory 434 00:19:17,920 --> 00:19:21,840 Speaker 9: pressure in Europe, as well as a lot of really 435 00:19:21,960 --> 00:19:24,480 Speaker 9: just skepticism and criticism for a lot of the partners 436 00:19:24,480 --> 00:19:27,359 Speaker 9: and developers that have depended on Apple over the years, 437 00:19:27,560 --> 00:19:30,320 Speaker 9: and it charts out basically Apple has changed from that 438 00:19:30,480 --> 00:19:33,679 Speaker 9: nineteen eighty four era when it released the Mac it 439 00:19:33,720 --> 00:19:36,440 Speaker 9: was seen as this sort of disruptive force in the 440 00:19:36,480 --> 00:19:38,800 Speaker 9: technology industry to twenty twenty four when a lot of 441 00:19:38,840 --> 00:19:41,400 Speaker 9: people think that this is a sort of domineering force 442 00:19:41,440 --> 00:19:43,680 Speaker 9: that needs to be disrupted. So we go through from 443 00:19:43,680 --> 00:19:46,560 Speaker 9: the Mac to the iPod and iPhone up through present day, 444 00:19:47,000 --> 00:19:49,520 Speaker 9: and it's just really just putting all the pieces together 445 00:19:49,560 --> 00:19:52,040 Speaker 9: about how Apple finds itself in that position now. 446 00:19:52,320 --> 00:19:55,320 Speaker 1: And Austin, along with Max Chafkin, you guys reported this 447 00:19:55,359 --> 00:19:58,879 Speaker 1: story just fantastic work. But for me, Cameron Galley, he 448 00:19:58,920 --> 00:20:01,640 Speaker 1: does all the illustration. It just made it really cool 449 00:20:01,680 --> 00:20:05,119 Speaker 1: and really interactive, some awesome stuff as always. So Austin, 450 00:20:05,160 --> 00:20:07,679 Speaker 1: where do you think Apple goes from here? Is it 451 00:20:07,800 --> 00:20:10,879 Speaker 1: just new products? Is it maybe getting more ingrained in 452 00:20:10,880 --> 00:20:13,600 Speaker 1: our daily lives if that's even possible. What do you 453 00:20:13,600 --> 00:20:15,760 Speaker 1: think kind of a longer term vision is for the 454 00:20:15,760 --> 00:20:16,720 Speaker 1: folks in Kupertino? 455 00:20:17,000 --> 00:20:19,080 Speaker 9: Look, I mean, I think a really good question for 456 00:20:19,440 --> 00:20:22,239 Speaker 9: listeners right now or even you guys, is just this 457 00:20:22,320 --> 00:20:24,840 Speaker 9: new iPhone? If you guys are Apple users have you 458 00:20:24,880 --> 00:20:28,000 Speaker 9: ever seriously considered switching to a different device, or is 459 00:20:28,000 --> 00:20:30,159 Speaker 9: it just the default now that I'm going to upgrade 460 00:20:30,160 --> 00:20:32,760 Speaker 9: to the iPhone sixteen, maybe at default, And so I 461 00:20:32,760 --> 00:20:35,200 Speaker 9: think the question is how long can that last where 462 00:20:35,320 --> 00:20:37,280 Speaker 9: it is just sort of the default. I mean, even 463 00:20:37,320 --> 00:20:39,399 Speaker 9: their new features they are all about you know, AI 464 00:20:39,520 --> 00:20:42,000 Speaker 9: and how that ties into some of its hardware, But 465 00:20:42,320 --> 00:20:44,800 Speaker 9: in all honesty, they're two years late to AI. A 466 00:20:44,800 --> 00:20:47,399 Speaker 9: lot of the features. Mark Kerman or Apple colleague is 467 00:20:47,440 --> 00:20:50,119 Speaker 9: reporting that won't really release until twenty twenty five, at 468 00:20:50,119 --> 00:20:52,480 Speaker 9: which point maybe you should just wait for the iPhone seventeen. 469 00:20:52,800 --> 00:20:55,439 Speaker 9: And I just think there's a big question about you know, 470 00:20:55,600 --> 00:20:57,760 Speaker 9: Apple's products are still good. They still make you know, 471 00:20:57,840 --> 00:21:01,560 Speaker 9: the best laptop, the best you know watch and earbuds. 472 00:21:01,560 --> 00:21:03,560 Speaker 9: I'm talking through my AirPods right now. But at the 473 00:21:03,560 --> 00:21:05,800 Speaker 9: same time, when they don't face that type of pressure, 474 00:21:06,040 --> 00:21:09,000 Speaker 9: does their products just become too incremental and too boring? 475 00:21:09,160 --> 00:21:11,680 Speaker 9: And I think that is when you're going to see 476 00:21:11,680 --> 00:21:14,520 Speaker 9: a lot more disruptives trying to change the way computing 477 00:21:14,560 --> 00:21:17,159 Speaker 9: works and work outside of the Apple ecosystem. But the 478 00:21:17,200 --> 00:21:19,400 Speaker 9: problem for consumers like us is we're kind of stuck 479 00:21:19,400 --> 00:21:21,520 Speaker 9: in it. I'm not going to switch anytime soon for sure. 480 00:21:22,080 --> 00:21:23,919 Speaker 3: Well then to that point. But I found also interesting, 481 00:21:24,040 --> 00:21:26,040 Speaker 3: and I didn't know in the piece that you wrote, 482 00:21:26,200 --> 00:21:29,800 Speaker 3: was sort of Tim Cook's role in managing Apple supply chain, 483 00:21:29,840 --> 00:21:33,040 Speaker 3: and you dug deep into Apple would have a supply 484 00:21:33,160 --> 00:21:36,200 Speaker 3: chain partner and then in essence look to manufacture that 485 00:21:36,440 --> 00:21:39,080 Speaker 3: in house, and then booed that company, which is really 486 00:21:39,119 --> 00:21:41,680 Speaker 3: messed up tons of companies around the world. Can you 487 00:21:41,680 --> 00:21:42,800 Speaker 3: give us some detail on that. 488 00:21:44,440 --> 00:21:44,760 Speaker 4: Sure. 489 00:21:45,240 --> 00:21:48,160 Speaker 9: The most infamous example actually goes back about a decade ago. 490 00:21:48,240 --> 00:21:51,960 Speaker 9: Apple was developing these new sapphire screams that were going 491 00:21:52,040 --> 00:21:54,119 Speaker 9: to be alter durable instead of the glass that they 492 00:21:54,160 --> 00:21:56,600 Speaker 9: currently use, and they sort of outsourced it to a 493 00:21:56,640 --> 00:21:58,879 Speaker 9: partner and then left that partner on the hook with 494 00:21:58,920 --> 00:22:00,919 Speaker 9: all the liability when Apple decided not to go that 495 00:22:01,000 --> 00:22:03,560 Speaker 9: route because the sapphire wasn't quite going as fast as 496 00:22:03,560 --> 00:22:06,520 Speaker 9: they could develop it for the iPhone. And I think 497 00:22:06,520 --> 00:22:08,479 Speaker 9: that we sort of position that a symbolic of what 498 00:22:08,520 --> 00:22:11,080 Speaker 9: Apple has seen with a few of the partners they've 499 00:22:11,080 --> 00:22:13,280 Speaker 9: worked with over the years, not just in the supply chain, 500 00:22:13,320 --> 00:22:16,639 Speaker 9: but also on the software ecosystem side. It's really fascinating 501 00:22:16,680 --> 00:22:18,639 Speaker 9: all this sort of trend that we see of a 502 00:22:18,680 --> 00:22:21,760 Speaker 9: partner really excited to work with Apple in the beginning, 503 00:22:21,760 --> 00:22:25,359 Speaker 9: like Goldman Sachs on the Apple card or even General 504 00:22:25,359 --> 00:22:27,840 Speaker 9: Motors we sid as another example of working them on CarPlay, 505 00:22:28,000 --> 00:22:30,040 Speaker 9: and then years go by and suddenly they're not so 506 00:22:30,119 --> 00:22:32,639 Speaker 9: happy with the relationship with the Apple anymore. And I 507 00:22:32,640 --> 00:22:35,000 Speaker 9: think that really has become our trend in recent years 508 00:22:35,040 --> 00:22:38,320 Speaker 9: as the company has grown to this massive, multi trillion 509 00:22:38,320 --> 00:22:41,439 Speaker 9: dollar force that essentially it's Apple's where or the highway. 510 00:22:41,640 --> 00:22:43,600 Speaker 9: And I'm just curious how long that will last with 511 00:22:43,640 --> 00:22:46,200 Speaker 9: partners before they say, you know what, enough is enough? 512 00:22:46,600 --> 00:22:48,119 Speaker 1: And you know, Austin, I think for a lot of 513 00:22:48,119 --> 00:22:50,760 Speaker 1: investors one of the longer term issues that's still always 514 00:22:50,760 --> 00:22:52,919 Speaker 1: out there and is probably increasing in concern. It's just 515 00:22:52,920 --> 00:22:55,720 Speaker 1: the regulatory risk for not just Apple but kind of 516 00:22:55,720 --> 00:22:58,240 Speaker 1: big tech in general, but certainly for Apple given their 517 00:22:58,240 --> 00:23:00,919 Speaker 1: marketing position. How do you think the companies kind of 518 00:23:01,080 --> 00:23:02,880 Speaker 1: how do they react to that, and just in terms 519 00:23:02,920 --> 00:23:05,160 Speaker 1: of a long term thread or headwind. 520 00:23:05,600 --> 00:23:07,919 Speaker 9: Well, actually, I mean the DOJ case in the US. 521 00:23:08,040 --> 00:23:10,679 Speaker 9: You know, they just released their their complaint in March. 522 00:23:11,280 --> 00:23:14,080 Speaker 9: Apple is pushed to dismiss it just earlier in August. 523 00:23:14,080 --> 00:23:15,800 Speaker 9: That's going to play out over the course of years. 524 00:23:15,840 --> 00:23:18,280 Speaker 9: I think that, you know, the preceding cases with the 525 00:23:18,320 --> 00:23:20,639 Speaker 9: DOJ and IBM or DJ and Microsoft. I mean this 526 00:23:20,720 --> 00:23:24,000 Speaker 9: last many, many years, but we're already seeing sort of 527 00:23:23,640 --> 00:23:26,000 Speaker 9: a precursor to that, and what's happening in Europe with 528 00:23:26,040 --> 00:23:29,119 Speaker 9: the Digital Markets Act, which has already pushed Apple to 529 00:23:29,240 --> 00:23:32,000 Speaker 9: change a ton In fact right now in Europe because 530 00:23:32,000 --> 00:23:35,400 Speaker 9: of those regulatory changes, you can get an alternative marketplace, 531 00:23:35,600 --> 00:23:38,119 Speaker 9: meaning you don't just have to rely on Apple's App store. 532 00:23:38,960 --> 00:23:41,359 Speaker 9: You're you're actually able to delete a lot of native 533 00:23:41,359 --> 00:23:43,440 Speaker 9: Apple apps that you can't delete the US. You can 534 00:23:43,480 --> 00:23:46,560 Speaker 9: delete Safari, you can, You'll eventually be able to delete 535 00:23:46,600 --> 00:23:48,840 Speaker 9: your phone app, your camera app, the app store and 536 00:23:48,880 --> 00:23:52,320 Speaker 9: just use alternative products from the third party ecosystem. And 537 00:23:52,359 --> 00:23:54,399 Speaker 9: so what you're seeing in Europe is this almost two 538 00:23:54,480 --> 00:23:58,200 Speaker 9: track system where they have a lot more flexible sort 539 00:23:58,200 --> 00:24:01,560 Speaker 9: of computing platform than anywhere else if you're an Apple user. 540 00:24:01,800 --> 00:24:03,400 Speaker 9: So I think what they've sort of done is take 541 00:24:03,440 --> 00:24:06,440 Speaker 9: this almost whack a mole approach to regulation the EU, 542 00:24:06,560 --> 00:24:08,359 Speaker 9: and even in some of the pressure they've seen in 543 00:24:08,359 --> 00:24:10,680 Speaker 9: the US, they've had to open up that walled garden that, 544 00:24:11,080 --> 00:24:13,240 Speaker 9: as we refer to it, sort of their closed ecosystem 545 00:24:13,320 --> 00:24:15,320 Speaker 9: a little bit more in a way that Apple doesn't 546 00:24:15,359 --> 00:24:17,720 Speaker 9: like because they lose control. But for consumers in a 547 00:24:17,760 --> 00:24:19,440 Speaker 9: lot of ways, it's a little bit interesting to watch 548 00:24:19,480 --> 00:24:21,879 Speaker 9: this company have to change and not just have it 549 00:24:21,960 --> 00:24:24,280 Speaker 9: the Apple approach. They're going to have to, at least 550 00:24:24,280 --> 00:24:26,359 Speaker 9: in Europe so far, open up their wild garden a 551 00:24:26,400 --> 00:24:29,159 Speaker 9: little bit allows some more players within their ecosystem to 552 00:24:29,720 --> 00:24:31,280 Speaker 9: run some of those fundamental cards. 553 00:24:31,720 --> 00:24:31,959 Speaker 4: All right. 554 00:24:31,960 --> 00:24:34,840 Speaker 1: Thanks to Austin car Bloomberg News technology reporter. 555 00:24:34,720 --> 00:24:36,600 Speaker 3: Coming up on the program, a look at why activity 556 00:24:36,600 --> 00:24:38,919 Speaker 3: in the carbon capture industry is starting to slow in 557 00:24:38,960 --> 00:24:39,440 Speaker 3: the US. 558 00:24:39,680 --> 00:24:43,080 Speaker 1: They're listening to Bloomberg Intelligence on Bloomberg Radio, providing research 559 00:24:43,119 --> 00:24:45,040 Speaker 1: and data on two thousand companies and one hundred and 560 00:24:45,080 --> 00:24:47,960 Speaker 1: thirty industries. You can access Bloomberg Intelligence via bi go 561 00:24:48,080 --> 00:24:48,639 Speaker 1: on the terminal. 562 00:24:48,720 --> 00:24:53,280 Speaker 3: I'm Paul Sweeney an a Malex Steel, and this is Bloomberg. 563 00:24:57,359 --> 00:25:01,760 Speaker 2: Your listening to Bloomberg Intelligence Nowlex Steel and Paul Sweenie 564 00:25:02,080 --> 00:25:03,760 Speaker 2: on Bloomberg Radio. 565 00:25:04,720 --> 00:25:06,800 Speaker 3: We move now to the auto industry and focus in 566 00:25:06,880 --> 00:25:09,639 Speaker 3: on Europe. German carmakers are now sinking deeper into an 567 00:25:09,640 --> 00:25:10,879 Speaker 3: industry wide crisis. 568 00:25:11,040 --> 00:25:13,439 Speaker 1: This week, BMW warned their profits We'll get hit by 569 00:25:13,440 --> 00:25:16,840 Speaker 1: a costly brake problem to Volkswagen scrap job protections that 570 00:25:16,920 --> 00:25:19,160 Speaker 1: workers have enjoyed for three decades for more. 571 00:25:19,200 --> 00:25:21,560 Speaker 3: We are joined by Michael Dean, Bloomberg Intelligence, Head of 572 00:25:21,600 --> 00:25:23,879 Speaker 3: Global Autos, and we first asked Michael to dig deeper 573 00:25:23,880 --> 00:25:26,680 Speaker 3: into YBMW lowered its expectations for the year. 574 00:25:27,160 --> 00:25:30,000 Speaker 11: So BMW had a profit warning, and that was partly 575 00:25:30,000 --> 00:25:33,040 Speaker 11: on the back of a warranty issue has with its 576 00:25:33,400 --> 00:25:34,720 Speaker 11: breaks not on the xtreek. 577 00:25:34,760 --> 00:25:37,680 Speaker 4: So you'll fine Paul Good, but they're going to have to. 578 00:25:37,640 --> 00:25:41,480 Speaker 11: Recall one point five million vehicles and that's going to 579 00:25:41,520 --> 00:25:44,879 Speaker 11: cost a high three digits million in terms of earnings 580 00:25:44,880 --> 00:25:47,000 Speaker 11: for twenty twenty four. But that doesn't tell the whole 581 00:25:47,040 --> 00:25:49,720 Speaker 11: story because they've downgraded their margin by about two hundred 582 00:25:49,760 --> 00:25:52,840 Speaker 11: bases points, which is about two billion v bits. So 583 00:25:53,000 --> 00:25:56,200 Speaker 11: the balance of that is coming from we could China sales, 584 00:25:57,240 --> 00:26:01,120 Speaker 11: lower pricing in Europe, lower demanding you. So just the 585 00:26:01,200 --> 00:26:04,639 Speaker 11: demand and pricing environment globally has been very difficult and 586 00:26:04,680 --> 00:26:06,560 Speaker 11: that's part of the reason for the profit warning. 587 00:26:06,800 --> 00:26:09,560 Speaker 3: Which then leads us to Volkswagen. So the latest news 588 00:26:09,640 --> 00:26:11,920 Speaker 3: is that it's ending its job protections for autoworkers in 589 00:26:11,960 --> 00:26:14,919 Speaker 3: Germany as part of its cost cutting push. There are 590 00:26:14,960 --> 00:26:17,400 Speaker 3: several agreements that were linked to a three decades old 591 00:26:17,440 --> 00:26:19,640 Speaker 3: pack that was supposed to safeguard employment un till twenty 592 00:26:19,720 --> 00:26:21,800 Speaker 3: twenty nine, but now those guarantees are going to run 593 00:26:21,800 --> 00:26:23,840 Speaker 3: out by the middle of next year. 594 00:26:24,560 --> 00:26:27,120 Speaker 4: I mean, wow, yeah. 595 00:26:27,280 --> 00:26:29,720 Speaker 11: So you know, Volkswagen was in the news last week 596 00:26:29,800 --> 00:26:32,600 Speaker 11: because it said it needs to close half a million 597 00:26:32,680 --> 00:26:37,280 Speaker 11: units of capacity in Germany. So that's very difficult because 598 00:26:37,280 --> 00:26:39,919 Speaker 11: of workers' rights. And you know, worker's rights have been 599 00:26:40,000 --> 00:26:43,199 Speaker 11: very one sided for Volkswagen in particular because you have 600 00:26:43,240 --> 00:26:46,040 Speaker 11: VW law and this is where twenty percent of the 601 00:26:46,200 --> 00:26:49,399 Speaker 11: ordinary shares, the voting shares are owned by the States 602 00:26:49,400 --> 00:26:52,879 Speaker 11: of Lower Saxony, which is where Volkswagen's biggest battery is, 603 00:26:53,000 --> 00:26:56,320 Speaker 11: and funnily enough, and they have the ability to block 604 00:26:57,240 --> 00:27:02,960 Speaker 11: certain agreements. So workers rights are very strong for Volkswagen employees. 605 00:27:03,119 --> 00:27:05,119 Speaker 11: And now I think management are saying, okay, hold on 606 00:27:05,240 --> 00:27:08,639 Speaker 11: a minute. The automotive world is changing rapidly. We need 607 00:27:08,680 --> 00:27:10,960 Speaker 11: to do something to reduce costs. And part of that 608 00:27:11,280 --> 00:27:13,600 Speaker 11: is the close factories and reduce jobs. 609 00:27:14,440 --> 00:27:16,880 Speaker 1: Michael, give us it just a thirty thousand foot view 610 00:27:16,880 --> 00:27:19,360 Speaker 1: of kind of the global auto business here. I mean, 611 00:27:19,440 --> 00:27:22,240 Speaker 1: the weakness that you're seeing in Europe, the weakness you're 612 00:27:22,240 --> 00:27:26,560 Speaker 1: seeing in China. Is that just general economic weakness effect 613 00:27:26,840 --> 00:27:28,640 Speaker 1: that we've seen in past cycles or is this something 614 00:27:28,680 --> 00:27:32,600 Speaker 1: to do with this ongoing transition to electric vehicles. 615 00:27:33,520 --> 00:27:35,600 Speaker 11: Yeah, it's a bit of both. So you know, you 616 00:27:35,640 --> 00:27:38,680 Speaker 11: have the transition to battery electric vehicles. It's going much 617 00:27:38,720 --> 00:27:42,840 Speaker 11: slower than expected in Western markets. Other markets probably going 618 00:27:42,920 --> 00:27:46,080 Speaker 11: quicker than expected, such as China. But the problem Volkswagen 619 00:27:46,200 --> 00:27:49,000 Speaker 11: has is that the competition is so intense and has 620 00:27:49,440 --> 00:27:52,560 Speaker 11: overtaken them in China, such as BYD So. Volkswagen a 621 00:27:52,560 --> 00:27:54,840 Speaker 11: couple of years ago was the market leader in China. 622 00:27:55,119 --> 00:27:58,720 Speaker 11: Now byd within two years has overtaken Volkswagen. And really 623 00:27:58,760 --> 00:28:01,000 Speaker 11: it's going to be a survival of the fittest in 624 00:28:01,280 --> 00:28:02,040 Speaker 11: these markets. 625 00:28:02,280 --> 00:28:05,120 Speaker 3: Well, I mean, these companies aren't going to go under 626 00:28:05,200 --> 00:28:07,359 Speaker 3: or anything, right, So I guess I'm wondering when the 627 00:28:07,400 --> 00:28:10,000 Speaker 3: trough is When do we know what is a trough 628 00:28:10,040 --> 00:28:11,000 Speaker 3: actually going to look like? 629 00:28:11,960 --> 00:28:14,240 Speaker 11: Well, you say, well, a lot of companies could could 630 00:28:14,280 --> 00:28:17,119 Speaker 11: go under, particularly the pure play battery electric vehicles. 631 00:28:17,480 --> 00:28:19,000 Speaker 3: And I mean I just meant that, like Germany is 632 00:28:19,040 --> 00:28:20,520 Speaker 3: not gonna let Bolkswagon. 633 00:28:20,040 --> 00:28:22,399 Speaker 4: Go bankrupt now, of course. 634 00:28:22,520 --> 00:28:25,440 Speaker 11: And the interesting thing if you look at the valuation 635 00:28:25,480 --> 00:28:28,920 Speaker 11: of Volkswagen today is valued at forty five billion euros. 636 00:28:29,400 --> 00:28:31,520 Speaker 4: I've had a lot of clients talk to me about this. 637 00:28:31,920 --> 00:28:34,440 Speaker 11: They have almost forty billion of cash on the balance sheet, 638 00:28:34,640 --> 00:28:37,119 Speaker 11: there's seventy five percent stake in Porsche is worth forty 639 00:28:37,119 --> 00:28:42,680 Speaker 11: five billion euros. They own Lamborghini brands, which has higher 640 00:28:42,680 --> 00:28:46,360 Speaker 11: probability rates than Ferrari, which is currently valued at seventy 641 00:28:46,400 --> 00:28:49,280 Speaker 11: seven billion. So we think Lamborghini's worth thirty billion to 642 00:28:49,360 --> 00:28:51,760 Speaker 11: use a Ferrari valuation. So there's some of the parts 643 00:28:51,760 --> 00:28:56,280 Speaker 11: of volksg is huge compared to the actual valuation at 644 00:28:56,320 --> 00:28:57,400 Speaker 11: Volkswagen at the moment. 645 00:28:57,920 --> 00:29:01,760 Speaker 1: So you highlight an area for me that just kind 646 00:29:01,800 --> 00:29:03,680 Speaker 1: of feels like a long term issue, which is China. 647 00:29:04,200 --> 00:29:06,880 Speaker 1: I mean, if you they spend decades they being any 648 00:29:06,880 --> 00:29:11,840 Speaker 1: auto company Volkswagen, BMW, Mercedes, whatever, building brand value and 649 00:29:11,880 --> 00:29:14,480 Speaker 1: brand loyalty in a market like China, and in a 650 00:29:14,520 --> 00:29:17,720 Speaker 1: period of two years they've lost that. It seems like, 651 00:29:18,120 --> 00:29:20,880 Speaker 1: I mean, is that the real barish case for some 652 00:29:20,920 --> 00:29:22,200 Speaker 1: of these global auto companies. 653 00:29:23,400 --> 00:29:24,880 Speaker 4: It's a it's a big case. 654 00:29:24,920 --> 00:29:27,600 Speaker 11: So for the German auto makers, in the past few years, 655 00:29:27,840 --> 00:29:31,000 Speaker 11: China was the most profitable market, accounted for thirty five 656 00:29:31,640 --> 00:29:33,920 Speaker 11: of their profits. Now this year it could be as 657 00:29:34,000 --> 00:29:37,280 Speaker 11: low as ten percent, and you know what the market's 658 00:29:37,320 --> 00:29:39,640 Speaker 11: pricing is is that could be zero in the future. 659 00:29:39,640 --> 00:29:43,560 Speaker 11: And that's because the technology changing and the way that 660 00:29:44,160 --> 00:29:48,440 Speaker 11: startups in China are pushing through so quickly. They're really 661 00:29:48,440 --> 00:29:50,600 Speaker 11: fighting for market share at the moment and their future. 662 00:29:51,480 --> 00:29:53,960 Speaker 3: So then it goes back to my question, what does 663 00:29:54,200 --> 00:29:58,040 Speaker 3: the bottom for either US car companies or for European 664 00:29:58,040 --> 00:30:01,520 Speaker 3: car companies wind up looking? Like as the tariffs go 665 00:30:01,520 --> 00:30:05,280 Speaker 3: into place, as China keeps producing those really CHEAPVS, as 666 00:30:05,320 --> 00:30:07,720 Speaker 3: we have different restrictions here in the US, like what 667 00:30:07,880 --> 00:30:08,240 Speaker 3: is that? 668 00:30:09,400 --> 00:30:11,320 Speaker 11: Well, you look at what GM and Ford have done, 669 00:30:11,320 --> 00:30:14,440 Speaker 11: I mean, in particulate, it's looked at different markets and 670 00:30:14,440 --> 00:30:16,640 Speaker 11: if it's not profitable, it's pulled out of those markets. 671 00:30:16,760 --> 00:30:20,320 Speaker 11: So China's one example, Europe's another example. So it's whether 672 00:30:20,440 --> 00:30:23,560 Speaker 11: the German automakers take a view that can they be 673 00:30:23,640 --> 00:30:27,560 Speaker 11: profitable in China in the future, and many foreign carmakers 674 00:30:27,560 --> 00:30:29,960 Speaker 11: are saying no. Volksnagen at the moment is saying yes 675 00:30:30,000 --> 00:30:32,680 Speaker 11: we can, and they've got this long term plan and 676 00:30:32,720 --> 00:30:38,160 Speaker 11: they've invested in Xpeng so hopefully accelerate their transition. But 677 00:30:38,200 --> 00:30:40,600 Speaker 11: it's going to be very, very difficult for foreign carmakers 678 00:30:40,600 --> 00:30:43,000 Speaker 11: to continue to make profits in China. 679 00:30:43,640 --> 00:30:47,120 Speaker 1: So I mean again it feels like is there an 680 00:30:47,160 --> 00:30:50,120 Speaker 1: even discussion of whether they should be there at some point. 681 00:30:51,080 --> 00:30:55,280 Speaker 11: Certainly within the markets, but for the company itself that 682 00:30:55,280 --> 00:30:58,880 Speaker 11: they've invested heavily in China and they've got a plan 683 00:30:58,960 --> 00:31:01,560 Speaker 11: now to try and catch up with local producers, to 684 00:31:01,600 --> 00:31:05,440 Speaker 11: catch up with BYD, which is with this partnership with XPANG. 685 00:31:05,800 --> 00:31:08,600 Speaker 11: So they think they've got an opportunity because they've got 686 00:31:08,600 --> 00:31:10,240 Speaker 11: a good brand in China. 687 00:31:10,280 --> 00:31:12,440 Speaker 4: But it's going to be very tough. I mean, pricing in. 688 00:31:12,400 --> 00:31:16,040 Speaker 11: China is really really competitive at the moment, so the 689 00:31:16,080 --> 00:31:19,960 Speaker 11: point where battery electric vehicles are actually priced below internal 690 00:31:19,960 --> 00:31:22,760 Speaker 11: combustion in vehicles compared to that to Europe, where the 691 00:31:22,760 --> 00:31:26,600 Speaker 11: average battery electric vehicle is thirty five percent higher than 692 00:31:26,720 --> 00:31:29,120 Speaker 11: a ice vehicle, and they still can barely make a 693 00:31:29,160 --> 00:31:31,880 Speaker 11: profit in Europe, so yeah, it's a very tough environment. 694 00:31:32,480 --> 00:31:35,800 Speaker 1: Thanks to Michael Dean, Bloomberg Intelligence, Head of Global Autos. 695 00:31:35,520 --> 00:31:38,120 Speaker 3: Each week we look at research from Bloomberg n EF 696 00:31:38,120 --> 00:31:41,640 Speaker 3: previously known as New Energy Finance. The team in Bloomberg 697 00:31:41,680 --> 00:31:47,400 Speaker 3: the tracks and analyzes the energy transition from commodities to power, transport, industries, buildings, 698 00:31:47,400 --> 00:31:48,800 Speaker 3: and agricultural sectors. 699 00:31:49,040 --> 00:31:51,360 Speaker 1: This week we looked at carbon capture. After two years 700 00:31:51,400 --> 00:31:54,360 Speaker 1: of consecutive and dramatic growth, activity in the carbon capture 701 00:31:54,360 --> 00:31:56,160 Speaker 1: industry is starting to slow in the US. 702 00:31:56,400 --> 00:31:59,280 Speaker 3: For more, we are joined by Brenna Casey, Bloomberg BNEF 703 00:31:59,280 --> 00:32:00,440 Speaker 3: carbon Capture Analyst. 704 00:32:00,800 --> 00:32:03,240 Speaker 1: We first asked Brennet to define what carbon capture is. 705 00:32:03,720 --> 00:32:08,640 Speaker 12: Basically simply CCUS carbon capture, utilization and storage. It's kind 706 00:32:08,640 --> 00:32:12,640 Speaker 12: of just a way to abate emissions from heavy industry, 707 00:32:12,760 --> 00:32:18,240 Speaker 12: so things like petrochemical refineries, integrated steel mills, hydrogen blue hydrogen. 708 00:32:18,440 --> 00:32:18,760 Speaker 4: Okay. 709 00:32:19,240 --> 00:32:22,520 Speaker 12: Natural gas processing is a huge historical and use sector. 710 00:32:22,720 --> 00:32:25,760 Speaker 3: So basically there's some sectors that you cannot decarbonize you 711 00:32:26,000 --> 00:32:28,880 Speaker 3: and they have to exist, like you need cement for example. 712 00:32:29,080 --> 00:32:30,239 Speaker 3: So this is a way to kind of get them 713 00:32:30,240 --> 00:32:31,680 Speaker 3: out of the air, and then the question is kind 714 00:32:31,720 --> 00:32:32,960 Speaker 3: of what do you do with it? Do you reuse 715 00:32:33,000 --> 00:32:34,920 Speaker 3: it somewhere, do you put it somewhere, do you store 716 00:32:34,960 --> 00:32:37,520 Speaker 3: it in a rock or somewhere else. And it's been 717 00:32:37,560 --> 00:32:40,680 Speaker 3: a huge focus for a lot of companies, energy companies 718 00:32:40,720 --> 00:32:42,880 Speaker 3: and a like in oil companies for example, what has 719 00:32:42,920 --> 00:32:44,600 Speaker 3: been the investment cycle like and. 720 00:32:44,560 --> 00:32:45,719 Speaker 8: Where are we now in that cycle? 721 00:32:46,400 --> 00:32:50,640 Speaker 12: Yeah, So if we're looking particularly to the US, following 722 00:32:50,680 --> 00:32:54,479 Speaker 12: the Inflation Reduction Act, we saw this catalysis of not 723 00:32:54,560 --> 00:32:58,000 Speaker 12: only project announcements, but kind of you know Series A, 724 00:32:58,520 --> 00:33:01,640 Speaker 12: you know, lots of equity finance into that into the 725 00:33:01,680 --> 00:33:05,920 Speaker 12: market right now, as you know, the IRS has still 726 00:33:06,000 --> 00:33:08,520 Speaker 12: yet to address forty five Q. So that's the inflation 727 00:33:08,600 --> 00:33:10,960 Speaker 12: reduction Yeah. Yeah, So the Inflation Reduction Act, which was 728 00:33:11,040 --> 00:33:14,040 Speaker 12: signed into law you know, two years ago. Forty five 729 00:33:14,080 --> 00:33:16,280 Speaker 12: Q is an investment tax credit that the government is 730 00:33:16,320 --> 00:33:20,280 Speaker 12: proposing to you know, heavy emitters. They can if they 731 00:33:20,320 --> 00:33:23,480 Speaker 12: meet X, y Z requirements, then they can take this 732 00:33:23,600 --> 00:33:26,800 Speaker 12: credit and apply it to their tax burden. And you know, 733 00:33:27,200 --> 00:33:29,280 Speaker 12: kind of helps to mitigate the cost of ccs because 734 00:33:29,320 --> 00:33:30,920 Speaker 12: it's extremely capex intensive. 735 00:33:31,440 --> 00:33:32,959 Speaker 3: So if you store your carbon er get it out 736 00:33:33,000 --> 00:33:34,160 Speaker 3: of the air, you get a tax credit. 737 00:33:34,200 --> 00:33:36,400 Speaker 12: Okay, Yeah, it's like eighty five dollars per ton if 738 00:33:36,440 --> 00:33:38,840 Speaker 12: you store it, and then sixty if you reutilize it. 739 00:33:38,920 --> 00:33:39,640 Speaker 8: Yeah, exactly. 740 00:33:40,160 --> 00:33:43,040 Speaker 12: However, the IRS has yet to finalize the criteria, so 741 00:33:43,200 --> 00:33:47,280 Speaker 12: developers don't know what actually constitutes as a project that 742 00:33:47,320 --> 00:33:50,080 Speaker 12: can qualify for these sorts of credits, and so what 743 00:33:50,160 --> 00:33:53,760 Speaker 12: we've actually seen is not only investment taper off, but 744 00:33:54,200 --> 00:33:55,360 Speaker 12: just announcements of you. 745 00:33:55,360 --> 00:33:56,760 Speaker 8: Know, future projects into the sector. 746 00:33:56,760 --> 00:33:58,959 Speaker 12: Which what's kind of ironic is that if you look 747 00:33:58,960 --> 00:34:01,360 Speaker 12: at INVESTM numbers for last year for ccs in total, 748 00:34:01,400 --> 00:34:02,880 Speaker 12: it was globally eleven point. 749 00:34:02,640 --> 00:34:04,880 Speaker 8: Three billion higher than it's ever been before. 750 00:34:06,000 --> 00:34:09,560 Speaker 12: The US to come around two point eight billion of that, however, 751 00:34:10,040 --> 00:34:12,400 Speaker 12: that is all bolstered by just DOOE grants. So the 752 00:34:12,440 --> 00:34:14,839 Speaker 12: DOE has you know, these direct air capture hubs. They're 753 00:34:14,840 --> 00:34:18,800 Speaker 12: trying to throw money at growing out midstream infrastructure, so 754 00:34:18,880 --> 00:34:22,800 Speaker 12: trans like pipelines, the storage like storage basins you mentioned earlier. 755 00:34:23,600 --> 00:34:26,040 Speaker 12: But there's really no FIDS being taken in the sector 756 00:34:26,040 --> 00:34:29,160 Speaker 12: at all. Besides, I think it was the hydrogen Bomont 757 00:34:29,280 --> 00:34:30,360 Speaker 12: complex last year. 758 00:34:30,239 --> 00:34:33,720 Speaker 3: So FID is foreign investment decision final best financaim sorry, 759 00:34:34,040 --> 00:34:36,080 Speaker 3: And it basically means like, Okay, I have enough and 760 00:34:36,120 --> 00:34:38,160 Speaker 3: I understand enough of the economics where I can actually 761 00:34:38,160 --> 00:34:39,640 Speaker 3: like put money in the ground and like put a 762 00:34:39,680 --> 00:34:41,640 Speaker 3: shovel in the ground and do some stuff. And that's 763 00:34:41,640 --> 00:34:44,319 Speaker 3: where we're really lacking, which raids of the question is 764 00:34:44,320 --> 00:34:47,480 Speaker 3: it building this stuff is still too complicated? Or is 765 00:34:47,520 --> 00:34:50,160 Speaker 3: it the demand side? So I'm a company and I'm like, 766 00:34:50,200 --> 00:34:51,960 Speaker 3: I can capture your carbon and I can store it 767 00:34:52,040 --> 00:34:53,680 Speaker 3: for you, but how much are you willing to pay 768 00:34:53,680 --> 00:34:55,319 Speaker 3: for that? Is that part of the issue now? 769 00:34:56,000 --> 00:34:59,720 Speaker 12: Yeah, it's definitely kind of a sector by sector issue. 770 00:34:59,760 --> 00:35:01,040 Speaker 8: So we look to power. 771 00:35:01,480 --> 00:35:03,880 Speaker 12: We're seeing the most cancelations in the power sector just 772 00:35:03,920 --> 00:35:08,319 Speaker 12: because CCS is tremendously expensive and so for seeing a 773 00:35:08,320 --> 00:35:11,440 Speaker 12: project announced around, you know, thirty percent of those projects 774 00:35:11,440 --> 00:35:13,640 Speaker 12: in the power sector are like they're probably going to 775 00:35:13,680 --> 00:35:16,879 Speaker 12: get canceled. And that's because retrofitting with CCS adds around 776 00:35:16,920 --> 00:35:18,200 Speaker 12: fifty six percent. 777 00:35:18,719 --> 00:35:21,640 Speaker 8: To the total l COE. So it's eight hundred million 778 00:35:21,800 --> 00:35:25,640 Speaker 8: plus capex investments. If you look to something which how 779 00:35:25,640 --> 00:35:26,440 Speaker 8: did they recoup that? 780 00:35:26,480 --> 00:35:28,759 Speaker 3: Because that's about power, it's either the company is paying 781 00:35:28,800 --> 00:35:30,799 Speaker 3: for it or like I'm paying for it in my bills, right, 782 00:35:30,840 --> 00:35:31,719 Speaker 3: And that's the definite. 783 00:35:31,480 --> 00:35:33,200 Speaker 8: Way of how they recoup that cash. 784 00:35:33,080 --> 00:35:35,279 Speaker 12: Especially if you know the forty five Q credit if 785 00:35:35,360 --> 00:35:37,600 Speaker 12: you are in amit or to qualify, it only lasts 786 00:35:37,600 --> 00:35:40,040 Speaker 12: twelve years. A lot of these lifetimes are twenty twenty 787 00:35:40,040 --> 00:35:42,560 Speaker 12: five years, and so yeah, how do you kind of 788 00:35:42,560 --> 00:35:43,720 Speaker 12: make that investment back. 789 00:35:43,520 --> 00:35:48,600 Speaker 1: Hard and capture losing some momentum because maybe just the 790 00:35:48,719 --> 00:35:51,120 Speaker 1: transition to green in the US has become a little 791 00:35:51,160 --> 00:35:53,480 Speaker 1: politicized and maybe it's losing a little bit of impetus. 792 00:35:53,480 --> 00:35:55,800 Speaker 1: Are we falling behind other countries for example? 793 00:35:57,080 --> 00:35:59,000 Speaker 8: I mean, the US is definitely the market leader. 794 00:35:59,080 --> 00:36:03,160 Speaker 12: So globe there's around four hundred and twenty four million 795 00:36:03,160 --> 00:36:05,839 Speaker 12: metric tons of CU two capture capacity do to come 796 00:36:05,840 --> 00:36:08,719 Speaker 12: online by twenty thirty five. Now, out of that, around 797 00:36:08,760 --> 00:36:11,520 Speaker 12: one hundred and sixty I think it's one sixty three 798 00:36:11,840 --> 00:36:14,920 Speaker 12: million tons is based in the US and following you know, 799 00:36:15,000 --> 00:36:18,000 Speaker 12: the forty five Q Inflace Reduction Act. Even though there's 800 00:36:18,040 --> 00:36:23,080 Speaker 12: you know, hiccups here, hiccups with transparent storage permitting, we 801 00:36:23,160 --> 00:36:25,080 Speaker 12: do see the United States as the best place in 802 00:36:25,120 --> 00:36:27,480 Speaker 12: the world is to kind of build one of these projects. 803 00:36:27,560 --> 00:36:29,520 Speaker 3: So what companies do you feel like have the real 804 00:36:29,560 --> 00:36:31,080 Speaker 3: deal it? So I talk to a lot of companies 805 00:36:31,080 --> 00:36:32,560 Speaker 3: and they're all going to try and sell me their 806 00:36:32,560 --> 00:36:35,279 Speaker 3: carbon capture products and like why they're the best, and 807 00:36:35,360 --> 00:36:36,960 Speaker 3: how their economics. 808 00:36:36,400 --> 00:36:37,600 Speaker 8: Work and all that stuff. 809 00:36:37,840 --> 00:36:39,560 Speaker 3: Who actually can make this work? 810 00:36:40,040 --> 00:36:43,120 Speaker 12: Yeah, I mean, if we're looking at power and hydrogen, 811 00:36:43,120 --> 00:36:44,880 Speaker 12: which are the two leaders right now, kind of the 812 00:36:44,920 --> 00:36:46,400 Speaker 12: biggest players here, we're. 813 00:36:46,239 --> 00:36:47,440 Speaker 8: Seeing Occidental Energy. 814 00:36:47,520 --> 00:36:50,680 Speaker 12: So not only are they looking to retrofit they're you know, 815 00:36:50,840 --> 00:36:53,839 Speaker 12: natural gas assets with carbon capture, but they're also kind 816 00:36:53,840 --> 00:36:57,759 Speaker 12: of taking this first mover run into the direct air 817 00:36:57,800 --> 00:37:01,160 Speaker 12: capture space. So that's really interesting company to watch in 818 00:37:01,200 --> 00:37:04,840 Speaker 12: that kind of little corner. There's also you know, like 819 00:37:05,040 --> 00:37:08,560 Speaker 12: air products for hydrogen excelon MO. It's primarily these oil 820 00:37:08,560 --> 00:37:11,759 Speaker 12: and gas majors that are moving around in the market 821 00:37:11,800 --> 00:37:15,520 Speaker 12: because they have you know, just previous expertise, but they 822 00:37:15,520 --> 00:37:18,279 Speaker 12: also understand the geology, how to store these things, how 823 00:37:18,320 --> 00:37:21,520 Speaker 12: to build you know, these big expensive projects. 824 00:37:21,560 --> 00:37:24,279 Speaker 8: So yeah, air products oxy All right. 825 00:37:24,280 --> 00:37:27,480 Speaker 3: Thanks to Brenda Casey, Bloomberg bn EF Carbon Capture Analyst. 826 00:37:27,719 --> 00:37:30,439 Speaker 1: That's this week's edition of Bloomberg Intelligence on Bloomberg Radio 827 00:37:30,719 --> 00:37:33,280 Speaker 1: providing in depth research and data on two thousand companies 828 00:37:33,280 --> 00:37:34,560 Speaker 1: and one hundred and thirty industries. 829 00:37:34,760 --> 00:37:37,480 Speaker 3: And remember you can access Bloomberg Intelligence through Big on 830 00:37:37,520 --> 00:37:39,160 Speaker 3: the terminal. I'm Alex Steel. 831 00:37:39,080 --> 00:37:41,600 Speaker 1: And I'm Paul Sweet. Stay with us. Today's top stories 832 00:37:41,600 --> 00:37:43,960 Speaker 1: and global business headlines are coming up right now