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Boeing shares have really been under pressure lately, investors waiting detail to from flight data equipment. So here to tell us more about it, break it all down for us. George Ferguson Bloomberg Intelligence, Senior Aerospace Defense Airlines analyst, George, I want to start with the flight data equipment to start here. Have they found all of them? And what particularly will they be looking for when it comes to this equipment.
Yeah, so I'm not totally sure if they've found all the equipment anything, had found some of the recorders. I think once they get into it, I assume you're talking about the Air India crash, right, correct, correct, When they get into it, I think one of the items are absolutely going to focus on is going to be what was going on in the engines and that Air India seven eighty seven. You know, look at Boeing seventy seven can lose one engine and still take off and gain altitude.
So the videos we saw circumstances indicate that both engines potentially were not producing enough lift. So my guess is that's where the focus is going to be is on
what was going on in the engines. It was eleven year old airplane, so we think that what it all is said and done, probably not going to be a manufacturing issue, either at Boeing or ge from original manufacturer, and probably going to be some sort of engine issue, which I think would probably you know, put Boeing not in the responsible category, you know, for that that crash, even though obviously something we're never happy to see and you know, very sorry about that.
George, You've in your coverage of Boeing and your discussions with us, you've always made sure that we focus on what's important. That is the deliveries of aircraft. June was a great month, wasn't.
It looked pretty good. So we see about US sixty deliveries. Of that, I think we had maybe forty two or so seven thirty seven deliveries. Seven thirty seven is the money maker, so that's super important. Of those forty two, we're focusing very closely on how many were first flown
in twenty twenty five. And the reason we're doing that is we know Boeing has a lot of inventory airplanes, so if they're boosting deliveries through inventory airplanes, that's indicating to us that the factory isn't as strong as we would hope. What we're seeing right now when we look at Syrium data is five of those forty two airplanes are inventory deliveries airplanes that were flown previous to this year, So that indicates it something around thirty seven Max's came
through the rentin factory in June. That's a pretty nice number. That corresponds pretty well with Boeing CEO's indication that they were producing at a thirty eight ish through put in the factory and that they were going to be breaking into forty two's levels sort of in the back half of the year. And so this absolutely confirms I think the improving health of the Boeing production system and that retin factory.
Now, George, you mentioned CEO Kelly Ordberg. What's the war on the street. How has he been handling this new role? I mean, a lot of pressures on him.
Yeah, I mean, I think when it's all done, it's going to be a function of did he get quality improved, did he improve throughput? Did he generate cash? Did he improve the balance sheet of Boeing, you know, sort of stave off any downgrades? And right now I'd say the report card would be pretty good for what Kelly Orbrick is doing.
And George, you also told us that, you know, tooling up these factors to crank a production, it's not as easy as it sounds. It's a little bit more difficult in manufacturing and automobile coming down the line here, and that goes to the labor issue. You need some pretty highly trained labor and coming out of the pandemic, that was a challenge. How is Boeing doing these days on that front?
Yeah, So, you know, if we measure it from the throughput in the factory, it looks like it's it's doing better. We're hearing, you know, better sort of noises from the supply chain that labor is stabilizing. I think we see in the country right the labor market isn't as sort of white hot as it was coming right out of the pandemic, especially for you know, some of this manual labor that they're looking for and so I think that helps stability. That stability allows you to go ahead and
train people and through put. So it appears to us all all those indicators that you know, labor stabilizing qualities improving, and that's definitely having Boweing benefiting from it.
George, you mentioned deliveries earlier. The Paris Air Show is a huge event for these airlines. Yes, yes, how did how did Boeing fair coming out of that?
Yeah, So we haven't seen a lot of orders for Boeing recently, and we you know, we didn't see any Paris air Show right they had pulled out. I think just as they're monitoring the developments of that Air India crash. But we really haven't seen a lot of orders recently for Boeing. I suspect that given the tariff backdrop, you're just not going to see a lot of orders for
Boeing until that tariff backdrop gets cleared right. Boeing has one factory they build seven thirty sevens at it's in the US, So terraffs between US and the rest of the world always get in the way. That has to get cleared.
Up, George. Great stuff has always George Ferguson's senior airspace depends in airlines unels.
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We're going to keep it here kind of in that AI tech space. I want to go to Man Deep thing. He's Bloomberg Intelligence senior tech industry analysts. So Man Deep, we have this sign of just how competitive the AI space is for talent. So you have Meta possibly poaching Apple's top AI executive, offering this big, big, big payout. Explain to us first of all, who this guy is and how much are they offering him.
Well, I don't know the exact dollar amount what they're offering, but clearly Meta is going big in terms of poaching the top AI researchers. We saw that with the scale AI aquahars, they pretty much post the founder and look, I think they want to assemble the top fifty AI researchers that are out there who have got published papers.
And they are paying up in this case because they've made all the big investments in terms of compute, in terms of infrastructure, but they don't have a cloud business or some other form of monetization that you know Google has or a Microsoft has. So from that perspective, I think it's crunched time for them to really show that, you know, they can develop an ecosystem with their large aguage model, which has been underperforming relative to OpenAI, Google
and Cloud. And I think it's the founder Mark Zuckerberg who really is going all out. I mean, you can't expect any other CEO to be that aggressive with paying five billion dollars for fifty people. Literally, that's what the expense that we are talking about Facebook. A Meta as a company has over seventy six thousand employees with an expense space of one hundred and fifteen billion. They're adding five more billion for fifty people. That's all we're talking about.
Wow, that's an order magnifade. Yeah, all right, so it's clear that metas all in. What does this mean for Apple?
This?
If I were an Apple Cheryl, I'd be concerned here A, I'm losing talent, but B I've already it's coming from an area where I feel like I'm under invested already perhaps I'm already behind. What do you think this means for Apple?
I mean, clearly everyone on the research site realizes that Apple doesn't have the big AI cluster that these companies have, and you know, generative AI is all about having a large cluster, training your model on that cluster, and then really building from there. So from that perspective, Apple has lagged behind. And if you're a top AI researcher, there are better companies to work for right now, so I'm not surprised, you know, a top AI researcher has ended
up taking up the offer. But for Apple, look, they're going to use a combination of partnerships and some on device AI investment, which is what they have done in terms of, you know, their own model efforts. They're going to partner with cloud open AI, probably Google as well once the anti trust issues are over, and that's how they're going to provide the functionality. As long as it's cloud based. They have the app infrastructure to offer AI for on device AI, they have to do it natively
at the operating system level. You can't really leverage the large acreage model from open AI on device because you have to really open up your operating system, which Apple won't do.
I have to add some kind of AI in my resume.
I think.
On this, Maddie, what kind of tone does this set for the industry, what kind of messages sending?
I mean, to my mind, this is a very high risk play right now. The market sentiment is Meta can do no wrong. They are making all the right moves with getting these you know, big AI researchers, but at the end of the day, it is you know, they're
doubling down on capex, adding more opics. So from a spending perspective, Meta is going all in, and so you know, once it starts to weigh on free cash flow and the returns are not there, which is why I said, you know, with everyone else, you see the AI monetization. You know, if you have a coding agent from Microsoft
or Google, they are monetizing it with Meta. All these are upfront investments with the hope that if we'll add more engagement time across their family of apps, they will probably have a killer AI product that they'll be able
to monetize with in addition to their recommendation systems. So the stakes are getting higher and higher, but clearly they are doubling down in terms of their investment, and at some point the monetization question, kay King, Probably not this earning season, but maybe a couple of quarters from now.
All right, Man deep Seeing, big, big numbers. That's his companies, folks. They just they traffic in huge numbers, huge investments, huge revenue, huge, huge free cash flow. That is the state of global technology these days, centered in the United States. Men Deep Seeing senior techannels for Bloomberg Intelligence. We appreciate that, and again Meta going all in, not that they weren't before, but it's just kind of another example the type of investments they are making there.
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I think from the pandemic, we all became familiar with this concept of supply chains and global supply chains and where stuff comes from. And boy, when the ship stops sailing, that's a problem. And do we need to bring some of that stuff closer to home? And that's one of the reasons I think for President Trump and his focus on tariffs here. But let's get a sense of what the global supply chains are looking at now and how they may react in a world where tariffs are higher.
Brandon Daniels joins the CEO of EXEG. He joins us from Chicago. Brandon, how do you put into context all this talk about tariffs and kind of what it means for the global supply chain and how we get stuff, where we make stuff, where we import stuff from. How do you guys think about that?
Absolutely? Well, thank you for having me on. It's good to talk to you guys today. I think when we think about it, it is a reflection of a major shift in priorities across across all countries from a global commerce perspective. Right, Like, when you think about what the United States is doing and what the administration is doing,
is there they're trying to prioritize three things, right. The first thing that we've in our discussions and in our talks with the administration, they want to bring back manufacturing where the United States can be competitive. And that's that's what our customers are utilizing our AI tools today and our multi tier supply chain visibility to understand where can they actually source in the United States in a way
that is at parity with their global sourcing requirements. And so that is mostly focused on where labor arbitrage has been taken out of the equation. So think things like additive manufacturing, Think things like you know, largely automated production floors. You know, those are the areas where you're starting to see major cost collapse in between emerging markets and more sophisticated markets, because the cost of the manufacturing equipment it's the same across the globe, the cast of the land.
I mean, there's there's parts of North Texas that are cheaper than parts of heav A, China. And with the volume of operators necessary in these factories going down and them having to be also more higher skilled, uh, the the major labor arbitrage effect kind of dwindles, and so they want to move those areas of automated manufacturing back to the United States. And so I see our customers focused on those commodity areas as well as you know,
some of the more specialized areas that require automated manufacturing floors. Uh, that stuff coming back to the US. The second thing is national security and economic security. So from a national security perspective, you know, there's a there's a core focus on semiconductors because AI is the future of our national security capacity, whether it's in managing you know, UA s and drones, or it's in you know, fighting cyber attacks. AI is where it's at. And then the other area
is in pharmaceuticals. It's actually keeping our you know, medical supply chains clean UH and independent. And you know, obviously we pulled back the veil on that in COVID Exeger was the technology utilized by the federal government to purchase seven billion dollars of goods and to do it in a way that didn't in a way that we could get it to the healthcare frontlines quickly and in a way that didn't allow for fraud, waste, abuse, and adversarial investment.
And I think they're looking to try to expand that and trying to bring back pharmaceutical manufacturing, medical device manufacturing to the United States. And so when when I look at this, I see those two first strategies getting you know, sort of being prioritized. The last one is honestly to ramp up our actual external UH tariff collection. You know, there have been estimates between thirty and one hundred billion
dollars of transhipment per year. You saw this in the deal with Vietnam, where it was twenty percent tariffs and then forty percent tariffs on expected or potential transshipment goods. Right. So one of the things that we've seen is China has used this sort of global economic coercion to create veneer centers of manufacturing across the globe, and the US is trying to crack down on that to level the playing field.
All right, bern I hear you got to talk about a couple of things, so AI pharmaceuticals. One of the things you mentioned in your notes is how auto is there going to be the best case study and how nuanced this policy really is? Can you dig into that for us?
Yeah?
Absolutely, so auto manufacturing is a great case study of where all of this might be going. I don't think we'll end up with just blanket country level policies. And I think those blanket country level policies will get nuanced down to the HTS code or to the actual sort
of segment or sector of goods, right. And I think that they will get nuanced down to a place where you know, the recognized dependencies we have on critical minerals or specialty alloys, or on specific goods that are indigenous to some of our allies, you know, where those are necessary for us to do the manufacturing in the United States. I think those goods will become subject to exceptions or
exemptions very similar to USMCA so. So automotive is a great example of this because basically, you can have fifteen percent of your auto that's being manufactured in the United States.
You can have fifteen percent of it be parts, components, and goods from other places, and your entire tariff burden can be offset by the three point seventy five percent tear credit you get on the vehicle's MSRP, right, and so it's almost like you have your tariff free if you have fifteen percent of the goods coming from everywhere else.
And that's because we realize that in many cases there are things that the US doesn't make yet, and it's going to take a while for the US or allies to build those things right, and we want to give you know, people the ability to have some leniency there.
Red headline crossing the Bloomberg terminal, Trump says August one, tariff deadline won't be extended. We'll have more reporting on that. Brandom got thirty seconds left here. When you talk to your customers, who's going to pay tariff costs? Is there going to be the importer or the manufacturer, the distributor or the consumer or how are these tariffs going to be worn by the economy.
I think the consumer is going to be the last to feel it. And I think, you know, the fact is this is going to be absorbed somewhere in the supply chain. In twenty eighteen, when we had the regional Trump tariffs on steel, you know, the entire defense industry, the entire automotive industry, airline industry, they all ate it, right because you just needed the steel, yeah, and you didn't and you didn't want to affect the end market.
I think that the consumer is going to be the last the feeling on this fr I.
Hopefully that is the case. Brandon Daniels, Thank you so much. Brandon Daniels. He's the CEO of Exeger, joining us from Chicago, Vias zoom talking about tariff talk about supply chains, fascinating and fluid situation.
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