Credit Suisse, Inflation, And Tesla (Podcast)

you know who's doing what in equity underwriting? Don't you get bored of that? It's always Goldman Stacks right at the top. What's not this time, big guy? It is China has an investment called citic C I T I C and they're kind of number one interns of equity issuance. I want to figure out what's going on there? So what are we doing? When we want to talk about

Wall Street, we go to Alison Williams. She's been covering the investment banks on Wall Street for decades, first at Morgan Stanley Investment Management and for the last i'm gonna say thirteen years. She was one of our absolute first hires. At Bloomberg Intelligence. Umus Williams, Senior Global Banks and Asset Manager Analysts for Bloomberg Intelligence. Allison talk to us about CITIC securities. Who are they? What are they? And boy they got they're pretty big here there. They beat up

Goldman Sacks, so they are. But there's two key things going on, which is UM. You know, there's no denying the slump here in the US in terms of I P O S. And really Asia is the big driver of of issuance that we're seeing here to date. CIDEC is a key player in their local market, and so UM to some extent. If we take a step back and we look at equity issuance excluding Asia, you would still see Golden Sacks at the top of that table.

So Goldman Sacks and Morgan Stanley City JP, Morgan Bank America if we sort of exclude the Asia market, but definitely in Asia, some of the local players doing very well there. And given that that is where we're seeing UM the majority of the action this year, it's not surprising that that those local players are sort of topping the global table. So Alison, with the SMP down this year, no surprise that there having been a lot of new

equity issuance or equity issuance issues in general. Here is there a sense that there's a huge backlog out there and when the market, you know, rallies off the bottom, that will see more activity. How does that typically work? That's been the hope, and so I think for most of this year what we've heard from the global investment banks is that pipelines are stalled, and so we hadn't necessarily seen pulling of deals. We've just seen sort of the backlogs sitting there, and so it really has um

come down to lack of execution. UM. But I think that some of the banks may have been sort of holding out September and October sort of the key months or you know, the key busiest and says, we get into this second half UM, and with the tougher markets in September, we wonder if we're going to be hearing in a couple of weeks some of the decaying of those pipelines from the investment banks. Alison, how important are

the league tables? I never worked at a bank. I did cold calls at a bucket shop for a while, and then I interned at a broker dealer. But in terms of um, the IB guys how much and and gals how much do they care about the league tables and their their ranks? Well, two things they do care very much. Um, they care about the bragging rights. Of course, you know we do want to be the bankers, want to be the ones getting deals. Um, they do care

about having the bragging rights. But as Paul will tell you as someone who helped to drive the numbers behind those league tables, is that you know, the league tables can show any given bank as number one depending on how you formulate the bad league table. Yes, you massage those and the mom in the number of deals priced between Tuesday and Thursday. You know that's how we did. But a bank will a bank or us will you

walk in? Will you you walk into your boss's office with the league table and say like, give me more money? You know I moved us to number two from number five or no. I usually just would just say pay me more money. I'm walking across the street. But those days are long gone. Allison remembers those days. Alison, let's switch gears here. My good friends at Credit Swiss. Boy, we were awesome back in the day, but they cannot

get out of their way. Here is there any future for the Credit Swiss investment bank maybe outside of Switzerland? What is it? What is it? We saw the cost to ensure Credit Swiss debt rise fifteen percent, like over the weekend, we saw the shares um you know, collapse this morning. I don't know why, Alison, what, What's what's

driving that? What's driving that is that we have number one, a tough global market, right and then on top of that, we have a bank that has said they're considering their options. There's a lot of uncertainty around what those options might be. UM. If one of the options includes a capital raise, it's always going to be tough UM for a stock to study when the amount of potential issuance and delusion is unknown.

And so I think in general, it's always a tough time when a bank says the strategy is coming and then there's several weeks ahead of getting the actual effects because UM investors getting patient. Tough markets increase the impatience, and there's really nothing that management can say or do in the meantime to sort of study that. And so we've we've been seeing that with Credits Weasis management coming out a few times and saying you know, we're working

on it. We're working on it. But um, as we know from prior periods of market stress, UM, it's just tough to instill confidence when the markets are behaving, especially um, when the global broader market is tough. Alison, I mean, is there any scenario where they merge with the ubs or the Swiss government just not allow that. I still think that's doubtful. UM. I think that probably the more likely UM thing that happens is they do have to

capital intensive businesses, securitized products, trading, credit trading. These are sort of less tied to their core wealth business as we know, UM, A lot of investors with both UBS and credit sweets, the focus is always they want to own it for the wealth business. They don't like the investment bank. I think that credit suites can, um, you know, make a case that they do need like M and A and things like that, but it's less likely to

make a case on those other types of businesses. All right, Allison, good stuff as always. Alison Williams, Senior Global Banks Analysts, one of the all time great analysts Boomberg Intelligence, and there are many of them at the this boom looking at the yields. Boy, the two years down twenty one basis points four point zero seven percent, So back on that four percent watch here after a big, big move up in rates, the question is what does the fellow

reserve do from here? PREA miserable managing director and global head of rate strategy at TV Securities joins us P. Thanks so much for taking the time here. Really appreciate it. Alright. The Fed has been very clear with its messaging it's fighting inflation. Um, some folks are saying they need to pause here, they need to take a break. What do you think is gonna happen? Thanks for having me on, so you know, I think it's much too early for

them to be taking a pause. Um. In fact, we've heard from a bunch of FED officials in the last week reinforcing the message from Jackson Hole or the September FED meeting that they're on a mission. They need inflation much lower. Inflation is sticky, inflation is broad based. It's just too high. So I think they're still going we're looking for another seventy five in November, fifty in December,

and then continued the hikes next year. I think they really want to see inflation monthly prints getting to point two point three in that range before they can stop hiking. So, you know, we think there's still a long way to go. I know, financial conditions have tightened, but inflation is too high and the economy is slowing. But they wanted us they will be paying ahead, and so I think we all should be uh, you know, expecting that pain to show up. I think the question is just how much

pain are they willing to tolerate? And this is just starting. Yeah, I was going to ask the same the exact that exact question, how much pain are they willing to tolerate, especially considering it's going to hit lower income uh families and consumers hardest. Um, And we're seeing in the UK how bad that plays out. You know, when it's impossible for two million people to remortgage or you know, too expensive, they're gonna have to be fire sales on homes there.

And then when you start to see you know, insurance markets um start to need a bank ail out. You know, how close can we get to that before they back off? Sure? So I would say inflation is also highly regressive, meaning it hits the lower income parts of the population much harder, and so if the FED is just focused on that, and they will see the labor market is still strong, and they'll see inflation being still too high. So that

still remains. I think inflation remains public and me number one in terms of the insurance market that you're talking about, I mean, I think financial stress. We're we're going to have to deal with more financial stress. You look at this, this is of our shock. We're living through these massive moves and rates. I mean, treasury is moving twenty five base points a day, the stock market all over the place.

I think credit spreads um in terms of bail. I mean, I don't think the insurance industry in the U S or the pension industry is as leveled to that trade um as we saw in the UK. And we have not had that level of moves in the tenure. I mean, I'm shocked with the twenty basis point move, but the tenure is still below four percent. We haven't had the hundred two hundred basis point more higher. So I don't see that particular industry in the US being as vulnerable

as it is in the UK. But in general, I think when you get moves like this and growth is slowing without a fit put insight. I think it just tells you liquidity is paramount to prevent sort of forced being forced to sell at a time when you know liquidity is not great. So I think, is there enough liquidity to soak up the bonds that are going to get unleashed with quantitative tightening? So that's fair. But you know, it's been well advertised that the FED is selling or

effectively letting nine between treasuries and mortgages run off a month. Um. You know, I I struggled to find the marginal buyer, and which is why treasuries have been selling off. But at some point longer treasuries are going to be the risk asset hedge because we should be pricing in a recession. I think the recession is pretty much baked on the cake for next year in the US, and I don't

buy the shallow short recession argument. This could be much longer lasting because the FED is going to be reluctant to start to ease. They're so worried about the nineties seventies that I think they're going to be late on the way to easing policy. So you know, if we're in a recession, where should the tenure b I would say the FED should when maybe it's twenty four or twenty five that they start to cut rates, and they'll cut I think at that point too well below neutral.

So the tenure is attractive as a risk hedge, and so I think that's where the bias will show up against risk castles. Pretty we had some I s M manufacturing data today came out weaker than expected and even new particularly on the new order side, uh forty seven point one showing contraction there. What do you make of that? Yeah, so we have been actually looking for the weakening to

show up because for a couple of reasons. I mean, these were numbers were very high given that this was a good driven recovery post COVID recovery and goods demand we had seen starting to come off sharply. So I think that slowing is expected. It's not a huge employe mean indicator. So it's what I'm more interested in is

I s M services. Have we seen the consumer? And I think that's going to be the early sign if the consumer is reducing spending because real wage growth for the U S consumers negative, meaning inflation is higher than the average. Early earnings. I think if I s M services, which is a huge employment uh early read, if that starts to slow down, I think that tells you that

the economy slowing. I don't think that stops the FED, though it gives them probably some caution about the pace of hikes, but that endpoint, it's all about inflation in the near term. Okay, really appreciate getting your time. Prove you know you're busy. Premiser a managing director in Global head of Rates Strategy at t D Securities here. So

some more movement up from the FED. Pre as talking about a recession, um, but perhaps you know, not be long, but maybe a little bit of a shallow recession there. So uh some more. We have to pay attention to this feed, of course, as it continues its fight against inflation. I want to get to our next guest right away. Jonathan Webb. He's the CEO and founder of app Harvest.

They are building some of America's largest greenhouses, combining conventional agricultural techniques with today's technology to grow non gmo chemical free produce. Jonathan, thanks so much for taking the time to join us here. Talk to us about what you guys are doing at APP Harvest. I know you're in Kentucky and that Appalachia area there. Talk to us about

what you guys are up to. Yeah, So we're building some of the world's largest controlled environment agriculture facilities to grow fruits and vegetables with less land and less water. And if you look at the US today, we imported about two thirds of our fruits and vegetables UH into the US and then the rest that we do grow here are mainly grown in grouch drought stricken areas of

the Southwest in California. So UH, climate disruption continues to impact farmers not just in the US but around the world. So we we have to use technology, build infrastructure and UH and be able to grow food year round with with less water and less land. And that's ultimately what we're doing doing here at a Harvest in Kentucky. So, I know, your first greenhouse in Morehead, Kentucky, it's going to span sixty acres and use less water. How do

you do that? Yes, So we by the end of the year, we'll have four facilities operating um of about eight million square feet in total. So just scale size and we'll be across strawberries, salad, greens and tomatoes. But ultimately we're we're using a host of different technologies that we combine into one system. Um and you mentioned if we we use about nine less water than open field agriculture and can get to about thirty times yield per acre, and we can do that no matter what the climate

is outside. So our general thesis is, you know, this is the third wave of sustainable infrastructure. Twenty years ago was renewable energy, ten years ago it was Tesla with electric vehicles, and then right now it's controlled environment agriculture. We're going to have to bring most of our fruit and vegetable production around the world into a controlled environment. Uh and and and ultimately were one solution, but there are a lot of different solutions that are coming out

of the market. When I grew up in Ohio, so, um, when I think of Kentucky and when I think of controlled environment farming, I think of the weed they grew there was very good. Reportedly, are you just doing um produced Are you also in the cannabis business now we're we're focused on fruits and vegetables. I mean the the convergence of technologies that can be somewhat similar the LED lighting Uh, that that's benefitted any any grower is something

that we're benefiting from. But ultimately, we're building facility US to supply fruits and vegetables to the largest grocers, so our our customers or Costco, Walmart, Cromer, Publics, um and and a whole host of variety of fast food chains and and just our focus as fruits and vegetables. But you'll see those technologies kind of go back and forth depending on on what the industry is. But we're we're focused on bringing fruit and vegetable production back to the

US and doing it in control environment. Why do you think, Jonathan, the stock price has suffered so severely? I mean a year ago, um, app Harvest was trading for over six and now we're looking at a dollar a D nine. What what are investors misunderstanding? Yeah? In a year and a half, we went to forty five bucks share forty down to two bucks. Um Yeah, I mean, look, we're we're investing and and and the long long term here at app Harvest. We're building facilities that will operate twenty

thirty years. Uh E. Those four facilities are not operational yet, they'll be operational later this year and you know, we we had a couple of stumbles last year. It was our first first crop, first season producing and selling to a grocure and we we went public via SPACK. I mean, ultimately, you know, you look at why are we down? Well, you know, SPACs are down, Tech growth futures down, uh E s G down. I mean, everything is down. We're just on top of that. We're a little worse than others.

And I've talked to the founders of CEOs of a lot of good companies that went public last year, and we're focused on building a good business that will be here the next twenty years. And you know, we have to weather the storm the next two years with incredibly terrible public mark. But do you have all the capital you need? I'm you know you're not generating cash right,

so you need to invest in this business. As you said, do you have everything or do you need to go to the market again, Well, we're weighing our options and and you know we're building facilities, so utimately, how we finance those facilities could be private and you know, doing a sale lease back type model for each facility. So you know, every growth company is going to need capital.

It's for us how do we get the capital. We've been able to secure attractive debt financing from JP Morgan U s D, a robo bank, So you know, we're constantly trying to field how to get capital at the most attractive price. And obviously if the stock was at fifty bucks, that would be ideal, but there's there's other ways for us to access capital, and we'll do whatever

is prudent to do that to funder growth. Jonathan, I spent a lot of time in central California, and there are agricultural farms, you know, spending as far as I can see, But also as far as I can see are the irrigation systems that have the sprinklers just going on forever into the horizon. You just got to think that that the water issue is probably the biggest issue facing agriculture in this country. What do you guys do that's that's different, that tries to address that. I mean,

this will be the collapse and lifetime. I'm I'm thirty seven years old. I grew up in Kentucky. I saw the collapse of the coal industry when people said there was no way you talk to any coal minor. Fifteen years ago, Peabody Energy. Anyone couldn't get their head out of the sand. Uh, and we saw a collapse of an industry that people thought there was no way it would collapse. We will not be farming leafy greens in California. We're not going to be farming the way we're farming

in the southwest of the US. I mean, it is an existential threat to those cities. We do not have enough water. Eight of the water that's being consumed in the West is consumed by agriculture. So you can talk about like Kim Kardashian, you know, reducing her shower time. I know it's made a lot of headlines in California where cities have tried to restrict shower time or bout

that it's irrelevant. That's agriculture. So we're not going to be growing leafy greens in Salinas, Cally Valley, California in my lifetime. We we solve it by using facility like ours. We're using less water. So you do the back back to the envelope math. It's pretty simple. I mean, we're close with Tom Vilsack. We knew the last at Secretary Purdue. You know, there's a real lack of leadership in d C on either side of the aisle. I mean, no

one wants to touch this topic. Which politician would want to touch this topic and try to get reelected anywhere? So it's a hot button issue. We're not talking about it. The water issues of Colorado, River Lake, pal Lake Mead, all through California. It's only going to get worse here over a year. Uh. And maybe you'll have to get really bad before it gets better. But the good thing is there's technology and we can use that technology and grow with less water. And the private markets can help

solve this. But ultimately we're going to need d C to incentivize the private markets to put capital to work across farms in the US. All right, good stuff, Jonathan Johnson Webb. We appreciate you taking the time here, CEO and founder of app Harvests symbol a p p H and put that into a Bloomberg terminal. Uh. And you know,

talking about sustainable farming going farther into the future. When we move over to M and A into the power generation space, we had a German power generator r w E announced today a six point eight billion dollar purchase of Khan Edison assets. UM, I want to get to the you know what's going on. We don't talk about the green unit of Yeah, the green unit of CONDAD. Let's bring in Patricia Alvarez, Equity research Channels for Bloomberg Intelligency,

joins us from the our Bloomberg's London studio. Patricia talk to us about r w E. Who are they, what are they? And talk to us about this deal. Sure so, um are do we E is one of Europe's largest coal fire generators of power, but as well they're also one of the fastest growing renewable asset operators in the region, with exposure to previous exposure to the US and the UK UM and with their headquarters and sort of their

their core market in Germany UM. In terms of the acquisition, we see this as part of their their longer term strategy UH into pivoting into the US UM And while it may surprise some investors to see r w E sort of spending money outside of of Europe amid the current energy crunch we're having here, we see this as as a structurally sound strategic move for them, especially now with the policy support coming in with the Inflation Reduction Act.

And considering that Conddition's assets are mostly solar assets, which are the ones that are poised to benefit the most from this policy shift. We see this as um as as a sound sort of a strategic move for for our W. So Patricio, um, you know, I've lived in Germany the past five or six years. They were constantly talking about reducing their reliance on coal. That is, until um the Russians invaded Ukraine. Does that mean and now of course they've had to go to coal because they

don't have as much gas they had previously. Does that mean that our w is flush with cash as those plants are just generating so much electricity and I guess then revenue that they can use it in acquisitions like this, So that that's an interesting point. Um so are do we has has done well compared to other UM German utilities.

It's no surprise that other utilities that are more reliant on both gas supply and also gas fire generations, such as Uniper, which is now the poster child of the energy crisis, being bailed out by by the German government UM bought out. Yes, um UM of of the equity is now going to be nationalized. But our do WE does not have this type of exposure. Are do We does have a significant fleet of gas fired power, but at the same time it has the largest lg nite

fired power generation fleet. So in that sense they are both covered from from the suppliers side, from Russia being a thing supplies, but at the same time they have been benefiting from from higher prices on their dispatchable power, which is mainly lignite, which is also important important to note that is mostly mined within Germany UM, which is which is interesting to see because most of the hard core coming into Europe comes from Russia UM, so, so in that way are WE so it's sort of in

the sweet spot where it has been mining that lignite as well, or they have to buy it from minors before they burn in their plants. I most of their of their lignite is is procured from their own minds and uh or from domestic from domestic producers, so they are not exposed to to any supply disruptions, which is interesting, and they they're sort of an outsized and an outlier i'd say within the energy crisis because they are both fetching capturing these higher power prices. But at the same

time they're not having the same struggles as as other utilities. Alright, Patricia, good stuff. We appreciate you hopping on the line with this, Patricia Abas these equity research channels covering all that power generation utility stuff across Europe for Bloomberg Intelligence. Uh, we've got Kick Knolan who covers it here in the US. We've got Patricio uh in all of Europe as well, So we've got it covered for you from a Bloomberg

Intelligence perspective. We appreciate getting his thoughts there. So a green deal, Yeah, I'm wondering why Conde. I wonder why Conde isn't selling I mean, who sells green assets these days? Well maybe it's um just for money. Yeah, you know, you might want to take a high price when you can get it. And said it's almost seven billion dollar deal. I think it's the biggest green deal that I've seen. Good stuff. Looking at Credit Swiss the a d r

s four dollars to share kids, Oh my goodness. Up a couple of percent today, but down fifty eight percent year today. People are really looking at Credit Swiss. Here is you know, real concern for global Wall Street welcome Shiney Basket, Wall Street reporter for Bloomberg News and our Bloomberg Interactive Broker studio. Paul Daviess, Bloomberg Opinion columnists. I believe in our London in studio will find out soon enough. Credit Swiss it just seems like I can't get out

of its own way. What's the latest here from my former employer. Listen, so much of this you saw coming in the sense that if you were making comparisons to Deutsche Bank or other banks here, you end up getting into a bit of a vicious cycle when you're funding cost rise at the same time your revenue is under pressure, and the problem for credit swises. This is all happening also when people are very worried about the larger macroeconomic outlook.

I really like what Boaz Weinstein tweeted about two hours ago, and he wrote that I do think that European Bank SUBSIDIS is a good catch all tailheage for the myriad of problem swirling around, but he hated how this weekend was full about Twitter, full of how CS is about to go bust, because he doesn't believe that's going to happen. Now.

This morning I was talking to another large money manager who has made the point here that the reason he's not worried is because this is as a diamond of Switzerland. No one's worried. Literally, no, everyone I've talked too said Credit Sweez is fine, There're no liquidity problems. Paul Davis, your story the title no Credit Sweez isn't on the brink. I don't know who's aimed at, because I've heard no

one say that there are real problems here. And yet the shares fell eleven and a half percent at the start of trading today and it costs fifteen percent more to ensure the bonds against default. Why is that? Why is the market freaking out? Yeah, well I think that. I mean there are people who are, you know, worried

about what's going on there. I don't think there are people there are, not sensible people worried about it actually falling over in you know, the coming days or weeks, because like you say, it does have plenty of capital, and it does have plenty of liquidity, but you know, it has a real issue in that it's got to

work out how to restructure itself. It really wants to change its investment banks significantly and This is a very expensive thing to do in terms of how you deal with assets that you're carrying, all the people and the systems that you have. So you know Rose column the other week saying you can either do it slowly and expensively or quickly and expensively. It's you know, it's it's just and for investors, for credit investors, quicker would be

better to pay for it. I have a question for you, because you know, Deutsche Bank when they did this restructuring, they did it generally into an upmarket, which means when they sold assets they were probably able to get higher evaluations for them. It means that they were able to generate revenue at a at a faster pace because the market was more normal. And so how much is this broader macro environment going to burn cut it, sweetz as it makes this restructuring work for them. It's going to

be really difficult for them. And it's and it's you know, if they'd have if they'd have tried to do this year eighteen months ago, it would have been so much easier. And that's and that's because the two key areas where they are biggest and most concentrated in, which is leverage finance funding, private exty buyouts and what they call the Security sized Products division, which is also do with packaging up mortgages and leverage loans and this sort of stuff

and sending them into the market. Those things were so much better. Those markets was so much better eighteen months ago.

Now they are really unattractive, I think unattractive businesses. Everybody's been taking write downs on their liverage, blown positions, and on top of all of that, you know, what we saw in UK guilt market last week with with you know, pension funds running up against problems with their with their investing strategies illustrates a broader problem that we're going to have continually in markets with rising interest rates, higher volatility,

and you know, more chance of you know, unexpected problems emerging and just kind of you know, growth in exposure between counter parties, more collateral calls, more margin calls, all of this sort of stuff, and that is just a much costlier environment in which the trade and what we're seeing with credit sweezes, you know, CDs prices, credit folts, what price which is one of the things that people were getting very excited about over the weekend is is

a rise in the cost of guarding against the risk of that bank as a counterparty. And again this is what which banks or when it just lost revenues because it became expensive to trade with. So you know, it just speeds into credit sweet problems. The fact that everything is more volatile, everything is more difficult, everything is more uncertain h and everything is just more expensive to do.

But when do you know, Um, I was thinking when I was reading these stories over the weekend, man, I want to sell the insurance or maybe by the stock because clearly they're well capitalized and a lot of this is just market noise. So when do you see a turnaround? Uh? So, well,

they've got to come up with a good plan. They've got to come exactly so I mean, I mean hopefully if they were, if they could, they would be really good to do it sooner than that, because um, you know, the pressure is only going to build and and things. Your panic has a way of feeding on itself and that's that's that's the kind of a worrying thing. So

if they could come down it, that would be great. Well, really quick question here, I know, and we don't have a lot of time, laugh, But how quickly can a third teen ct ratio falls to ten or even fifteenth gotta fall to I mean, I don't have the numbers off stuff my head that you would need to suffer billions and billions and billions of dollars in losses, you know, And this is why credit Swiss size losses well much bigger than much bigger than ones that they've already suffered.

But I think you know, this is where Crede is now is different from Deutsche Bank in twenty sixteen. Deutsche Bank then had very same capital based and threats of huge fines coming at it, and was was was in a much weaker position, but still wasn't really in danger of falling over credit sweezes. I mean it would take it would take, would take more artgos and green sales, right, exactly, all right, Paul Davis, thank you so much for joining us.

Paul Davis, Bloomberg Opinion joining us from our London offices and chios actually covers all things Wall Street for Bloomberg News here in New York. What do you talk to her about league tables? We'll talk to her about league tables. We have her on more often. You can always talk about L E A G go on your Bloomberg terminal. I want to get over to our Bloomberg intelligence analysts. Who knows the most about cars? I'm pretty sure, both

in UH financial analysis terms and in actual UH motor terms. UM, Kevin Tynan, We've got a lot to talk about with you, but I want to start with Tesla Um. They made three hundred and sixties six thousand vehicles in the quarter, but they only sold three forty three thousand in a time when people are waiting six, eight, twelve months for vehicles. Why are they selling so many fewer than they produce. Well, you could argue there's demand issue there, you know. And

I look, it's not just them. I think we're we're in this little window here where UM. You're you know that consuemer is a little bit is a little bit tentative. Um. And you're going to see this from other automakers too. But supply has been constrained to the point where you're just not gonna throw good money after bad anymore. UM. And I would think that they want this sorted out and balance between supply and demand by Black Friday sales, you know, November sales, end of the year clearance sales,

kind of thing. UM. So there's this little period I think, you know, September October, maybe even the first half of November, where UM, the automakers will let demand fall where it will not chase it with incentives and discounting UM, and then make a push towards the end of the year. I mean that's what I was in Detroit last week, and I sat down with Mark Royce Um, the president of General Motors, drove around the Silverado EV, drove around in the new Corvette zero six that was sick, flat

plane crank um. He was saying, you know there or her book is full. Their pipeline is deep, um and you know, going going into next year, and they had a fantastic third quarter as well, but at some point, you know, it can't continue to demand now GM, I feel like it's not the high end for the most part. That well, I say that and their truck selfer sometimes

over a hundred thousand dollars. But so that that we imagine Tesla as more of a luxury car maker, right, but GM brings out new models Tesla, I feel like they've been making the same old tired designs for a decade. My alone on that Kevin well again, you know, it's more of a device maker than an automaker. And it's and I've said this a million times, you know, and from in the mindset of Tesla, it's not so much about the vehicle right about um, what it looks like.

It's just what it can do, sort of the way your phone is not about what it looks like. It's about all the you know, Angry Birds games you can play on it and whatever, um, you know. And I've feel like that's where they positioned themselves a little bit and then market positions them as a as a tech company because it's not so much about changing design and changing features and options and colors and content in the vehicle, um in the way that we're used to seeing other

automakers address those issues. Kevin, give us a sense of just the landscape here. I mean, you know, when I was growing up Detroit and the others, they made seventeen million cars every year. Are we going to go and there's tons of cars on the lots. You could go negotiate a little bit if you felt like it. What's the Is that world ever coming back? I don't think so. Um And and that's not to say never, but I don't think the automakers want it there, The dealers don't

want it there. The consumer wants it there only because of that haggling and the discounting and the incentives that were really the way the business in the industry ran was, We're going to produce these things to cover fixed costs and create generate cash flow, and then we'll figure out how to sell it tomorrow by throwing money at the problem, which is hey, ten thousand cash back or gero percent financing for you know, twenty months or whatever it winds

up being. And the automakers, now that the costs are rationalized, and that's something that's been happening since the bankruptcy period of eight oh nine UM through the pandemic, have gotten to the point where they don't need to operate in that way anymore. So, you know, an unhealthy seventeen million is what we were used to and now we're at

a healthy thirteen, fourteen, fifteen million. And I think, you know, from that side of it, from the business perspective of it, this is where the industry wants to be and as and has actually worked decades to get to. In terms of the dealership model, I've never understood why the US has this arcane system. How long until that's dead? I mean surely Ford and GM and Harley are going to sell their products through their own stores eventually. Look, I I am on the side of the dealer in this.

I think if you hate the dealership experience, that means that it needs to improve. And I and I don't question that. But could you imagine an automaker trying to sell what GM sells in the U, say, you know, roughly three million vehicles in the US every year. Directly they're a manufacturer that people would argue aren't very good as a manufacturer. Now all of a sudden, they're going to be a great retailer. I just don't understand how people think that way, that at volume you're going to

be a better retailer than a retailer. I mean when you need so they're gonna go there, right, I mean GM not. It seems like, you know, Royce said, you know, we debated this and we're going to stick to our guns here. But the but Farley has split off the e V s. It seems like that's why he hates the dealerships. Um Harley just split off its EV business to live Wire, which by the way, is on fire today in the markets. I don't know why. I mean, it seems they want to go direct to consumer as well,

but even Farley's model for now is not direct. They're just telling dealers that they have to invest in a charge point at their store. Uh, they have to train texts, they have to train their salespeople to understand the technology.

They're not saying, we'll do it directly. And what they're telling dealers also is if you don't want to invest in these things, which the estimate is about one point two million dollars per dealership, is to say, well, then you can't have e V inventory and you can't have EV demos um. So they're sort of forcing the dealers into it, but it's not an issue. Or they'll say you have to have an order for one before we send you one. You can't. You can't have anything sold

off the lot um. So it's not direct. I mean, it's a it's a way of doing it direct, but look, it doesn't work at scale. I think you as a consumer, we as a consumer, will have horrible experience buying vehicles directly and trying to get them serviced um from manufacturers if they assume the role of a retailer. I just can't imagine having a good experience at a dealership here in the US. You know, I've bought a fair amount

of cars and never enjoyed it. Now, on the other hand, go buy a nine eleven at Porsche in Berlin, operated directly by the company, and you have a great experience. Right. But talk about three million a year though not not a niche product or you know, a couple of thousands of units a year. It's very different at scale. You got I mean, as gmm, gonna go to Paduca, Kentucky to sell a car and you gotta put some local

person here. I don't know. So next time I'm gonna figure out what Kevin Tynan is driving because it changes like everything. They probably have a fact that they build corvettes in your Paduca exactly. Automotive analyst for Bloomberg Intelligence Bowling Green is in Great Town. Spend a lot of time there. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews a full podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm

on Twitter at Matt Miller three on Fall Sweeney. I'm on Twitter at pt Sweeney before the podcast. You can always catch us worldwide at Bloomberg Radio