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Ford and US it will take a nineteen point five billion dollar charge tied to an overhaul of its electric vehicle business after struggling to turn a profit. Speaking of Bloomberg's remain Bostic, Katie Greifeld and Matt Miller CEO Jim Farley says the overhaul is about moving towards more profitable vehicles.
Look for this announcement, Matt, It's really about moving to more profitable vehicles. You know, we're going to make in Tennessee now an affordable pickup truck. I think is going to really surprise the market. These are customers we know, not a lot of guestwork in terms of the revenue, the cost we need to get at and in war four vaner in Ohio. So these are going to be better investments for the company profit and all those hybrid sales, you know, those are really profitable vehicles for us.
All right, That was ford A CEO Jim Farley, speaking with Bloomberg's remained boss at Katie Greifeld and Matt Miller. After that nineteen point five billion dollar charge, Let's break it down and what does it mean for the company and for the stock. We do that with Steve Mann Global Autos and Industrials Research Channels, a Bloomberg Intelligencies based down there in Princeton, Steve nineteen point five billion dollars. That is a massive number for Ford. What goes into
that number? What does it mean about their commitment to EVS.
Yeah, it is a very big number. It pretty much backed up the truck on these charges. But the important thing is it's Clarinda deeck for next year. Right, there is a couple of earnings tailwind for Ford and actually to their competitors in the right as well. So the biggest, I think the biggest write down. Two biggest write down is the writing down the losses on their Mustang Machy. You know they've been losing around twenty five thousand dollars
on the edit line per vehicle, so it's massive. The other is the charges really on their joint venture with their battery supplier in Korea, So you know they're going to repurpose one of those plants for energy storage. So again it's really clearing the deck. There's a couple of tailwinds for twenty twenty six, which includes you know, Trump's loosening the MPG miles per gallon rule.
Yeah.
Absolutely, Just looking at the stock pretty much flat today, but the stock is at a fifty two week high of thirty seven percent. Does that reflect steve investors want these auto companies to kind of back away or proceed more cautiously towards their move towards EV's.
Yeah, definitely, especially in the US. And look, Ford is you know, not just pivoting in the US, but they're also pivoting in Europe. You know, they just announced a joint venture with Renault to develop evs over in Europe, and you know Ford doesn't really have a big presence in Europe, so they're taking that approach of partnership. GM is doing the same thing. Remember they took one point six billion dollar charge, much more modest than the nineteen
billion that Ford is taking. But you know GM is dialing back but keeping one foot on the EV's. I think they I believe they still think that they're you know, they still can succeed, especially when they introduced the Chevy Bolt in the New Year.
So, Steve, you know, we're many years into this transition to EV's, and you know, I know there are many there are European country, Scandinavian countries where it's almost one hundred percent of their fleets are are their new car sales are EV's. That ain't the case here in the US. With some hindsight here, why hasn't Why haven't EV's taken a better hold here in this US market?
Yeah, it definitely needs more, you know, regulatory support for EV to take uh grow because you know, ev UH there's a lot of three hurdles, right that consumers have to get over, which is the price, the range uh in, the convenience, right of charging infrastructure. You know, without government support to actually build that out, it's gonna take some
time for this electrification transition. I think a lot of people in the industry still feels that electrification, battery EV maybe hybrids in between it is the way to go in the future. But you know, I think there's there's a huge paradigm shift that consumers hair hair have to get over and it's it's really challenging to do that without government support.
Here, and it does not appear that this administration at least is willing to provide support that support.
How does the industry kind of view that, Oh.
It's it's it's very unfortunate. I think the gyration, the volatility that we're seeing in regulation is really not helping the industry. There's a lot of some costs that's been incurred with the shift to the emphasize evs. You know, all three many automakers around the globe have spent billions, you know, with that nineteen point five billion that Ford just written down, you know, it's probably about half of what they what they've invested in in ev already. So,
you know, we do need more stable policy. Uh. You know you mentioned Europe earlier. Uh, you know, Europe is in the same situation. I'll sink the European regulators really know what they want to do in the future. They're still continuing to talk about delaying going all evs by twenty thirty five, and you know that's going to have you know, some negative as well as positive implication to the global autumn auto industry.
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So we want to take a look at the companies to watch for in twenty twenty six. But how do you shrink that universe of investamble companies down into fifty that you really want to focus on.
Well, thankfully we have.
Bloomberg Intelligence and Tim Craighead, who is our global Chief Content Officer for doing just that. Tim is joining us right now. And Tim, you guys have really narrowed it down to companies to watch for for better or for worse. And you have a couple of themes to keep in mind here. What are the companies or what are the big themes that have the most companies that you really point us to?
Yeah, sure, thanks so, and we dive into some of those. So put a little bit of context. This group of fifty are all part of what we call focus ideas. It's a broader group of about one hundred. These are all high conviction ideas.
They have.
High conviction ideas where we see something very different from what we think is embedded in market expectations, and there's catalysts ahead to change the market mindset. Those catalysts coming up in twenty twenty six, and that's where these fifty come into and across the group this year, the biggest bucket are two. One is just simply new product innovation that is being rapped out into twenty twenty six. The other no surprise AI related, and some of it's the
tech companies. Some of it are companies that are feeding into the process and happy to get into some of those or other topics as well, such as cyclical pressures and competitive concerns on the negative side, and there's a couple of other things as well.
So on the new products, give us an example of a new product that you guys think might really be important for a company in a stock.
Yeah.
So, you know, it's interesting because some of these can be quite technical. Paul. You know, you think Annilan Pharma or Bridge Bio are two biotech companies that have new products coming. One of them relates to heart issues, another relates to dwarfism. But it's new products that will expand to market and drive we think significantly better revenue and earnings. On the other hand, there are some good old fashioned
names that you know and you love. Canada Goose has new product flow coming through that we think reinvigorates the top line. Brinker think Chili's, the restaurant are going through a whole new upgrade of their menu and up selling clients with good stuff like Margarita's with Patron and so the new product idea can expand across a whole number of different segments. It's quite interesting.
Yeah, I'm looking at Decker's as one of the new products companies you highlight and their ug is introducing styles to stay relevant beyond the winter months.
Let's talk a little bit about AI because that's.
Going to continue to be a big theme even as investors are starting to make distinctions between companies that are in it for good and those that maybe kind of fat ish. What are some new names that surprised you in terms of their making the list.
Yeah, it's it's interesting. I'll givia the new names and the ones that aren't on here, and I'll do the latter first. There's none of the big llms this year that are on our list or in video that's on the list that's not on the list. What you find are other either enabling technologies, so I think LAMB Research it's a semicap equipment company that makes the gear that
you make the semiconductors with. That's quite well positioned. TSMC, the world's largest foundry that's making the AI accelerator chips that feed into the llms, or even back up in the channel of how do you build out AI constellation, which is the US's largest nuclear utility. That's quite important if you're going to generate the electricity to drive the data centers to drive AI acs. Interestingly, European construction company they own Turner, which is the US largest construction company.
They've got the biggest order book for building out data centers. So there's a host of different kinds of ways you can think about leveraging AI beyond just simply the big lllms like Google or Open AI or things along those lines that you hear about.
Tim on this list, you and the BI analysts also highlight stocks that might be have pressure on the downside, whether it's cyclical pressure, competition, MNA, project delay. Give us a name or two that might have some downside risk this year.
Yeah, it's interesting on that. Think about what's going on from the standpoint of you're just talking about airlines from a European vantage point, We've got wage pressures that are rising, and for Air France KLM, a big chunk of their business is the Transatlantic market, which is getting more and more competitive, and with both of those factors, we think that there's risks to estimates. China Railway Group. It's a big state owned enterprise in China. It's one of the
big four engineering companies. And to the degree that China is shifting towards more technology and innovation driven investment and less away from bridges and roads and railroads and things along those lines, China Railway Group we think has downside risk. A couple little companies that are unusual but intriguing. Dino Polska, which you've never heard of, I'm sure, is a Polish supermarket company, but they've got two big European competitors that
are coming into the Polish market. Again, downside risk to earnings, and the same thing can be said about Joined Labs. We talked about a couple of positive healthcare companies. This is one of the contract research companies that helps a pharmaceutical do their drug development. And China is now looking to go broad and global with approvals on new pharmaceutical products. Join who focuses in on China is losing some of their business. So there's lotswo ways we can think about this.
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Some news in the food business today, Kraft Heines is replacing its chief executive officer get somebody new here starting January first. And this move follows a difficult period for the food company here and I know they made some announcements about splitting up the company. So a lot going on Kraft Heins. Let's break it down with Christina Peterson, food industry reporter for Bloomberg News. She joins US lifeg on our Bloomberg Interactive Broker Studio. Talk to those first
about this, the change at the CEO level. What's going on there?
Yeah, we had expected in September that the current CEO would lead one of the two new companies, specifically the one that is the grocery staples. They actually don't have official names yet, but that was a collection of the least profitable or less profitable food items there, including things
like lunch abules and Oscar Meyer Deli meats. The surprise came this morning that he is in fact not going to lead that company, and instead they are bringing in Steve kay Helene from Kelenova to lead the second company after the split has gone through. That is being called the Global Taste Elevation Company, and that's going to have Heinz, Ketchup, Kraft, mac and cheese, some of those beloved iconic products.
So that's the fast going part of the company, and the other one is kind of the you know, the equivalent of CNN, TNT and you know, the leave it behind assets that you know are you're managing a decline in What can you tell us about Steve cal Lane uh, the former Kelenova CEO. What is his approach his philosophy.
Well, I just spoke with him and he said that he's going to be focused on bringing organic growth to the company. We talked a little bit about focusing on some of the health and wellness trends that consumers are looking for, increasing offerings with protein, with fiber, with shorter ingredient lists, you know, the so called cleaner labels. So they'll definitely be leaning into that. It sounds like a little bit more. He also led Kellogg through it split.
The Kelag company split into w K Kellogg and then Kelenova. Both of those companies were then separately acquired. I asked him if he thought that could be a path here, and he said, it's hard to break the future. So not rolling it out.
Just looking at this stock here, Craft times compound it and your return over the last five years negative to percent versus the consumer Packaged Good Index up about seventy eight percent. Of course, the S and P up about fifteen percent. So what's what's been a challenge for Craft, heigns over the last number of years.
I mean, in general, the food companies are all struggling with this shift as consumers move towards healthier, less processed food. The company says that they just had too many brands and that splitting into two will help them focus on each component. I think that there is. Some analysts chatter that that's what companies say when they just need to
know spin off some of their less profitable items. But they will tell you that they expect both companies will have better value when there's an ability to focus more on the condiments and box meals and then on some of the other foods.
Chris Christina put this all into context for us when Paul talks about how you know this group has been kind of struggling overall.
We also saw that.
With PepsiCo with Coca Cola, I mean, they have had to rethink their strategy completely.
Yet there's just been a lot of movement in the food industry right now. PepsiCo announced some pretty dramatic changes last week. They're going to reduce the number of products they sell by twenty percent and lower prices in some of their key brands as part of agreement with activist investor Elliott Investment Management. Coke has a new CEO. I think Coke is in pretty solid shape. They've been doing their shares have been doing really well compared to some
of the other business companies. But yet, in general, the companies that I think are really tapping into this health and wellness interest in. Consumers are often the smaller startup brands, and the big companies are playing catch up not only with them, but some of the private label companies too that are really nimble and able to get some of these new products to market really fast.
Well I know, I mean you mentioned a private label.
I know when I go to the shop right bellmar New Jersey, we bluay a lot more private label than we ever used to. How's that's got to be a bummer for some of the like craft tients who spend my lifetime getting me to you know, brand up with cheese Whiz or something. I mean, now I'm going to store brand, That's going to be a problem.
I mean, consumers are definitely under pressure. They still need to buy food, and one of the things they do is turn to more affordable food, and often private label is an enticing option. Interestingly, we are seeing that more on the food side than on the beverage side.
Yeah that's true.
Yeah, I guess people are willing to pay for beverage. But I mean, I think about especially on the food side, it's that move towards protein. Everyone is obsessed with ingesting protein and making sure that whatever they are eating and when if they are on Ozenbic or something else that it's going to add to their you know, their healthfulness rather than you know, kind of take away from it. What are these companies doing in terms of competing better
against those startup brands? Are they looking to acquire them? For instance?
Yeah, for sure in some cases that we saw PepsiCo acquire Poppy, the prebiotic soda brand this year and Coete grain free chips. So they are in certain instances acquiring some of these companies, and I expect we'll see more of that in twenty twenties.
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Big Take Story, You know we love these Big Takes stories. These are great topics on who thinks of them? Great topics. They're really well reported, deeply sourced, all that kind of good stuff. A lot of times they have fun graphics for me to look at. So this one is really cool. Saudi sisters wheeled fifty billion dollar fortune as global power brokers.
I had no idea about these people, but our next guest does.
Devin Pendleton. She's a wealth reporter for Bloomberg News. She joins us live here in the Interactive Brokers studios. Who is the Oleyan Group? Olayan Group, O Lion O Lion. Who are the two sisters behind the Saudi group?
So it is Lubna and her sister, Hizam a Lion. They're both in their early seventies and they have been at the helm of this family enterprise for decades, for more than forty years.
Wow.
And they have fairly low profiles too. That's the thing that is striking. They have these low profiles, but they are known as steally negotiators.
Tell us what they've done.
Yeah, they've done an incredible job building this family business, which was started by their father, who was a really unbelievable character. He basically worked his way up from nothing. You know, he's not a royal, was not connected to the royals at a young age, but he built an oil servicing company which he grew striking deals with all sorts of consumer brand companies in the US, bringing them to Saudi Arabia, everything from Coca Cola to cheese its
to oreos. And he came over to the US in the early nineteen sixties, was very inspired by what he saw and bought some bank stocks, and basically his daughters took over that business which was sprawling. I mean it was in all sorts of sectors real estate, oil filled services, consumer goods, and hung on to those equity stakes, those
banking steaks. So now they have this incredible portfolio of investments in the US on Wall Street as well as this you know, booming multi sector business in Saudi Arabia.
So but people in power know these two sisters. They were at the White House recently t tell us about that. How do they subtly wield their influence?
They are not noisy people. I think it's one thing to do business and thrive in Saudi Arabia as you have to really sort of be be quiet, be force full, sort of no be a little bit deferential to you know who's really in charge, which would be the government and the king and the Crown Prince. But they have had long term ties with the US. I mean you really saw that at the White House dinner you mentioned Paul.
She was sitting right next to Elon Musk, but you know, arguably one of the most important people in the room because she has these connections on Wall Street through their long term equity investments. It's really important right now, especially because the Kingdom is trying to bring in a lot of inbound investment to transform their economy past oil. It's a big deal for them to be bringing in money.
And these Alliance sisters have had these connections for a long long time, so they're more important than ever.
So they have the connections with the right people in Saudi Arabia. How does their I mean when I think about prominent investors in the kingdom, I think about Prince Abolid been to Lull and how he's been very vocal about his positions. He's you know, often seen on media networks. You don't hear about these Alliance Sisters at all, and I wonder how much of that is. You know, it is part of their success story totally.
It's so so important. I think they are extremely discreete they are, like I said, like they really know their role in the kingdom, like they're important. They step in and help when they need to. For example, in Saudi Ramco IPO. Back in twenty nineteen, the Kingdom was having trouble kind of getting people excited and really getting the investors that they needed early to get backstop this IPO, they ask some influential families and the Alliance were one
that you know, they really showed up. That matters for the Kingdom, and it also gives them, you know, license to really expand their business as much as they need to and too being a position of power to help out, but also you know, have favors in return.
And the Bloomberg the Rich Go function lists their wealth of the family at approximately fifty billion dollars US.
Right, Yes, fifty billion dollars US. But I can guarantee you that that is a conservative estimate.
Is that right now?
I understand that they while they keep a low profile of these sisters, they have good relationships with some of the big folks on Wall Street and like Larry Fink of Blackrock and things like that.
So that's got to be useful.
Yeah, absolutely. I mean, just through one portfolio alone, they have their big investors in Blackrock, the equity investors. They have at one and a half billion dollar steak in black Rock they own an almost billion dollar steak in JP Morgan. It's actually where lived a Lion first got her start. She was initially working as a low level banker at JP Morgan right after college. So they're really worldly, very well traveled, and just tough in this sort of
very you know, meaningful business sense, like negotiators. They're very involved in their investments. People really described them as intense.
How hard was it to do the reporting on this story? I mean, these are people who intentionally want to keep a low profile. As you write, they came of age at a time when women weren't allowed to drive. They needed a mail guardian's permission to even get a passport to leave the kingdom.
So were people willing to open up about them? No, Skylet it was so hard.
In fact, me and my colleagues who worked in the story, we had been righting reporting on them for years, like just kind of keeping tabs and what they were doing and writing things down on our notebooks for years until we felt like we were at a point where we could put together a story. And people just did not want to talk about them because they respect how discreet they want to be, and especially when they found out that We were trying to give a sense of their
influence by tabulating their wealth. They were like, no way, absolutely not. You know, they're very modest people.
Have you heard from anyone in the Kingdom following the story.
Not yet.
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