Surveillance: GM Results with Barra

say that joining us now is the GM chief Mary Barra. Mary, fantastic to catch up with you. I want to whip through the south Side research off the back of these numbers, Dan, i've's wet bush by laying major groundwork for a game changing EV strategy city a positive outcome. It increases our conviction by Jeffries and Philippe Hut is a little bit more balanced on this. He seems surprised by the volume guide two to three times bigger than what they've heard

coming into this. Where's that coming from? Mary? Where are you getting that visibility from? Well, as we look at the year, we've been working closely with the semiconductor manufacturers. Are tier ones to make sure that we you know, have the best possible forecast for what we're gonna be able to build this year. Recall, last year we were hit a bit hard with some of the COVID impacts

in Malaysia. So that's where we see, um, you know, the opportunity to see on a global basis, you know, greater than increase from a production perspective, and that is assuming that we're not going to have any you know, dramatic changes from a COVID or a supply chain perfect perspective. But we feel very confident. And also what's exciting is we know there is strong demand for our vehicles. So I'm very h I think twenty two has the opportunity to be a very good year. I want to hit

that to mind story in just a moment. Clearly there's a balance a play through last year, and you're now that balance with a stalk performance. We saw a balance between the chip access and pushing it towards the high price vehicles. Now it's almost the opposite, and I think there's some disappointment around that. Mary that you get the better access, you get the better volume, but the average price comes down. How do you balance that? How do

you optimize the balance there for twenty two. Well, you know again this we had record performance this year and again hats off to the GM team with all the work that they did, the challenges that they overcame. And as we get into next year, you know, not only are we going to be selling across many more segments. Last year in twenty one, we focused on our most in demand and capacity constrained vehicles. So as we open it up to you know, other allocation to chips, to

other products. Uh. You know, it is a different from a profitability perspective, and we also are investing in growth and so you know, we're investing for the future. We know there's a huge opportunity not only from an EV perspective UH and a V perspective with crews, but also across the board from a software perspective, whether it's ICE or E V s H. We see an opportunity to

really grow from a from a services and subscriptions perspective. Mary, you've gotta help me with the numbers what it comes to capex and investment. The numbers we've seen in this industry just huge. The team here at Bloombergh came out with the story FOD yesterday, throwing another twenty billion at this transition. You said, quote, we're going to be increasing spending that much is clear. Is the answer always going

to be more? When you're asked how much you need to throw at this story, Mary, Well, you know we've already announced between twenty and twenty five that we're going to invest thirty five billion dollars and we've been investing. That big announcement yes or last week in Michigan seven billion dollars for conversion of a plant to build trucks

EV trucks as well as our third battery plant. We're pulling ahead our fourth battery plant will be making that announcement in the first half of this year, as well as an additional EV truck plan. So we're seeing the demand for our products and we're seeing customers willingness to adapt VS. That's what's calling causing us to pull ahead. You know we're we're going to continue to do that, and you know we've got the capability to do that, and you'll just see our number grow as we continue

to invest in e v a V capability. Right at the end of the cool yesterday you talked about the dividend murray, where is it? When does this dividend come back? What you need to achieve to bring them back into apply? Well, you know, we've had a capital allocation framework for the last several years where first we invest in opportunities to generate a return on invested capital of greater than as well as have an investment grade balance sheet, and then

return the rest to shareholders. And that's what we plan to do. But with all the opportunities we see in front of us to accelerate on EVS, accelerate a VIS, and accelerate the software defined vehicle, we want to make sure we have maximum flexibility and that's why we're not reinstating the dividends as we currently assess the situation. Uh, you know, there's still are other mechanisms to return value to shareholders, but we want to have the flexibility to

really support our growth. Do you think bipacks make most sense? Is that what you're trying to say that? Well, again, you know, I think the first there's three pillars of our capital allocation framework to me, Uh, making sure we're investing in creating value and growth think is the best thing we can do for our shareholders. But if you know we at the end we have excess capital. We are going to use one of the mechanisms to be able to return that to our shareholders. You've mentioned demand

a few times. Let's go through the numbers. The numbers are staggering. You've talked about this pent up demanding the American market of several million vehicles on the e V side. I was looking through the orders the reservations. Fifty nine thousand hummery vs dred and ten thousand Electric Chevy Silveradoes. I'm sure that if you open the books again for some of these names, they'll go again. They'll go again. Mary, have you ever seen demand this great in this country

for this transition? You know, I just am really encouraged by how much interest there are in evs. I really last year we started to see a tipping point, and that's why last year we really end in. In twenty we started accelerating our push to e vs. And you know, we're uniquely positioned from a traditional o EM because we have the ultim platform that we started working on several years ago. We launched the first vehicles off of it, share with the Hummer, and so that's enabling us to

move quickly. But also have scale from a battery perspective, that will I think give us a really efficient um margin as we make these transitions. So I'm very enthused with the interest in EVS the reservations, as you say, and I also think it goes to the fact that our products are ev products off of ultium offer a lot of advantages from a range from a performance, uh, you know, flexibility. So, uh, this transformation is pretty exciting. I can tell you're excited about it. I can tell

you're excited about the margins. I can tell you're excited about it. Debob, here's the delicate question. Why does this industry then need credits, need tax credits? Well, as you look at EVS, we do need to get in uh customers into electric vehicles. We've seen that, Uh, the incentives do help drive ev adaption. And remember we have aggressive goals from a country from frankly, a country perspective and a global perspective from what we need to do for

the environment. So we think that will help, especially as all companies work to get battery costs down. I don't think it's for everything, but I think right now to get where we need to go from a market perspective from a climate change, it's appropriate to do. What we're asking is is let's make it a level playing field. We were a first mover, we're already out of today's credits, and we're saying let's uncap them so customers can truly

buy what they want. When you say make it a level playing field, what do you make of the extra credits going if this was implemented and pushed through from the White House, what would you make of the extra credits going to companies that are selling cars made with domestic union labor. Does that sound like a fair playing field to you? Well, you know again, everybody, every workforce has the right to unionize, so it's a choice that

they're making. We're General Motors were you know, represented in the United States by the UAW and unions around the world. We've done a lot of great work together. So um, you know again, every company can make their choice and the workforce can as well. Well. The White House has got to make a choice too, and you support it. I want to go through these credits. They're pushing for a four thousand, five d dollar additional credit of vehicles

that are made using domestic union labor. You get an additional five dollars for manufacturers that use domestically produced batteries. And Mary, one thing that I've been confused by is why the push here. You've just gone through the demand story. It sounds fantastic, you're excited about it. I see the same thing at Ford, and I see a demand problem here. I see an infrastructure problem which the government could be focusing. Gone, Mary, why do you think we should be focusing at all

on tax credits? You sat in the White House in the last couple of weeks and you supported that. You said, getting strong demand is very important. But we have that demand. So Mary, again, why should we be focusing on that in any way, shape or form. Right, Well, I think what we're looking for is we have strong demand. But you know, when you look at how many EV sales

there are today, we're in this single digits. We need to buy end a decade to get to UH and so that's where you've really got to have the right portfolio. That's what we're working on. But you've also got to move the customer and get their interest and so to get to the levels of adaptation. We're just in the

early phases right now, and I think that's important. Also, infrastructure EV charging infrastructure is very very important, and the bipartisan bill that was passed for infrastructure, I think is going to move the infrastructure along along with what startup companies are doing. We're investing about a quarter of a billion dollars in charging again to make sure that there any customer, even customers that only own one vehicle, know that they can count on their electric vehicle for their

daily drive. Mary, as you know little mention of the Bowl Ev in your letter, some people have been raised to a question as to whether that whole project gets can as you read, so your plants around the country, Maria committed to that. Why does that still makes sense? I'm sorry, could you really I couldn't hear your question. Sure, just on the Chevy boat, just on the boat itself.

There's been some problems there, as you know, some people have raised the question as to whether you should just ditch the whole project and focus on what you've been doing subsequently, which seems to be attracting massive demand. Why does that push there's still makes sense? Well, first of all, it's a great product. I was most recently driving a Chevrolet Bold Ev and it's just a peppy vehicle fund

to drive. You know, our customers that have bought Bold evs or evs are some of the most satisfied CUSS summers in industry, not just with the GM product, so it's a great product. We had a very specific issue with lg Are, our manufacturer, the batteries. We have worked with them. That's been corrected and we're seeing uh, you know, strong interests and so that the Chevrolet Bolt, EVY and eu V will be a very important part of our near term, near term for future for evis. You've got

an ev market share goal for this year? Mary? What is it again? I'm sorry you're coming in muffled. I'm so sorry. That's okay. I'm happy to repeat myself. Don't worry. Do you have an e V market share goal for this year? And if so, what is it? You know, we're working between twenty two and twenty four as we accelerate vehicles to sell uh four hundred thousand um or planned to build and sell four hundred thousand vehicles by the end of three sou and that's just going to

ramp up from there. So we're very very optimistic about the strength of our products and as we build them. Uh again, we're seeing with the reservations they're sold. So that's our goal for the three time frame. The puny question for may have also taken the ham of the Business round Table in America. So for you personally, what

are the big goals there for you? Well, again, I think business when we look at the transformation um that's happening in almost every industry, I think business working together and also being a partner to move the country forward is very important. So I'm very proud of my b r T role and representing companies as we look to to move to the future and you know, really create a stronger country. So uh, really important opportunity and the

work that beer T does is so important. So I'm honored to be able to have the opportunity to lead them, and we honored to have you with us this morning. Thank you for being with us, looking forward to catching up through the year ahead. The General Motors Chair and CEO Mary Barra right now with the Cruel Institute, a global chief economist and that's an app phrase from Megan Green with terrific transatlantic academic. We're Megan, thank you so

much for joining this morning. How do you do a three months moving average on something as emotional is the American labor economy, do you single point at Friday grim number or do you smooth it out to a moving average? I think you have to smooth it out. And also it's it's not like bad numbers on Friday will be a surprise to anyone. It's been very well telegraphed by the White House, the Labor Secretary, that FED um the numbers should look pretty disappointing relative to what we've become

accustomed to. But I've never ascribed too much meaning to any single data point, whether it's the jobs data or any other. And we know that our labor market is healing. The questions, as you guys pointed out, is really where did all the workers go? Uh? And are they ever coming back? I think that's what the FED really needs to know to be able to gauge exactly how tight the labor market really is and therefore how they should

be setting uh their rate path going forward. Megan, A hallmark of your work is to wait of the data. What do you make of the present rate height? Guessing parlor game? Is there any value to it? Are you are you saying to yourself. I gotta wait for pictures and catchers to see what the red sox will do, and also to see what the rate structure will be, yeah, more the latter. To be honest, Tom, I think that in six to nine months we're going to be having

a very different conversation around inflation and demand. Demand will be weakening over the course of this year. I think supply chain constraints should start to ease over the course of this year, and the supply of labor should also start to ease as the virus abates. Now that's assuming there aren't more variants, and certainly not more deadly variants. But as we move through this omicron weave, I think that a lot of workers will jump back into the workforce.

Those who are staying home either because they're sick or they're taking care of someone who's sick, those who haven't gone back into employment from retirement because of concerns of being sick, and those who have had a financial cushion uh and so have stayed out of the labor market but or have burned through them. We'll have to jump into the labor market as well, and I think that will take a lot of upper pressure off of wages

and therefore off inflation too. So you know, it just seems like a competition to see who can get more hawkish about the FITS path going forward. At the moment, I think that conversation should change towards the second half of this year. This does feel, though, again like a pivot point, and I talk about not just whether people come back to jobs, but which jobs they come back to. I've seen a number of surveys showing that people in manufacturing jobs are looking for office jobs, are looking to

get retrained, want that flexibility to work from home. You've seen a complete sea change in terms of healthcare and education. How much will that increase wages in those less love professions now that really got hit the hardest and more at the forefront of the pandemic. Yeah, I think you're right. People don't want hourly services jobs, their low wage, low hour jobs. People I think have been holding out based on the financial cushion they have received from stimulus measures

and to avoid going back into them. But it's some point there's going to have to be some capitulation, and so I do think those jobs will be filled again. Also, something worth mentioning is that immigration is massively down over the past two years, and it was a lot of foreign born workers who were also filling those jobs. Going forward, that should abate now that we don't have the same

kind of travel restrictions that we had before. Biden's proposed some easing of immigration restrictions, and so those hourly services jobs should see some wage games. It's the worker bees, the non supervisory workers who are actually seeing the greatest wage games right now, and that should spread into uh,

you know, leisure restaurants and bars as well well. Meggan, That's what I was gonna gonna say, you are, We're going to see outsized increases in some of these areas where people have to be enticed back away from the cushion that they're depleting in order to not have to go to work there. So I think wages have already risen quite a lot, and so as low income households in particular burn through their financial cushion the fastest, as that cushion evaporates, I think the wage gains that we've

seen will entice them back into the labor force. So I think that the supply side issue will probably a bit. I mean, the best cure for high wages is high wages because people get pulled back into the labor force, and particularly once this wave starts to abate, it already has to some degree. I think we'll see the labor supply shortages as well. Megan, can you just help me in understanding how some of the data on Friday will be put together, how it has been put together the

perfect guests to do this. Just got this note from Cantile Economics. It's going to share it with our audience just quickly. Because the ADP figures count everybody on payroll as employed, regardless of whether they worked or not, they do not capture the full hit from the omicron related

search and absentee is UM. They go on to say, with an estimated five million Americans isolating mid month, we suspect close to half a million of those won't have been paid at all during the survey period, which wasn't captured in the ADP figures, but will show up in non farm payrolls. Megan, can you just explain the technical situation around how this data is put together and how it might show up on for day. Yeah, so that's

right there. ADP is often not a great indicator of how the nonfarm payrolls will go though the direction of travel seems to be correct or similar in both these cases.

Assuming that we get a disappointing headline figure for tomorrow, but it is down to classifications and so a number of people weren't able to go to work either because they had symptoms of omicron or they had omicron, and they won't have received a paycheck, and so that doesn't show up in the ADP data, which is only people who are receiving paychecks, but that will show up in

the non farm payrolls data. Megan, I want to go the Transatlantic Act with you, and right now what we're seeing is maybe a yield structure in America that migrates higher and a europe yield structure which some would say stays where it is, maybe even with negative interest rates. What is the outcome for our viewers and listeners of such a spread, a difference in yield across the pond. Well, we're seeing monetary policy divergence, which should put yields up

in the US, particularly at the short end um. Whereas the ECB, you know, investors have started to price in hikes for this year, but at a much more gradual rate than what we're seeing in the US. And that means that you know, you'll still be facing negative yields in Europe, whereas there will be much more positive yields now. I don't think the long end will go up significantly

in the US. I've been asked why would anyone by a tenure government bond with a two yield um, And it's because you could go elsewhere Europe, Japan and it will be negative. So you know, the US Treasury ends up being a cleanert shirt in the dirty laundry basket like green waterful as all whites with your experience sound of Europe too. At the Crawl Institute and the Harvard Kennedy School, Evan Brown joined US now multi Asset Strategy

has an ups asset management. I want to ask you that question, Evan, don't worry I'm gonna wash you about the note that you wrote with Luke. What I thought was fantastic. What we've seen is evaluation centric adjustment. You don't think it's a growth scare. How do you draw a distinction between the two, Evan, Well, I mean a lot of it is just looking at prices cross asset and if it was really a growth scare. You'd expect to see were widening in credit, which we just have

not gotten. You wouldn't expect to see e M outperforming, which is what we've gotten. So we look cross asset oil to holding up really well and uh, and so we don't see it in price. But also it just doesn't really make a lot of sense economically when you have income growth almost double what it was last cycle. So it's still strong economy, still strong nominal GDP. And as Powell said last week, we're in a different cycle

than the last one. Well, let's sit on the valuation scare for a minute, Evan, How do we determine what the scare should be in terms of what real rates are going to be with a FED action and and sort of how do you game that out with respect to what's already happened in markets? Yeah, so I think, uh, I think the first of all, the point is that the FED wanted this right. They want a tightening of financial conditions in their view, is a way that's going

to cool inflation down the road and extend the cycle. Now, you know, it's up to them to decide how much we you know, we saw quite a hawkish FED. But then now you're seeing a parade of FED speakers this week saying, hey, we're not going to do fifty basis points at the next FED meeting in March. So um, you know, it's a it's a dance between the FED and markets. I think the frothier areas of the market will continue to have headwinds, you know, unprofitable tech, these

kind of things. But the more cyclical areas of the market, I think we're unfairly punished in UH in this more recent sell up, and those are going to be the big gainers over the coming weeks and months. Kevan, what do your analysts say about the ability of corporations to adapt to sustain margin? The first thing I did yesterday with Google is go to look at the margin. Then it was a fractional lift off the parlor game of

guessing margin. But what you know, sector to sector, the two analysts you've got it ubs, what do they say about the ability to sustain margin? I mean, margins are fine in the data. We don't quite have what we've seen over the over the last couple of years, but so there's some moderation there. But overall, the message that we're getting from corporates, is is really strong pricing power. Uh. And so we just look at the data and yes, the analysts internally and we just even with higher wages,

we see that higher pricing power. So it just does not appear to be a major concern at this point. Evan, where are you in the team on the rest of the world at the moment. Big surprise for some people through the first month of the year was the relative at performance of site emerging markets. It's not something you think can persist. I think it can. Actually we have

the difference between this year and last year. Is China's easy, right, We're not going to see the boom and credit growth that we got the previous cycle, those boom bus periods, but they've put a floor on GDP growth and that has implications for the rest of the world. So emerging markets I think can have a better year. We think the dollar is kind of weekends from here at least stops strengthening. Uh. Europe, I think we'll look back on

two and say this was Europe's year. It's not just the solid global growth outlook, but got all the green spending, You've got more political cohesion. Certainly than we saw last highcle and you've got really strong balance sheets and you've got inflation right and that should put upward pressure on on yield um and higher yields is good for financials. So so I we really like the rest of the world, and we think the rest of the world will will outperform the US for the first time in a while

this UH, this year high year. It's haven't helped out the US banks in a big white yea today, Evan, do you have more confidence they will in say, you're relative to what we've seen in the US. Well, I think there's a bigger valuation just count and UH in European banks not I think I know and UH and and also you know you have more room. I think the boon yield at zero percent that is extraordinarily low.

We all we all know the presence of the central bank there and and down beat whether down beat whether Europe and and UH Europe can sustain growth and inflation over the over the medium term. But the valuation story is there, there's a lot more room and UH in boone yields to to reprice, which should help European banks and UH and you know, it's a really it's a really positive story. We're seeing it in the earnings as well. Evan, Thank you, buddy, send down best to the team until too,

He's going to catch right now. And a broader conversation with Michael Nathanson. You've seen him quoted everywhere. Is he deservedly should be since is a senior research analyst at Moffatt, Nathanson barely describes the fact he owns a phrase, content is king. Michael, I want to go to Apple developing five fifty thousand, almost ten football fields of square feet in Culver City out by Irvine. You know there this gigantic plant, our Google, our Apple. Are they gonna take

over everything? Um? It depends on which business we're talking about, Tom, I would say Apple and video probably not Google and advertising probably yes. Um, but Apple doesn't need to dominate video. They've done great on their own. But you know, the Google print to me is just it's mind blowingly good when you think about how large that company is and how fast they're growing. We have heard from day one day Google went public that there was a constraint on search.

Everyone including me, has been wrong. What's your terminal? What's the X axis of your terminal value. When you look at search, do you go out five years or fifteen years? Yeah, Tom, that's a that's the point, right that everyone fades growth on search to like mid single digits, we go out

fifteen years on it. Because what is happening, Because big picture search is getting more valuable in the world as many of us stopped watching linear TV, as Apple has put up blockers on you know, for privacy, searches goes up in value because we're giving people intention right when when you when you search, you're telling people what you want to see, and that is a perfect lead for advertiser. So that's been our thesis that people underestimate search and

just a long cycle of growth here. And that's that's the essence of the call on Google better than you think, Michael. Do you think that this reduces the emphasis on diversification that a lot of people are looking for with the cloud with YouTube, which actually disappointed you know, It's funny because list, when we look at the stock, you don't need divertification for the stock to work. We just look

at the core ad business. But I think in Google's world, they have so much talent in terms of technology talent, they have, so they have an incredible advantage of machine learning. They'd be foolish not to take that and lean into other businesses. So, um, we're not giving them a lot of credit for Google Cloud or other beds. But YouTube in our world, you know, is really underappreciated asset. Again, going back to the big picture, it's rising in value,

so we don't underestimate YouTube. So YouTube and search alone gives upside for the stock without the other thing is really kicking in, Michael, how much is Google and anomaly and sort of an idiosyncratic story of incredible strength and dominance versus a representation of an economy that's really recovering with advertising spending going up so much, even without travel picking back up to pre pandemic levels. Yeah, that's that's a great question. I think it is idiostocratic because of

searches value in the world and YouTube. When we wrap up earning season for media and you know and other small small add companies will not grow nearly this fast and they'll have problems with structural headwinds here and Google has a tailwind that is, you need to Google, Michael, what are you doing, Craig think you yesterday of a t n T doing a ballet from fifteen billions spent on dividends to a model nine billion. Oh no, we're not going to do that. We're gonna do eight billion.

I believe the stock was down six percent, don't you know. I believe that was the number. What does it say about escapades in entertainment? Right, Well, Craig is here, he would take a bow because of the past five years he's been saying t T can't sustain the dividend. It says that, um, the cost of competing and streaming is incredibly high. That's been our call on streaming, and you know, and it says in the telecom world the cost to compete there is and probably high too because all the

promotional activities being done because the five G build out. Um, you know, these businesses are a lot more challenging than I think the market thinks. And again it's easy when you look at Google to say that's where you want to be. You know, we're we're relatively negative on streaming. We're they're pivoting out away from and telecom as well in terms of mobile telecom. Michael, just a final question from me. I think it's important not to let moments

like this slip or slide. This is a one point a trillly in dollar name moving ten percent. Michael, what do you make of that? Multi trillon dollar names moving this much? These are huge amounts of money. Well, Jonathan, they grew their revenue, they grew their top linet. Just search has been around for twenty years, right, Search grew

faster than YouTube this quarter. Um and again, if you stop back and think about what we learned this pandemic, this is about digital transformations and Google has the best position in advertising because of what advertisers need to do. They need to pivot to search and need pivot to YouTube. And even though this has been around forever, the transformation of the pandemic has accelerated budgets. And I agree. When I first started covering, I'm like, this cannot be as

good as it looks. And now six years later, they keep going. They really do just phenomenal. Michael. We appreciate you support on this program and your contribution this morning, as always said, thank you, Mite, Michael Nathan said of Moffatt Nisenson. This is the Bloomberg Surveillance Podcast. Thanks for listening.

Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course, on the terminal. I'm Tom Keene, and this is Bloomberg