April 22, 2025 • 25 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Tesla Inc. backed away from an earlier view for 2025 sales growth and pledged to revisit its outlook next quarter, a sign that tariffs, an aging vehicle lineup and the backlash against Chief Executive Officer Elon Musk are having an impact on the electric-vehicle maker.
The company on Tuesday reported adjusted earnings of 27 cents per share for the first quarter, below the average analyst estimate. Tesla omitted an earlier prediction that sales would return to growth for the full year, saying instead that it’s “making prudent investments that will set up” the vehicle business for growth. That will depend on factors including production increases and the “broader macroeconomic environment.”
“It is difficult to measure the impacts of shifting global trade policy on the automotive and energy supply chains, our cost structure and demand for durable goods and related services,” Tesla said.
The dimmer outlook for the year follows a tough 2024, when the carmaker missed its annual sales growth target for the first time in more than a decade. It also fell short of analysts’ expectations for first-quarter vehicle sales, which were released earlier this month.
President Donald Trump’s tariffs are compounding Tesla’s challenges, and threaten to upend automotive supply chains globally and drive up costs across the industry. While Tesla is expected to be relatively less affected than many carmakers due to its large plants in California and Texas, its vehicles nevertheless contain some non-US components, and the company has warned of a potential impact.
Today's show features:
- Tony Roth, Chief Investment Officer of Wilmington Trust Investment Advisors
- Julie Johnsson, Bloomberg News, Senior Aerospace Reporter
- Ross Gerber, President and CEO Gerber Kawasaki Wealth and Investment Management
See omnystudio.com/listener for privacy information.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg business
Weekdaily reporting from the magazine that helps global leaders stay
ahead with insight on the people, companies, and trends shaping
today's complex economy. Plus global business finance and tech news
(00:23):
as it happens. The Bloomberg Business Week Daily Podcast with
Carol Masser and Tim Steneveek on Bloomberg Radio.
Speaker 2 (00:33):
It's almost like people are forgetting that we have company
after company telling us they're concerned about tariffs.
Speaker 3 (00:39):
And it's interesting.
Speaker 2 (00:41):
Yeah, look, yeah, I want to see what Tony Roth
has to say about it. He's chief investment officer of
Wilmington Trust. Tony joins us this afternoon from Radner, Pennsylvania. Tony,
a recession, yes or no in the cards for this year.
Speaker 4 (00:54):
Well, tell me what it's going to happen with tariff policy,
and I'll tell you whether right right now, forecast.
Speaker 5 (01:00):
Is sixty percent that will have a recession, and that's
essentially probability waiting the fact that we may be getting
to a point we think we are getting to a
point where we're passing the point in a return with
respect to pulling back on the tariffs and what.
Speaker 3 (01:16):
Does that mean? What does that mean? What does that mean?
Speaker 5 (01:20):
Well, it means that even if they were to de
escalate now, there's been enough damage to supply chains, specifically
with respect to China, that and to the soft data
the consumer and the business confidence that there's going to
be a significant slowing and economic activity because of the
(01:41):
terroiffs and the uncertainty that have been released by the
administration in their very poorly orchestrated efforts to achieve a
very righteous goal. Unfortunately, and consequently we'd have a recession.
I don't know that we're there yet, but we're pretty close.
Speaker 6 (01:57):
Well, what is the when is the point of no return?
Speaker 5 (02:01):
Well, I would say certainly by Memorial Day if there
isn't a significant de escalation. And I think the important
way to I think understand the environment is there's China
and there's everybody else, and right now, for everybody else.
Speaker 4 (02:16):
There's a ten percent terariff in place.
Speaker 5 (02:18):
We can continue to trade with those countries, but with
China it's an effective embargo, and there are there are
many respects in which that embargo will be existential for
thousands of not tens of thousands of small businesses in
America and well, that will impact supply chains, will create
even deeper levels of degradation and consumer confidence. And so,
(02:45):
you know, what the administration has done here is really reckless.
I would have to say, the way that they've gone
about this, if you care about the economy, if you
don't care about the economy and you're just looking for
some other goal, there's some type of long term national
security is about you know, other sets.
Speaker 4 (03:02):
Of values other than economic ones, then this could be
the right thing to do.
Speaker 6 (03:06):
Well.
Speaker 7 (03:07):
To be fair, I think President Trump has thought about
tariffs for a long time, right, and I you know,
many would argue that his reasoning, just to look at
the other side, is that this is a way of
getting investment in the United States, bring back some jobs,
bring back a certain part of the economy, be it
(03:28):
the manufacturing that has really gone to the wayside over
I don't know, fifty sixty seventy eighty years. Having said that,
you know, we are a service led economy, and many
would also say that that is the kind of economy
you want to have. It's kind of whether it's financial
services and so on and so forth. Maybe a more
sophisticated economic economy. But I don't know do you think
(03:54):
that ultimately this experiment potentially that the present and it
is doing that it could bring back a lot of
investment to the United States and jobs and actually work.
Speaker 4 (04:08):
No, I don't not the way it's going about it.
Speaker 5 (04:09):
In fact, I think that he's causing the exact opposite
outcome as it relates to investment. As we're seeing a
unpredictably weaker dollar in terms of how we may get
we're seeing deep concern around the foundational bedrock of our
system being the US Treasury security as a store of value,
(04:30):
and so we're seeing a repulsive effect from a capital
and investment formation standpoint as it relates to manufacturing. The
kinds of the type of manufacturing that we want back
in this country, which is high value semiconductors, pharmaceuticals. Those
(04:51):
are the kinds of things that can't come back in
the timeframe that the president is going to be in office.
Speaker 4 (04:55):
And they can.
Speaker 5 (04:57):
Start to come back over that period of time, they
can't actually really come back in that time. And so
in order to create an environment where those types of
flows will occur, he needs to create an incentive system
works in the interest of companies to do that. And
right now, he's not doing that, he's creating. He's trying
to achieve a he's very cause and effect oriented guy,
(05:19):
and he's trying to be the biggest cause and bully
an effect that he wants to see. But companies won't
abide by that because there's no underlying incentive for them
to keep that manufacturing in place or even create it.
Speaker 4 (05:34):
In his three and a half years left of his administration.
Speaker 5 (05:37):
He's got to create a structure, and I'm not sure
that that's a nuance that he grasps.
Speaker 6 (05:42):
So what's an investor to do right now?
Speaker 5 (05:44):
Well, I think that we're at what I would call
this and this is a term I heard by a
guest on the TV channel Bloomberg TV this morning.
Speaker 4 (05:54):
I don't remember who it was. This is the wily.
Speaker 5 (05:56):
Coyote moment where the embargo on China is going to
be so damaging to the economy that you see Best
today coming out and saying, well, you know, this mutual embargo,
it can't last in the very near term.
Speaker 4 (06:10):
You're going to see the de escalation. No, I don't
have no idea what that means.
Speaker 5 (06:14):
But as I've described, we're at this moment now where
if we don't have a very very significant de escalation
with China within the next thirty days or so, but
certainly by Memorial Day we will be revocably into a recession,
and then the question will be how deeple the recession be.
And so as an investor, I think that you have
to stay right now.
Speaker 4 (06:35):
You have to stay tight to your long term goals,
and you have to.
Speaker 5 (06:40):
Essentially be ready if we got to pop in markets
to de risk if you don't believe that it's true,
or you have to be ready to re risk if
we go down into the mid four thousands, I think
where there's probably better opportunity. But right now we're sort
of in this no man's land between this range of
(07:01):
color it forty five hundred and fifty five hundred, where
we expect markets to sort of bump around now in
a very very volatile fashion until we get to a
much more certain and less damaging position from a tariff standpoint.
And by the way, they've grossly miscalculated in our estimation
the leverage that they have with respect to China on
(07:21):
multiple levels. China largely imports from US commodities they can
get from anywhere in the world, and we import from
them very critical supply chain components that range from rare
earth minerals to ninety percent of the plastic trays that
our poultry sits on or our meat sits on, all
(07:42):
comes from China.
Speaker 3 (07:43):
No, you're right.
Speaker 7 (07:43):
The longer this goes on, I think COVID started to
open up that window. We realized how much our supply
chain came out of China, but rare earths for something
Tim and I were just talking about.
Speaker 3 (07:53):
On our broadcast. Hey Tony, thank you so much.
Speaker 7 (07:56):
Tony Roth, chief investment Officer of Wilmington Trust, joining us
from Radner Pennsylvania on Royal Day. He says, all right,
Baucus ticking, that could be the point where there's kind
of no going back in the impact on the economy,
at least according to him.
Speaker 1 (08:08):
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Speaker 3 (08:19):
Live on YouTube.
Speaker 7 (08:23):
Boeing selling portions of its digital aviation solutions business.
Speaker 3 (08:27):
It's moved him.
Speaker 7 (08:27):
That's scene as helping the company really shore up its
balance sheet.
Speaker 2 (08:31):
With what you need to know about the sale and
what it may mean for the company's outlook. We've got
with us our LA bureau. From our LA Bureau, Bloomberg
News senior aerospace reporter Julie Johnson.
Speaker 6 (08:40):
Julie, good to see you.
Speaker 2 (08:41):
The unit that was sold, What exactly did it encompass?
Speaker 8 (08:46):
Okay, Jepson is really considered one of Boeing's crown jewels.
They produced navigation software and tools that are in the
planes of just about cockpits, just about every plane on
the planet. Uh really thought to be solidly profitable and
(09:07):
and I think if if these have been better times,
Boeing would have wanted to hang on to Jepson. But
right now they you know, it's an amazing source of
capital and you know, safety cushion to get through these
very turbulent times.
Speaker 2 (09:25):
So it's shoring up its balance sheet essentially. I mean
you mentioned it's it's crown jewel, even in times that
are challenging. Why would Boeing part with a part of
its business that is the crown jewel.
Speaker 8 (09:36):
Well, it's not central to the you know, jet manufacturing
or defense businesses that are really at the heart of Boeing.
This is part of the you know, the profit machine
that's been Boeing Global Services, So it'll be interesting to
see how that unit does going forward without some of
these these digital assets. But I think bo is really
(10:00):
sort of right now has the mindset, let's just stick
to our knitting. And I think they, you know, the
CEO is trying to bring some sort of steady conservatism
to how the company is managed. And they, you know,
they definitely need to pay down debt and keep their
(10:21):
you know, cash stash at a healthy level.
Speaker 7 (10:25):
Is it as smart or is it seen to Julie
as a smart fundamental play by those who follow this company.
I get the idea of it being good for the
balance you but I'm wondering, is it just solely a
balance sheet play or is it, as you said, the
relatively or newest CEO of Boeing, you know, is on
a mission to kind of define the company and stick
(10:47):
to its core. So fundamentally, do folks think this is smart?
Speaker 8 (10:51):
I think so. You know, there were some analysts gnashing
their teeth when this was first made public, and by
the way, we had the school thank you, and I
think we might have forced the company's hand last night,
by the way we had the scoop on the buyer,
and they they pushed out an announcement this morning. But anyway,
(11:15):
enough enough congratulations and backpacks.
Speaker 3 (11:18):
Boeing says, thanks, Julie, go ahead.
Speaker 8 (11:23):
I know the people who stayed up all night on
that release are probably not loving us today. But anyway, yeah,
you know, it's Carol, that's such a smart question. I think,
under the circumstances people, and especially given that the price
is almost double what people were projecting, you know, a
(11:44):
few months ago, I mean Boeing, So I think this
is going to be seen as a good move all
in all. But I think definitely, you know, they're people
who wished Boeing It had hung on to this and
one other thing that I that was tucked into the release,
and hopefully there'll be more details on this. But I
think Boeing struck a really unusual agreement with Toma Bravo,
(12:09):
the buyer, and they'll maintain some rights to some of
the digital you know, some of the information flowing through
the apps that are going. So I think it'll they'll
have a chance to study user data and and you know,
intellectual property is valuable, and I think other buyers might
(12:33):
not have been willing to give that to Boeing, Julie.
Speaker 2 (12:36):
What other transactions do we need to have on our
radar right now? The Spirit Aerosystems acquisition that happened over
the summer, this Jepsen one, the sale is happening. Now,
are there other parts of the business that are going
to be shed or is Boeing going to look to
bring anything else back under its umbrella.
Speaker 8 (12:56):
So so one real quick answer on that. I think,
you know, some of this is still TBD, but we're
really interested in to see what they do with space, okay,
and they've been very you know circumspect when it comes
to Starliner, which is the troubled spacecraft. Even as NASA
(13:17):
has you know, charted out months of tests and you know,
plans to maybe put the next capsule into the air,
Boeing's not saying a whole lot. And so that's really interesting.
And the SLS rocket, which is the massive and like
massively expensive rocket that you know, it was sort of
(13:38):
the last echo of old you know, old space, and
I think Musk you know, would love to see that
go away. So we're, you know, we're keeping a watch
on space. And then but I think the company is
sort of indicated that they're not doing a huge fire sale,
(13:59):
which is what we sort of thought at the outset.
I think they're just going to pick, They're going to
pick their spots. So maybe some businesses also get shut down.
And can I just point out a weird, you know,
circle of life situation with Spirit that was Boeing's largest
(14:19):
divestiture at the time, and that was two thousand and five,
so twenty years ago, and I think I haven't had
a chance to go you know, do look at inflation
adjusted numbers. But I think this deal today eclipses the
Spirit acquisition and it will help finance Boeing bringing Spirit
(14:41):
back into the fold.
Speaker 7 (14:43):
Oh you kind of need a little bit of a whiteboard,
but I get it.
Speaker 3 (14:47):
But you're right.
Speaker 7 (14:48):
But it's like, you know, they're trying to figure out
their way forward, right and the money that they maybe
need to do it.
Speaker 3 (14:54):
And so it's kind.
Speaker 7 (14:55):
Of interesting to see the pieces being moved, if you
will buy it by the new CEO who we we
know right. Investors are watching really closely to see where
it all goes. And gosh, wait, does the company actually
report Ernie's tomorrow?
Speaker 4 (15:09):
Oh?
Speaker 8 (15:10):
Yes, so just in our last.
Speaker 3 (15:13):
Thirty seconds top of mind.
Speaker 7 (15:14):
What's the numbers that you're going to be watching out
for because it is before the market, so she's gonna
have to stay up all night.
Speaker 8 (15:21):
It's alarm. The number is thirty eight, and that's seven
thirty seven production. Let's see how close they get to
that number.
Speaker 3 (15:32):
Julie, Thank you so much. Julie Johnson. She's Bloomberg New
Senior Aerospace reporter.
Speaker 1 (15:39):
This is the Bloomberg Business Week Podcast. Listen live each
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Just say Alexa play Bloomberg eleven thirty.
Speaker 2 (15:57):
Let's go back to California, though, and bring in ros Gerber.
He's president and CEO of Gerber Kawasaki Wealth and Investment Management.
They manage about three point four billion dollars and according
to the most recent filings, they have a stake in
Tesla worth about sixty three million dollars. Russ joins us
from Santa Monica. Russ, I want to go to threads
that you sent earlier. You said before the numbers came out,
(16:20):
here's what you wrote. I've done Tesla calls for eleven years.
This is the worst performance I've seen in Tesla's history.
I get Elan will tell everyone about trillions of total
addressable market and robots taking over the world, anything to
get you not to look at the facts.
Speaker 9 (16:34):
The numbers are clear as day that automotive sales are
down twenty percent and things aren't going well, and earnings
are down substantially from the pace and cash flow from
what it was doing over the last several years. But
you can see it mostly with auto sales as well,
just have plateau it and started moving lower.
Speaker 10 (16:51):
So there's a lot to be concerned about.
Speaker 3 (16:53):
What's the narrative that would make you, I don't know,
more upbeat about it. I mean, where are you?
Speaker 7 (16:57):
Because you know we've talked with you where you love
this company? There were times you were certainly concerned. You've
owned cars, I'm assuming you still own some Tesla's, You've
owned stocks, you've had it, you built, okay, you've got
the cyber trucks. So where are you in terms of
your view on Tesla the company and maybe on Elon
as head of this company.
Speaker 10 (17:19):
Well, I get in my cyber truck, and I'm kind
of embarrassed.
Speaker 9 (17:23):
And fortunately I live in Santa Monica, where everybody else
has a Tesla, so they can't throw rocks at me.
Speaker 10 (17:28):
But it's like people drive Teslas with their heads.
Speaker 9 (17:31):
Down because they're embarrassed by the fact they drive the
Tesla because of Elon Musk. And that's how bad the
brand value has declined over the last year.
Speaker 10 (17:40):
And so it's really sad to me.
Speaker 9 (17:43):
You know, I love the company, and I personally believe
climate change is one of the most important issues that
we solve. I just survived the Palisades fire barely, and
I can tell you after looking at sixty foot flames
a block from my house and almost destroying everything I own,
that if you're not worried about climate change, you should be.
And Tesla is the solution for so many of the
(18:07):
issues that we can address, like evs in cars and
then storage for utilities and creating energy through solar and wind.
And so that's why it's hard for me to let
go of Tesla, because I still think it's the best
solution for an enormous problem, and people want to solve
(18:27):
this problem, and people are buying evs, but it's simply
because of Elon that they don't want Tesla, And so
I partially want to believe that if there's changes or
better marketing or a different CEO, or some way that
the company can separate itself from the negativity that's created
by Elon's actions, then Tesla maybe can recover and get
(18:48):
customers again. But you know that hope is fading as
the time goes on.
Speaker 2 (18:52):
How much has your how much has your stake in
Tesla shifted in terms of where it was a couple
of years ago, how optimistic you were about the company
versus the roughly sixty three million dollars that you have
in the company right now. In other words, are you
putting your money where your mouth is?
Speaker 9 (19:06):
Yeah, I mean we've been sellers, and you can look
at our public filings.
Speaker 10 (19:10):
We've been sellers of Tesla for almost three years now, so.
Speaker 9 (19:13):
Since twenty one at the high, we've been, you know,
on and off sellers when we have the opportunity because
we had so much stock, so it used to be you.
Speaker 10 (19:20):
Know, ten to twelve percent of our overall assets.
Speaker 9 (19:23):
It grew so much for us during those days, you know,
five years ago was when it really started.
Speaker 10 (19:28):
And so three years ago. When it peaked over three
years ago.
Speaker 9 (19:34):
You know, it was really around the purchase of Twitter
that we became pretty concerned.
Speaker 10 (19:39):
And then that got us to lower our state.
Speaker 9 (19:42):
And then the device and comments and anti gay rhetoric
and then obviously turning into total right wing MAGA got
us extremely concerned about the damage to the brand, and
we continued to lower our stake. So we've sold about
sixty percent of our at where we are at the
high point, we sold about sixty percent of our shares,
and we're still active sellers with Tesla when we have
(20:04):
the opportunity.
Speaker 6 (20:05):
When would you become a buyer again?
Speaker 9 (20:08):
Either by price, like if the price declines substantially to evaluation,
that makes sense for the company.
Speaker 10 (20:15):
So if it started trading at a reasonable multiple, which.
Speaker 9 (20:18):
Would be a substantial decline for Tesla, you know, it
could drop about fifty percent to get to just a
reasonable multiple, then I.
Speaker 10 (20:26):
Think I would look at Tesla again.
Speaker 9 (20:28):
But it would also take a shift in strategy to
trying to actually market and sell their products instead of
turning off all the potential customers of the world. So
that's a big issue. Until they actually want to sell
a car. I don't see how Tesla gets better. But
right now they just want to talk about things they
can't sell because they don't exist.
Speaker 10 (20:47):
But the products they.
Speaker 9 (20:49):
Have, they're doing everything possible to convince you not to
buy them.
Speaker 10 (20:53):
And that's the problem I have.
Speaker 3 (20:55):
Ross.
Speaker 7 (20:56):
I feel like for a long time, Tesla was the
north star when it comes to EV's in the United
States and everything that's happened over the last few years,
and certainly Elon's involvement with the Trump campaign and White
House that has certainly changed things. But it's also the
Trump white House and administration in terms of what they
(21:18):
may do going forward or lack thereof. When it comes
to EV's. It's an interesting day where all of a
sudden we saw maybe some help for the solar industry.
So trying to get a handle on I guess what's
coming out of the administration. At the same time, Tim
and I are obsessed with what's coming out of China
in terms of their advancement with EVS. How critical as
(21:39):
you look at things, yes on a company basis, but
bigger broader that this moment in time could be really crucial,
whether it's for Tesla, but also the US involvement in
EV's going forward.
Speaker 9 (21:54):
Yeah, you're kind of hitting this really big issue that's
about to happen, which is the fact that China is
now building better vs Than anybody, and BYD in particular
is really getting.
Speaker 10 (22:08):
Good at this and they're making tons of low cost evs.
Speaker 9 (22:12):
And we're in the midst of a trade war created
by Trump, which if you kind of understand the way
Chinese people think, they're gonna stick with their brands now
versus American brands. So if you're in China today, driving
around in a Tesla with your iPhone isn't cool and
it used to be cool. And so Chinese consumers are gonna,
(22:34):
you know, vote with their dollar dollars, vote with their
Chinese buddy, and gonna they're gonna buy Chinese products. So
that's gonna be a big problem for companies like Apple
and Tesla, you know, because it's just nationalism.
Speaker 10 (22:45):
Secondly, the competition's good now.
Speaker 9 (22:48):
You know, in the old days, we used to say
like Tesla has no competition, like there was nothing that
could compare. But today there's a lot of good EV's
people can buy. So you know, Tesla does have competition,
and I still think they make the best.
Speaker 10 (23:01):
Evs, but you know there are some good EV's. I
have a Ribbean, I love it.
Speaker 9 (23:06):
You know, my business partner has a BMWEV, he loves it.
We're seeing lots of happiness with lots of different evs
from customers.
Speaker 6 (23:14):
So well here, Russ.
Speaker 2 (23:15):
Here in the US, we don't see byds. We see
if you poll stars, right, you know, we don't see
by Yeah, we see a lot of Tesla's. But in Europe,
in parts of Europe, in Mexico, in Australia, Mexico, yeah,
a lot of these. You can you can find these
Chinese evs average. An issue is it for Tesla outside
of the US, but not including China, so xus ex China,
(23:39):
the competition from Chinese companies.
Speaker 9 (23:41):
Well, a perfect antidote to this was I was just
in Mexico City and I was staying at a hotel
across from the Tesla dealership, which is on the nicest
street in Mexico City, which is like the Rodeo drive
Beverly Hills of Mexico City. And a Tesla costs like
thirty five thousand dollars dollars in Mexico just like it
does here. That is way, way, way too expensive. For
(24:04):
a traditional Mexican consumer. Okay, there are byds everywhere, and
why people want to go electric in cities like Mexico City.
Speaker 10 (24:13):
It makes a lot of sense.
Speaker 9 (24:15):
But BYD sell for fifteen thousand dollars and so all
the ubers were bygs that we took. Now, the bye
it doesn't compare to the Tesla and quality in any way,
but it's a chap EV. It's perfect for the emerging markets,
and I don't see how Tesla can compete because they
really haven't made a car to compete in the emerging markets.
And at this point I think it's too late and
they should just not deal with that market. I think
(24:37):
they should stick with the markets that they're in and
try to dominate those. But the low end EV market
is going to be brutal, and BYD is going to
be the winner.
Speaker 7 (24:45):
Great stuff as always on Tesla, on Elon and really
the macro EV market.
Speaker 3 (24:50):
Ross, thank you so much.
Speaker 7 (24:51):
Take care of Ross Gerber, President and chief executive officer
of Gerber Kawasaki Wealth and Investment Management, joining us from
Santa Monica.
Speaker 1 (24:59):
This is the Blueloomberg Business Weekdaily podcast, available on Apple, Spotify,
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Speaker 2 (00:33):
It's almost like people are forgetting that we have company
after company telling us they're concerned about tariffs.
Speaker 3 (00:39):
And it's interesting.
Speaker 2 (00:41):
Yeah, look, yeah, I want to see what Tony Roth
has to say about it. He's chief investment officer of
Wilmington Trust. Tony joins us this afternoon from Radner, Pennsylvania. Tony,
a recession, yes or no in the cards for this year.
Speaker 4 (00:54):
Well, tell me what it's going to happen with tariff policy,
and I'll tell you whether right right now, forecast.
Speaker 5 (01:00):
Is sixty percent that will have a recession, and that's
essentially probability waiting the fact that we may be getting
to a point we think we are getting to a
point where we're passing the point in a return with
respect to pulling back on the tariffs and what.
Speaker 3 (01:16):
Does that mean? What does that mean? What does that mean?
Speaker 5 (01:20):
Well, it means that even if they were to de
escalate now, there's been enough damage to supply chains, specifically
with respect to China, that and to the soft data
the consumer and the business confidence that there's going to
be a significant slowing and economic activity because of the
(01:41):
terroiffs and the uncertainty that have been released by the
administration in their very poorly orchestrated efforts to achieve a
very righteous goal. Unfortunately, and consequently we'd have a recession.
I don't know that we're there yet, but we're pretty close.
Speaker 6 (01:57):
Well, what is the when is the point of no return?
Speaker 5 (02:01):
Well, I would say certainly by Memorial Day if there
isn't a significant de escalation. And I think the important
way to I think understand the environment is there's China
and there's everybody else, and right now, for everybody else.
Speaker 4 (02:16):
There's a ten percent terariff in place.
Speaker 5 (02:18):
We can continue to trade with those countries, but with
China it's an effective embargo, and there are there are
many respects in which that embargo will be existential for
thousands of not tens of thousands of small businesses in
America and well, that will impact supply chains, will create
even deeper levels of degradation and consumer confidence. And so,
(02:45):
you know, what the administration has done here is really reckless.
I would have to say, the way that they've gone
about this, if you care about the economy, if you
don't care about the economy and you're just looking for
some other goal, there's some type of long term national
security is about you know, other sets.
Speaker 4 (03:02):
Of values other than economic ones, then this could be
the right thing to do.
Speaker 6 (03:06):
Well.
Speaker 7 (03:07):
To be fair, I think President Trump has thought about
tariffs for a long time, right, and I you know,
many would argue that his reasoning, just to look at
the other side, is that this is a way of
getting investment in the United States, bring back some jobs,
bring back a certain part of the economy, be it
(03:28):
the manufacturing that has really gone to the wayside over
I don't know, fifty sixty seventy eighty years. Having said that,
you know, we are a service led economy, and many
would also say that that is the kind of economy
you want to have. It's kind of whether it's financial
services and so on and so forth. Maybe a more
sophisticated economic economy. But I don't know do you think
(03:54):
that ultimately this experiment potentially that the present and it
is doing that it could bring back a lot of
investment to the United States and jobs and actually work.
Speaker 4 (04:08):
No, I don't not the way it's going about it.
Speaker 5 (04:09):
In fact, I think that he's causing the exact opposite
outcome as it relates to investment. As we're seeing a
unpredictably weaker dollar in terms of how we may get
we're seeing deep concern around the foundational bedrock of our
system being the US Treasury security as a store of value,
(04:30):
and so we're seeing a repulsive effect from a capital
and investment formation standpoint as it relates to manufacturing. The
kinds of the type of manufacturing that we want back
in this country, which is high value semiconductors, pharmaceuticals. Those
(04:51):
are the kinds of things that can't come back in
the timeframe that the president is going to be in office.
Speaker 4 (04:55):
And they can.
Speaker 5 (04:57):
Start to come back over that period of time, they
can't actually really come back in that time. And so
in order to create an environment where those types of
flows will occur, he needs to create an incentive system
works in the interest of companies to do that. And
right now, he's not doing that, he's creating. He's trying
to achieve a he's very cause and effect oriented guy,
(05:19):
and he's trying to be the biggest cause and bully
an effect that he wants to see. But companies won't
abide by that because there's no underlying incentive for them
to keep that manufacturing in place or even create it.
Speaker 4 (05:34):
In his three and a half years left of his administration.
Speaker 5 (05:37):
He's got to create a structure, and I'm not sure
that that's a nuance that he grasps.
Speaker 6 (05:42):
So what's an investor to do right now?
Speaker 5 (05:44):
Well, I think that we're at what I would call
this and this is a term I heard by a
guest on the TV channel Bloomberg TV this morning.
Speaker 4 (05:54):
I don't remember who it was. This is the wily.
Speaker 5 (05:56):
Coyote moment where the embargo on China is going to
be so damaging to the economy that you see Best
today coming out and saying, well, you know, this mutual embargo,
it can't last in the very near term.
Speaker 4 (06:10):
You're going to see the de escalation. No, I don't
have no idea what that means.
Speaker 5 (06:14):
But as I've described, we're at this moment now where
if we don't have a very very significant de escalation
with China within the next thirty days or so, but
certainly by Memorial Day we will be revocably into a recession,
and then the question will be how deeple the recession be.
And so as an investor, I think that you have
to stay right now.
Speaker 4 (06:35):
You have to stay tight to your long term goals,
and you have to.
Speaker 5 (06:40):
Essentially be ready if we got to pop in markets
to de risk if you don't believe that it's true,
or you have to be ready to re risk if
we go down into the mid four thousands, I think
where there's probably better opportunity. But right now we're sort
of in this no man's land between this range of
(07:01):
color it forty five hundred and fifty five hundred, where
we expect markets to sort of bump around now in
a very very volatile fashion until we get to a
much more certain and less damaging position from a tariff standpoint.
And by the way, they've grossly miscalculated in our estimation
the leverage that they have with respect to China on
(07:21):
multiple levels. China largely imports from US commodities they can
get from anywhere in the world, and we import from
them very critical supply chain components that range from rare
earth minerals to ninety percent of the plastic trays that
our poultry sits on or our meat sits on, all
(07:42):
comes from China.
Speaker 3 (07:43):
No, you're right.
Speaker 7 (07:43):
The longer this goes on, I think COVID started to
open up that window. We realized how much our supply
chain came out of China, but rare earths for something
Tim and I were just talking about.
Speaker 3 (07:53):
On our broadcast. Hey Tony, thank you so much.
Speaker 7 (07:56):
Tony Roth, chief investment Officer of Wilmington Trust, joining us
from Radner Pennsylvania on Royal Day. He says, all right,
Baucus ticking, that could be the point where there's kind
of no going back in the impact on the economy,
at least according to him.
Speaker 1 (08:08):
You're listening to the Bloomberg Business Week podcast. Catch us
live weekday afternoons from two to five e's during Listen
on Applecarplay and Android Otto with the Bloomberg Business app,
or watch us.
Speaker 3 (08:19):
Live on YouTube.
Speaker 7 (08:23):
Boeing selling portions of its digital aviation solutions business.
Speaker 3 (08:27):
It's moved him.
Speaker 7 (08:27):
That's scene as helping the company really shore up its
balance sheet.
Speaker 2 (08:31):
With what you need to know about the sale and
what it may mean for the company's outlook. We've got
with us our LA bureau. From our LA Bureau, Bloomberg
News senior aerospace reporter Julie Johnson.
Speaker 6 (08:40):
Julie, good to see you.
Speaker 2 (08:41):
The unit that was sold, What exactly did it encompass?
Speaker 8 (08:46):
Okay, Jepson is really considered one of Boeing's crown jewels.
They produced navigation software and tools that are in the
planes of just about cockpits, just about every plane on
the planet. Uh really thought to be solidly profitable and
(09:07):
and I think if if these have been better times,
Boeing would have wanted to hang on to Jepson. But
right now they you know, it's an amazing source of
capital and you know, safety cushion to get through these
very turbulent times.
Speaker 2 (09:25):
So it's shoring up its balance sheet essentially. I mean
you mentioned it's it's crown jewel, even in times that
are challenging. Why would Boeing part with a part of
its business that is the crown jewel.
Speaker 8 (09:36):
Well, it's not central to the you know, jet manufacturing
or defense businesses that are really at the heart of Boeing.
This is part of the you know, the profit machine
that's been Boeing Global Services, So it'll be interesting to
see how that unit does going forward without some of
these these digital assets. But I think bo is really
(10:00):
sort of right now has the mindset, let's just stick
to our knitting. And I think they, you know, the
CEO is trying to bring some sort of steady conservatism
to how the company is managed. And they, you know,
they definitely need to pay down debt and keep their
(10:21):
you know, cash stash at a healthy level.
Speaker 7 (10:25):
Is it as smart or is it seen to Julie
as a smart fundamental play by those who follow this company.
I get the idea of it being good for the
balance you but I'm wondering, is it just solely a
balance sheet play or is it, as you said, the
relatively or newest CEO of Boeing, you know, is on
a mission to kind of define the company and stick
(10:47):
to its core. So fundamentally, do folks think this is smart?
Speaker 8 (10:51):
I think so. You know, there were some analysts gnashing
their teeth when this was first made public, and by
the way, we had the school thank you, and I
think we might have forced the company's hand last night,
by the way we had the scoop on the buyer,
and they they pushed out an announcement this morning. But anyway,
(11:15):
enough enough congratulations and backpacks.
Speaker 3 (11:18):
Boeing says, thanks, Julie, go ahead.
Speaker 8 (11:23):
I know the people who stayed up all night on
that release are probably not loving us today. But anyway, yeah,
you know, it's Carol, that's such a smart question. I think,
under the circumstances people, and especially given that the price
is almost double what people were projecting, you know, a
(11:44):
few months ago, I mean Boeing, So I think this
is going to be seen as a good move all
in all. But I think definitely, you know, they're people
who wished Boeing It had hung on to this and
one other thing that I that was tucked into the release,
and hopefully there'll be more details on this. But I
think Boeing struck a really unusual agreement with Toma Bravo,
(12:09):
the buyer, and they'll maintain some rights to some of
the digital you know, some of the information flowing through
the apps that are going. So I think it'll they'll
have a chance to study user data and and you know,
intellectual property is valuable, and I think other buyers might
(12:33):
not have been willing to give that to Boeing, Julie.
Speaker 2 (12:36):
What other transactions do we need to have on our
radar right now? The Spirit Aerosystems acquisition that happened over
the summer, this Jepsen one, the sale is happening. Now,
are there other parts of the business that are going
to be shed or is Boeing going to look to
bring anything else back under its umbrella.
Speaker 8 (12:56):
So so one real quick answer on that. I think,
you know, some of this is still TBD, but we're
really interested in to see what they do with space, okay,
and they've been very you know circumspect when it comes
to Starliner, which is the troubled spacecraft. Even as NASA
(13:17):
has you know, charted out months of tests and you know,
plans to maybe put the next capsule into the air,
Boeing's not saying a whole lot. And so that's really interesting.
And the SLS rocket, which is the massive and like
massively expensive rocket that you know, it was sort of
(13:38):
the last echo of old you know, old space, and
I think Musk you know, would love to see that
go away. So we're, you know, we're keeping a watch
on space. And then but I think the company is
sort of indicated that they're not doing a huge fire sale,
(13:59):
which is what we sort of thought at the outset.
I think they're just going to pick, They're going to
pick their spots. So maybe some businesses also get shut down.
And can I just point out a weird, you know,
circle of life situation with Spirit that was Boeing's largest
(14:19):
divestiture at the time, and that was two thousand and five,
so twenty years ago, and I think I haven't had
a chance to go you know, do look at inflation
adjusted numbers. But I think this deal today eclipses the
Spirit acquisition and it will help finance Boeing bringing Spirit
(14:41):
back into the fold.
Speaker 7 (14:43):
Oh you kind of need a little bit of a whiteboard,
but I get it.
Speaker 3 (14:47):
But you're right.
Speaker 7 (14:48):
But it's like, you know, they're trying to figure out
their way forward, right and the money that they maybe
need to do it.
Speaker 3 (14:54):
And so it's kind.
Speaker 7 (14:55):
Of interesting to see the pieces being moved, if you
will buy it by the new CEO who we we
know right. Investors are watching really closely to see where
it all goes. And gosh, wait, does the company actually
report Ernie's tomorrow?
Speaker 4 (15:09):
Oh?
Speaker 8 (15:10):
Yes, so just in our last.
Speaker 3 (15:13):
Thirty seconds top of mind.
Speaker 7 (15:14):
What's the numbers that you're going to be watching out
for because it is before the market, so she's gonna
have to stay up all night.
Speaker 8 (15:21):
It's alarm. The number is thirty eight, and that's seven
thirty seven production. Let's see how close they get to
that number.
Speaker 3 (15:32):
Julie, Thank you so much. Julie Johnson. She's Bloomberg New
Senior Aerospace reporter.
Speaker 1 (15:39):
This is the Bloomberg Business Week Podcast. Listen live each
weekday starting at two pm Eastern on Appleclocklay and Android
Auto with the Bloomberg Business App. You can also listen
live on Amazon Alexa from our flagship New York station.
Just say Alexa play Bloomberg eleven thirty.
Speaker 2 (15:57):
Let's go back to California, though, and bring in ros Gerber.
He's president and CEO of Gerber Kawasaki Wealth and Investment Management.
They manage about three point four billion dollars and according
to the most recent filings, they have a stake in
Tesla worth about sixty three million dollars. Russ joins us
from Santa Monica. Russ, I want to go to threads
that you sent earlier. You said before the numbers came out,
(16:20):
here's what you wrote. I've done Tesla calls for eleven years.
This is the worst performance I've seen in Tesla's history.
I get Elan will tell everyone about trillions of total
addressable market and robots taking over the world, anything to
get you not to look at the facts.
Speaker 9 (16:34):
The numbers are clear as day that automotive sales are
down twenty percent and things aren't going well, and earnings
are down substantially from the pace and cash flow from
what it was doing over the last several years. But
you can see it mostly with auto sales as well,
just have plateau it and started moving lower.
Speaker 10 (16:51):
So there's a lot to be concerned about.
Speaker 3 (16:53):
What's the narrative that would make you, I don't know,
more upbeat about it. I mean, where are you?
Speaker 7 (16:57):
Because you know we've talked with you where you love
this company? There were times you were certainly concerned. You've
owned cars, I'm assuming you still own some Tesla's, You've
owned stocks, you've had it, you built, okay, you've got
the cyber trucks. So where are you in terms of
your view on Tesla the company and maybe on Elon
as head of this company.
Speaker 10 (17:19):
Well, I get in my cyber truck, and I'm kind
of embarrassed.
Speaker 9 (17:23):
And fortunately I live in Santa Monica, where everybody else
has a Tesla, so they can't throw rocks at me.
Speaker 10 (17:28):
But it's like people drive Teslas with their heads.
Speaker 9 (17:31):
Down because they're embarrassed by the fact they drive the
Tesla because of Elon Musk. And that's how bad the
brand value has declined over the last year.
Speaker 10 (17:40):
And so it's really sad to me.
Speaker 9 (17:43):
You know, I love the company, and I personally believe
climate change is one of the most important issues that
we solve. I just survived the Palisades fire barely, and
I can tell you after looking at sixty foot flames
a block from my house and almost destroying everything I own,
that if you're not worried about climate change, you should be.
And Tesla is the solution for so many of the
(18:07):
issues that we can address, like evs in cars and
then storage for utilities and creating energy through solar and wind.
And so that's why it's hard for me to let
go of Tesla, because I still think it's the best
solution for an enormous problem, and people want to solve
(18:27):
this problem, and people are buying evs, but it's simply
because of Elon that they don't want Tesla, And so
I partially want to believe that if there's changes or
better marketing or a different CEO, or some way that
the company can separate itself from the negativity that's created
by Elon's actions, then Tesla maybe can recover and get
(18:48):
customers again. But you know that hope is fading as
the time goes on.
Speaker 2 (18:52):
How much has your how much has your stake in
Tesla shifted in terms of where it was a couple
of years ago, how optimistic you were about the company
versus the roughly sixty three million dollars that you have
in the company right now. In other words, are you
putting your money where your mouth is?
Speaker 9 (19:06):
Yeah, I mean we've been sellers, and you can look
at our public filings.
Speaker 10 (19:10):
We've been sellers of Tesla for almost three years now, so.
Speaker 9 (19:13):
Since twenty one at the high, we've been, you know,
on and off sellers when we have the opportunity because
we had so much stock, so it used to be you.
Speaker 10 (19:20):
Know, ten to twelve percent of our overall assets.
Speaker 9 (19:23):
It grew so much for us during those days, you know,
five years ago was when it really started.
Speaker 10 (19:28):
And so three years ago. When it peaked over three
years ago.
Speaker 9 (19:34):
You know, it was really around the purchase of Twitter
that we became pretty concerned.
Speaker 10 (19:39):
And then that got us to lower our state.
Speaker 9 (19:42):
And then the device and comments and anti gay rhetoric
and then obviously turning into total right wing MAGA got
us extremely concerned about the damage to the brand, and
we continued to lower our stake. So we've sold about
sixty percent of our at where we are at the
high point, we sold about sixty percent of our shares,
and we're still active sellers with Tesla when we have
(20:04):
the opportunity.
Speaker 6 (20:05):
When would you become a buyer again?
Speaker 9 (20:08):
Either by price, like if the price declines substantially to evaluation,
that makes sense for the company.
Speaker 10 (20:15):
So if it started trading at a reasonable multiple, which.
Speaker 9 (20:18):
Would be a substantial decline for Tesla, you know, it
could drop about fifty percent to get to just a
reasonable multiple, then I.
Speaker 10 (20:26):
Think I would look at Tesla again.
Speaker 9 (20:28):
But it would also take a shift in strategy to
trying to actually market and sell their products instead of
turning off all the potential customers of the world. So
that's a big issue. Until they actually want to sell
a car. I don't see how Tesla gets better. But
right now they just want to talk about things they
can't sell because they don't exist.
Speaker 10 (20:47):
But the products they.
Speaker 9 (20:49):
Have, they're doing everything possible to convince you not to
buy them.
Speaker 10 (20:53):
And that's the problem I have.
Speaker 3 (20:55):
Ross.
Speaker 7 (20:56):
I feel like for a long time, Tesla was the
north star when it comes to EV's in the United
States and everything that's happened over the last few years,
and certainly Elon's involvement with the Trump campaign and White
House that has certainly changed things. But it's also the
Trump white House and administration in terms of what they
(21:18):
may do going forward or lack thereof. When it comes
to EV's. It's an interesting day where all of a
sudden we saw maybe some help for the solar industry.
So trying to get a handle on I guess what's
coming out of the administration. At the same time, Tim
and I are obsessed with what's coming out of China
in terms of their advancement with EVS. How critical as
(21:39):
you look at things, yes on a company basis, but
bigger broader that this moment in time could be really crucial,
whether it's for Tesla, but also the US involvement in
EV's going forward.
Speaker 9 (21:54):
Yeah, you're kind of hitting this really big issue that's
about to happen, which is the fact that China is
now building better vs Than anybody, and BYD in particular
is really getting.
Speaker 10 (22:08):
Good at this and they're making tons of low cost evs.
Speaker 9 (22:12):
And we're in the midst of a trade war created
by Trump, which if you kind of understand the way
Chinese people think, they're gonna stick with their brands now
versus American brands. So if you're in China today, driving
around in a Tesla with your iPhone isn't cool and
it used to be cool. And so Chinese consumers are gonna,
(22:34):
you know, vote with their dollar dollars, vote with their
Chinese buddy, and gonna they're gonna buy Chinese products. So
that's gonna be a big problem for companies like Apple
and Tesla, you know, because it's just nationalism.
Speaker 10 (22:45):
Secondly, the competition's good now.
Speaker 9 (22:48):
You know, in the old days, we used to say
like Tesla has no competition, like there was nothing that
could compare. But today there's a lot of good EV's
people can buy. So you know, Tesla does have competition,
and I still think they make the best.
Speaker 10 (23:01):
Evs, but you know there are some good EV's. I
have a Ribbean, I love it.
Speaker 9 (23:06):
You know, my business partner has a BMWEV, he loves it.
We're seeing lots of happiness with lots of different evs
from customers.
Speaker 6 (23:14):
So well here, Russ.
Speaker 2 (23:15):
Here in the US, we don't see byds. We see
if you poll stars, right, you know, we don't see
by Yeah, we see a lot of Tesla's. But in Europe,
in parts of Europe, in Mexico, in Australia, Mexico, yeah,
a lot of these. You can you can find these
Chinese evs average. An issue is it for Tesla outside
of the US, but not including China, so xus ex China,
(23:39):
the competition from Chinese companies.
Speaker 9 (23:41):
Well, a perfect antidote to this was I was just
in Mexico City and I was staying at a hotel
across from the Tesla dealership, which is on the nicest
street in Mexico City, which is like the Rodeo drive
Beverly Hills of Mexico City. And a Tesla costs like
thirty five thousand dollars dollars in Mexico just like it
does here. That is way, way, way too expensive. For
(24:04):
a traditional Mexican consumer. Okay, there are byds everywhere, and
why people want to go electric in cities like Mexico City.
Speaker 10 (24:13):
It makes a lot of sense.
Speaker 9 (24:15):
But BYD sell for fifteen thousand dollars and so all
the ubers were bygs that we took. Now, the bye
it doesn't compare to the Tesla and quality in any way,
but it's a chap EV. It's perfect for the emerging markets,
and I don't see how Tesla can compete because they
really haven't made a car to compete in the emerging markets.
And at this point I think it's too late and
they should just not deal with that market. I think
(24:37):
they should stick with the markets that they're in and
try to dominate those. But the low end EV market
is going to be brutal, and BYD is going to
be the winner.
Speaker 7 (24:45):
Great stuff as always on Tesla, on Elon and really
the macro EV market.
Speaker 3 (24:50):
Ross, thank you so much.
Speaker 7 (24:51):
Take care of Ross Gerber, President and chief executive officer
of Gerber Kawasaki Wealth and Investment Management, joining us from
Santa Monica.
Speaker 1 (24:59):
This is the Blueloomberg Business Weekdaily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on Bloomberg dot Com,
the iHeartRadio app, tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
(25:20):
and always on the Bloomberg terminal
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