Hello, I'm Stephen Carroll. I'm in Brussels, where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London. We're the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday, keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled, and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break. So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. on Apple, Spotify, YouTube, or wherever you get your podcasts. Bloomberg Audio Studios. Podcasts. Radio. News. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. We had some more earnings. General Motors out with some numbers. They raised their profit outlook for the year by $500 million. Let's break it down with Steve Mann, Global Autos and Industrial Research Analyst for Bloomberg Intelligence. Steve, what have we learned from General Motors and their earnings release? actually overall the earnings was uh pretty good and uh if this iran war uh you know doesn't drag on i think they're going to have a great second half uh you know inventory is is low uh they've managed it very well that means their pricing is is pretty steady up to you know up a bit and like you know trucks truck sales are still going well despite the four dollar gas prices so So, you know, second half production could could could ramp back up if the war doesn't drag on. If the war doesn't drag on and if the company gets the relief from paying all those tariffs, my understanding is that that increased outlook that Paul referenced does reflect the benefits of tariff cost relief tied to the Supreme Court deciding to strike down those reciprocal tariffs that President Trump imposed. Yeah, they had a $500 million benefit, well, less cost from the tariff. There could be more coming. And right now, their inventory is at a low target, especially in the pickup truck side. And pickup trucks are the highest profit margin vehicles for them. So if they can and keep production steady, you know, increase inventory, dealer inventory a bit by raising the production, you know, that 8.6% EBITDA, adjust the EBITDA margin that they had in North America could, you know, could stay up there or even get even better. What's GM saying about, you mentioned the trucks and that's what Americans, we like to drive, you know, big trucks, SUVs, all that kind of stuff here. But with gas north of $4 a barrel, what's GM saying about the demand for those big vehicles? Yeah, they're actually very cautious. You know, the gas prices are up, like oil prices are up like $3 today. And I think that's really the impact on the consumer discretionary stocks, including GM, despite its, you know, very good earnings results. But they are very cautious, not only demand, but if elevated oil prices are staying up, it could trickle down into material costs, even though they haven't seen a huge impact from that yet. But a prolonged war could impact it. But the other thing that we've talked about is this K economy. It's very interesting to see what's happening today where the high-end, expensive vehicles are actually doing well. Where we're seeing decline is really on the cheaper vehicles where buyers in that segment are more cost-conscious. and I think they are holding onto their purse strings, but like you know it all about the war Yeah absolutely it all about the war That affects everyone willingness to spend their mood when it comes to spending What is GM offering by way of low vehicles How big of a lineup offering does it really have? They do. I mean, they have, you know, the Chevrolet Trax is selling very well. You know, the Buick and Vision, not bad. You know, they do have a few vehicles. the EV Chevrolet Bolt, which they just rolled it out, is one of the most popular EVs out there. That's going to help them reduce some of the EV losses there. So they have a pretty diverse portfolio. But I think if truck sales maintain where it's at, consumer sentiment gets better if the war ends. and even the commercial side, if commercial demand stays steady, I think, you know, they're going to have a decent second half. Ford reports tomorrow after the close, Steve, is there a read across from GM over to Ford? Yeah, definitely. You know, Ford relies much more on their pickup truck. The F-150 is, you know, the top selling pickup trucks in the U.S., not just to consumers, but to the commercial buyers. So it is a positive rate across to Ford. The only thing that's on the risk side is, you know, they had some delays on ramping up the F-150 or due to the Novelis aluminum plant fire last year. But again, look, they're going to get that aluminum shortage fixed up. And if the war ends, they're going to have to ramp up the F-150 production, and that's only going to improve their unit costs and profitability in the second half. Stay with us. More from Bloomberg Intelligence coming up after this. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. All right, we've got Geetha Ranganathan with us. She's a media analyst for Bloomberg Intelligence, and we're supposed to talk about Spotify, which we kind of will. Spotify reported their quarter results were good. Their guidance is a little disappointing. The stock's down 13 percent. There, I gave it to you. That's the analysis. What I want to know, Geetha, is AI and music. Is AI a threat to recorded music? I think it is, Paul. And I think that is what we're kind of seeing reflected in, you know, the Spotify stock market stock price reaction today. So for Spotify, I mean, the way that they've generally framed this is that it is actually AI is going to be a positive for them because, you know, you have AI tools that can create more personalization, that can enhance music discovery, that, you know, can help with customization, can help with better ad targeting. So all of the things that they're saying, they're saying the right things. The problem is that they will have to obviously undertake significant investments for all of that to actually happen. So we know that Spotify already offers one of the best user experiences. This is why they have a 35 percent subscriber share of the global music market. So there's no doubt that people really love their Spotify app, but they're going to have to really invest heavily. And I think that is what the street is getting a little bit uncomfortable about. So how exactly is AI a competitive threat here? Do people then I mean, is the concern that people won't subscribe to Spotify because AI can serve up music better and cheaper? Or is it that AI generated music takes the place of what Spotify can offer? Yeah, it's actually a combination of both Scarlett. So, yes, AI generated music. And we've seen a number of platforms kind of emerge over the past few months. I mean, Suno, Udio, all of these are, you know, Suno and Udio, they're the big ones that have come up, you know, which just offer you AI-generated tracks. And people are actually tuning into those, you know. So if you just look at downloads, for instance, those have kind of been off the charts. And so there's obviously a very real fear that these can become real competitors to the traditional DSPs, to a Spotify, to a YouTube Music, to a Amazon Music. But then I think the bigger threat for Spotify is that, remember, Spotify is a pure play audio streamer. It is up against all the other big tech companies tech companies that are already investing very very heavily in AI capabilities So you know you look at YouTube Music you look at Amazon Music or you look at Apple Music These are all companies that are already going to be spending something like 700 billion dollars in capital expenditure this year just on AI developments. You know, Google, for instance, just introduced something called Lyria in, you know, Lyria 3 in March, which basically allows for AI generated music up to three minutes of a music track. And so this is a real, real risk for Spotify because, you know, now the hyperscalers can really gain market share. Wow. I just went on to the Suno. Is AI for music creators creating stunning original music for free in seconds using our AI generator? Make your masterpieces, share with friends and discover music from, I mean. Is music then labeled AI generated or not? I don't get it. It is, but people still like it because, you know, you can. But there's no connection to anyone who's making it. Is there? Yeah, there has been actually, there have been a couple of AI generated artists that have actually topped some of the billboard charts. So it's surprising, but they've done it. So it, you know, right now, still very early, but it can become a big thing pretty fast. And what is it? Hold on. AI generated music cannot hold concerts. Right. I mean, that's the other big part of it. Right. Yeah. Unless you get a robot or something. That's no fun. See, I'm telling you, it's all coming. So. All right. So that's music. Like, and now that brings you to the probably the biggest fear in Los Angeles and Hollywood right now, which is AI created just content in general. What are the big content creators, the Disneys of the world, the Paramounts of the world? What are they saying about that? Yeah, so the really big thing that I think everybody is looking for is this big WGA contract, the Writers Guild contract that kind of comes up in a few weeks, actually, you know, negotiations. and AI is obviously supposed to be a big key topic there. So far, we've not really heard any major rumblings. I mean, yes, we've heard something from Paramount in terms of offering AI efficiencies. We've heard about Netflix talk about AI efficiencies, but nothing really significant or radical on the content creation side. So, so far, it's pretty benign, but all that can change pretty quickly too. Geetha, I've got to get your take on what's happening. between President Trump and Jimmy Kimmel. Jimmy Kimmel making some jokes before the White House Correspondents' Dinner that referenced Melania being a prospective widow. He says, Jimmy Kimmel says, it was a reference to the age disparity between the president and the first lady in light of what happened over the weekend. President Trump calls it despicable. And now it's calling on ABC to fire Jimmy Kimmel. Is this something that could pose a threat to the company, to Disney, to ABC? Yeah, it's definitely controversial, Scarlett, and it's kind of a PR nightmare for the new CEO, Josh Tomorrow, who really doesn't have much experience in kind of navigating all of this Hollywood talent stuff. So, you know, Bob Iger, the previous CEO, obviously had had, you know, had his fair share of these moments. He kind of knew what to do. We do have Dana Walden, who is the content chief and who actually helped navigate a very similar issue a few months ago when, you know, we had a similar controversy with Jimmy Kimmel and the whole Charlie Kirk debate. She kind of obviously helped smooth things over. I don't know how things are going to play out this time, but obviously, President Trump, again, with his whole rhetoric of, you know, revoking ABC's license and Brendan Carr, who is the FCC chair, also kind of chiming in. Obviously, lots of, you know, noise, lots of political maneuvers here. But I'm not necessarily sure that anything tangible is going to happen, at least in terms of licenses. But again, it's a PR nightmare. Stay with us. More from Bloomberg Intelligence coming up after this. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. Coca-Cola reported some numbers today, some pretty good numbers. Stock is up 6% today on the news, up about 14.5% year to date. So some good numbers out of Coke. Ken Shake follows all the consumer finance companies for Bloomberg Intelligence, joins us now. Ken, talk to us about Coca-Cola. How was their quarter? Yeah, hi, Paul. Coke's quarter was strong. You know it hard to characterize it in any other way really Organic growth was up 10 Expectations were seven And it was a balanced performance also It was not relying on price mix as much as they had been in the past. Volumes were up three, which is pretty good for this mature company. Results were also broad-based geographically and by product line. I think the key takeaway here is that it shows the company's ability to be agile during a period of low consumer confidence, You got a war going on. You know, a company that's in 200 countries is always going to have a pocket of strength and weakness. And this quarter showed that by far there's more positive things going on than negative here. So unlike Pepsi, which has the, you know, the snack business, Coke is pretty much pure play beverage company. Which one is more rewarded by the street? Which one do you think the street likes better? I think generally speaking, the street has rewarded companies with more focus and, you know, more focus, I guess is the right word. And Coke has always generated a higher multiple on the street. Also, food tends to have more problems when it comes to cost inflation. You know, when you're a beverage company, particularly with Coke's business model, you can offset a lot of these inflationary pressures because you're offsetting it to third-party bottlers. So that kind of dovetails into probably your next question, which is how are they faring in this period of high commodity costs? Pretty darn well, I would say, because, again, they get to push off the production of the finished product, the distribution, and therefore these are companies that are incurring high gasoline prices. onto third-party bottlers, and Coke is not incurring them by far as much as they are. We're now a year into these tariffs now. What does a company, a global company like Coca-Cola, what are they saying about how they're navigating tariffs? Are they kind of finding a new normal? Tariffs are not really a big thing for Coke, again, because of its business model, where it pushes off the procurement of other materials to their bottlers around the world. And they're not immune to it. I mean, as a result of the tariffs, the aluminum costs are higher. That certainly affects the northern area, the U.S. bottling companies, gasoline prices and so on. So it's a minor hit to cope, but, you know, the margins were strong. And matter of fact, the operating margin widened in this quarter. 34.5% was the comparable number. I mean, that's almost like an Apple-like operating margin. This company's highly profitable. It's been resilient. And I think it's part of that relief, you know, about what we hear about the macro environment is being reflected in the stock price today. Yeah, I mean, you know, they have – I'm looking at 20%. 2026, $17 billion projected EBITDA, and they dropped a lot of that down to the free cash flow line, about $12 billion. So that's pretty darn solid. Do we still have cola wars out there, Ken? I would say, yeah, it's an inherently competitive business. You go down the soda aisle, you see lots of different products by different companies. But having said that, I think high innovation is good for everybody because you're expanding the pie. So Coke talked about today about some of its innovation, Cherry Float, Coke, Diet Coke Cherry. This kind of mirrors things that PepsiCo and Curie, Dr. Pepper, for that matter, are doing. They're experimenting with innovative new flavors, bringing excitement to the category. And so I think that competitive spirit is good for the category as a whole. You know, as a kid, I'd be bummed out when my mom would buy the store brand Cola as opposed to Coke or Pepsi. Is that still a thing out there? Private label is not really a material threat. You know, it serves a role in the marketplace, but I think many retailers are more than thrilled about having Coke and Pepsi on the aisles to bring customers in. And even if they don't make a big margin on that product, it brings traffic in where they can buy other things. And so I think any retailer that doesn't have Coke and Pepsi products are probably alienating a lot of consumers. This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.
