When the rest of the markets slow down, the futures market keeps moving. Did you know that CME Group S&P 500 and NASDAQ 100 futures trade nearly 24 hours with great liquidity? In the ETF markets, volume and liquidity lessens after 4 p.m. until the next morning. But with futures, you get trading opportunities both day and night. Learn more at cmegroup.com slash equity futures. 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. This is the Bloomberg Surveillance Podcast. I'm Jonathan Farrow, along with Lisa Abramowitz and Anne-Marie Hordern. Join us each day for insight from the best in markets, economics and geopolitics. From our global headquarters in New York City, we are live on Bloomberg Television weekday mornings from 6 to 9 a.m. Eastern. Subscribe to the podcast on Apple, Spotify or anywhere else you listen. And as always on the Bloomberg Terminal and the Bloomberg Business App. It's the latest this morning. Brent climbing back above 111 as President Trump weighs Iran's latest proposal to end the war. The Treasury Secretary Scott Besson saying the US blockade is forcing Iran's oil industry to shut, with gasoline shortages to follow. Joining us now to discuss, I'm very pleased to say, the U.S. Energy Secretary, Chris Wright, joins us for more. Mr. Secretary, you are in Croatia, I believe. We can talk about the relationship between the U.S. and Europe in just a moment. We have to lead with Iran this morning. Mr. Secretary, in your mind, how much storage capacity does Iran have left, and what's informing that conclusion at the moment? Well, look, there's monitoring of storage tanks at Karg Island and around the nation of Iran. But yeah, they don't have a huge amount of storage capacity, and they've got old reservoirs that are low pressure, which means it's much more destructive if they have to shut in their production. Kepler, Mr. Secretary, is talking about 12 to 22 days left that Iran has in terms of storage before they have to shut in. Do you see the president making any sort of decision on Iran's proposal before that time period is up? The president's focused on getting the right deal. That could be independent of their storage, but obviously that puts great heat on Iran. If we can get the right resolution, that could be tomorrow, that could be two weeks from now. But the key thing is the right resolution. Iran, and let me just put the context again, Iran has roughly 1,000 pounds of 60% enriched uranium. There's no commercial, peaceful use for that. bomb material, and that's 10 days, two weeks tops to turn that into highly enriched uranium for bombs. So this is a existential crisis. I'm very proud of the president to stand up and put an end to Iran's efforts to get a nuclear bomb. So it doesn't sound like the president would take this off ramp from Iran, which is reopening the Strait of Hormuz. Obviously, the U.S. blockade would have to end and then kicking the can down the road when it comes to talks on nuclear. Yes. Again, the critical outcome here is that we end the ability for Iran to have a nuclear weapon. There's many ways that deal can be structured, but the compromise will not be made on the principle no nuclear armed Iran. We see gasoline prices on average rising again this morning. They're above four dollars a gallon. You recently said the administration plans to do more to bring down U.S. gas prices. We saw the waiver on the Jones Act extended. What else are you thinking about? When you also saw announcements on the EPA for blending requirements this summer that allows our refineries to produce a lot more gasoline. Unfortunately, a few states foolishly did not go along with it. So California is still going to have outrageously high gas prices. New York state, I don't know why, also did not go along with the federal regulations. But we're doing everything we can to increase refinery throughput. American oil production is at record high. American oil export store allies abroad are at record high. So look, we're going through a purity of discomfort to solve a 47-year crisis. And gasoline prices are still a dollar a gallon cheaper than they were during the middle of the Biden administration. Well, I'm hearing that the administration is also considering an export ban on U.S. products. Is that accurate? Absolutely not. Absolutely not. Look, here I am in Dubrovnik in Croatia signing multi-billion dollar deals to sell American energy exports That is the fastest growing export out of our country We selling American natural gas American oil American jet fuel diesel and gasoline all around the world We not going to stop those exports We're going to grow those exports. Secretary, how much are you trying to ameliorate some of the price considerations in traditional allies of the United States as this does potentially drag on for a longer period of time? I mean, how much is cost a big part of some of these exports? Yes, everyone understands, particularly over here in Central and Eastern Europe, people understand the existential threat from Iran. Everybody wants to see that the United States is successful in ending Iran's nuclear weapon ambitions. Nobody likes, of course, high prices in the short term, but they understand increased American energy exports, increased energy addition policies, lean into more energy production. That's what President Trump is all about. We've got to get away from those Western European policies of making, intentionally making hydrocarbons expensive and energy subtraction policies. The future of Europe, the dynamic growth of Europe is going to be in these Central and Eastern European nations that lean into President Trump's American agenda of more energy, more economic growth, more opportunities for citizens. And Marie was alluding to this idea, this idea of potentially having restrictions on exports. And this has been deployed before, in part because prices were going up and it increased the price when we were exporting a significant part of resources in the United States. How do you plan to have exports continue to increase to U.S. allies while not necessarily having the ramifications of much higher prices here? Because the refinery capacity we have in the United States now is greater than all of the consumption in the United States. If we didn't export our diesel and jet fuel, we'd have to turn down our refineries. Who would want to turn down their refining capacity in today's world? We want them, the higher utilization they run, the higher throughput they run on, the more efficient they are. They produce more products. That puts a downward pressure on prices, not just in the United States, but for everyone abroad. That's what America is about, bringing more energy to the world. and pushing prices down. Mr. Secretary, and you're announcing today Trump peace pipelines. Will it be something that all of our allies in Europe can get a handle of? Absolutely. This Trump peace pipeline agenda is to grow the connection between the nations of Europe. Where I'm standing right here in Croatia, these nations were at the end of Russian Soviet Union energy system. They were at the behest. They were beholden to Russia. That's not a good place to be. What we're doing here is expanding this pipeline network so they can import oil and natural gas from the United States and then transport it among the nations in this region so their economies can grow and they can realize lower prices for their citizens and greater economic futures. I think the idea of the Trump peace pipeline, peace pipelines, there's many of these, huge. We'll announce today a couple of historic agreements in this regard. Stay with us. More Bloomberg Surveillance coming up after this. More at cmegroup.com slash equity futures. As markets move and headlines break, what matters most is context. A Bloomberg subscription gives you unmatched reporting, sharp analysis, and powerful tools that help you connect the dots. Visit Bloomberg.com slash podcast offer to learn more. Let's talk about some earnings. General Motors reporting better than expected first quarter earnings and raising its full year guidance. The General Motors CFO, Paul Jacobson, joins us now for more. Paul, welcome to the program. The buzzword this earnings season appears to be resilient. I think it would be unfair just to call this resilient. It looks strong, sir. Paul, where is that strength coming from? Well, good morning, John. Thanks for having us. You know, this quarter was a really strong one for us, but I think that resiliency word works really well. It's something that we've demonstrated for the last several years, whether it was the chip crisis or tariffs or inflation. I think the teams responded really well. And this quarter was no exception when you look at some of the challenges that we faced around inventory levels. The go-to-market team did an outstanding job dealing with the traffic that we saw in the stores, which continued to be strong and steady and has continued through April. So we feel good about the quarter, and we're able to take up our guidance as a result of the IEPA tariff accrual that we took in the quarter. And, you know, so far it looks like we're able to handle some of the pressure that we've seen in inflationary items, primarily resulting from energy prices. Well, Paul, let's talk about that. It's an important topic. Your supply chains have been battle tested, battle hardened. The pandemic, the tariffs and now this. What challenges are you working through as a team at the moment? Well I think right now obviously the team has done a really strong job of maintaining it through even some of the DRAM memory chip issues that we saw in the middle part of last year I think a lot of that has calmed down But what we really seeing across the board right now is inflationary effects in raw materials, aluminum, steel, just overall transportation and logistics costs. We're calling out about $500 million of pressure that we've added to our forecast for the year. So despite our beat, we're not taking up our guidance by nearly as much as that beat, primarily because we're continuing to adjust the business. But we feel good that we're a little bit ahead of it right now, but we are cautious about how long this might last. How much are you able to pass along those extra costs, Paul, to consumers in the face of already relatively high prices, but a very strong consumer demand? Yeah, so we came into the year saying that price was only going to be up by about a half a percent, which really was the annualization of model year 26 price increases. We haven't built any significant price increases into our models. In fact, what we're seeing is the industry discounting a little bit more. There's some competitive pressure out there, but our team has held up well. I think when you look at the GM portfolio, we've really got a vehicle for every consumer out there. We're known for our trucks and our SUVs, but we sold over 700,000 vehicles last year with a starting price of approximately $30,000 or less. So we've got that portfolio. The Chevy Trax is hitting record levels for us last quarter. So we feel like we're in a good spot, depending on where the consumer might be. Has there been any pushback against some of the large vehicles, the SUVs, the pickups, in the face of higher gasoline prices? Or have you seen no ramifications whatsoever? You know, we really haven't seen any changes. In fact, our light-duty pickup sales were up about 8% year over year in the quarter. And like I said, traffic has been strong. If anything, we probably were a little bit light on inventory coming into the quarter because we had such a strong December. And with the weather in January and so on, we had difficulty making up those inventory levels. So we're down quite a bit from where we were a year ago. It gives us an opportunity to replenish that stock and make sure that we've got product in the stores at our dealers for customers when they come. But so far, traffic has remained steady. Paul, when it comes to the tariffs, how is it going in terms of getting the refunds back from the U.S. government? So, you know, we're exposed a lot differently. I think many companies out there are principally focused on IEPA. Many of our tariffs are under Section 232. And there's been a pretty robust process. We haven't had any challenges with the offsets and making sure that we're getting the accounting right with the government to make sure that the cash is flowing efficiently. with IEPA, with the Supreme Court decision that was somewhat unexpected. We took the accrual. We have not moved our free cash flow guidance like we did our EBIT because we're not sure when that refund is going to come. We haven't applied for anything yet, but we're going to work through that with the government in partnership because I think that partnership has worked really well as we've adjusted and tried to benefit the U.S. auto industry the best we can. Well, how deep is this partnership? A few weeks ago, there was a report that the Pentagon is talking to General Motors and other auto companies about making munitions and helping in the war effort. Is that accurate? And where are those conversations now? Well, I can't comment on anything specific, but we do have a growing GM defense business, particularly with the Infantique squad vehicle, which has been great for the troops and for the department as well. But this is taking advantage of really strong U.S. manufacturing, and that's where we lead the way, I think, as automakers and do a great job. So, you know, while we would rather not be paying tariffs across the board, we understand the environment that we're in. And we're making sure that we can pivot the business the best we can to adjust to that reality. And I think the team's done a good job when you look at the consistency of our earnings over the last several years. The earnings speak for themselves, Paul, at a difficult time. And we talked all throughout this interview about the challenges on the horizon. How does that inform your approach to capital returns for the year ahead? Well, you know, our capital allocation policy starts with investing in the business. We'll put $10 to $12 billion in. Much of that this year is actually onshoring work that was previously done internationally. We're bringing that in as a result of our tariff response. The second pillar of our capital allocation is making sure we've got a strong balance sheet. And when you look at where our balance sheet is, how funded our pension plans are, we're in a really, really strong position. And what that's allowed us to do is take some of that free cash flow and allocate it back to shareholders to reward them for their confidence in the GM story and make sure that they're generating the returns for their customers as well. During the quarter, we were able to repurchase about $800 million worth of stock at about $75 a share, taking advantage of some of that dip and continuing to be very, very consistent about the way we apply our capital allocation. Paul, when you look forward at the potential priorities of General Motors, how much do you see EVs as playing a bigger part just because of some of the questions around oil, as well as, of course, autonomous driving? So while we did take a number of charges special item charges last year and even in the quarter as we continue to right size our EV footprint as a result of the new regulatory environment unlike many of our competitors we sticking with our models We discontinued the right drop van for very specific reasons but we not impairing any of our other EV programs like some of our competitors We continue to believe that we can make EVs work through our winning platform. They're not affordable, are not profitable at these levels right now, and that's something that we've got to work on. So we've got a number of battery chemistry, architecture initiatives coming in over the next couple of years that are going to get the costs down and where we think we can take and continue our leading role. We're already number two in the U.S. in EVs, and I think we can continue that and continue to grow it in the future. Paul, before we go, inquiring minds want to know, the Corvette behind you, what kind of money do we need to come up with? It's definitely in your price range, John. We'll have a whip around around the table. Thank you, Paul. Thank you. Stay with us. More Bloomberg Surveillance coming up after this. so here's the latest this morning president donald trump telling advisors he's not satisfied with iran's proposal to reopen the strait of humus general karen gibson of academy security is writing for us reopening the strait is a matter of urgency and iran knows it i suspect iran is gambling it cannot last us here general gibson joins us now for more general gibson that last line. Is there good reason to believe that Iran can outlast the U.S.? Well, I think it's a matter of political fortitude on our part. And if we want to achieve the objectives of this campaign, which were, as we've just heard, to impose very strict limits on Iran's ability to gain nuclear weapons, then this key leverage is something that we need to sustain. I think it's telling the actions that Iran is taking right now and indicating, as you've said, that, you know, combination of previous sanctions, of the wartime infrastructure damage, and now essentially a maritime blockade, our interdiction efforts are probably beginning to take a toll on a regime that has previously proved very resilient to economic pressure. Well, if the Iranians are so resilient, do you see the United States doing anything before they reach their maximum capacity on storage in the oil industry called tank tops. I think that the strategy that we have now, really this post-kinetic phase of using our military assets mutually, Iran is doing the same thing, to exert economic pressure on one another. Iran preventing essentially the flow of traffic in and out of the strait and the U.S. Navy preventing the flow of traffic in and out of Iranian ports, is proving to be pretty successful. Again, I think when we look at Iran's negotiating strategy at this point, trying to decouple the economic pressure from the nuclear discussions. I think they're seeking economic relief. They want military relief in terms of sustaining the ceasefire. And then that would allow them to postpone, drag out, or negotiate at least on the nuclear aspects from a position of a less coercive position and greater advantage to them. If Trump cannot open up the straight and foremost diplomatically, will he do so with the military? I think in terms of opening it with the military, that would really mean escorting tankers and other vessels, as we've talked about before. It's certainly a feasible military option. And I don't think that Iran would be in a position to really strongly contest that. They could strike, take pot shots at vessels that are going through. But I think if they did that, they would be inviting more of those very punishing airstrikes that we've levied in the past. General, what do you make of the comments we've heard from both the administration and other analysts that there really isn't any kind of cohesion in the Iranian leadership, that there isn't anyone like the former Ayatollah who could have come out and said, this is the route that we're going to take, the poison chalice that we're going to drink, and we're going to come to this agreement. Do you think that that's an accurate reflection of things on the ground? Well, I certainly think it's fair to say that the current Ayatollah lacks the strength of his father to act, you know, certainly with greater authority. But I think that the IRGC is really the Iranian Revolutionary Guard Corps remains probably pretty cohesive. I've often heard there are no real moderates among those who are in charge. It's just various factions of hardliners. And I'm not sure we see yet concrete evidence that there's significant friction within the Iranian, the Islamic Republic's leadership. General, what do you make of reports that there is some dissension from the rank and file that aren't getting paid because of a lack of cash coming into the regime? So I think that's where we would probably be more likely to see some friction. Some of the indicators I would look for would be defections or units that are no longer willing to carry out orders. But now that we're not conducting kinetic operations and Iran is not responding in kind, that's a little harder to detect. But those are some of the indicators I would look for that would lead me to believe that there was a growing friction within the security establishment. This is the Bloomberg surveillance podcast, bringing you the best in markets, economics and geopolitics. 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