Ford Will Take $19.5 Billion in Charges Tied to EV Overhaul

0:00Donald Trump is rewriting the Washington rulebook and reshaping the global economy. If you're trying to connect the dots behind the headlines, Bloomberg's Trumponomics podcast is here to help. I'm Stephanie Flanders, head of government and economics at Bloomberg. Every week, I'll bring you a smart, focused conversation with reporters and experts from Washington, Wall Street and beyond. Listen to new episodes every Wednesday and follow Trumponomics wherever you listen. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy.

0:38Bond markets are massive, murky, and let's be real, lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at Vanguard.com slash audio. That's Vanguard.com slash audio.

1:14All investing is subject to risk Vanguard Marketing Corporation Distributor. 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. Ford announced it will take a$19.5 billion charge tied to an overhaul of its electric vehicle business after struggling to turn a profit. Speaking of Bloomberg's Romain Bostic, Katie Greifeld and Matt Miller, CEO Jim Farley says the overhaul is about moving towards more profitable vehicles.

2:00Look, for this announcement, Matt, it's really about moving to more profitable vehicles. You know, we're going to make in Tennessee now an affordable pickup truck. I think it's going to really surprise the market. These are customers we know. Not a lot of guesswork in terms of the revenue, the cost we need to get at, and a more affordable van in Ohio. So these are going to be better investments for the company profit. And all those hybrid sales, you know, those are really profitable vehicles for us. all right that was ford a ceo uh jim farley speaking with bloomberg's uh remain remain boss at katie greifeld and matt miller to after that 19.5 billion dollar charge uh let's break it down uh and what does it mean for the company and for the stock we do that with steve mann global autos and industrials research analyst at bloomberg intelligence he's based down there in princeton steve 19.5 billion dollars that is a massive number for ford what goes into that number What does it mean about their commitment to EVs?

2:56Yeah, it is a very big number. It pretty much backed up the truck on these charges. But the important thing is it's clearing the deck for next year, right? There is a couple of earnings tailwind for Ford and actually to their competitors in Detroit as well. So the biggest, I think the biggest write down, two biggest write down is the writing down the losses on their Mustang Mach-E. You know, they've been losing around$25 ,000 on the EBIT line per vehicle. So it's massive. The other is the charge is really on the joint venture with their battery supplier in Korea. So, you know, they're going to repurpose one of those plants for energy storage.

3:47So, again, it's really clearing the deck. There's a couple of tailwinds for 2026, which includes, you know, Trump's loosening the MPG miles per gallon rule. Yeah, absolutely. Just looking at the stock, pretty much flat today, but the stock is at a 52-week high, up 37%. Does that reflect, Steve, investors want these auto companies to kind of back away or proceed more cautiously towards their move towards EVs? yeah definitely especially in in uh in the u.s and look uh ford is you know not just pivoting in in the u.s but they're also pivoting in europe you know they just announced a joint venture with renault to develop uh evs over in europe and you know ford doesn't really have a big presence in europe so they're taking that approach of partnership um gm is is doing the same thing Remember, they took a$1.6 billion charge, much more modest than the$19 billion that Ford is taking.

4:51But, you know, GM is dialing back, but keeping one foot on the EVs. I think they I believe they still think that they're, you know, they still can succeed, especially when they introduce the Chevy Bolt in the new year. So, Steve, you know, we're many years into this transition to EVs. And, you know, I know there are many there are European countries, Scandinavian countries where it's almost 100 percent of their fleets are their new car sales are EVs. But that ain't the case here in the U.S. With some hindsight here, why hasn't why haven't EVs taken a better hold here in this U.S. market? Yeah, it definitely needs more, you know, regulatory support for EV to take, grow, because, you know, EV, there's a lot, three hurdles, right, that consumers have to get over, which is the price, the range, and the convenience, right, of charging infrastructure.

5:49You know, without government support to actually build that out, it's going to take some time for this electrification transition. I think a lot of people in the industry still feels that electrification, battery EV, maybe hybrids in between is the way to go in the future. But, you know, I think there's a huge paradigm shift that consumers' hair have to get over. And it's really challenging to do that without government support here. And it does not appear that this administration, at least, is willing to provide that support. How does the industry kind of view that? Oh, it's very unfortunate.

6:35I think the gyration, the volatility that we're seeing in regulation is really not helping the industry. There's a lot of sunk costs that's been incurred with the shift to de-emphasize EVs. You know, all three, many automakers around the globe have spent billions. You know, with that$19.5 billion that Ford just written down, you know, it's probably about half of what they've invested in EV already. So, you know, we do need more stable policy. You know, you mentioned Europe earlier. You know, Europe is in the same situation. I think the European regulators really know what they want to do in the future.

7:19They're still continuing to talk about, you know, delaying going all EVs by 2035. And, you know, that's going to have, you know, some negative as well as positive implication to the global auto industry. Stay with us. More from Bloomberg Intelligence coming up after this.

8:04of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio. That's vanguard.com slash audio. All investing and subject to risk, Vanguard Marketing Corporation Distributor. 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.

8:38We'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

9:31to 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. So we want to take a look at the companies to watch for in 2026, but how do you shrink that universe of investable companies down into 50 that you really want to focus on? Well, thankfully, we have Bloomberg Intelligence and Tim Craighead, who is our global chief content officer for doing just that. Tim is joining us right now. And Tim, you guys have really narrowed it down to companies to watch for, for better or for worse.

10:10And you have a couple of themes to keep in mind here. What are the companies or what are the big themes that have the most companies that you really point us to? Yeah, sure thing. So, and we can dive into some of those. So, But to put a little bit of context, this group of 50 are all part of what we call focus ideas. It's a broader group of about 100. These are all high-conviction ideas. They have high-conviction ideas where we see something very different from what we think is embedded in market expectations. And there's catalysts ahead to change the market mindset. Those catalysts coming up in 2026, and that's where these 50 come into.

10:58And across the group this year, the biggest bucket are two. One is just simply new product innovation that is being ramped out into 2026. The other, no surprise, AI-related. And some of it's the tech companies. Some of it are companies that are feeding into the process. I'm happy to get into some of those or other topics as well, such as cyclical pressures and competitive concerns on the negative side. And there's a couple of other things as well. So on the new products, give us an example of a new product that you guys think might really be important for a company in a stock. Yeah. So, you know, it's interesting because some of these can be quite technical, Paul.

11:42You think Anilin Pharma or Bridge Bio are two biotech companies that have new products coming. One of them relates to heart issues. Another relates to dwarfism. But it's new products that will expand the market and drive, we think, significantly better revenue and earnings. On the other hand, there's some good old-fashioned names that you know and you love. Canada Goose has new product flow coming through that we think reinvigorates the top line. Brinker, Think Chili's, the restaurant, are going through a whole new upgrade of their menu and upselling clients with good stuff like margaritas with Patron.

12:31So the new product idea can expand across a whole number of different segments. It's quite interesting. Yeah, I'm looking at Decker's as one of the new products companies you highlight, and their UGG is introducing styles to stay relevant beyond the winter months. Let's talk a little bit about AI, because that's going to continue to be a big theme, even as investors are starting to make distinctions between companies that are in it for good and those that may be kind of faddish. What are some new names that surprised you in terms of their making the list? Yeah, it's interesting. and I'll give you the new names and the ones that aren't on here, and I'll do the latter first.

13:10There's none of the big LLMs this year that are on our list, or NVIDIA that's on the list, that's not on the list. What you find are other either enabling technologies. So think Lamb Research. It's a semi-cap equipment company that makes gear that you make the semiconductors with that's quite well positioned. TSMC, the world's largest foundry that's making the AI accelerator chips that feed into the LLMs, or even backup in the channel of how do you build out AI constellation, which is the US's largest nuclear utility that's quite important if you're to generate the electricity to drive the data centers to drive AI.

14:00ACS, interestingly, European construction company, they own Turner, which is the US's largest construction company. They've got the biggest order book for building out data centers. So there's a host of different kinds of ways you can think about leveraging AI beyond just simply the big LLMs like Google or OpenAI or things along those lines that you hear about. Tim, on this list, you and the BI analysts also highlight stocks that might have pressure on the downside, whether it's cyclical pressure, competition, M &A, project delay. Give us a name or two that might have some downside risk this year.

14:43Yeah, it's interesting on that. Think about what's going on from the standpoint of you were just talking about airlines. From a European vantage point, we've got wage pressures that are rising. And for Air France KLM, a big chunk of their business is the transatlantic market, which is getting more and more competitive. And with both of those factors, we think that there's risks to estimates. China Railway Group, it's a big state-owned enterprise in China. It's one of the big four engineering companies. And to the degree that China is shifting towards more technology and innovation driven investment and less away from bridges and roads and railroads and things along those lines, China Railway Group, we think, has downside risk.

15:40A couple little companies that are unusual but intriguing. Dino Polska, which you've never heard of, I'm sure, is a Polish supermarket company. But they've got two big European competitors that are coming into the Polish market. Again, downside risk to earnings. And the same thing can be said about Join Labs. We talked about a couple of positive health care companies. This is one of the contract research companies that helps a pharmaceutical do their drug development. And China is now looking to go broad and global with approvals on new pharmaceutical products. Join who focuses in on China is losing some of their business.

16:26There's lots of ways we can think about this. Stay with us. More from Bloomberg Intelligence coming up after this. I'm Barry Ritholtz, inviting you to join me for the Masters in Business podcast. Every week, we bring you fascinating conversations with the people who shape markets, investing, and business. CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market, whether you own stocks, bonds, real estate commodities, crypto, you really need to hear these conversations. Sometimes it's behaviorists like Dick Thaler or Bob Schiller.

17:10Sometimes it's fund managers like Peter Lynch, Bill Miller, Ray Dalio. Sometimes it's authors, Michael Lewis, author of The Big Short, and Moneyball. Regardless of the conversation, these are the folks that move markets each week. That's the Masters in Business podcast with me, Barry Ritholtz. Listen on Apple, Spotify, or wherever you get your podcasts.

17:37You'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. Some news in the food business today. Kraft Heinz is replacing its chief executive officer, getting somebody new here starting January 1st. And this move follows a difficult period for the food company here. And I know they just they made some announcements about splitting up the company. So a lot going on at Kraft Heinz. Let's break it down with Christina Peterson, food industry reporter for Bloomberg News.

18:12She joins us live here in our Bloomberg Interactive Broker Studio. Talk to us first about this, the change at the CEO level. What's going on there? Yeah, we had expected in September that the current CEO would lead one of the two new companies, specifically the one that is the grocery staples. They actually don't have official names yet, but that was a collection of the least profitable or less profitable food items there, including things like Lunchables and Oscar Mayer deli meats. the surprise came this morning that he is in fact not going to lead that company and instead they are bringing in steve k helene from kelanova uh to lead the second company after the split has gone through that is being called the global taste elevation company that's going to have heinz ketchup kraft mac and cheese some of those beloved iconic products so that's the fast growing part of the company, and the other one is kind of the equivalent of CNN, TNT, and the leave-it-behind assets that you're managing a decline in.

19:15What can you tell us about Steve Cowlane, the former Kelanova CEO? What is his approach, his philosophy? Well, I just spoke with him, and he said that he's going to be focused on bringing organic growth to the company. We talked a little bit about focusing on some of the health and wellness trends that consumers are looking for, increasing offerings with protein, with fiber, with shorter ingredient lists, you know, the so-called cleaner labels. So they'll definitely be leaning into that, it sounds like, a little bit more. He also led Kellogg through its split. The Kellogg company split into W.K.

19:49Kellogg and then Kela Nova. Both of those companies were then separately acquired. I asked him if he thought that could be a path here, and he said it's hard to predict the future, So not ruling it out. Just looking at the stock here, Kraft Heinz, compounded annual return over the last five years, negative 2 % versus the consumer packaged good index up about 7%, 8%. Of course, the S &P up about 15%. So what's been the challenge for Kraft Heinz over the last number of years? I mean, in general, the food companies are all struggling with this shift as consumers move towards healthier, less processed food.

20:28The company says that they just had too many brands and that splitting into two will help them focus on each component. I think that there is some analyst chatter that that's what companies say when they just need to spin off some of their less profitable items. But they will tell you that they expect both companies will have better value when there's an ability to focus more on the condiments and boxed meals and then on some of the other foods. Christina, put this all into context for us. When Paul talks about how this group has been kind of struggling overall, we also saw that with PepsiCo, with Coca-Cola.

21:06I mean, they have had to rethink their strategy completely. Yeah, there's just been a lot of movement in the food industry right now. PepsiCo announced some pretty dramatic changes last week. They're going to reduce the number of products they sell by 20 % and lower prices in some of their key brands as part of an agreement with activist investor Elliott Investment Management. Coke has a new CEO. I think Coke is in pretty solid shape. They've been doing – their shares have been doing really well compared to some of the other business companies. But, yeah, in general, the companies that I think are really tapping into this health and wellness interest in consumers are often the smaller startup brands.

21:45and the big companies are playing catch up not only with them, but some of the private label companies too that are really nimble and able to get some of these new products to market really fast. Well, I know. I mean, you mentioned the private label. I know when I go to the ShopRite in Belmar, New Jersey, we buy a lot more private label than we ever used to. How's that's got to be a bummer for some of the craft clients who spent my lifetime getting me to, you know, brand up with Cheez Whiz or something. I mean, now I'm going store brand. That's going to be a problem. I mean, consumers are definitely under pressure.

22:15they still need to buy food. And one of the things they do is turn to more affordable food. And often private label is an enticing option. Interestingly, we are seeing that more on the food side than on the beverage side. Yeah, that's true. Yeah, I guess people are willing to pay for beverage. But I mean, I think about especially on the food side, it's that move towards protein. Everyone is obsessed with ingesting protein and making sure that whatever they are eating, if they are on Ozempic or something else, that it's going to add to their healthfulness rather than, you know, kind of take away from it.

22:46What are these companies doing in terms of competing better against those startup brands? Are they looking to acquire them, for instance? Yeah, for sure. In some cases, we saw PepsiCo acquire Poppy, the prebiotic soda brand this year, and Ciete grain-free chips. So they are, in certain instances, acquiring some of these companies. And I expect we'll see more of that in 2026 also. Stay with us. More from Bloomberg Intelligence coming up after this. I'm Carol Masser. And I'm Tim Stenevec, inviting you to join us for the Bloomberg Business Week Daily Podcast. Now, every day we are bringing you reporting from the magazine that helps global leaders stay ahead.

23:25We've got insight on the people, the companies and trends that are shaping today's complex economy. That's right, Tim. We're all over global business, finance, tech news, all as it is happening in real time. And we've got complete coverage of the U.S. market close. Got to say, basically, if it impacts financial markets, if it impacts companies, If it's impacting trends and narratives that are out there, we are on it. We also have a lot of fun doing it. Bloomberg Business Week also brings you the analysis behind the headlines through conversations with our expert guests. And we are doing this all live each weekday.

23:54And then we bring you the best analysis in our daily podcast. Search for Bloomberg Business Week on YouTube, Apple, Spotify, or anywhere else you listen. Check it out on your way home from work to catch up on the conversations that you miss during the business day. And on the weekend, check it out for a complete wrap-up of your business week. That's the Bloomberg Business Week Daily Podcast. I'm Carol Masser. And I'm Tim Stanovic. Subscribe today wherever you get your podcasts.

24:20You'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. Big Take Story. You know, we love these Big Take Stories. These are great topics. I don't know who thinks of them. Great topics. They're really well reported, deeply sourced, all that kind of good stuff. A lot of times they have fun graphics for me to look at. So this one is really cool. Saudi sisters wield a 50 billion dollar fortune as global power brokers.

24:55I had no idea about these people, but our next guest does. Devin Pendleton, she's a wealth reporter for Bloomberg News. She joins us live here in the Interactive Broker Studios. Who is the Olayon group? Olayon group? Yeah, Olaian. Olaian. Who are the two sisters behind this Saudi group? So it is Lubna and her sister Hutham Olaian. They're both in their early 70s, and they have been at the helm of this family enterprise for decades, for more than 40 years. Wow. And they have fairly low profiles, too. That's the thing that is striking. They have these low profiles, but they are known as steely negotiators.

25:34Tell us what they've done. Yeah, they've done an incredible job building this family business, which was started by their father, who was a really, you know, unbelievable character. He basically worked his way up from nothing. You know, he's not a royal, was not connected to the royals at a young age, but he built an oil servicing company, which he grew striking deals with all sorts of consumer brand companies in the U.S., bringing them to Saudi Arabia, everything from Coca-Cola to Cheez-Its to Oreos. and he came over to the U.S. in the early 1960s, was very inspired by what he saw and bought some bank stocks.

26:11And basically his daughters took over that business, which was sprawling. I mean, it was in all sorts of sectors, real estate, oil field services, consumer goods, and hung on to those equity stakes, those banking stakes. So now they have this incredible portfolio of investments in the U.S. on Wall Street, as well as this, you know, booming multi-sector business in Saudi Arabia. So, but people in power know these two sisters. They were at the White House recently. Tell us about that. How do they subtly wield their influence? They are not noisy people. I think it's one thing to do business and thrive in Saudi Arabia is you have to really sort of be quiet, be forceful, sort of know be a little bit deferential to you know who's really in charge which would be the government and the king and the crown prince um but they have had long-term ties with the u.s i mean you really saw that at the white house dinner you mentioned paul she was sitting right next to elon musk but you know arguably one of the most important people in the room because she has these connections on wall street through their long-term equity investments um it's really important right now, especially because the kingdom is trying to bring in a lot of inbound investment to transform their economy past oil.

27:30It's a big deal for them to be bringing in money. And these Olyan sisters have had these connections for a long, long time. So they're more important than ever. So they have the connections with the right people in Saudi Arabia. How does their, I mean, when I think about prominent investors in the kingdom, I think about Prince Abolid bin Talal and how he's been very vocal about his positions. He's, you know, often seen on media networks. You don't hear about these Alliance sisters at all. And I wonder how much of that is, you know, is part of their success story. Totally. It's so, so important.

28:03I think they are extremely discreet. They are, like I said, like they really know their role in the kingdom. Like they're important. They step in and help when they need to. For example, in Saudi Aramco IPO back in 2019, the kingdom was having trouble kind of getting people excited and really getting the investors they needed early to get backstop this IPO. They asked some influential families and the Lions were one that, you know, they really showed up. That matters for the kingdom. And it also gives them, you know, license to to really expand their business as much as they need to and to be in a position of power to help out, but also, you know, have favors in return.