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First Move with Julia Chatterley
Fed Set to Raise Rates again Later Today; Concerns Over Potential Visit by Pelosi to Taiwan; Chipolte give away $200,000 in Cryptocurrencies; Chipolte CFO: Inflation Environment is Really Tough; The Vans have record- breaking range of 250 Miles per Charge; GM's Brightdrop Delivers Electric Vans to FEDEX. Aired 9-10a ET
Aired July 27, 2022 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
(COMMERCIAL BREAK)
JULIA CHATTERLEY, CNN HOST, FIRST MOVE: A warm welcome to "First Move", another jam-packed show coming up for you today, including D-day for Powell
and the team at the Fed. A planned trip to Taiwan has China seeing red inflation red for global consumers continues to spread and ask for price
hikes corporations increasingly embed.
For now though stock futures on Wall Street plowing ahead. Europe higher too but expect some volatility as we approach to that Fed decision time
we're less than five hours away now as we speak a sizable three quarters of a percentage point rate hike is already baked into markets.
Investors though will be laser focused on what the Fed Chair Powell has to say about future moves? Could he go a mere half a point and they see that
carefully in September if inflation moderates? We'll be discussing all the details and the outlook in a moment.
In the meantime, corporate earnings from both the United States and Europe showing profits holding up. I think we can say overall even as rate hikes
begin slowing economies food giant Kraft Heinz today even raising its 2022 sales outlook. That said most of the challenges we talk about constantly on
this show are far from resolved.
Boeing's results missing estimates today amid ongoing supply chain woes, the ad sales slowdown, impacting Alphabet that's the Google Parent. And the
dollar strength dinging Microsoft Corporation is grappling with how much inflation to pass on to consumers too, just take a listen to what Coca
Cola, McDonald's and Unilever said they're all seeing sales hold up even as they raise prices. But as Walmart warned yesterday, the urge to splurge on
non-essentials is simply no longer there.
The popular Mexican Food Chain Chipotle now saying it will cost more dough for its tacos. Chipotle though hoping diners won't say holy guacamole.
We'll discuss it with the firm's CFO later in the program. For now, it's hang on to your burrito. The Fed is far from - and that's where we begin
today's show.
Rahel Solomon joins me now; no food references required Rahel, great to have you on the show. I think three quarters of a percentage point rate
hike is expected which takes us to a level that we often talk about neutral, no longer supporting growth, no longer withdrawing from growth.
The question is I think what next for the Fed?
RAHEL SOLOMON, CNN CORRESPONDENT: Absolutely short of any surprises in today's meeting, the guidance is sort of all eyes turn to well, what could
happen in September? 75 basis points and three quarters of a percent even though we saw that in the last meeting, Julia that is still significant.
I mean, the last time before June, we saw a rate hike of that magnitude was 1994. And now we're starting to see a growing consensus that we could
possibly see another three quarters of a percent in September City Research putting out a note a short time ago this morning saying that look with
headline inflation at 9.1 percent. And core measures above 4 percent
A Fed that has committed to bringing down inflation I think we have the quote here that we can pull up is unlikely to pivot to a more dovish
strategy. We continue to expect further aggressive hikes including 75 basis points or three quarters of our percent in September.
Julia, I don't know that we have you ever seen consecutive increases, meeting after meeting three quarters of a percent again, the last time we
saw that was 1994. So it really just goes to show you how aggressive the Federal Reserve feels like it has to be? The question, however, is how much
is too much?
We can argue that there is likely some consensus right now that the Fed has to do more because inflation has clearly shown signs of accelerating, but
at what point does it become too much and the fear of a recession grows and accelerate? So that's the big question now.
And we're going to be sort of listening very closely to Powell's comments in terms of messaging and in sort of sentiment and how they're feeling
about some of the data we've seen, but it's a really big question and a question that a lot of people are probably asking now.
CHATTERLEY: These big jumps of what being late looks like, deliberate or otherwise. And that's a fact. You're right. And I couldn't agree more with
you on some of the big questions that we're asking.
I think some of the others are, what level of inflation is the Fed going to say OK, prices are now under control and what level of interest rates given
all the rises that we're talking about now create that level where they go, OK, we're comfortable and while the all the Fed members are holding
together now and recognizing they have to take action? The views are going to start changing very quickly to your point about what's enough and what
level of inflation are we happy with? And that's a real hot potato in terms of questions, and I shall throw it in your direction right now.
[09:05:00]
SOLOMON: If only I knew the answer. And the truth is perhaps that no one knows the answer right now, right? I mean, this is why we hear from Powell
that they will be data dependent. But Julia, it's a great point, because we're already starting to see prices fall in certainly in terms of raw
materials in terms of commodities, like soybeans, grain, corn, certainly crude.
And so if we're already starting to see prices fall off, we're already starting to see inflation appear to peak, at least at what point will
enough be enough? And I would argue, just based on Powell's comments before that, they're probably not going to take their foot off the brake until
they see a deceleration, and monthly inflation month over month core inflation until we start to see that come down, which we haven't yet.
I don't think they're going to feel like this is moving in the right direction. And of course, also, Julia, there is a concern that the Fed may
take their foot off the brake too soon, that once we just start to get indications of peaking, that it might sort of pull back, and then we're
sort of in a yo-yo, so, so many questions, no one really knows the answer.
And that's what unfortunate right is now that we're all sort of taking a wait and see approach. But I should say, between now and the September
meeting, we're going to get to jobs reports, which are going to be very important for the Fed, we're going to get some very key inflation reports,
including one on Friday.
So we'll be looking very closely at that month over month core inflation. But the question is how much will be enough? And we want now. We won't
know, right? Monetary policy of course, there's a lag there. So it is not an exact science unfortunately.
CHATTERLEY: No, it's definitely imperfect. And we're both envious and not envious of Jay Powell having to be the person who has to front that
campaign and try and explain the quite frankly, inexplicable most of the time, Rahel, thank you for that.
OK, natural gas prices have hit their highest level since 2008. It's complicating some of the challenges this after Russian gas giant Gazprom
said it would further reduce supply through the Nord Stream I Pipeline.
Clare Sebastian joins us on this, Clare, its eye watering gas prices have jumped out a further 30 percent over the last few days. I think everyone
was expecting Russia to play hardball or to continue to play hardball over energy and specifically gas prices. But I don't think anybody expected
supply capacity cuts down to what 20 percent, just days after Nord Stream I was reopened.
CLARE SEBASTIAN, CNN CORRESPONDENT: Yes, Julia, I think what you had there was Russia, essentially engineering and emotional rollercoaster for the gas
market, a relief a feeling of relief when the Nord Stream one came back online at the end of that scheduled maintenance period.
And then just three days later, cutting in half the amount of supply or announcing was going to cut in half the amount of supply coming through
that pipeline. This is why we see gas prices soaring so much in the last few days. And the interesting thing, which analysts at rise that energy
have pointed out, if you look exactly at that chart, you see that it's coming back close to the highs that we saw in the early days of the Russia
Ukraine war in March.
But back then, the highs were sort of on the back of sentiment, fear that there would be a supply crunch. When we when we saw that Europe wasn't
going to immediately move in and sanction energy, that fare receded and the prices came back down. Now what we have Julia, is a real supply crunch real
limits on supply into Europe.
And couple that with sentiment as well, this could get worse. And this is very serious. And I think really what the European plan to cut demand by 15
percent lays bare is the truth that we've known all along, which is that there is no way to fully replace Russian gas deliveries into Europe, with
gas from other sources, they always had to cut them out. And now they have to do it even quicker than expected.
CHATTERLEY: I think that's an incredibly valid point at the perfectly appropriate moment, Clare, we know that there's an affordability crisis for
consumers. These prices were beyond the limits of affordability for many industrial uses too. And I think to your point about what was a watered
down plan from the Europeans too at times voluntarily cut capacity and of course, with caveats on certain countries. The credibility is not there.
It's not enough.
SEBASTIAN: I mean, like for the EU, the important thing was to try at least to put on a show of unity, to show that they're resolved to continue to
support Ukraine, even if it means enduring economic pain themselves remains but it is watered down Hungary has voted against it.
They told us they said the plan was completely unacceptable. Then we have exemptions which according to the think tank here in your Bruegel. Affect
about six countries, the derogations, as they're called, where countries can then apply for lower targets when it comes to demand reduction that
could affect according to Bruegel and other 12 countries.
So there you have two thirds of the EU that could either be exempt or have lower targets should we move from the voluntary 15 percent into mandatory
cuts if we get into a gas emergency. But look it really was supposed to be a show of unity. I think the jury's still out and whether they actually
achieve that.
[09:10:00]
CHATTERLEY: Yes and if you get to those forced capacity cuts, we'll take another look at that unity. Clare Sebastian thank you.
Lufthansa, canceling over 1000 flights as its ground staff go on strike the airline says 130,000 passengers will be impacted by the walkout. Anna
Stewart joins me now just the latest, I think in the challenges and battles for Lufthansa, what did the union's want Anna? And talk us through these
capacity limitations because when we're talking about 130,000 people, that's a lot of angry customers.
ANNA STEWART, CNN REPORTER: Yes, and we've covered so many strikes from airports and airlines in recent weeks. This one is absolutely huge when you
consider 130,000 passengers. Now at the heart of this strike, like many others, it's a demand for a wage increase from ground staff at Lufthansa.
This is led by the Verdi Trade Union.
And they want to see a wage increase of 9.5 percent for some 20,000 ground staff. And they want that over a 12 month period. My rough calculation that
brings the cost if that was to be agreed to $88 million for Lufthansa.
Over a 12 month period Lufthansa have offered a wage increase, but it's nowhere near what this trade union would like they've already had two
rounds of negotiations, and it's not going anywhere. For those people there are 130,000 people that are impacted by the strike today it's really tricky
to know what's going to happen in terms of their onward travel because ordinarily the airline would just rebook you onto another flight.
But we know already that capacity issues for airlines for airports all around the world, but particularly, of course, in Europe. So how many of
those people will actually get rebooked onto a flight today or tomorrow is anyone's guess frankly, and speaking to some passengers on social media and
also listening to a few from Reuters this morning.
I think it's really hard for people to get information. Lufthansa staff of course really stretch to respond to 130,000 people. Take a listen to this
passenger he was stranded in Frankfurt.
(BEGIN VIDEO CLIP)
DIEGO LAMBIASE, LUFTHANSA PASSENGER: The problem know cannot travel I arrived from Africa now. I have to go to Paris, the flight was canceled.
And they said tomorrow you will be booked. But nobody was here when we arrived in order to say what do we have to do?
Where do we have to go? Where we have to sleep? And so we are looking for some Lufthansa people that can help us. But when we ask guys it will be
very hard to find someone - today in the airport. So we don't know what to you?
(END VIDEO CLIP)
STEWART: And I think the biggest problem for many people is actually a lack of information because it is so hard to speak to 130,000 people with
obviously quite unique situations and people want to know, will they get compensation? Will they be refunded? If they have to book into a hotel if
they need food, drink transport?
When will the next flight be that they can get on and off for so many people stranded at home? So at the moment, a big problem here is
inflammation of the Lufthansa. The third round of wage negotiations with this union takes place next week. If that doesn't bear fruit, then of
course, we could be looking at another day like this before the summer ends, Julia.
CHATTERLEY: Yes, it's difficult, isn't it to negotiate and try and get help when people are striking. That's why there's no one around to help. I was
going to ask you any resolution in sight. But what we're saying is it's we've got another week till the negotiations take place. And then there's
the risk is that there's more of this.
STEWART: Yes, and will all those passengers who are stuck today even be on their way home by the time the next negotiation round comes next week, who
knows Julia?
CHATTERLEY: Yes, we'll keep in touch, Anna thank you for that Anna Stewart there. OK, let me bring you up to speed now with some of the other stories
making headlines around the world. Joe Biden is expected to speak with China's President this week, as concerns grow about a potential visit by
House Speaker Nancy Pelosi to Taiwan.
Sources say Pelosi wants to go there in the coming weeks, but administration officials are expressing concerns about how China will
respond? Selina Wang has more on why such a visit will be so contentious at this moment.
(BEGIN VIDEO TAPE)
SELINA WANG, CNN CORRESPONDENT (voice over): Fire and fury from Beijing in response to House Speaker Nancy Pelosi's potential visit to Taiwan. China
threatening to take resolute and powerful measures a U.S. official told CNN, China could impose a no fly zone around Taiwan.
A prominent hawkish voice in China said Beijing's reaction would involve a shocking military response even suggesting that PLA military aircraft will
accompany Pelosi's plane to enter the island making a historic crossing of the island by military aircraft from the mainland. But the Chinese
government hasn't announced details about how it could retaliate?
DREW THOMPSON, SCHOLAR, NATIONAL UNIVERSITY OF SINGAPORE: Beijing believes that this uncertainty will lead to deterrence and that Washington and
Taipei will effectively talk themselves out of this. But I don't think Beijing really wants to risk a military conflict.
WANG (voice over): China sees the self-ruled island as a breakaway province that must be reunified with the mainland, even by force if necessary. There
have been recent U.S. congressional visits but if Pelosi goes to Taiwan she would be the highest ranking U.S. official to travel there since then House
Speaker Newt Gingrich in 1997.
[09:15:00]
WANG (voice over): This potential visit comes at an extremely sensitive time. China's military is celebrating its founding anniversary on August
1st. And we're just months away from a key political meeting when Xi Jinping is expected to seek an unprecedented third term.
From Beijing's perspective, a potential visit by Pelosi to Taiwan would be a reckless act that provokes Beijing at a time it's supposed to be
projecting strength control and stability.
UNIDENTIFIED MALE: I think military action on China's part in response to a Pelosi visit is very risky for Xi Jinping.
WANG (voice over): Officially Washington and most governments around the world only acknowledge Beijing as the legal government of China yet
unofficial ties between Washington and Taipei have been growing closer. And the U.S. continues to sell weapons to the island, all of that infuriates
China.
In response last year, Beijing flew a record number of war planes into airspace near Taiwan. For decades, the U.S. has been purposefully vague
about whether it would defend the island should the Chinese invade?
JOE BIDEN, PRESIDENT OF UNITED STATES OF AMERICA: That's a commitment we made.
WANG (voice over): Biden has said several times that the U.S. would intervene militarily if China were to attack Taiwan.
BIDEN: Yes, we have a commitment to do that.
WANG (voice over): Only to have the White House walk back those remarks each time. But as China's military might grows, more are calling for the
Biden Administration to end the so called strategic ambiguity. It's impossible to overstate how important Taiwan is to the Communist Party and
its legitimacy.
Beijing is against any move that appears to acknowledge Taiwan as an independent country, or makes the U.S. relationship more formal. And a
visit from one of America's most powerful politicians does just that. Selina Wang, CNN, Beijing.
(END VIDEO TAPE)
CHATTERLEY: People in the Philippines are bracing for more tremors after a seven magnitude earthquake struck the north of the country early Wednesday.
At least four people died and dozens were injured. The quake caused landslides and knocked out power in some places and was felt more than 400
kilometers wait in the capital Manila.
U.S. basketball star Brittney Griner says her rights were not read to her when she was detained at a Moscow airport in February. Griner is back in
Russian court testifying in her trial on charges of drug smuggling. She pleaded guilty earlier this month to taking cannabis oil into the country.
Her lawyers argue it was prescribed for severe pain that we've convicted Griner faces up to 10 years in prison.
OK, so ahead here on "First Move" where burritos meet Bitcoin foster giant Chipotle leveraging crypto to attract new customers plus, electrifying
deliveries. Exciting new EV vans from GM's Brightdrop we have the CFO coming up.
(COMMERCIAL BREAK)
[09:20:00]
CHATTERLEY: Welcome back to "First Move" the popular Mexican food chain Chipotle stock jumping pre market following its second quarter earnings, it
was able to raise prices in recent months to offset soaring costs. Those sales prices will go up again next month.
Meanwhile, it's giving away $200,000 in crypto with a promotion called buy the dip. Chipotle stores now accepting crypto currencies, including
currencies like Bitcoin, Etherium and Dogecoin.
Joining us now is the CFO of Chipotle Mexican Grill Jack Hartung. Jack, fantastic to have you on the show! Investors clearly impressed with these
earnings and incredibly challenging times. And to some degree, a bit of sales, softening offset by your ability to raise prices. These are
challenging times.
JACK HARTUNG, CFO, CHIPOTLE MEXICAN GRILL: Yes, they certainly are Julia, and you know, what I'm really proud of is during these challenging times, I
mean, we really focus on the basics, meaning focus on providing a great experience to our customers focused on culinary, our customers come in and
expect to see real cooking, they expect to taste delicious food made from real ingredients.
And that's what we focus on more than anything. The inflation environments really, really tough everyone out there, every industry is facing this. One
of the advantages we have is pricing power, and we don't love to be in a hurry to use it but when the inflation keeps coming at us. We will take it
the modest increases just to try to offset some of that inflation.
CHATTERLEY: I mean, I saw it compared to where you were back in 2020, sort of on average, a 10 percent price rise, and there's more coming in August.
How many more times can you do this, to your point about the ability to change prices and pass that on?
HARTUNG: Well, we still do have room Julia because we compare ourselves to other restaurants remember other restaurants are raising prices as well,
grocery stores are raising prices. So really the consumer any way they turn, there's really going to be inflation, it's just the reality of when
ingredients go up, the prices are going to go up as well.
So we have pricing power, we'd love it. If inflation would ease and level off here, we'd love it to not have to take another price increase.
But when you compare what we offer in terms of the quality in terms of the customization, in terms of the experience you get at Chipotle compared to
anything comparable, we're still priced quite a bit under what other competitors are pricing at right now.
CHATTERLEY: So it's the relative pricing power that we have to remember into and that's vitally important. Is it getting easier? Jack very quickly.
Is there any sense that it's leveling off is your assumption here? Look, these price pressures could be around at least for the next quarter,
perhaps a couple more?
HARTUNG: Yes, we see additional inflation, additional pressure from a few items in the third quarter in terms of dairy in terms of beef in terms of
packaging, we're still seeing pockets of wage inflation, we took a very big move a little over a year ago, where we raise all of our wages, you know,
15 percent or more our average hourly rate wage for our employees is in the $15 to $16 range. But we still see pockets of inflation throughout the
country.
So we don't see an easing right now. I do think as consumers responded, we did see a softening like other businesses during the second quarter. I do
think as consumers pull back, there will be some rebalancing of the supply and demand out of balance that we're seeing, because that's, frankly, the
biggest cause of inflation. And we're hoping that will level off by let's say Q4, or maybe early next year.
CHATTERLEY: Yes, I mean, that's still a long time to go. And I want to talk to you about wage pressures. Obviously, you did raise wages to on average
them a $15 minimum wage, and we're one of the first to do that, let's be clear.
But you did recently catch close a store in Maine, and it was due to staff shortages. According to the company though, we have to raise the point that
these workers were talking about unionizing. And I know the company said look, these are two issues that are not related in any way, Jack, what is
the Chipotle view on unionizing?
Because sometimes that can be helpful in that it creates a united voice and negotiating voice rather than trying to negotiate with lots of people. Do
you welcome some form of unionization or is it unwelcome at Chipotle?
HARTUNG: Julia, we fully support our employees' rights to unionize. And in Augusta we support the rights as well. The reality unfortunately we don't
like closing restaurants we hate to take away the Chipotle opportunity away from customers in that marketplace. We couldn't staff the restaurant in
fact; we had do full time recruiters go to that area to try to hire enough staff.
[09:25:00]
HARTUNG: We had closed the restaurant because frankly we didn't have enough staff to safely, you know, prepare, cook and serve our food. So to close
the restaurant, we invited our existing crew to come in to go through some retraining, we were paying them during that period, we were actively
recruiting for a matter of a couple of months, we just couldn't get enough crew.
And so we had no choice at some point, you know that we had to close the restaurant. One of the other things I'd like to add is, you know, we've
chosen to be a company owned business, most restaurant companies rely on heavy franchising, meaning somebody else owns the business, somebody else
hires employees, we have 100,000 employees.
So we value our employees, we know our future is based on hiring great people today, that will be our future leaders of tomorrow. So we really
spent a lot of time making sure that our employee proposition is a favorable one that people that join Chipotle, they may come in for a job
that pays 15 or 16 bucks an hour, but they have the ability within a matter of a few years to move up into management roles.
We'll teach through that come in today how to cook, how to lead people how to run a business, we promoted 19,000 people last year, that's more than
six people in every single restaurant. So when you join support, lay, you can't help but look around you and see people being promoted all around
you. And so, you know, it just speaks to the idea that there's opportunity when you come.
So our main focus is to make sure we provide a compelling employee proposition. So people love to join Chipotle. And when they join, they feel
like that we value them and they've got a future with us.
CHATTERLEY: Jack, I appreciate your honesty on this. We have to talk about the venture fund too, because it does tie to what we're saying about some
of the broader labor challenges that you mentioned. When I look at some of the investments that the venture fund is making in it, it is tied to
productivity and efficiency for the existing workers you have Chipotle.
I was looking at this online, the autonomous kitchen assistant. Do you think in the end, you'll end up perhaps if these kinds of technologies are
installed more broadly across your chains that actually you will need less workers because the ones that you do have will be more efficient due to the
kind of autonomous technology that you're investing in? Is that where you're sort of headed?
HARTUNG: Yes, I don't think we'll need fewer employees, Julia. But I think we'll allow our employees to do other tasks. For example, frying chips, you
know it results in delicious chips; we make our chips from scratch every single day.
And so, you know, they're delicious. We don't want to give up on that. But it's a hard job, it's very, very hard to stand over that fryer for hours,
and make the Chipotle. It's a job that our employees don't love doing.
So if we can bring automation that will make the employee experience a better experience? They can focus on other tasks, like doing some other
culinary tasks, serving customers, things like that. So I think it's a win, not just for the quality of our culinary and the restaurant, but also the
quality of the experience that our employees will have.
So I don't see us going down in terms of the number of employees, but I do think we can redeploy them into other tasks.
CHATTERLEY: You got it, "Buy the Dip", Jack; we have to talk about the Cryptocurrency offerings. I've seen all sorts of feedback on this some
excitement, some criticism that you shouldn't be telling people to buy the dip. I know you're not but you can come back on that. Ultimately, what is
this about? And on what percentage of people buying food do you see in the future paying in crypto even today?
HARTUNG: Yes, listen this, Yes, sure, it's about having fun to be honest. Crypto, we're not allowed to encouraging people. Yes, you know, but listen,
you know, a lot of people are investing in crypto, a lot of people are talking about crypto, its part of culture, whether you're pro crypto or
against crypto, people have opinions about it.
Listen, we just thought it'd be a fun thing to do, obviously, by the Deputy Head, you know, has a double meaning because we're talking about our
guacamole and our case, so and so it's just a matter of having fun.
We do accept crypto, you know, through a partner called Flexa. To be honest, I don't know if any customers actually come in and pay for crypto.
But again, we just thought it would be a fun thing. We have a lot of young customers, a lot of our young customers are very interested in crypto, some
are invested in it.
And so we thought this would be a fun way to, you know, tap into, you know, a tap it that a lot of our customers are having fun with nowadays.
CHATTERLEY: Yes, and look, we're talking about it Jack, are you a crypto? Are you a crypto fan?
HARTUNG: I am not, people have asked us some are worried about they will say well, you know, we've got over a billion dollars on our balance sheet
and they asked us will we ever invest? Some want the answer to yes. Most wants to be answered no.
The answer is no. Crypto is not part of our business strategy today. We're going to focus on really the best investment we can make into our
restaurants and into our people. And you know, crypto, well, there certainly is going to be some future. You know crypto with other businesses
right now that's not our focus.
CHATTERLEY: So if I offer you burrito, Bitcoin, you take the burrito?
HARTUNG: If I'm hungry hits the burrito absolutely.
CHATTERLEY: Yes, there's a clarification.
[09:30:00]
CHATTERLEY: Anyway, Jack, great to see you. Thank you so much for your time and we'll speak again soon.
HARTUNG: Thank you Julia.
CHATTERLEY: Jack Hartung there the CFO of Chipotle Mexican Grill. OK, up next, a bright spark in the race to net zero we're joined by the CEO of
GM's Brightdrop on their work to decarbonizes last mile logistics
(COMMERCIAL BREAK)
CHATTERLEY: Welcome back to the "First Move". And a highest start to the Wall Street trading day stocks bouncing from Tuesday's weakness sparked by
Walmart's warning if you remember on the health of the U.S. consumer will have few days for investors up ahead with important earnings and economic
data on tap.
Perhaps some cooling refreshment is needed for the heads of business and finance. The first mover Ice Cream Shop proposes a few scoops of rum rising
for Fed's Chair Jay Powell in the Federal Reserve.
The U.S. Central Bank raising rates later today, investors hope Powell will go two scoops in September though, instead of three plus a cone of rocky
road for U.S. economists and negative print is a very real possibility.
When we get preliminary looks at the second quarter GDP reading tomorrow the White House already bracing for a bad number stressing that two
quarters of negative growth do not an official recession make and finally cookie dough for the Big Tech firms as earnings season reaches its peak
Meta earnings on tap later today. Amazon and Apple of course are out tomorrow.
Chairs of the one and only Mr. Softie Microsoft higher in early trade too, Alphabet also rising as you can see both firms missing in fact on profit
and revenues in their latest earnings. But both are assuring investors that their underlying businesses remain strong with Microsoft even going as far
as raising guidance.
GM's EV unit Brightdrop is truly racing to electrify last mile logistics. The jewel in the crown is its electric van the XIVO 600 FedEx already has
150 of them in its fleet. The truck has already set a record too the quickest ever development of a vehicle by the GM or the GM umbrella taking
just 20 months; 20 from conception to market.
[09:35:00]
CHATTERLEY: The XIVO's range is also record breaking for an electric van FedEx and Walmart have both placed big orders. Joining us now to discuss
Travis Kats, President and CEO Brightdrop, Travis fantastic to have you with us not only have you delivered, but I believe you've got a pending
deals and orders for up to 25,000 more.
Tell us where you are? And how pivotal this moment is? Because I do think the speed to which you've got this truck on the road and delivered is
pretty astonishing?
TRAVIS KATS, PRESIDENT AND CEO, BRIGHTDROP: Yes, it's great to be here. And thank you for having me, Julia. So this is a really exciting moment for us.
So our mission of Brightdrop is really to decarbonizes and really reimaging last mile delivery for an all-electric future. And the timing couldn't be
more critical.
On the one hand, you've got, you know, this explosion and package growth as we all start to shift our buying behavior from shopping in stores to online
and companies are really struggling to keep up with that.
And at the same time, you've got climate change, and there's a lot of urgency to really figure out how we keep up with that growth while reducing
carbon emissions? So at Brightdrop, we've been really focused on this.
And we're really delivering for customers today. And like you mentioned, we've already got more than 25,000 reservations for these. We finished our
first deliveries of low volume production to FedEx these first 150 to FedEx in June. That's now the largest installation of electric vehicles,
commercial electric vehicles in the country.
And we are getting ready to ramp up we're launching our high volume production at our - at our factory and in Canada, in December of this year,
so we're really hitting the ground running, and we're gearing up for explosive growth.
CHATTERLEY: You know it's fascinating, isn't it? I mean, there's so many questions, I can ask you there. But one of the other elements that we're
facing is the supply chain challenges, in particular, the chip shortages. The beauty, I think of the business that you have as a spinoff from GM is
that I guess you're cushioned by their supply chain, and that you can draw on them when you require them.
But even they in the latest earnings said that semiconductor shortage remains a challenge. To what extent in terms of the ramp up of the
production is reliant on your ability to get component pieces like semiconductors, is that going to be a limitation?
KATS: Yes, so the way we've set Brightdrop is a little bit unique, where we set it up as a separate tech startup under the GM umbrella, which allows us
to really both move at the speed and with the urgency of a tech startup. But really leverage the strengths that GM brings to bear and strengths
around supply chain and manufacturing so the way that we were able to get these first vehicles on the road so quickly.
I think faster than anyone's ever delivered a vehicle from conception was by leveraging the strengths that GM brings to the table. Supply chain, as
you know, is has been a big challenge for everyone in the industry. And GM is not immune to that.
In our last earnings we talked about being short a bit on our deliveries because we were missing some semiconductors to finish some vehicles. That
said GM is still one of the best companies in supply chain in the world.
And we also announced that we've secured battery minerals to deliver our ambition of a million electric vehicles per year by 2025. We think about
some of the startups who have entered this space, and there's a lot of buzz around these startups and a lot of stack IPOs and those things.
If you're starting from the ground up trying to figure out how do you manage through the supply chain disruptions? How do you scale
manufacturing? It's a really, really hard problem.
So our setup at Brightdrop with General Motors backing really allows us to move forward with confidence and feel confident that we can deliver for our
customers.
And I think the proof is in the pudding that we're delivering today. So we have trucks on the ground today delivering packages in the Los Angeles
area. And that number is just going to continue to grow.
CHATTERLEY: Yes, it's a cash burn business. But to your point as well, there simply aren't enough resources to go around for everybody that's on
the market. I mean, - Ford, Rivian, all in the same game of producing EV, and in your case, pure EV, what is the cost of one of these trucks?
And I know you're going to produce a smaller one next year as well. But what is the cost? And what are customers saying to you? And what's your
message about the relative cost savings particularly the time when we know fossil fuel prices have soared? What is the relative cost saving of driving
one of these for FedEx or a Walmart?
KATS: Yes, it's a very important question, Julia. That the reality is that while everyone's sort of hand wringing about the state of the economy right
now and inflation is sort of the story of the day. One of the exciting things about this moment for electric vehicles in particular is we've
crossed the threshold where it is now cheaper to own and operate an electric vehicle than it is to operate a diesel vehicle.
We ran these numbers you know two years ago we found that the average customer was going to save about $7,000 per vehicle per year when they
switched from a traditional diesel step band to a Brightdrop electric van.
[09:40:00]
KATZ: That was when gas prices were about $2.25 per gallon. Obviously, the savings are much higher now. And as with the war in Ukraine and the spike
in gas prices, I think companies are really looking even though they're looking at ways to cut back and different parts of their business.
In the face of economic uncertainty, this is one area where they will save money by investing in electric vehicles. And so we are hearing customers
wanting to dig in even more aggressively to move to an all-electric future and to get off these very expensive diesel vehicles.
CAHTTERLEY: Yes, big upfront cost but then as you say that the relative benefits over the course of several years a key. It's not just about EV
vehicles for you, though, there's also a push into software and providing greater efficiency of logistics for some of these companies because as you
keep saying, it's this the last mile delivery that we're talking about.
You also have a platform called Trace that helps as well with delivery. Travis, how important a part of the business, is this going to be as well,
but the software, part of the business in particular?
KATZ: Yes, it's huge. Thanks for asking. So one of the things that set Brightdrop apart from the competition is we're not just building electric
vans although I think we've gotten one of the best vans on the market.
We're really building a whole suite of products. These include electrically propelled carts, the trace, as well as software to really help holistically
think about last mile delivery. So if you think about what's happening, as ecommerce is growing, you know, people have just started packing more and
more trucks into our cities to make deliveries.
And consumer expectations are continuing to grow. So we want our vehicles, our packages delivered faster and faster. But the infrastructure in cities
is fixed. So streets aren't getting bigger. And so what you're starting to see is traffic congestion, package delays, and companies are really
struggling to figure out and cities are struggling to figure out how we let people have the convenience they want from E-commerce without the negative
externalities of more traffic?
We've brought these solutions together. So the Trace E-cart is an electrically propelled cart, it's meant to move packages over short
distances, say from a truck to the front door. We piloted this with FedEx last year, and they were able to see a 25 percent increase in the amount of
packages they can deliver per day without increasing labor costs. So that's massive.
In addition, they were able to reduce their curbside dwell time. So how long trucks are sitting at the curb by 50 percent so when you think about
traffic flows, and how do you make sure we keep traffic flowing in our cities, it's a game changer.
And then of course, all of this I'm a software entrepreneur by background and everything that we're doing all of our products our vans, our E-carts
are all connected to things devices.
CHATTERLEY: Travis, I'm out of time. I'm going to have to get you back on because I have all sorts of further questions as always, thank you so much.
That was my fault for asking three questions--
KATZ: Thank you Julia. It is wonderful to be here. Thank you.
CHATTERLEY: Likewise, we'll continue the conversation sir thank you Travis Katz, the President and CEO of Brightdrop. Thank you for that and that was
from last mile to last second of the show and beyond. That's it. Market Place Europe is up next. We'll see you tomorrow.
(COMMERCIAL BREAK)
[09:45:00]
NINA DOS SANTOS, CNN EUROPE EDITOR: Hello, and welcome to "Marketplace Europe" from St. Pancras International Station. This is one of Europe's
gateways to a long awaited summer break. After two years of pent up demand Europeans are taking their holidays in their droves to such an extent that
the World Travel and Tourism Council say that this sector will likely be the driving force behind the region's economic recovery.
I spoke to the CEO of Eurostar who said after a difficult pandemic, his business is now back to close to capacity.
(BEGIN VIDEOTAPE)
SANTOS (voice over): Jacques Damas busy seems like these are a sign of things returning to normal. The Frenchman took over as Eurostar CEO just a
few months into the pandemic, one of the biggest challenges in the company's history.
It needed a rescue package worth well over $350 million to survive. Yet today the passengers are back. Now the issue isn't customer demand its
staffing supply. When we spoke at St. Pancras, Damas told me that Eurostar is a family and one which has to stick together.
JACQUES DAMAS, CEO EURO STAR: So it's very, its ramp up has been very, very quick. And you see, and there is an appetite for traveling and even the
summers whose appetite is almost 1 percent of the pre-pandemic figures.
SANTOS (voice over): And what this return to interest in travel and the summer holiday season now kicking off, are you finding it hard or easy to
attract and retain talent?
DAMAS: Yes, attracting talent, of course, is something which is absolutely key for our business. You see, well, Eurostar, even if it has gone through
a very tough crisis was a brand that is absolutely terrific. And so it's so well known that there is real attraction for going back to this your sub
business.
SANTOS (on camera): Are you finding it hard to find the right workers?
DAMAS: I have made a very strong strategy during the pandemic, despite the fact that is economics was very tough despite that, I didn't want to make
we don't operational people.
So you see, well, no driver at all, no training manager at all, has been made redundant. And we have kept the maximum resources. So there is really
a very, very strong family within Eurostar. So I'm very proud of this - which has been performed by the staff.
SANTOS (voice over): Eurostar now wants to move past its pandemic struggles. It's moving ahead with a merger with the French and Belgian rail
company Tallies and its launching new direct trains between London and Amsterdam. Check them out wants to make sure the company learns lessons
from the past and reshapes the travel sectors' future.
DAMAS: Everybody is focusing on one thing, which is satisfying the customer expectation. At the very moment there is a strong appetite, which may be
specific to this summer, which is the first one for two years with great appetite to travel. There are also a number of other positive and
sustainable evolutions. So it is up to us now to make that is a plus bigger than the minus.
SANTOS (voice over): The world's most popular international destination is just a few hours train ride away from here, and France has made it a
priority to rebuild its tourism sector given how much it adds to the country's GDP? Now as Jim Bittermann explains the return of summer crowds
has brought with it a fresh set of challenges.
JIM BITTERMANN, CNN CORRESPONDENT (voice over): They call it revenge tourism. Travel with a vengeance to get back at two years of pandemic. And
so here in France, which the travel ministry says is the world's number one tourist destination, hotels, restaurants, boats, planes, museums and shows
are packed.
[09:50:00]
BITTERMANN (voice over): And it's not just the icons of power press the tourists are interested in. From Sanvello to - plane load after a planeload
of travelers are heading for the beaches.
JEAN- FRANCOIS DIETERICH, MAYOR, SAINT-JEAN-CAP: It's much better than 2018 which is very good for the shops for restaurants for hotels which are full.
BITTERMANN (voice over): The demand is so high that one airline executives said customers will pay just about any price to fly luxury leisure he
called it. But it's not just high end travelers who are obsessed with travel this summer.
At a campground which caters to a more modest clientele a young Norwegian couple, Anders and Sarah were making themselves at home for the night.
Because of COVID travel restrictions they were stuck vacationing in Norway last year. So this year, they wanted to get out and travel.
SARA SKJAVIK, TOURIST: I just wanted to go in the vacation.
ANDERS LIEN, TOURIST: We just liked the idea of being free in France and can travel with the weather and just explore whatever comes natural that
day.
SKJAVIK: So fun traveling.
LIEN: Yes.
BITTERMANN (voice over): Fun yes, but complicated as well. They had to spend their previous night in a city parking lot because they couldn't find
a campground with an available spot. You think with business booming, there'd be nothing to complain about, right? Well, this is France where
there can sometimes be too much of a good thing. At - beachside restaurant, the staff is running what has become the daily lunchtime marathon, trying
to keep up with the customers.
The problem she says is that the restaurant is suffering from a severe shortage of qualified help. And like so many others here and elsewhere
around the globe, she blames COVID.
CHEMSY ABDELHAFIDH, MANGER CASTEL PLACE: I think they discovered you know, a new way of life during the COVID and the lockdown. And they discovered
you know, to have evenings and to have family time. And that was I don't want to change.
BITTERMANN (voice over): But there is at least one thing around here that has certainly changed. Sure there are the crowds on the beaches and the big
yachts and the harbors. But notably absent this year are the Russians there sometimes conspicuous vacation style has this year been blocked by the
sanctions imposed by the Ukrainian war.
At the Royal Riviera Hotel Bruno Mercadal remembers well his Russian clients over his 20 years as Director? But especially one family in March,
who ended up paying their bill in cash after their credit cards and bank transfers were cut off because of sanctions.
BRUNO MERCADAL, MANAGER, HOTEL ROYAL- RIVIERA: It was more and more difficult for them to get cash from the bank because they had to go back to
Russia to get the cash. So for some Russian, I think it has been tough.
BITTERMANN (voice over): Mercadal says it's not just the Russian tourists who have disappeared, but the permanent residents as well. Just up the road
from his hotel is one of the 61 properties the French government has put on a Russian sanctions list.
Ring the buzzer to see whose home? And the properties caretaker - we didn't like it in the news. So I'm going to keep the television American.
UNIDENTIFIED MALE: Hang up on you currently doesn't want to talk.
BITTERMANN (voice over): Yet, no one seems distressed about the actions of the Russians this year especially since Americans have taken their place.
BITTERMANN (on camera): You know what the headline in the morning newspaper says the return of the Americans and after two years of COVID they're
spending like crazy.
BITTERMANN (voice over): So if you're traveling this direction this summer, no need to worry about the French economy or the Russians. But you might
want to brace yourself for the crowds the long lines and oh yes, the prices. Jim Bittermann CNN on the South Coast of France.
(END VIDEOTAPE)
SANTOS: Next, from trains to planes, Europe's Airlines say that they won't be fazed by the halls of summer fines.
(COMMERCIAL BREAK)
SANTOS: Never mind the rising prices the crowd so the staff shortages half of all European travelers say that they will still fly to their destination
this summer that's according to the European Travel Commission. Now the International Air Transport Association is predicting better than expected
year for the aviation sector. Our Anna Stewart has more from the IATA meetings in Qatar.
[09:55:00]
(BEGIN VIDEOTAPE)
STEWART (voice over): From the empty airports of 2020 to the teaming terminals of 2022. This year's summer rush in Europe has been so big
airlines are struggling to keep up.
The International Air Transport Association says passenger revenues in Europe will double this year despite the war in Ukraine. Only Asia and the
Middle East are growing faster for Europe's biggest carriers it's a moment of opportunity.
CARSTEN SPOHR, CEO LUFTHANSA: After two years of being grounded, one way or another, including physically being rounded me to a certain degree. I think
sharing the upbeat mood you feel around this conference. And again, people want to fly again. People want to connect again.
STEWART (voice over): Here at IATA's Annual General Meeting in Qatar there's been caution. There's also been some optimism. As far as the COVID
recovery goes, the journey isn't over for Europe's Airlines. Euro Controls says traffic may not reach pre pandemic levels until 2024. Guillaume Faury
is the Chief Executive of Airbus, in his view, while there may be a lot of moving parts to this recovery, the future still looks right.
GUILLAUME FAURY, CEO AIRBUS: Though it's a roller coaster. But there are some steady trends. One is the appetite for flight is very strong. And as
soon as passengers see the restrictions being lifted they want to fly again. There is so much pent up demand that there is still room for the
industry to continue to catch up domestically. It's already much better than it used to be and also international.
STEWART (voice over): The sticking point and all this have been airport delays, while passengers may be plentiful staffing shortages and customs,
security and immigration have all caused disruption.
UNIDENTIFED FEMALE: Yes, we were well prepared. We knew but we didn't expect this. This surpasses everything.
STEEWART (voice over): It's a miserable challenge for travelers. But the head of IATA himself, a former airline boss says it's the kind of challenge
the industry is well used to dealing with.
WILLIE WALSH, DIRECTOR- GENERAL IATA: I'd love to be back running an airline, because these are the sorts of challenges we face time and time
again. And it's completely different to the challenge the industry faced in 2000s when we were dismantling our networks.
So you know we look back at events like this where we've managed them in the past, and I've absolutely no doubt we'll manage them again going
forward. And in fact, I believe we've managed them better.
STEWART (voice over): It's been a shaky summer at times but just getting off the ground has been an achievement in itself.
(END VIDEOTAPE)
SANTOS: That's it for this month's edition of "Marketplace Europe". You can see more of our reports@cnn.com/mp. For now we'll see you next time.
(COMMERCIAL BREAK)
[10:00:00]
END
