Transcripts For CNBC Squawk On The Street 20240713

Beyond meat. Ten year 1. 83. Caseshiller up 3. 2 year on year road map, record watch the s p at the all time high dow and nasdaq not far behind. Streaming wars, hbo max, details coming today david is live in los angeles ahead of the warner media investor day and some tough questions for boeing what to expect as Dennis Muilenburg testifies later today. Well start with the markets, a day after the s p hits the 12th all time high and the 14th record close of 2019 jim, halfway through earnings season here. What does it all mean . I think you go back and i was going back and looking at some of the big Billionaire Hedge Fund managers and what they have been saying and almost in unison said, look, you got to be very careful. It cant last. Numbers can go back to the negative the companies arent letting it happen the companies, for the most part of, the Biggest Companies reporting great numbers. The classic one is merck last week, merck got hit down to 79. 80. Bristolmyers, a cocktail, that was very positive. Keytruda is doing i dont know if people understand this 3 billion this quarter. This is, you know, heaven help you if you have cancer, a terrible illness, this is extraordinary, mercks drug, raises dramatically. Pfizer unbelievable. On a day where merck and pfizer raised their full year guide, but a day where cummins cuts its guide, you to stick with defensive still i think you have to say, listen there are some guys that beat that really have figured out what to do lets see how much cummins is down they missed on revenue, but the fact is that caterpillar was horrible last week horrible and the stock hit 140 yesterday. And Morgan Stanley downgraded it before it came out and you started thinking, it is going to be awful and the stock didnt go down im a little suspicious about giving up cummins right here when you see revenue declining 2 , your instinct is to say sell it we got to hear this Company Caterpillar is so committed to the dividend they call themselves dividend aristocr aristocrats. Plenty of industrials doing quite well you may not neat cummins they have done well in china, like emerson even 3m is comingback. I just caution people not to throw out the cyclicals. You would have sold caterpillar. Absolutely, yeah. Feels like a wash out given what they printed i think the exciting thing is the semiconductors nxpi, there were six different lineitems, only number that was better was the internet of things thats where Texas Instruments was weakest, why you see nxpi going up ritt clemer calling it. His line is, while the shortterm Global Demand environment appears to have stabilized, the intermediate demand environment continues to be uncertain, and is not markedly improved. Not an all clear, is it . The market is reacting to the beginning. The beginning statement. But remember, nxpi was at 90 after the walkaway, the takeover i think that nxpi is just sensational. I dont want to pay up here. You think david has anything to say, or probably more focused on hollywood . Lets check in with david faber who has got a full day of media ahead. Yeah, we do it is not until 3 00 our time that warner will roll out their latest offering, of course in the streaming wars we all followed so closely at that anchor desk back at the nyse so well get details there their pricing will be important. What else is going to be involved, what other content, of course, going to be exclusive to that platform, which we have talked about in the past as having a lot of library time, but sort of introducing some interesting questions for time warner, parent at t, and the guy who is running all of this, john stankey, as they bring this thing into the marketplace, how to distinguish it, how to also price it in terms of what hbo is at and what youre actually going to get a lot of questions there very much wrapped up, of course in the future of at t, which we talked a lot about yesterday, guys, which went up a lot on that new plan to obviously increase margins over the next three years by 200 basis points, increase revenues by 1 to 2 , that may not sound like much, but it could be a heavy lift for them more on the revenue side than taking costs out of the business, but this is certainly important part of that overall plan so well be following that as for nxp, i dont have much of anything we want to get to google or alphabet, i guess, which certainly dont know what your thoughts are, funny, in talking to a couple of people who own the stock, this morning, they were more positive perhaps than others seem to be after the bell yesterday when alphabet reported, just talking about what looked to be a decent operating margin markdown in uber, 550 million litigation related expense, tax expense perhaps, masking what were not bad numbers curious to get your thoughts 11 firms that follow it, official status, ten boosted, boosted their price targets. Ruth porat, not as bad as maloney, please dont buy us, ruth porat, they i i always have trouble falling asleep but there is four days a year i dont have to worry. Those are the four days that alphabet reports if you try to read their thing, even during a really good monday night football game, it can put you to sleep it is remarkable it is better than klonapin this is the most it is like, hey, you know, the cloud, and you got youtube. Costs per click, yeah it is just i cant read it anymore. I cant. The headlines are, they havent missed on the bottom line in seven quarters and it is the highest quarterly expense ever. They have to in order to be able to keep cloud going they talk about getting cloud back into action, they dont mention a lot of big clients i also felt that, david, im curious to hear you say this, if you are the Justice Department and youre thinking about breaking up alphabet, i think you go through this thing and you say, well, gee, i dont know, they seem to be doing okay, not setting the world on fire, this is like a brief for the for the defense about why you dont need to do anything. Were, like, okay, were not kings. Were not killing it anymore . So you dont have to break us up i dont know try to make delrahim less combative. I was going to ask you about making delrahim, if hbo decides 3, then at t rules the world delrahim, hes determining a lot of the earnings. It is true. I dont see them going down to that price im not sure what that means for all of us paying our Cable Provider breaking it up, i dont know what is the sum of the parts anyway it is as unlikely, as long as it would take, should it come to fruition that the Justice Department would move to actually bring litigation against them to break up, i mean, how many years in the future it would be, but what are the other parts worth . What is increasing i increasingly see varly as doing something in healthcare waymo, cars all over the place in phoenix youtube is interesting property. But it is really hard to untangle these things from the sense of these other bets, theyre designed just to be able to take longterm positions that can lose money from now to kingdom come i just think that there is very little here to make me feel like, you know, trade higher it was already trading and trade open a breakup basis it should trade higher on earnings basis great quarter. The only people that didnt know it was a great quarter were people at more expensive on a forward basis than apple or facebook look, they have 120 billion in cash. I mean, 120 billion it is extraordinary. This is a company that is doing so well, but does not ive decided, it is not this they dont know how to tell the story, they dont feel the need to there is a line, there is a line in the Conference Call, where ruth says, you know, the company says, we dont manage the business to maximize quarterly results. Well, you bet they dont i know the secret, david, i know the secret to reading the Conference Call. Crystal meth. What is it . You use crystal meth, like breaking bad, the only way to do it. They dont want you to like the stock. They dont theyre not like maloney, the worst letter in history, the promiscuous diner is making it so theyre not using our product. Talking about grub now . Grubhub. Down 30 . It should be down more than that it should be down more than that that letter says, listen, were not in a Good Business thats very she didnt say were not in a Good Business at no point did she say promiscuous when did that become a word associated with grubhub . Who would say that . Promiscuoupromiscuous. Business. Beyond meat is a Good Business. Between beyond meat, grub and shopify this morning, there is some land mines on the table. Shopify was good, a million customers. 45 gross market value, my wife says i hit the things too hard all the time. But, you know, they have a loss. They are they are spending money in order to grow now, wall street hates that. They dont want people to spend any money and they want to i defy shopify i defy the sellers of shopify. You will regret you sold it. You dont know what youre doing. I like the stock and unless youre ray dalio, you shouldnt sell it. Dalio had some comments in saudi arabia about scary times ahead. Once again once again. 1934, and then nationalists and today is the anniversary of 1929. The headlines are great on that even the times. There was no fake news when the times didnt like that. They were a good paper. Rca stock got tv. When we come back, Dennis Muilenburg will Face Congress for the First Time Since the crashes of the two 737 max jets. Hes before Congress Today well bring you coverage in 50 minutes. Looking for a little bit of a pause here futures are pretty steady. More squawk on the street from the nyse is back after a break beyond meat, tumbling in the premarket, despite better than expected results including a first ever quarterly profit. The company says it would need to offer more discounts to deal with growing competition this is what ethan brown said on squawk an hour ago if you look at our velocity over the same period last year, were up 144 . People say the competition is coming its been here we have been competing for a long time. We feel comfortable where we are. We have a myopic focus on doing one thing, building a Perfect Piece of meat directly from plants were not beholden to a supply chain, not competing among different divisions, thats our sole focus and well execute well against that. They raised their sales guide. More about the lockup expiration. This was a great Conference Call hes a great proselytizer for what he does, talking about the hes really rebutting a lot of presumptions. You think there is a lot of salt let me tell you how much salt there is in this a lot of fat, a lot of cholesterol. I felt fabulous about this quarter. It is just that the problem is how much stock coming to market, mcdonalds test, dont have an answer we know a lot of people ask about tim hortons, why tim hortons took it out. There is a lot of competition. This guy is an evangelist. Remember, he says why do we have to get the protein through the mouth and then the other part of the cow . Why cant we just get it right to us . And, you know, he makes so much sense. Hes Crystal Clear hes so devoted. And he is my friends who work at whole foods, they swear by him. They think he is the man who is trying to change the whole food chain. I wish you could just vote on a great guy rather than have to deal with the stock. Hes a great guy, hes got a great story. Stock is up 250 from the ipo at 25. They didnt issue enough stock to begin with. He felt i remember he did the secondary offering, he was trying to please all, he did he priced it way in the hole if you bought it, you can flip it and make money. But there is too much stock. It is going to settle. It is not like it belongs at this level but i can tell you that there is no doubt in my mind, this guy is here to stay and i know nestle has a good product. Tyson, i had their chicken products, extraordinary. I didnt care for the nestles. Theyll come out with a better product. I had this i had his ethan steak, i had ethan oh my in pasta, a fabulous dish it caramelizes very well it is easily cooked. My vegetarian daughter loves it. Hes got some what i love best about it, it is not for vegetarians. It is for people who want a better way to eat protein. You have consumer groups, full page ad in the times yesterday, saying that plantbased meat is ultra processed. Still heavily processed. Well, we have talked about that in the piece, and what is actually behind the amount of ingredients and chemicals to some extent that are actually in these. But we made the point, i think, and jim, you have, it is not necessarily youre not necessarily doing this for Health Reasons as much as youre doing it as a meat replacement for other reasons that have to do with the planet and things of that nature. And i think your point about the lack of supply is sort of one of the key ones here as we watched this stock soar and come back down to earth in recent weeks. Simply never enough stock out there, nrbl initially and we foe it so closely. But it was really sort of based on just the lack of supply for the stock itself that was really it. It was ive got to tell you, a lot of people are saying to me, jim, if it is so good, why is the stock down . It is supply and demand. There is just a ton of stock for sale but in terms of being competitor versus impossible, versus nestle, versus tyson, which, by the way, up big yesterday, poultry lift ban in china, this is a very solid story. You know, it is funny. I will say this, it sounds stupid, but there is a big anticow movement. Cows use a lot of like cows are like fracking. They eat a ton of grain they produce a lot of methane. I dont know. When i look at cows, they just seem to be sitting and eating. Go by a cow, sitting and eating. Not to mention the end of the life usually often doesnt end well. Ends with that bolt in the head, a suboptimal way to go i do find that when you speak with people about this, they say, why the heck do we need cows like, enough with cows im, like, im old school. Like, cows seem to be part of nature cows are big polluters second only to natural gas companies. Someone actually said that to me lets pivot for a moment to boeing big day for Dennis Muilenburg in front of congress. Questions about the balance of regulation, between the regulators and the companies who think that they could handle this sort of on their own. I thought that the testimony i read the testimony beforehand, has enough mea culpa in it to feel that i felt better. He said we made mistakes. Ive been waiting for him to say, we made mistakes. I think they have a good system to be able to have recompense. I feel like that it is not about redundancy like senator cruz said i thought he could have this is testimony that i think is about as good as youre going to get from a ceo in a very tough position every day, of course, i go back and forth with boeing, every day there is some new guy that says the faa was owned by them. I come back and say, well, the faa does not to me seem like a bunch of captured regulators, but thats a narrative that nobody that the newspapers dont believe. They think the faa is owned by boeing and didnt have the resources and boeing cut corners. I think that im taking my clue from doug parker, who said he would be happy to have his wife and kids fly with him on that plane, right now. You say hes selfinterested i dont think hes selfinterested in dying. Do you believe gary kelly when he says theyll talk about diversifying their fleet i think you have to i think you dont think it is posturing to get a better price . Look, doug parker says that more than theyre owed more than 400 million i think everybody will submit a bill there are they owe a lot of people a lot of money. Theyre going to have to make good or, yeah, airbus, the one thing about airbus, they dont have enough planes either. Right nobody is making enough planes. A long wait so with boeing at 340, does that feel like a cat situation where bad news comes and stock stops going down on it i think that i got the impression from speaking with four airline ceos that it is a first quarter, theyll be flying now, obviously, no guarantees, the rest of the world, blah, blah, blah i do believe that we are at the point now where were further along in terms of bad, how many more revelations are there i think the tape, the text message, which really didnt which really the New York Times said he lied, and when you parse everything, ive gone over this and over this and over this with the good people from boeing, it is look, if i had known about this one thing, which is not the thing that caused the crash, i would not have said this i think that were now in the period where boeing is overly hated. Could the stock go down . Look, i got to i want to see a forecast of how much they owe. They owe a lot of money. Yeah. Maybe well get to a point here as we wait for muilenburg in a moment to where we Start Talking more about how theyre going to market its return, right . Looking at passenger interest in flying on it, versus not flying on it. Will they ask, what are we going to be on today it is a big issue i think that americans do have they do have shorter memories about plane crashes than people think. I covered a terrible plane crash when i was a crime and homicide reporter and it was a psa plane, hit by a small plane and people saying people would never fly again there is this horrible chicago to chicago flight that i followed infamous chicago to chicago, crashed in chicago i thought no one would ever fly again. No one even remembers those. They dont remember the consolation plane that crashed over i remember because i covered plane crashes, i covered a horrible plane crash in pensacola. And every one made me think no one will fly again and people did. People do david, thoughts from you as we i think muilenburg might make a statement before the hearing begins we have seen so many of these types of hearings and it is much it is as much theater as anything else. It is important one would expect for the future of this particular executive, how they handled themselves, how they handled the questions and what the Public Perception is jim, is muilenburg sort of fighting for his job to a certain extent, based on his Performance Today in front of congress i dont think so. I think that when i look at the Board Members and canvas, i get the sense that people say that he the last round of was undeserved, and he should have another shot here to be able to tell the story i do believe that heof the airlines than people realize i think im not saying his job is safe. We got to see how much he owes but i am saying that that that the board feels he overreached. The media overreached the last time they attacked him and this is a very conciliatory noncombative fall on your sword speech hes about to give, which the board wants. There is no hubris in this speech Kevin Mccallister is gone, who ran commercial mulan bu muilenburgs lot his chairmanship role. You think thats enough . Yes i think the bad headlines will run out. I look, i think there is some people on the board who really there is a fellow from amgen. Hes had to deal with fda, which is not not like the faa exactly, but hes had to deal with this. Hes very supportive of muilenburg i dont know i kind of feel like hes in a situation where hes okay right now. That split was a tough one on him. Covering this verse, along with the gm earnings today, is our own phil lebeau, as we look for an entrance out of muilenburg here. Your thoughts and sort of i dont know, where is your head now on return to service well, they believe that it will be return to service, meaning certified by the faa by the end of the year. And that may still happen. There is certainly a possibility that could happen. But in terms of the flying public, thats not going to happen until early next year and, guys, as we speak, dennis muilenbu muilenburg, ceo of boeing is walking in, hell make a statement before the hearing. Lets listen. Appreciate the opportunity to be here today, we look forward to the hearing and very focused on everything we can do to continue to enhance aviation safety. But first and foremost, today, on the anniversary of lion air flight 610, i think first and foremost it is important that we remember the lives lost, and, again, express our deepest sympathies to the families and loved ones and we will never, never forget. And that will be our reminder as we look to aviation safety in future dennis, what do you say to the families, the victims families who say you coming here is too little too late phil, again, on this day, our deepest sympathies go with these families and we thought long and hard about both of accidents that have occurred. We learned a lot as a company. Were humble has only amplified our focus on safety, going forward. As i said, were never going to forget can you guarantee this would never happen again once this plane gets recertified . Phil, we are going to commit to doing everything we can to ensure access like this never happens again. We have made to max, where we think accidents like this will not happen again and were never going to stop focusing on safety and continuously improving. A lot of families want to see you resign im focused on the job at hand i came to boeing because we care about building safe airplanes for the world. Thats what it always has been about. These two accidents occurred on my watch and i have a keen sense of responsibility to see that through. Will you resign thats not where my focus is. My focus is on the job at hand focused on safety. And were going to do everything we can to ensure safe flight. But, dennis, have there been discussions with board that maybe once this is seert pcertin the plane returns to service, that it is time for you to transition out of the ceo job . Those are discussions im involved in or is that my focus. My focus is on the job at hand we have important work to do for the world. We know that the work we do matters. Safety is at the very forefront of that. We have always been focused on safety, quality, integrity as our core values. And that demands a sense of excellence in how we do our work. But you know youll hear from senators today and congressmen tomorrow who will say you are not the man to run boeing . Again, we understand those criticisms and those views and, phil, my responsibility, the responsibility of the boeing company is to design and build, provide safe airplanes our job is to provide safe travel for the flying public thats where my focus is dennis, are you able to answer the question of i know youre going to get today which is how did boeing let this happen how did boeing let a plane with a design flaw get into the air it is something that we spent a lot of time thinking about over the last year and we have a keen sense of responsibility were responsible for our airplanes. And any accident, any accident with one of our airplanes is unacceptable and we reviewed both of these accidents. We know what needs to be fixed we own that. We have a responsibility to do that thats exactly what were doing. And were confident with the updates that were making that once the max returns to the skies, that it will be one of the safest airplanes ever to fly. Thank you, dennis. Thank you Dennis Muilenburg, the ceo of boeing, answering a few questions after making a statement, guys, before heading up to a room where hes going to be waiting for the hearing to begin. Thats going to start at 10 00 this morning and, guys, you heard Dennis Muilenburg talking there a lot of questions about whether or not he should remain as ceo of this company. I can tell you from the number of years that i have known dennis and ive interviewed him, both in terms of when hes been chairman and ceo and now hes just the ceo as well as when he ran boeing defense, that is a far different tone that we have heard from Dennis Muilenburg than we heard from him in the past i think he realizes the gravity of the situation and the gravity of the moment not only today, but what will happen tomorrow. And these will be tough questions and you can bet, he will hear from people on capitol hill who will say youre not the man to run boeing. Boy, phil, i could not agree more in the last, say, five days, Dennis Muilenburg has been humbled. Which you should be. I think that i thought his job was on the line, if not gone i think hes totally differential, what he said to your question is, hey, listen, im doing my job, the world wants to fire me, they should fire me. Im doing my job phil, this is a man who seems to discover maybe i havent approached this right and now im just going to do my job and if you dont want me, fire me. That is very, very different from the combatant muilenburg i thought we had youre spot on. I think you and i heard this question from a lot of people. Why doesnt the board fire him they got rid of kevin mcallister, that move was made last week, why not get rid of Dennis Muilenburg at the same time theyre trying to get this plane recertified, get it back in service. At some point the board is probably saying, is it wise to make a change at the top and add even more turmoil to an already tenuous situation . Thats why i think at a minimum Dennis Muilenburg remains in this job through the return to service, through the plane going back into service, Actual Service with passengers on board. Then at some point maybe the board does say, okay, is it time for us to transition into new leadership we dont know that for sure. But i would whenever i get this question for people, why dont they fire him now, what i come back to is you got a lot of balls in the air and if youre the board of directors well hear more from muilenburg when the hearing begins on gm, north american margins look pretty good although we know the cost of the strike is going to be about a billion dollars from profit. Right thats for the Third Quarter overall for the year, it is about 2. 9 billion thats how much the strength iks going to cost them if not for the strike this he would have made 4 billion in north america in the Third Quarter. Record demand for crossovers, the pickup trucks are selling at huge prices. At the dealerships i think theyre close to record transaction prices and now ramping up with the full size pickup trucks as well. You look at where they are right now, theyre leveraging that demand in the north american market, and the Pricing Power that they have good thing. International is not the same story. No. China is hurting. I keep coming back, phil, there are people who are in ford for yield. Every time i read a story about ford, i get worried about that balance sheet. Dont feel that way about gm am i getting too cautious myself youre not alone in those concerns and we already heard from some of the credit agencies that theyre worried about the financial state at ford. Not the liquidity. This is not a Company Going to junk status, but they were cut to one level above junk status last week. We know when jim hackett laid out the turn around plan, the easy part is the cost cutting. We know that, jim. Now comes the tough part how do you make sure the investments in mobility services, that are starting to that are supposed to kick in late next year and 2020, how do you know youre going to get the revenue and growth off of that otherwise, if you are looking at ford, youre saying, you got the f series, you got your some suvs that do well, the explorer launch did not go well other than that, what have you got . Your international business, commercial vehicles in europe, there is strength there. Internationally, china is a mess south america, we know what south america is cant count on that for continued growth those are legitimate questions, jim. Phil, nothing you cant handle, even in that hallway that is not your own phil lebeau, doing both boeing and gm well talk to you in a bit big gainer this morning. Look, theyre making a lot of money. And they made a lot of money during a strike. Thats rather amazing. We all remember the old days, i remember there was a moment, a terrible strike at gm, you know, in the 90s. It was like all hope is lost congratulations to them. It is not a big company. We havent yet touched on mastercard pretty flat here, though dollar volume up 14 they guide revenue to the high end. I knew my travel trust owns it. It had gone up too much because of these because of pay pal it is a fabulous number. It is done this before a. J. Is a very good executive, if it comes in, you can buy the stock. Not a problem. Speaking of raising guides, tmo raises ebitda to what a story. Keeps taking customer after customer after customer. Hes adding so many. He never stopped i know that he wishes he could come on and crow, but hes got this sprint thing. It has been the one to own the whole time you could win either way stock down david, i think john ledger, once again, doing a good number, but i guess people are confused, trying to figure out where they are with the attorneys general and this decision. It is hard to understand where they are in the process. Theyre going to court in early december to fight the ags who are still aligned against them that group has a few fewer ags as part of it. Enough that theyre going to still go to trial. The expectation is at least he says that theyre going to be able to close this thing early next year. But there is still a question as to what theyre going to face at trial from those ags saying this the acquisition of sprint is anticompetitive for the wireless industry. Over, of course, the objections of the department of justice, which is already reached a Consent Decree with the parties which would create this other nationwide 5g player in the form of charlie ergens dish. We havent talked much about, how theyre going to get the capital they need, how much is going to be required for them to really roll out and become over the next few years a significant competitor in 5g but as for tmon, youre right, 730,000 branded post paid additions, churn at record lows, so the numbers theyre not looking bad. We all know over the last seven, eight years how much competition tmobile has added to the wireless marketplace, but that continues to be one of the big contentions of the ags who were fighting this, saying, yeah, look how much competition they have added, when you put sprint together with them, you only you go from 4 to 3, what happens then so still a lot of questions. Still a lot of questions and, by the way, questions as well for softbank, dont forget. The owner of sprint. Some 80 or so and what would happen should that deal unexpectedly, because i think most people do expect it will eventually go through, unexpectedly be stopped by the judge if in fact he rules in favor of the ags after the trial. It is amazing to me, david, how do you keep adding subs the whole time youre trying to do this deal. It is a little magical i cant believe this guy has basically convinced everyone that hes got the best signal moved around the country, appeals to millennials, early adopters go to him he has david, is a bit of magic, isnt he . Yeah. Sorry, they had branded post paid net customer additions of 1. 1 million. Thats huge 754,000, there is different numbers here but, yeah, big numbers and they have been for some time they have been creative in terms of the offerings they give people remember unlimited didnt start without them, right, jim and the move that the other big carriers had to make to offering that and price still continues to be an important component of this overall, and other services they offer as well. But there is no doubt, a great job marketing this service dont forget, hes not going to be that long in the ceo job. So thats another thing people have it keep in mind, a transition is expected to take place at the company in the not too distant future hes not going to what do you mean what do you mean what do i mean hes going to yeah, you know that. Yeah. I know. Im just hoping thats not news im hoping i want you want him to stay . I want him to stay. There is very few people who really understand that you because youre ceo, you dont have to be a stiff you can identify with you dont need a p ar person, you c be on a peloton while texting. David, hes he was fun. How about that yes not was, is. Okay. You know, he may be he may be the antidote to ruth porat lets say you took ruth porat youre calling ruth klonapin. Hes five hour energy hes unbelievable. Hes like a whole thing of five hour energy. Hes got your heart going and stuff. But ruth calms you down, gives you the klonapin i suggest just a quarter but ruth could be 2. 0. Shes not seroquil, the drug for prisons, thats not ruth. I dont think well hear from ruth on that im sure shell find out about it. I only took 1. 0 seroquil, i went to bed friday night and woke up sunday. Pfizer and merck are leading the dow. Down 13 on the index that will offset the tone coming from the grubs and the beyonds today, jim. Yeah. Beyond, i feel bad for ethan ethan, he is one of those ethan brown, he came on this morning on squawk, he had a wrap for everything. I love that guy. But it doesnt matter, there is too much beyond meat today it is not nestles by the way, can i say tyson chicken tenders that are actually peas, theyre killer. Really . Killer. Im talking like the best thing ive had as a snack at the office since spam. Interesting as for grub, jim, two double downgrades to underperform from outperform. Bamle goes underperform from buy. The food Delivery Market is increasingly irrational. Competitors flood the market with rewards and incentives. Yeah. Basically there was a moment he says, listen, my industry has no more growth and, you know, doesnt really matter who you use, there is no loyalty to grubhub even though we have locked up every single major company, it doesnt seem to matter the jeffries piece, grubhub, food fight, this is messy. I like that. I just feel like he matt, im doing a lot of im doing a lot of psychiatry today. Im not getting my United Health is not reimbursing me matt has to go see somebody. Matt has to go see somebody. Hes in an existential crisis. Hes read too much sartan kamu needs to get his head together i know Michigan State must not be doing that well in football, listen to me, you are you need to be more in the now you need to be present and ive got some stuff. Ive got some cognitive for him. He needs cognitive. Thats tough. Yeah. Can i just can i just make sure i understand, because i am out here and dont have as much data as i usually get. He used the word promiscuous, which the first definition has to do with having a lot of relationships, it does also mean, however, being undiscriminating or unselective in your approach what are they talking about in the use of that word, jim . What does it actually mean what happens when i the longshoremen, where my wife we were customers of caviar, okay . We used caviar, which was square we wanted to use grubhub, grubhub is the same as square, the same as uber eats, which was the same as door dash, door dash buys square, square is caviar, now we use door dash we dont give a dam who we use neither do the customers whoever can get us the best price, 25 from square, because we argued really well. But the fact is that nobody cares who comes to your door and nobody cares who comes to your restaurant. And even though matt is lined up a lot of big major chains, the people from door dash think matt gave up the store to get the contracts. I like matt. Hes a little a little elon musk thing going here. His business isnt nearly as bad. Hes caused double downgrades across the board he did not use need to use the word promiscuous, all we need to say now is there is going to be a shakeout and a winner im going to have get over to his house and go the narrative straightened out. Said too much. After i go to ethan brown, too earnest. If i can, if i can, if i can find Something Like maybe nine cups of youband, will go see ruth and straighten her out. As long as youre not lasentius. No, hes not discriminate. There is nothing there when he says promiscuous about disease. It is not it is not about that not about gleet. Dow has gone green. Were getting data on the way in a moment to Rick Santelli hey, rick. Good morning, carl. There is a lot of consolidation going on in Interest Rates and much of it just seems to be slightly, slightly at odds with recent global data but nonetheless, as we go into our central bank meeting, bank of japan, come out of ecb, were holding these gains on global Interest Rates lets look at three day charts, remembering that yesterday was a breakout day so as you look at three day chart, you look far to the left on two years, were holding the breakout, consolidating. The entire curve right now is unchanged on the day look at three day of ten years, they extended, theyre holding, even bunds, they extended their holding. Everybody is unchanged im sure part of that is our Central Bank Meetings coming up, but there is more going on than that there seems to be this notion in the markets that the buyers that once used to come in, pushing Interest Rates down, just seemed to be at least for the moment on strike if you look at october 1st for ten years, look at this chart, it is just been nothing but rates higher would look the same if im showing you charts from the uks ten year or the european ten year, the bund here is the fly in the ointment. Lets hook on september to that chart, you can see that really what october did was recoup all the drops in yield that occurred in september carl, jim, david, back to you. All right, rick, thank you very much. As you know, by now, apple tv plus set to launch later this week tim cook joining the stars of their new original series the morning show jennifer aniston, reese witherspoon, steve carell. Apple drops the first three episodes of the series on friday new episodes will continue to roll out every friday after that, reviews have been tepid so far. But we dont know how good it will get down the road. I dont know. I saw the trailer. I thought it was hysterical. But i did not get i thank apple for inviting me. I do want the new the buds. Air buds they i have very expensive noise canceling headphones and these cancel noise i have to tell you, there is no innovation under tim cook, hes done nothing other than change my life with every device that he has. David, certainly, you would probably agree, the innovation on the devices has outweighed their innovation in content. Yeah. I made it clear, sort of wondering what why they would start with a show like this, and those reviews were not kind. But as jim is reminded us many times, as we have discussed, apple is in things, can be in things for the long haul, this is way too early to judge. They are going to be spending a good amount ofmoney and time and effort on improving and increasing the amount of content on this. And it is at some point it may become something worth discussing i dont think you can realistically compare it in any way to amazon, netflix or what is coming from warner media. Not to mention even our own ad supported peacock. It doesnt have any heft and it is first show out of the box, not getting particularly good reviews it is pretty early in this. One thing we do know, it is like the credit card, look, credit card, i pay i was overdue last month, kind of in there, next thing you know, it is a fixture. Apple does a lot of things, what are they doing and then a fixture, maybe this is a fixture david, is that a maybe. Is that a bud band. No, it is not a button down i dont think it is a button down, no. You got to reserve the shirt. What . You have to use a tshirt to preserve the shirt thats what you do. Oh. They taught me this at goldman sachs. One of the few things left over from my days at goldman. Always wear a tshirt and try to get a nine multiple on your stock. I never would have done that. I agree with both of those things when we come back, Dennis Muilenburg on the hill, Senate Commerce committee getting ready to grill the ceo dow up less than two points. Dont go anywhere. The bond report is sponsored by pimco if you have medicare, listen up. The medicare enrollment deadline is only weeks away. Having the wrong plan may cost you thousands of dollars out of pocket. Thats why i love healthmarkets your insurance marketplace. With their new fitscore, they compare thousands of plans from National Insurance companies, to find the right medicare plan that fits you. In minutes you can find out if your current plan is the right fit. Does your plan have 0 copays, 0 deductibles, and 0 premiums . If not, maybe its not the right fit. Does it include dental and vision coverage . If not, maybe theres a better fit for you. Call Health Markets now or visit healthmarkets. Com for your free fitscore. Compare thousands of medicare plans with all of these benefits and more. They work to help you and they do it all for free. Healthmarkets only healthmarkets has the free fitscore. Call the number on your screen call healthmarkets now weve seen Dennis Muilenburg once already this morning. In a few moments he will appear in front of the Senate Commerce committee to talk about the 737 max jet and the future of boeing and his tenure for the time being dow is up 20 points were back in a moment park capital of the world, it also has the highest growth in manufacturing jobs in the us. Its a competition for the talent. Employees need more than just a paycheck. You definitely want to take advantage of all the benefits you can get. 2 3 of employees said that the workplace is an important source for personal savings and protection solutions. The workplace should be a source of financial security. Keeping your people happy is what keeps your people. Thats Financial Wellness. Put your employees on a path to Financial Wellness with prudential. Jim, whats on mad tonight one of my Favorite Companies Zebra Technologies when you talk about automation in this world and digitalization, theyve got maybe the best anders gus tafson is a genius and underrated and the stock keeps going higher. We didnt talk brexit we will get an election or the fed tomorrow. I know. I think Steve Liesman covered it well today saying we all expect something. October brexit is a black hole some companies are doing better over in europe david, good to see you maybe throw a little tie on there now and then. And you jim yes, thank you no undershirt but thanks for showing your always good to see you. Always. Well see you later on. Busy day as l. A. Still waking up when we come back boeings ceo on capitol hill facing questions fr t satomheene commerce committee. Dont go anywhere. Jet, max jet, boeing 737 max jet. Of capitol hill where in a w moments the ceo of boeing, Dennis Muilenburg, will testify before the Senate Commerce committee answering questions about the 737 max. When that begins, of course, we will take you there live in the meantime good tuesday morning. Welcome back to squawk on the street. Im Carl Quintanilla and leslie picker were live at post nine. David faber is in california for warner media day a lot of coverage coming from david later on markets flat here. A lot of mixed bag of earnings today, including some blowups. Were getting data as well well go to Rick Santelli at the cme. Looking for a read from the Conference Board expecting 128, we end up with 125. 9 that might look like a disappointment based on expectations, but its sequentially higher than well it was sequentially higher until we got a revision, 26. 3 the new previous month versus 125. 1. Were a bit down how does that stack up well, its the highest number really since the lowest number going back to march now going back to march. It would have just been to last month. The internals, shall we. The present situation, actually ramped up nicely 169 to 172. 3. And if you look at the expectations of what may lie head, it backtracked from 95. 8 to 94. 9. For september pending home sales, aim east, diana olick rick, pending home sales rose 1. 5 in september month to month and were 3. 9 higher annual according to the National Association of realtors thats a beat the street was expecting lower this index measures signed contracts to buy existing homes, people out shopping in september, realtors thank low Mortgage Rates for the gain. Fell below 4 and sustained 3. 5 to 4 since then rates did move to the higher end of the range in september which may be behind a split in sales by region. Pending sales in the northeast and west where prices are highest fell month to month. Sales in the south and midwest where prices are less rose a shortage of homes for sale continues to be the biggest barrier to stronger sales. Clothes sales in september, contracts in july and august, fell unexpectedly and realtors blamed low supply and high prices for that. Carl thank you and thank you, rick. Lets get to phil lebeau who a few moments ago had a chance to ask Dennis Muilenburg quest ahead of todays hearing. We had a chance to ta this ie in this day our deepest sympathies go with these families and weve thought long and hard about both of the accidents that have occurred weve learned a lot as a company. Were humbled. It has only amplified our focus on safety going forward. As i said, were never going to forget. Can you guarantee this will never happen again once the plane gets recertified phil, were going to commit to doing everything we can to ensure accidents like this never happen again we have made updates to the max where we believe accidents like this will not happen again were never going to stop focusing on safety and continuously improving. Have there been discussions with the board maybe once this is certified and the plane returns to service time for you to transition out of the ceo job . Phil, those arent discussions that im involved in or is that my focus. My focus here is on the job at hand we have important work to do for the word and the work we do matters. Safety is at the very forefront of that. We have always been focused on safety, quality and integrity as our core values and that demands a sense of excellence in how we do our work. Thats where my focus is you will hear from senators today and xhen tomorrow who will say you are not the man to run boeing. Again, we understand those criticisms and those views phil, my responsibility, the responsibility of the boeing company, is to design and build, provide safe airplanes our job is to provide safe travels for the flying public. Thats where my focus is. Ceo Dennis Muilenburg here on capitol hill just a few minutes ago. He is now in the Senate Hearing room we expect this hearing to begin momentarily. You can bet this will be a rough couple of hours for Dennis Muilenburg there will be a lot of senators, not only asking about the max and its development but who come out and likely say you should not be running this company and how do we have guarantees this will never happen again andboeing has truly learned from whats gone wrong here phil, in those conversations that you had with muilenburg a little while ago when you asked him whether hes having conversations with the board over the ceo job, he said these arent discussions im involved in how important is his Performance Today in order to keep his job as ceo i think its important. I dont think it will be the deciding factor. I think that look, if he has a terrible performance, and we do sometimes see that web the ceos of Companies Come to capitol hill, look at the first time mary barra came here for the gm ignition switch, that was a disaster, when that happens that does not help had the ceo in the hot seat and Dennis Muilenburg in the hot seat. Do i expect that at the end of the next couple days if its really bad they would pull the trigger and say youre not ceo anymore, i dont think so. Clearly they want to get through this certification, thats the many focus for the company, to remove the ceo right now would just add more turmoil. Phil, sounds like you think the important questions will focus more on the process than on muilenburgs tenure. Yes the process and the culture at boeing yesterday we talked to representative peter deface yo and he will lead the hearing tomorrow on the congress side, representative side, and he basically said, it goes all the way to the top i think the pressure to get this plane done and cut costs goes all the way to the top he wasnt saying, you know, Vice President level, he was saying right up all the way up to Dennis Muilenburg. That will be a focus as well. Phil, well be talking to you all morning long phil lebeau covering the hearing in d. C joining us is former u. S. Transportation secretary ray lahood thanks for your time this morning. Thank you whats important to you out of this hearing . Well look, this is a tough hearing, but this is a hearing that needs to happen because these members of cups, these senators today and the house members tomorrow, represent the people and the people want to know when they board a plane, is it the safest plane that is being manufactured by boeing that is the ultimate question. Can you can he answer the question, are you manufacturing the safest planes that are in the air . Is these people represent the flying public and this is the flying publics first opportunity to go face to face with the number one guy at boeing did the relationship between the manufacturer and regulators, has it gone askew . Does there need to be some rebalance and who bears responsibility for innovations and fixes . You know, while we were at d. O. T. For 4 1 2 years, we felt that the people at faa were highly professional, theyre career people, not political people, the only political maybe a handful of political people at the faa, i really never felt that there was any kind of a, you know, opportunity for people to have any kind of, you know, relationships that were not totally professional. The faa has had a good reputation and theyre a part of the evaluation of the fix for the max and ive always had a very high regard for the professional people at faa much has been made, secretary, about what the faas role was here and whether boeing had too much clout when it came to approving these systems and making them eligible for flying. Do you think there needs to be a restructuring of the balance of power between the faa and Companies Like boeing in which it regulates i do think that part of the hearing today will get into that matter and perhaps there does need to be rethinking on the kind of relationship the faa has with boeing and the kind of responsibility that faa has for certifying these planes. I think its a good point and i think youre going to hear that from the senators and the house members tomorrow as they get into the kind of methods that are used for certification of these planes i think its a good issue to look at, i really do and youve previously served in the house of representatives for the 18th district of illinois, how well versed can we expect the congressmen and lawmakers to be over the next few days in kind of the more intricate, complicated issues related to Software Processes as it relates to the safety of these aircraft well, i do think that when you look at the members of the committee, particularly the Transportation Committee in the house, you have some people, the Ranking Member of the committee is a pilot Peter Defazio is from oregon and hes right next to the state where boeing is located. I think over the long period of time and peter has been in congress, the chairman has been in congress for 30 years, hes studied these issues, do they know in depth all of the technical aspects of it, of course not, but they know enough to ask the right questions and they know enough about the process of certification to do what youve been suggesting and thats to look at this process and see if it needs to be changed. Secretary, what do you think is the right tone that muilenburg should strike today is it this conciliatory tone that weve seen from his prepared remarks does he need to be, you know, this voice of confidence to get these planes back up in the air and reassure members of the public that theyre safe to fly . What would you like to see from him in terms of his tone today i think his tone of humility is a good tone i think his tone these planes are not going to go back in the air until the idea that theyre 100 safe. I think he has to guarantee that to the members of the senate and house tomorrow i really do. I think the flying public wants assurance when they get on a plane its 100 safe i think his humility is very good, i think his recognition that some things perhaps were not done correctly is very good. I think hes setting the right tone based on what ive read obviously ill have a chance to actually watch him, but i think the words that hes using are words that will hopefully give assurance to the members of congress that these planes are not going to be in the air until theyre 100 safe. Yeah. You keep using the words 100 safe like thats some special thing. That should be the standard for all planes that are in the air, as we watch the chairman roger wicker bring the hearing to order. Once we get closer to return to service how you think the company will try to market this, how the carriers will try to market this. You can bet some flyers are going to ask at the gate what plane are we on . Well, i do think that youre going to have to see, as the faa administrator has already said, hes going to be doing some testing on these planes and hes going to make sure that theyre 100 safe. I think thats a good signal i think you have to see some of the top executives of boeing getting on these planes and assuring people that theyre safe and i think that sends a good message and certainly thats the message they have to send secretary, what do you think air bus is looking for from todays hearing . Well i dont know i havent looked at that that much air bus is a big competitor and so, you know, i dont i really i havent really thought that much about air bus. Ive been really more focused, as you have, on boeing and finding the fix and making sure that its the right fix and again, back to my point, 100 safe, assurance to the flying public i think thats what members of congress are looking for what do you make of this ongoing dispute, mr. Secretary, between the manufacturer and the pilots alpha continues to suggest that a lot of this was not because of any kind of Pilot Training and historically that had been boeings defense in the past is that going to get resolved one way or another of course it will be. I think when the final report comes out and the final recommendations and boeing finally steps up and says heres what happened, heres what we i think thats really what has to happen, so again, the pilots, the flying public and everyone knows what really went wrong theyre going to have to disclose that before people are going to really feel safe on these planes and take full responsibility for what happened well learn a lot more in a few moments, mr. Secretary, ray lahood, appreciate your time on an important story for anyone investsed in boeing. Thanks very much. Thank you for a closer look at the Airline Industry expectations lets bring in former continental ceo and chairman and cnbc contributor gordon bethune. Thanks so much for joining us today. Glad to be here, leslie, thanks. Cnbc. Com had a story out today that quoted representative Peter Defazio the chair of the House Committee on transportation and infrastructure and he said this all starts on wall street, indicating there were investigator pressures that led boeing to make decisions it made in becoming more aggressive in getting the 737 max up in the air as quickly as possible to compete with air bus what do you make of that well, theres always financial pressure, but i dont believe it changes behavior necessarily. There is a cognizant that you need to be profitable, but im 100 sure that this is not profit driven Decision Making at boeing and yet, boeing is still up about 6 this year thats lagging the market, but clearly investors believe that this plane will fly again eventually do you believe that to be the case oh, absolutely. I think its ready to go now, but i understand out of a preponderance of caution theyre going through this process the previous guest mentioned it is a process and a good one. At the same time its a good airplane, been a good airplane for many, many years, and it will be many years in the future as well. How important is it to obviously today will be the focus on u. S. Lawmakers. How important is it also to get the buyin from Global Regulators as well on these planes i know historically the faa has been kind of the singular regulator to approve the safety conditions of u. S. Manufactured planes, but now it seems like this has become more of a global focus for regulators outside of the u. S. I think that is some political actions being taken not just necessarily safety. Dont forget, you know, this same Company Boeing put people on the moon and brought them back and has a 100year Safety Record unprecedented in the world. U. S. Aviation is a benchmark and has been you can see some erosion in it every time there is a crack, but at the same time i wouldnt discount boeing for anything at all. Gordon, we had gary kelly of southwest on with us last week he kind of took us by surprise when he said that the board would look at next year whether or not to diversify away from not just the 737 but from boeing planes in general. I wonder, is that posturing or could that actually happen how big of a deal would thab for the work horse of the industry it would break a 50year mold thats made them successful. I dont blame gary for talking in frustration hes not wedded to the boeing company. Be sure they dont take him for granted. But it would be a very expensive move if they did that. Just in, sort of retraining pilots and mechanics or absolutely. Folding in the complexity that comes from multiple aircraft type . And thats been their blue chip that they would not wave their standard same type rating, same airplane, same inventory, same training, thats how they get scale economy which makes them a discount carrier and a good one and a fierce competitor, so you would be giving up a whole lot if you switched off of what you have today. A lot of lawmakers are blaming culture, a crisis of culture at boeing, for being partially responsible for some of the lapses as it pertains to the Software Bugs that led to these two planes to crash. How difficult is it for boeing or anyone else in the industry to really change and shift a culture to make sure there are more of these checks and balances that would prevent some of these lapses in the future . Well, you know, i was a proud employee of boeing for a lot of years and they have one of the strongest and highest rated cultures of safety and human cognizance awareness of how youre feeling boeing has got one thing and thats to be safe. Thats primary i also their idea is no single point of failure which they may have deviated from that concept that caused this issue im guessing i dont want to say that for sure boeing believes that pilots should fly the airplane, should be able to disconnect any automated feature, disconnect whatever goes wrong and still fly the airplane successfully and thats what didnt happen in these two instances. Yeah. You mentioned that engineering, gordon, which was the result of a rethinking of the plane in general and the placement of the engines and the way the plane was balanced i wonder if you think because of that weve reached a plateau in the ways in which an airplane can be improved from an efficiency standpoint . Thats not a bad point. I dont want to make that point. They need to address the issue there was an issue which caused the problem which precipitated the mcas system. At the same time, boeing continuously involved and improves airplanes, even airplanes made ten years ago, receive improvements today as theyre made aware of where they can make a positive influence. I dont see the mouse chasing its tail here. I think theyre trying to make us safe in the airplane as they know how to do it and its going to be a good airplane, carl. Its a good airplane today gordon, put on your marketing hat for us just for a moment yes. If youre a carrier that uses the max, we get back to service, you got it once again in rotation, how overt are you in publicizing that it is in a cycle . Do you tell consumers out flat do you try to keep that quiet and answer only if they ask . You know, carl, listen, how many millions of people fly every day, theres not enough air bus airplanes to carry them all. We will have to fly boeing from a marketing perspective i would put myself on the airplane, i would have all my Senior Officers on the airplanes and my employees and i would bet you, if you went to boeing today and asked, who wants to go fly on the max in the morning, you would get 100 participation i think its important to show selfconfidence that theyve got it fixed i believe they have it fixed i would fly any day, i would fly it tonight one of the assurances that muilenburg will need to make to lawmakers is that the testing that theyve been doing the simulations theyve been doing have been robust enough that would ensure that they have fixed the problem. How can you do that in terms of testing . Are there any Lessons Learned in terms of how they tested this aircraft previously . Oh i think before you answer, gordon, i think we are going to get muilenburgs Opening Statement theres the chairman, roger wicker, of mississippi lets get to Dennis Muilenburg Ranking Member cantwell, committee members, thank you for the opportunity to join you today and we share your commitment to aviation safety. Before we start today i would like to speak directly to the families of the victims that are here with us on behalf of myself and the boeing company, we are sorry deeply and truly sorry as a husband and father myself, i am heartbroken by your losses. I think about you and your loved ones every day and i know our entire boeing team does as well. I know that probably doesnt offer much comfort and healing at this point, but i want you to know that we carry those memories with us every day, and every day that drives us to improve the safety of our airplanes and our industry that will never stop im grateful and humbled to be here today and to be able to say these words to the families directly and i want to convey our absolute commitment to safety, our commitment to learning, our commitment to rebuilding the publics confidence in what we do, and to preventing accidents from ever,g again. We will never forget, and that is our commitment going forward. Mr. Chairman, i know this committee has many questions about the max. Well do our best today to answer all of those questions. While one of the accidents is still under investigation, we know both accidents involved the repeated activation of a flight system called mcas which responded to erroneous signals from a sensor that measures the airplanes angle of attack based on that weve enhanced mcas in three ways first, it will now compare information from both sensors instead of one before activating second, mcas will only activate a single time. Third, mcas will never provide more input than a pilot can counteract using the control column alone pilots will also continue to have the ability to override mcas at any time weve brought the best of boeing to this effort and spent over 100,000 engineering and test hours and flown more than 800 test flights, we conducted simulator sessions with 545 participants from 99 customers and 41 Global Regulators ive flown on a couple of flights myself this has taken longer than expected, but were committed to getting it right during this process weve worked closely with the faa and other regulators, provided them documentation, fly the simulators, answer their questions and regulators around the world should rigorously scrutinize the max and only approve its return to flight when they are completely satisfied with its safety. The public deserves nothing less mr. Chairman, today and every day over 5 Million People will board a boeing airplane and fly safely to their destination. Decades of cooperation and innovation by industry and regulators and the rigorous oversight of this committee have reduced accidents by more than 95 over the last 20 years but no number, other than zero accidents, is ever acceptable. We can and must do better. Weve been challenged and changed by these accidents weve made mistakes and weve got some things wrong. Were improving and were learning and were continuing to learn. We established a permanent Aerospace Safety committee of our board, stood up a new Safety Organization, we strengthened our Engineering Organization so that all engineers now report up through boeings chief engineer. Were also helping to rebuild the communities and families impacted by these accidents and pledged 100 million to this effort and have hired renownes as quickly as possible no amount of money can bring back what was lost, but we can at least help the families meet their financial needs. Mr. Chairman, i started at boeing more than 30 years ago as a summer intern in seattle i was a junior at iowa state university, studying engineering. Having grown up at a family farm in iowa, i was awe struck to work at a company that brought the jet age to the world and helped land a person on the moon today, im still inspired by what boeing does and by the remarkable men and women who are committed to its outstanding legacy these heartbreaking accidents and the memories of the 346 lives lost are now part of that legacy it is our solemn duty to learn from them and we will. Recently theres been much criticism of boeing and our culture. We understand and deserve this scrutiny but i know the people of boeing. They are more than 150,000 of the most dedicated, honest, hardworking men and women in the world. Their commitment to safety, quality and integrity is unparalleled is resolute we will stay true to those values because we know our work demands the utmost excellence. Mr. Chairman thank you very much, mr. Muilenburg during my Opening Statement, i mentioned an instant message conversation and then a series of emails the instant message conversation was between the 737 max chief technical pilot and a colleague. And it expresses concerns about the operation of the mcas. Boeing knew about this instant message for months but failed to share it with the faa until recently with regard to the emails, again, mr. Forkner, former max chief technical pilot, calls for removing any mention of the mcas Flight Control system from the flight crew operating manual he talks about jedi mind tricking of regulators, with at least one person who works for the faa. With regard to the instant message conversation, when were you made aware of the existence of the november 2016 messages . Mr. Chairman, as i recall, i was made aware of that message earlier this year, part of a document gathering process in response to a government investigation. So it was after the crashes, you were made aware of it this year sir, as i recall, i believe it was prior to the second crash earlier this year. Was it your decision to wait months before disclosing this to the faa . Mr. Chairman, at that point, it had been identified as a document in response to an Ongoing Investigation and i relied on our counsel to provide that to the appropriate authorities. What did the counsel tell you . Did he say im going to supply it to the Justice Department or did he say im going to get it to appropriate authorities mr. Chairman, i dont recall having a specific conversation about which authorities, just again, as part of this investigative process, our intent to cooperate fully with the request and to provide that to the appropriate authorities i think over this time period this year, weve provided on the order of half a million pages of documents in support of various requests. Do you agree that this should have been provide to the faa in retrospect senator, as i became familiar with the details of the document over the last few weeks, as i expressed our disappointment and concern with how this came to the faa, i think you heard the same from administrator dixon, i called him and apologized for how this had come through the process. Again, i was involved in the document production process, but we counted on our team to make sure all the right authorities were notified. We should look to the team then could you assure the committee that boeing has now turned over all such safety related communications to the faa, related to the 737 max senator, our Team Continues to cooperate with all requests for documentation. Im sure that additional documents will be provided over time as theyre discovered, as would be normal to the process, and we will cooperate fully with the requests it seems to me that a request shouldnt have to have been made with regard to that im conversation, sir. Let me ask you, when did you become aware of the emails that i referred to in the second part of my question about jedi mind tricking regulators . Senator, again, just recently ive been informed of the details of those emails and the instant message can you give us an idea of how recently over the last couple of weeks when it became public news okay. You did not know about it until then sir, i dont recall being briefed on the details of those documents any time prior to that can you see that this raises much concern about the level of coziness between boeing personnel and faa regulators mr. Chairman, i understand the concern there and again, were doing our best to lean forward and provide information as part of this process. I can tell you that the comments, the values, the approaches that are described in those emails are counter to our values that no way would meet any expectation i would have for our team, our employees, so i understand the concern, share the concern, and just want to convey its not consistent with our values as a company at all. This series of emails has only in the last few weeks come to your attention, that is right, sir senator, as i said, i was aware of the documents that were being produced as part of an investigation. Thats what i recall from earlier this year. I dont recall getting briefed on details of these documents. Those details are things that i learned of over the last few weeks. Senator cantwell. Thank you, mr. Chairman if you could help, i have a lot to go through so were going to try to move quickly through it was boeing aware of the defects in the mcas system which it failed to disclose to the faa at the time the aircraft was in development and certification . Senator, as you know, the mcas development occurred over a lengthy time period about a sixyear Development Program of the max. We have learned from both accidents and weve identified changes that need to be made to mcas we did during the Development Process follow our certification standards and longstanding industry standards behind the mcas design. But clearly weve learned and there are things we need to improve on mcas are you saying answer the question. Answer the question, mr. Muilenburg senator, could i ask you to was boeing aware of defects in the mcas system which it failed to disclose to the faa at the time the aircraft was in development and certification . Senator, i just have to question, ill say the premise of the question. We, as part of our Development Process, we do identify hazards and Failure Modes. They were disclosed that was part of the failure mode analysis that we shared as part of the certification process during that time period. So you think everything that you were aware of was disclosed to the faa as it relates to defect in the mcas system . Senator, as we get to defect, things we need to fix, weve identified three areas that we talked about needing to address. One was the single sensor feed that was a piece of the architecture that was shared with the faa the fact that the system would operate more than once during a flight, that was also part of the design description and the control authority of the system at various parts of the flight do you know what mr. Faulkner is referring to when he says unknowingly lied to the faa our jedi mind tricking senator, im not sure what he meant by that. We havent been able to talk to him. He doesnt work for boeing anymore. Weve been trying to contact him. Heres my concern, if you dont know what he meant, then you also dont know what wasnt disclosed. And so we dont know if there are things in the mcas system that were defect that he or someone else knew about that werent disclosed. I hear what youre saying, that theres a lot to discover in a process, but i would like to go over some of the very specifics about what was tested and did boeing test the consequences of the mcas reliance on a single aoa sensor if did it tests that . Senator, we tested a broad array of the mcas system, a set of Failure Modes we did thorough flight testing john, if you want to comment on the details there. Yes senator, 737 ng is one of the safest airplanes that okay. Look were trying to understand what got tested. Did you test the reliability of the aoa sensors in jen untgener . Did you test the reliability on a single sensor, consult the pilots on the lack of mcas and flight manuals the aoa sensors degree of alert to ensure reliability . Did you test the human factor response these are things from the lion air report and my guess is you didnt test those and thats at the heart of this. If you did and you have data on that and it was provided to the faa thats what we want to see senator, we did test the mcas uncommanded inputs to the stabilizer system. Due to whatever causes was driving it not specifically due to an aoa sensor we assessed that hazard level. We which now do you think is wrong . In hindsight, senator, yes. Thank you because i agree. Yeah. Senator, if i could just add a point to that because as john pointed out, we relied on these longstanding industry standards as part of our evaluation of Response Time behind mcas and that is one of the areas that heres the thing im we found a shortfall. Heres the thing im confused about, this larger issue, and look we want to get this right because we do want go forward and we know there is going to be automation in many aspects of our lives, but this robust testing that must occur and thirdparty validation, there were just i dont understand how you have sensors on the outside of a plane and youre going to let that send a command to the inside of the plane, that basically says trim the plane 2. 5 degrees and all of a sudden you will be yelled at from the cockpit from somebody saying pull up and at the same time being forced down on your nose and you have seconds to respond because youre in takeoff. That doesnt seem like a lot of robust testing was done to me, because if it was the lion air incident wouldnt have happened. Okay i see my time, i have a few seconds left i want to just bring up, look i think the whole issue of air speed is a major issue writ large for all of us to get right, the sector, those crashes, about automation, even the air france crash is related to a faulty tube i dont know how much we should be trusting things on the outside of the plane to give commands to the inside of the plane when they could be damaged. I want to know youre improving the Safety Culture this issue of both reporting, people not being able to talk to faa, oversight people, and this issue of some of the machinesist boeing Quality Inspectors being their work being taken over, i want to understand that a Safety Culture is going to exist. Senator, if anything, i can leave with you today, i want to reinforce the culture of safety at boeing and we know we can improve. We encourage our employees to speak up when there are issues and some of those have been public recently. We respect and accept those inputs we take action following on those. We have recently made a number of improvements that includes restructuring our safety review boards, elevating them to increased transparency and focus on safety. Weve moved all 50,000 boeing engineers to now report directly to our chief engineer separating them from im going to ask you to come back on the boeing Quality Inspectors, two different issues with a written response. Thank you, mr. Chairman. I went over my time. Now i have the duty of telling the distinguished whip that hes limited to five minutes. Thank you, mr. Chairman mr. Muilenburg, its my understanding that mcas has been substantially redesigned to include several redundancies that will better prevent eron nous activation. Can you speak to why some of the changes being made in the reconfiguration of the mcas were not considered in the initial development of the system . Yes senator, i think you raise a very important point and as john began to allude to earlier, the original concept for the mcas design was an extension of what we called the speed trim system on the 737 ng, previous version of the 737 that is a single sensor system proven safe in flight, more than 200 flight hours one of our safety principles is to minimize change from model to mod. That is a good standard safety process. That was the concept behind the original mcas design what weve learned from both accidents is that we made some mistakes theres some things we can improve. One of them is this idea of going to a dual sensor feed instill of single and limiting mcas to a single action or activation during a flight those are improvements weve identified we take responsibility for that. We feel responsible for our airplanes and we know that theres some fixes that we need to make. We own that. We are implementing those fixes going forward. As we discuss possible improvements to the certification of aircraft it would be helpful for you to explain how safety is supposed to be ingrated into the process from the initial conception of the aircraft to flying at 30,000 feet filled with passengers. Since these crashes, weve heard concerns about whether boeings relationship with the faa is too cozy and we want a certification process that is efficient and that promotes u. S. Competitiveness, but one that always prioritizes safety. So what would you say to address the concerns that have been raised about regulatory capture . Senator, i agree with the focus in that area i would say that over the last couple decades the improvements that have been made in aviation safety are because of strong government oversight that includes the work of this committee, it includes the oversight of the faa the delegated authority process, as its structured, we do think has contributed to safety of the industry i mentioned in my comments theres about a 95 proechlts in safety over the last two decades. Some is associated with the delegated authority. We have to get the balance right. I think its very important that we have strong government oversight, strong faa oversight, but we also tap the Technical Depth that our industry teams can bring to the table thats the concept if we need to rebalance it, i fully support evaluating that concept, looking at the details and making sure we have the balance right. Could you briefly explain how boeing and the faa Work Together to certify aircraft . Yeah. Senator, i could, but i think mr. Hamilton here is a deeper expert on that if i could ask him to take that question. Senator, the faa is actually in control of the certification process the whole time let me just kind of walk you through the process very quickly. It starts off by identifying the requirements to certify the airplane that is the Sole Authority of the faa. It establishes the certification basis of the airplane. The second step is identifying the methods of compliance to those requirements, so this is how youre going to show that the airplane design actually meets those requirements again, the faa is the Sole Authority on that. Thats their action. The third step is, doing the testing, the analysis, and the documentation that demonstrates the airplane meets those requirements and that is done by boeing in our case or the applicant. And then theres a review of those documents to validate that they actually met the requirements that can be done by the faa or the oda who acts as a designee of the faa or a combination. Finally theres oversight. The faa does oversight of the actual unit members, they do oversight of the oda and are you following the processes. They do oversight of did you find compliance as they expected with the methods of compliance, and then they do systemic oversight of entire system okay. Mr. Muilenburg, how are you working to ensure coming back to this issue of safety, that employees who raise concerns, even if they inhibit your ability to get a product to the market quickly or taken seriously, and that importantly, those concerns are raised to the top and not brushed aside . Yes senator, in my role as the ceo of this company, i take that responsibility very seriously. We have a number of ethics hotline avenues that our employees can use. When it comes to delegated authority in particular, we also have Additional Survey tools that we deploy and we openly share that data with the faa and make improvements. That said, again, we know we can improve and one of the areas ive taken recent action on is to restructure our Safety Organization, so we have now created a new Safety Organization, a Vice President beth pastor, reports to my chief engineer who reports directly to me that Safety Organization has responsibility for all safety related accident investigations, our oda process, and also responding to any employee concerns thank you, senator. Thank you, mr. Chairman. Senator klobuchar thank you, mr. Chairman, and thank you to senator cantwell. I also want to give my sincere thanks to the people who are here who lost their loved ones in these two crashes i think you know you are here not only for them and it must be hard to hear all of these technical issues when you think of your brother or sister or father or mother or son or daughter but i want you to know we want to get to the bottom of this and change this. So i guess i would start with where senator thune was going with the faa and boeing and this relationship a recent Inspector General report found that only 4 of Airline Manufacturers is responsible for conducting the certification, were certified by the faa, that they conducted oversight. The same report found that one manufacturer proved about 95 of certifications for their percentage of certifications that boeing conducts on its own aircraft senator, i cant answer that number off the top of my head. I dont know, john i would have to followup with you. How many boeing engineers both Design Systems for the company and then certify those same systems for the faa im just trying to get at a safety check from the outside. We have approximately 1,000 members that work not just in systems but what percentage then certify the safety as opposed to having the faa certify the safety those are roughly 1,000 members acting on behalf of the faa to find compliance but thats beyond just systems, this includes structures and propulsion its across the whole airplane. Senator, just to clarify, we have about 50,000 engineers at boeing about 1,000 of them are what we call operate in this area that john refers to unit members. These are members who have the authority and the training. Why dont we well followup on that. I am trying to get at when the faa steps in and when you certify it yourself and well get that later two months after mr. Forkner sent these messages expressing safety concerns, he asked the faa to remove mention of the mcas automated Flight Control feature from the 737 max pilots flight manual and training course, change that the faa approved in 2017 notably indonesias National Transportation Safety Committee report on the lion air crash confirmed that the pilots lack of knowledge of mcas was one of the key reasons for the plane crash. How frequently are new Automated Systems left out of the manual and training that you give to pilots senator, first of all, one of the things weve learned from both of these accidents is that we need to provide Additional Information on mcas to pilots, just to give you a context as we develop our training manuals, our idea is to provide training on pilots so they can respond to the effects of failures as opposed to trying to diagnose failures thats an important distinction. More information in the training manuals is not necessarily safer, but weve as we understand from both of these accidents we need to provide more information on mcas to enhance safety we do try to include information in the training manuals that focuses on do you think its acceptable that pilots flying planes without knowing about the key automated Flight Systems senator, again, our approach is to train pilots on the effects of a failure mode so in this case the mcas Automation System when it fails, it fails in what we call a runaway stabilizer, uncommanded movement of the horizontal tail that is whats in the training manual and we try to train pilots to respond to the effect of the failure failure as opposed to diagnosing. Let me move to two more quick things after the terrible clashes claimed 346 lives, do you think it makes sense for these aircraft to be allowed to fly in some countries and not others . Because the faa says each country can make its own decision well, senator, we respect the jurisdiction of the regulatory authorities around the world so you think it is acceptable just say yes or no senator, thats up to the regulatory authorities, thats not a decision that we can make. We respect the authority of the regulators youre saying the same thing again. Im going to go with a yes while there have been several factors that contributed to the plane crashes, one that is particularly troubling was highlighted in a recent article in the Washington Post that found they had faulty angle of attack sensor that gave pilots unreliable information the day before it crashed. Do you think thats a problem and what steps can be taken to change that . Senator, in the case of angle attack alert, we got implementation wrong i mentioned in comments up front we made some mistakes. We made a mistake in that implementation once we discovered it, the engineering teams quickly convened a safety review board, confirmed it wasnt an operational safety issue and the faa subsequently concurred with that nonetheless, we got the implementation wrong and addressed the faults in the process. We fixed that and angle of attack disagree alert will be standard on all maxes going forward. Thank you, senator klobuchar. I would like to recognize and offer sympathies to people that are here today and people who are at home who lost loved ones in crashes i hope that we can get answers at this hearing and also in the future so that these issues, these mistakes, will not happen again and cause future loss of life mr. Mullenburg, the technical review notes boeing made several other changes to 737 max that differ from earlier models such as structural changes that would accommodate new engines planned on the plane and other advanced technologies senator thune touched on this with the delegated authority was boeing delegated authority over the certification of those changes as well . Senator, i cant answer that question completely because as you pointed out, there were a number of changes. Again, those are done and evaluated jointly with the faa john, if you want to comment on specifics there . There was approximately 92 certification plans associated with the max which encompass all the different change to the airplane the faa reviewed approximately eight of those initially. Are you looking into the certification processes as part of your review of the 737 max . Senator, yes, we are. I asked my board to set up an independent review committee about five months ago. That committee did its work, provided inputs were acting on, and with other authorities, continuing to take a hard look at that. We look forward to taking action on those reports. Also, the joint authorities technical review included a recommendation that states, quote, if any Flight Control surface is used in a novel manner, the faa should be directly involved. This is based on the observation that the faa was not completely unaware of mcas, but because information and discussions about mcas were so fragmented and they were delivered to disconnected groups within the process, it was difficult to recognize the impacts and the implications of the system do you agree that the communication between boeing and the faa is fragmented to the point that relevant information on mcas was not provided to the agency, is this what you were referring to when you talked about getting the balance right . Senator, i think you raise some very good points. I think one of the areas we can improve, we have seen it in the jatr report and others, system wide integration, cross System Integration amongst different Technical Expertise areas, and improvements in documentation and communication. Again, we found some areas there where we could have, should have done better. Do you think those steps will improve your communication with the faa . Senator, i do do you think the faa has responsibility to also change its process to improve communication . Senator, i believe the faa does, but i wouldnt say thats only the faas responsibility. We at boeing need to make improvements in communication. And we own that. And were committed to doing that the boeing 737 airplanes are based on a Type Certificate. That was originally provided in 1967, i believe, and it has been amended to address the different 737 models since then. That technical review notes that, quote, some elements of the design and certification remain rooted in the original 1967 certification of the boeing 737100. Does boeing or the faa review elements of the 737 thatn for continued safety when new models of the airplane are produced senator, if i could ask john to field that question senator, as you note, theres a single Type Certificate for the 737, but as the design has evolved with each new generation of airplanes, the Safety Standards on which the airplane is designed to have also evolved. Yes, there are some amendments that the design might reference back to an earlier amendment level, but those maybe are likely changes that have not changed in the family of airplane since the original design example might be some structural elements however, we have stepped up in many areas voluntarily to later amendment levels to demonstrate it still meets the latest standards in compliance. Thank you, senator fisher senator blumenthal thank you, mr. Chairman thank you to both our witnesses for being here today thank you, most important, to relatives that lost loved ones, if you could please stand so we could thank you all. Thank you for being here, if you can just stand thank you. And go ahead and hold up the photographs you brought. You have been very kind. I was going to ask you hold up those photographs i understand for security purposes you cant during the hearing, but just for this short e keeper could start senator blumenthals time over thank you very much to the family members senator blumenthal thank you, mr. Chairman mr. Mule enberg, as i watched the loved ones stand and as i reviewed this file in the past week or so again, as i sit here today, my anger has only grown these loved ones lost lives because of an accident that was not only preventable as the chairman said at the very start but was the result of a pattern of deliberate concealment. Boeing came to my office shortly after the crashes and said they were the result of pilot error those pilots never had a chance. These loved ones never had a chance they were in flying coffins as a result of boeing deciding that it was going to conceal mcas from the pilots. And the best evidence is this message from mark falkner saying in effect were going to conceal mcas, delete it from the manual used in training when did you become aware of the fact that mcas was not going to be included in the flying manual senator, first, if i could express my deep sympathies. Youve done that. My time is limited i apologize for interrupting you. But i want to know specifically when you became aware of this effort senator, i cant reference that email im not asking about the eamo email. You were asked about that. I am asking about boeing policy as reflected in this email, its chief test pilot deciding he was going to mislead pilots who were then going to take passengers into the air, these loved ones, and turn those planes into flying coffins senator, im not sure what mr. Forkner meant by the email i ca