Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod, legendary investor Paul Tudor Jones. All these folks in AI are telling us, 'We're creating something that's really dangerous. It's going to be really great, too, but we're helpless to do anything about it.' Wall Street's well-known risk managers warning on the risks of artificial intelligence and who has the power to harness it. President Trump has to get in the game on his watch and on President Xi's watch. In the next four years, we'll probably have artificial super intelligence. And Mattel CEO Ynon Kreiz joins us. The tariff impact on the maker of Barbie dolls. A significant part of toy creation happens in America. Design, development, product engineering, brand management, all happens in America. Making product, producing product in other countries allows us to create quality product at affordable price points. Plus, the rest of today's news that got us squawking. Tariff fear hits a range of industries. The White House versus Harvard and President Trump wants to make America film again. In fact, he named every single conservative in Hollywood. All three of them. It is Tuesday, May 6th. Squawk Pod begins right now.
Good morning everybody. Welcome to Squawkbox right here on CNBC. We're live from the NASDAQ market site in Times Square. I'm Becky Quick along with Joe Kernan after a long winning streak for both the Dow and the S&P 500 where we'd seen up nine sessions in a row.
Yeah, market closed. Dow closed down yesterday, but it was much worse earlier on. It came all the way back. It was only down 99 points by the end of what looked like similar sessions we've seen recently where it looks like it's going to be another one of those sessions and then it isn't, but unable to hold on to gains. I think the latest move in the 10-year, I don't look at that as disruptive and worrying about US assets and foreigners buying. I look at it more like, wow, the jobs number was good. Maybe the growth fears are overstated, but then you got a lot of these things coming even though we saw Jim Farley express some almost support for tariffs or at least saying that he understood what the administration was trying to do, but the company is now suspending 2025 financial guidance saying it expects a $2.5 billion impact from the White House's legislative tariffs.
I don't think any of us would say we know exactly enough now that we can transition to a 10% or whatever the number's going to be. But I think they obviously, the government wants us to shift more parts to the US. So that's one thing. I think GM was three to four. Ford said three to four billion. Ford's in the best position of the big three, better than GM, more domestic production. Ford said it expects to offset $1 billion of that amount by taking actions like transporting vehicles from Mexico to Canada using special agreements so that they're not subject to US tariffs.
Yeah, it's like bonded trucks and you can do a lot of whatever you got to do. In terms of getting rid of the guidance, Ford cited near-term risks, including the potential for supply chain disruption, higher US tariffs, and retaliatory tariffs from other countries. Now, for the first quarter, Ford beat analyst profit and revenue expectations. And excluding the tariff impact, Ford's CFO said the company was still on track to meet the 2025 earnings guidance that it gave back in February. Also, Barbie maker Mattel is withdrawing its 2025 financial guidance and saying that it's going to be increasing prices for some toys in the United States as tariffs raise their input costs. The company is planning to make changes to its supply chain to try and reduce some of the Chinese sourced products in the US. Right now, Mattel imports about 20% of US sold toys from China. It said it would cut that number to below 15% by the year 2026. We've got the CEO of Mattel, Ynon Kreiz, who's going to be joining us. And you may remember he was with us just March 4th. So, it was just over two months ago. At that point, he didn't think tariffs would be a big deal, but that was before we heard exactly how high the tariffs were. You've seen the stock drop pretty precipitously since then. I think for the year to date it's down by about nine or 10% maybe right in the mid-range of that position. I think he thinks that there shouldn't be any tariffs on toys. I think the president has said that maybe girls could do with fewer Barbie dolls. Unfortunately they got caught up in the example that President Trump used. Fewer dolls.
What was instead of how many did he say? Instead of 100 or instead of 30 you could have two or...
Somebody said all the shelves are going to be open. Well, maybe the children will have two dolls instead of 30 dolls, you know, and maybe the two dolls will cost a couple of bucks more than they would normally. That didn't go over well, though. Sort of the asking for some let them eat cake.
This is interesting because when I was thinking this morning about whether you should tariff toys or not, the one thing I thought was, well, maybe I can see a tariff on toys. I'd rather not see one on pharmaceuticals so that people aren't paying more for drug prices. President Trump says that he will announce tariffs on pharmaceuticals within the next two weeks. The president making those comments as he signed health related executive orders in the Oval Office. One of those was a measure to try and incentivize more prescription drug manufacturing in the United States by directing the FDA to reduce the amount of time that it takes to approve American plants. That's good news. It would be nice to see some more production here. We know with supply chains what an issue it was during COVID to have so many things that we were sourcing in from China. You don't want to get caught in a position where you don't have drugs. Eli Lilly, Johnson and Johnson, and Abbott have recently pledged more manufacturing investment in the United States. Yesterday, Bristol Myers Squibb said that it will put $40 billion into the US over the next 5 years. So, good news to see additional manufacturing here. You just wonder what it will mean in the meantime for costs for sick people.
And we talked about it. It's like alphabet soup if you talk about how you make these complex compounds and drugs. You start with some materials that aren't really made here. Then it goes into some precursors that a lot of pharmaceuticals use. They're complex molecules. Those really aren't made here. So you can't just, it's a supply chain issue where you might be able to finally put the things together here but there could be tariffs on the stuff and putting it in, right? And each drug, you know, and then you get some drugs like what was it, I think it was Keytruda or one of those complex drugs that is made from Chinese hamster ovary cells. That's the only way you can make it. It's made in cell culture. It's actually made biologically, not chemically. And Keytruda, by the way, is described as a miracle drug. They're finding it for more and more uses. In some ways, maybe way more effective than chemotherapy because it doesn't damage your body in the same ways.
The education department telling Harvard University it won't receive any more federal grants until it meets a series of demands from President Trump's administration. That action laid out in a letter to Harvard's president from education secretary Linda McMahon. The government is calling on Harvard to, in McMahon's words, return to merit-based admissions and hiring as well as ending unlawful programs that promote crude identity stereotypes. Also reform the school's disciplinary process. Harvard has sued the Trump administration last month after the White House suspended more than $2 billion in federal funding to the school. In that lawsuit, Harvard said funding cuts are going to put critical medical and scientific research in jeopardy.
Interesting. Fascinating angles from this. Well, but I was a fascinating interview with a Harvard alumnus, well-known Bill Ackman, talking about how illiquid the actual endowment is, how much debt that Harvard has taken on. So, they're not in a position really to act. It sounds like a political battle. He was talking about Penny Pritzker being the chair there and he said this battle going back and forth. There's a reason that the culture at Harvard is the way it is right now. Yeah. They've not said you got enough of the problems that you got on, you got to stop excluding, you don't have to hire certain people but you got to stop excluding certain people and only a litmus test basically for who gets to walk around that campus. And I thought Ackman was fascinating yesterday. But he also said how important Harvard was to him. How at times it's been such an important key point for when asked about whether the tax exempt status should be revoked. He said yes.
Yeah. And then we heard well it's a longer conversation than just that. 'That's a longer conversation' is just what you say when you've lost the argument.
No it's not just, I mean it's just a complex situation. Scott Sperling when he was here and he's at the head of Brigham, of Mass General, right? Mass General, great hospital, right? And the cuts that he was so worried about in research and the things that they see there. That concerns me. I don't know that I want the administration telling them how to run everything, but Harvard has not reacted to the massive problems they've had on campus. They didn't do anything. They sent a totally incendiary letter back and that was the first thing Ackman said was you don't start out just by saying go f yourself. You actually, I think it was an accidental letter that got sent to Harvard from the administration. It was their own negotiations and talking. There's a way you say, you know what, a lot of these things are, I mean, you saw those three presidents when, I mean, it was like the Twilight Zone listening to their answers on some of those and all they had to do was maybe respond with a little bit more conciliatory tone that yeah, we're going to try and change something because you can do something and then not just respond in a conciliatory tone, do something. And you can't put a cop on at the corner of every building. It does come down to what is allowed there in terms of students not feeling safe and you can't control if the entire environment, every person you hire is a Marxist that is spouting from the river to the sea then this is what you're going to get. That's where you're going to end up.
OpenAI dialing back a significant restructuring plan, announcing its nonprofit parent will retain control of the company, even as it morphs into a public benefit corporation or PBC. OpenAI says that it made that decision after consulting with the attorneys general of California and Delaware. On a call with reporters, OpenAI's CEO Sam Altman said that he was quote very happy that the nonprofit and the PBC will have the same mission. OpenAI was co-founded by Elon Musk and the Tesla CEO has been working to stop it from turning it into a for-profit company. In response to a question over that dispute with Musk, Altman told reporters that they were quote obsessed with Elon and said that OpenAI's mission had not changed. In the meantime, Musk's lawyer saying the billionaire is still planning to proceed with his lawsuit against OpenAI.
But part of that was in conjunction with the state laws and I think the attorneys general, particularly in California and Delaware, you can't do it in a lot of different situations and that clearly seems to be what happened here. It's like trying to figure out a, I don't know, it's a Rubik's cube when I was reading exactly how it works with the public and how much, you know, it's for someone else to worry about.
California Governor Gavin Newsom signaling that he wants to work with the White House to try and bring more movie production to the United States. In a post on X, Newsom called for a federal partnership to make America film again, saying, 'POTUS, let's get it done.' This follows President Trump's call Sunday evening for a 100% tariff on movies shown in the United States that were produced overseas. Meanwhile, there are some details about a meeting that came before that announcement. A news release says that the actor Jon Voight and his manager Steven Paul met with President Trump over the weekend at his Mar-a-Lago club in Florida where they pitched a suite of ideas to boost domestic film and television production. Voight is one of the three stars that the president tapped to be special ambassadors to Hollywood. Voight and Paul say that their proposal included tariffs only in certain limited instances and that the news release doesn't otherwise mention tariffs. In the meantime, President Trump told reporters that he wants to help the US film industry and would be meeting with Hollywood stakeholders.
In fact, he named every single conservative in Hollywood. All three of them: Sylvester Stallone, Mel Gibson, and Jon Voight.
What about Dennis Quaid? Oh, I'm thinking of Randy Quaid. No, no. There's a couple others. Yeah. Vince Vaughn, but that's James Woods. Yeah, slightly. Yeah, James Woods.
That recent movie that all the kids were throwing popcorn at the screens. Yeah. What is it? Minecraft. Why was that made in Canada? Because there's a lot of stuff in Toronto to get incentivized to do it. There's a lot of films that are being made in New Jersey now and Atlanta's okay and Atlanta, California is having this slump and it's not just Canada and other places that this is happening. It's just that a lot of other jurisdictions including other states. Stick it to Hollywood or should I, I'm like you want to see new content I want it in the United States about Hollywood. You know, Hollywood's a great place but I think it's nice to have stuff here in New Jersey. There's a lot of incentives that have been built up. Kind of let it slip away by being so insufferable about something. I don't think it's that. It's the incentives. It's not that, but it's hard for me. You know, I talked to a filmmaker not long ago who said that in New Jersey like the tax credits are incredibly lucrative. They were looking for things to make here just because it was so lucrative. Be nice to bring it back. Another good idea.
Coming up next on SquawkPod, tariffs toll on toys. Mattel CEO Ynon Kreiz has a plan to redirect the Barbie and Hot Wheels supply chains. China represents less than 20% of our global production and we plan to reduce that further to less than 15% by next year and less than 10% by 2027. But Kreiz says other countries are key to keeping toys affordable. More from Mattel is right after this.
This is Squawk Pod from CNBC now with added Andrew Ross Sorkin. You're watching Squawkbox on CNBC. I'm Andrew Ross Sorkin along with Joe Kernan and Becky Quick. Air traffic controllers temporarily lost communication with aircraft flying in and out of Newark Liberty Airport in New Jersey last week. An equipment malfunction caused an outage during which the air traffic controllers were unable to see, hear, or talk to aircraft traveling to and from the airport. Reports say that the outage lasted nearly 90 seconds. That incident has led to some controllers taking a leave under a federal rule that covers employees who experience traumatic events on the job. Since that incident, delays and cancellation of flights at Newark have been constant.
We knew about this from last week that there were problems happening on Monday at Newark airport. The delays have continued and now we're getting some of the details as to what was happening. You've even heard the transportation secretary talk a little bit about this and how this is very concerning and that some of the technology that they've been using is from 1990. Here we are 35 years later and none of this has been updated. In some cases at the FAA using floppy discs. I'd imagine this generation doesn't even know what these things are. But it is setting us up on a lot of levels for some pretty concerning issues.
Andrew and I have both been snarled at Newark airport over the last... terrible delays. Terrible delays. I had four or five hour delays on Thursday last week, delays yesterday coming in, and you got in very, very late. But what was more concerning to me is not the delays, but the concern. Tom Costello from NBC said had someone tell him that you should avoid Newark at all costs, that it's not safe with some of the issues coming in and out. So, trying to find out to make sure that we are getting our arms around this, trying to do this quickly. It's the lead editorial in the Wall Street Journal today. And they just talk about how some of these issues, the upgrades of the system are taking decades to try and get things up and running. It's a problem we've known about for a long time but seems to be hitting the forefront and could be in for a very long summer of delays and concerns about the safety there too.
Just mean it's got to go out of LaGuardia and JFK.
Well, but that's hard. So much more traffic going into there. Those airports will also feel the strains from it.
I know. I know. I was just looking at a couple flights I got to take and I know it's going to be complicated this summer.
Barbie and Hot Wheels maker Mattel withdrawing its financial guidance and saying that it plans to increase prices for some products in the United States because of tariffs. The company also talking about accelerating moving some of its production out of China since the tariffs were announced on April 2nd. Mattel's stock is down by about 19%. The tariffs were steeper than most people, just about everybody was anticipating with some of this and you've seen the reaction in Mattel shares and in other companies as well. Joining us right now to talk more about what to expect is Ynon Kreiz. He's the chairman and the CEO of Mattel and Ynon, thank you for being with us. We are looking at lots of moving pieces. You had your quarterly results but I think people are trying to figure out what comes next because the tariffs were after the quarter ended. What have you seen? Because when we talked to you on March 4th, you thought you'd be able to navigate the tariffs fairly well. The tariffs were quite a bit more than anybody was anticipating. What did that higher tariff mean for your bottom line or what will it?
Hi Becky, great to be here. Let me start with a quarter. This was a strong first quarter with topline growth, gross margin expansion and continued operational excellence. We are also off to a strong start in the second quarter with consumer demand up double digits. Our brand portfolio, flexible supply chain and balance sheet are clear advantages during this uncertain time and we are maintaining our target of $600 million of share repurchases this year. As it relates to tariffs, we are taking mitigating actions designed to fully offset potential incremental cost and continue to manage our business and look to supply and provide quality product for our fans.
What are those actions? How do you mitigate the tariffs?
Well, there are three areas where we look to find efficiencies and mitigate for cost. We're looking to accelerate the diversification of our supply chain and further reduce reliance on China source product. We're optimizing our product sourcing and product mix. And where necessary, we will be taking pricing action in the US.
Okay, let's talk about each of those. I know you've been trying to move your supply chain away from China for some time. Where are the majority of your products made at this point? How can you speed that up and what countries will you go to do that with?
We've been on this journey for 7 years. This is not something that we've done overnight. We've diversified our manufacturing footprint and developed a flexible model to adapt to changing market conditions. We currently source product from a mix of own factories and third party vendors in seven different countries. By the end of this year, China will be below 40%. This year, China is below 40%. And in two years, no country will be at more than 25%. China currently represents less than, as I said, 40% which is less than half of the industry average. And in terms of US imports, China represents less than 20% of our global production. And we plan to reduce that further to less than 15% by next year and less than 10% by 2027 with additional contingency plans to accelerate that if we need to.
You know, the president's point is to try and get production moved back to the United States. Is that going to happen with the toy industry?
