trawling today's times: economy and environment
Today's New York Times made for some interesting reading (which made up for a trés lame crossword puzzle, even by Monday standards.)
Of particular note:
Of particular note:
- Detroit Churches Pray for God's 'Bailout' -- I kid you not: a Pentacostal church in Detroit with gospel singers and SUV's on the altar, praying (presumably to got to intervene so) that the ( Read more... )
As you point out, Detroit was making big cars and SUV's because Americans were buying them. We grow lots of commodity corn because "the system" has struck upon it as a particular flavor of economical. We invaded Iraq at least in part because it seemed (to someone) to be the way to ensure that our fossil fuel economy would stay afloat.
Meanwhile, free-market advocates (and I'm thinking here more of Wall Street than Detroit) are suddenly lining up for government handouts.
What would it take to shift our way of doing business (literally and figuratively) to something that doesn't just assume that "the market" knows what it's doing? Do we have any viable alternative large-scale economic models?
I'm torn (as so often I am) about the paternalism of having government tell people what to do. I'm all for raising CAFE standards, and wish Congress had done it at least a decade ago, but beyond that I *do* think it's kind of crazy for Washington to tell Detroit what to do. How do we shift to an economic model that values people and long-term consequences?
I like your idea of finding the Michael Pollan of manufacturing. Any candidates?
::A study released today place the unemployment rate in the City of Detroit at just north of 20%::
Crap. I knew it was bad, but I had no idea it was that bad. What employment can we find for a fifth of the city's population? One thing I've been wondering is what the place of other car companies might be in Detroit. Can we get, or would we want, Toyota or Honda or Nissan to take over and retool unused facilities in Detroit, re-hire laid-off Big-3 employees, etc? I expect that prayer is only on of the many strategies folks are trying to save Detroit -- any other approaches that have particularly caught your eye?
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Exactly. Many of my clients are out of work. Am I supposed to tell them, "Of course you're out of work. Everyone's out of work." There are no referrals, and no amount of career training will help.
any other approaches that have particularly caught your eye?
Yes. I dislike the idea of appealing to foreign car companies, because I think that car companies are not going to help in the long-term. We need to diversify this area's economic base. In terms of saving the American auto manufactures, I have a whole lot of ideas. Here are a few.
When Obama wants to talk about what the auto companies did years ago, he should start with what the Congress should have done years ago. So first, I'd fix the CAFE standards. That should have been done years ago.
Second, I'd put political pressure on China to stop pegging their currency to ours. Strange as this sounds, it's a huge problem for all manufacturers, not just the auto industry.
Third, I'd lobby like hell for universal health care. The United States is as a huge disadvantage because employers have to pay for health care costs, when companies in other countries do not have this expense.
Then, I'd give the auto companies their money. The last time they asked for a bailout, the government made something like $800 million in profit when they were paid back. Auto industry analysts are universally predicting a boom for all car companies (not just domestic) is just around the corner, and it stands to reason that the government will get back every penny of these loans, with interest. If I were Ford/GM/Chrysler, I'd remind everyone (again and again) that these are LOANS, and not a bailout. Unlike the financial bailout, these loans will be paid back.
For short-term relief, I'd institute a temporary (maybe 5 years) tax rebate (say, $2,000-$5,000) for every purchase of an American car, both by individuals and by corporations. This will give Americans an incentive for buying home-grown autos, and it should have been done years ago, too. I'd call it a "manufacturing stimulus," and I'd pay for that by taxing imported vehicles. Both of these measures would make the domestic three cost-competitive. Since the auto industries predict that they will be cost-competitive by 2012, this should get them over the hump.
If I were one of the Domestic Three, I'd offer a $5 million prize for anyone who can design a car that gets 75-100 miles a gallon, seats four, has power everything and air conditioning. I might even instute other prizes, as well. ($2 million for safety improvements on existing vehicles. $10 million for an electric car that can go for more than 300 miles on a single charge. $20 million for a car that reliably functions without any technical failures before 300,000 miles...) This is chump change for these companies, and I have no doubt that somewhere, some team of enineering geeks will meet the challenges. Not only will this result in some of the most amazing cars the world has yet seen, it is a tremendous PR gesture that tells America that the domestic three are serious about changing, and serious about thinking outside the box.
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Except the last two conditions (power everything and A/C) this prize exists in the form of the Automotive X Prize. $7.5 million for a car that "must seat 4 people, have 10 cubic feet (0.28 m3) of storage room, accelerate from 0 to 60 mph (97 km/h) in 12 seconds, be able to drive 200 miles (320 km), achieve a speed of 100 mph (160 km/h), and have a fuel economy of 100 mpg."
The must-go-200-miles criterion seems pretty weak to me...
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After looking at that article, I would add another criteria: The car can't look like a spaceship. No one wants to drive something that looks "weird."
Even though this prize exists, I would still offer one, for a couple of reasons. 1) As a condition of the Detroit Three prize, the Detroit Three would get the rights to the technology. 2) The PR and buzz that would be generated is much needed now. This would give the Big Three a chance to control the debate and generate some buzz, even if they never manufactured the car.
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Re: your tax rebate: how does that square with the increasingly global nature of car production? Not every car sold by the Domestic Three is entirely produced in the US, and many of the cars sold by foreign automakers are largely or wholly built here.
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how does that square with the increasingly global nature of car production?
This is tricky. First, I think it's important for American car companies to regain some of their lost market share. The part about taxing imported cars (and other goods) would work to increase some of the costs of goods manufactured in other countries, making fair manufacturing practices more competitive. Also, the universal healthcare part, plus the "get China to stop pegging their currency to ours" would help to even the playing field for American manufacturers.
More to the point, while it is true that "American cars" may be manufactured in Canada or Mexico, it is also true that American cars are designed, engineered, sold, re-sold, and made loans on by American companies. Manufacturing jobs have the largest job multiplier of any industry in our economy: That is, one manufacturing job supports more non-manufacturing job than any other industry supports jobs outside of it's industry. Manufacturing really IS the backbone of the economy: Labor really does make the world go 'round.
And, the cost of manufacturing is about $2k - $3k per car for an Amercian car. A percentage of the car goes for materials, but a large portion of the total costs goes to R&D, technical writing and support, marketing, management and other non-manufacturing auto industry jobs. Those jobs are also disapearing, and that's really hurting our region as well. When Chrysler announces they are eliminating 10,000 white-collar jobs, that shows how important manufacturing can be to a region's economy, even when the actual manufacturing isn't done in that region.
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Essentially, though, the Domestic Three are not niche market car companies, and they never were. They don't make the cutest sports car, or the latest fuel efficient vehicle: They make average cars for average families. This has to stop, because these niches are growing and the Domestic Three are losing market share. I'd consider eliminating most of the brands (If I were GM, I'd consider elminating everything except Chevy, Buick, Cadillac and Corvette, for example) and introducting (or re-branding) some niche-market cars. I would not worry about selling the old brands: no one is going to buy Hummer or Saab, for example, they just need to fold. I'd re-tool the idle plants, and go after niche-market crowds more effictively. I'd go after the high-efficiency crowd with something that can compete with Tesla and the Prius. I'd re-brand and improve Saturn to go after the Honda reliability-focused crowd. And so on. But here's how I would do this: I would encourage small start-up automakers to take over some of the old plants. I wouldn't invest any of my capital in any of these businesses until it is clear that they are profitible. In other words, I'd encourage inguenity and invention, and cast a really wide net. Also, these smaller plants can be more responsive to market forces and needs, as opposed to huge corporations.
Finally, I'd poach every single engineer that I possibly could from Toyota and Honda. And I'd make no secret about it: Press releases would be a good start. I'd want the UAW to help with this, since it means more members for them as well. I'd use any and all tools at my disposal for this, including the allure of becoming an American Citizen, cash bonuses for relocation, etc. The goal here would be to kill the idea that American cars are somehow inferior to foreign cars. That hasn't been true in a long time, but the prejudice still exists, even in places that should know better, like Consumer's Report.
As for the city of Detroit...
I'd like to see other manufactures take over those empty auto plants: Electronics, paper, furniture... you name it. In particular, I'd like to see Michigan become a leader in sustainable energy production. I would like to see a "Henry Ford of Solar Panels" emerge: Low-cost, plug-and-play systems of alternative power, mass-produced on assembly lines. In particular, it makes sense to make wind turbines here, because the cheapest way to ship wind turbines (which are huge) is by water, and Lord knows we have the water. We have the space. We have the labor pool. We have access to shipping routes. We even have one the nations largest undeveloped wind farms (the west coast of Lake Michigan--ask Chicago about that) to use as a demonstration.
I'd like Detroiters to return to a more locally-based system of economic self-reliance. I'd like Detroiters to start farming in the city, to really show the world what a Green City could be. Goddess knows that we have the land. I'd like to see Detroiters using "Detroit Dollars," to keep what money we have in the city and not being sent to corporations located elsewhere.
Also, I'd like the rest of the country to stop using Detroit as the butt of their jokes. It's not a bad city to live in. And, we are people, too. Stop asking questions like, "Is Detroit still needed?" or "Why would anyone live in Detroit?" It's poor taste. We really don't need to add insult to injury here.
So how's that for a start? ;-)
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