Ross Perot a prophet? 3

[funnelguy]

MrStohler, Your views are no different than those of others on this forum who have declared sentiments similar to, "I didn't care when the manufacturing jobs left, but now engineering and IT jobs are leaving..".

You asked, "If you cannot compete with foreign services or products why should consumers of these products be subsidize your inefficiency?" US workers are among the most efficient in the world. How would you care to measure efficiency? Work/hour or work/dollar? I am guessing that your view leans toward work/dollar. What are your views on slavery? A more "efficient" means of production has never been found. Certainly any gains in "efficiency" realized through technology can be applied as well by slaves?

So there lies the difference in our viewpoints. I don't view the race to the cheapest labor market as being beneficial for the long run. For anyone. I definitely do not consider it an improvement in "efficiency".

You are concerned with erosion of property rights. Certainly the Chinese have had no qualms about infringing on US intellectual property in the past. And yet Wal-Mart would cease to exist if a long term strike shut down the docks unloading the container ships from China. MFN status even with all of the copyright and patent infringements. Are we only concerned with OUR property rights? How does China come down on their worker's rights, property or otherwise? Or does that not matter, so long as they are "efficient".

The property (and other) rights that you value are granted and defended by a government which is supported by tax revenues. When the revenue stream dries up, so will the services provided by the government. You see this an a small scale when factories close up in smaller communities. The schools and police are the first to go.

You seem to believe in the myth of free trade. There is no such animal. ALL nations have trade rules, tariffs and restrictions when dealing with other nations. The role of each nation's government should be, IMO, to secure trade rules that benefit the populace. Our current problem is that we are willing to sacrifice long term strength for short term gain.

 

[TheTick]

I believe that there is a limit to how much can be outsourced overseas. It happened with manufacturing. There are some things that, for reasons cultural, economic, or political, can not be done properly in third world countries.

In the meantime, until we reach that point, buckle in for a wild ride.

All this machinery making modern music can still be open-hearted.

 

[rhodie]

MrStohler:

Why don't you recommend to the US agriculture industry the solution "to just solve the problem"? Building on what funnelguy addressed in his post, the US agriculture industry is the most efficient and productive such industry in the world. Yields are higher, quality is better, and personal productivity is enormously higher.

Why then, can't the farmers compete? Why must they resort to gov't subsidation? Why do 300 family farms declare bankruptcy every month? Why, with all this wonderful technology and technique, do millions of farmers find themselves saddled with huge capital debt?

The simple answer to this question is the US cannot compete because we are not playing the same game. It is not a matter of trying harder. It is not a matter of fixing great inefficiencies and quality gaps.

US manufacturing received that wake up call in the '70s and '80s, so guys like Dr. Deming and Juran brought us back to reality. The result: the US has more ISO-900x registered companies than continental Europe, where the whole movement originated. Our quality and productivity IS better than the rest of the world. The economic environment we are currently dealing with in the US is NOT something that can be solved with quicker machine tools or better logistics flow, and to hope that it can is futile.

The solution is obvious, yet people hesitate when considering it; Corporate greed is killing America, and our Government is doing nothing to stop it.

Shut the door on "Free Trade", take the time to re-establish the rules, protect strategically important industries, and only then re-open the door.

 

[GregLocock]

Rhodie. You are an engineer. Let's see the numbers for:

"(Agricultural) Yields are higher"

By what measure? Compared with who? Everyone in the world?

"quality is better"

ditto.

"personal productivity is enormously higher"

not very important, but ditto

"Our (manufacturing) quality and productivity IS better than the rest of the world"

Measured how, and compared with who?

In the only manufacturing industry with which I am familiar I doubt the USA as a whole tops any measure for quality(1), or productivity per direct dollar spent(2). It may, like agriculture, achieve impressive results in productivity per man hour (it doesn't according to (3)), by investing hugely in machinery, which, to answer one of your questions is why US farms appear to be over-capitalised.

If you reintroduce (or more accurately raise) tarriffs then you will syphon money from the American consumer into the pockets of shareholders. That may be a good thing (doesn't sound like it to me), but it doesn't seem very sustainable in the long term.

References

(1)"in J.D. Power’s Initial Quality Study ... reports that Big Three facilities are now even with European automakers in terms of quality, and fast closing the gap with Japanese companies."

http://www.uaw.org/solidarity/03/0703/feature03.cfm

ie, Japanese quality is better than American. No surprise there.

(2) Can't find a free reference for this, but anyone with knowledge of the marketplace can see that productivity per dollar is what is hurting US automakers more than anything else.

(3) ""Our estimates indicate that productivity — measured by the number of worker days required to assemble a vehicle — currently stands at 3.04 in Canada compared with 3.27 in the United States, nearly a 7% advantage," says Carlos Gomes, Scotiabank auto industry specialist. "This represents a further improvement from Canada's 5% edge in 2000 and 1% advantage in the mid-1990s." Canadian plants are 33% more productive than Mexico. "

http://www.canadaone.com/ezine/sept02/automotive_productivity.html

Cheers

Greg Locock

 

[funnelguy]

Greg, your source for (3) is a staff writer for a Canadian small business web paper? Anyway...

Do you suppose there may be some differences in the facilities in the referenced North American assembly plants? I recall Ioccoca running to Canada to escape the health insurance costs in the US.

Now, let's say there are no tarriffs and no trade restrictions at all between any of the countries being discussed. Canada at 3.04 days looks to be the winner UNTIL we apply a wage to those worker days. Now Mexico wins hands down. They don't have to be productive, they work cheap. Yup. No trade restrictions. Gooood idea. We can all work for $8.00 per day.

No wait, John Deere has decided Mexican labor costs are too high and they will relocate their small diesel production facilities yet again. Tyco preceded them by a couple of years. The race to the bottom.

 

[GregLocock]

Well, feel free to post better numbers. Since in essence we are discussing numbers, I just thought that some objective identifiable ones were better than handwaving.

FWIW I doubt that Canada is especially efficient, and, frankly don't like measuring productivity like that. The reason is that it is possible to show incredible vehicles built/man day merely by assembling modules. Their methodology may account for that. Generally transplant and greenfield sites show very high productivities, partly because the traditional plants are poorly laid out, and partly because the newer sites are custom designed.



Cheers

Greg Locock

 

[rhodie]

Hello Greg:

I'm putting together a reply, just need time to gather sources.

Thanks,
rhodie

 

[funnelguy]

Greg,

My point was, is, and remains that worker productivity measured in units/time is washed over by labor cost differences. My knowledge of the auto industry is limited, but I think the principles I argue are universal.

Japanese automakers have formed partnerships with US automakers and were literally using the same workforce and facilities. Mazda and Ford jump out immediately. Mitsubishi and Mopar.

Is there a general consensus within your industry as to which nation of origin has the best manufacturing efficiencies? I have a suspicion that productivity has more to do with the corporate culture and methodologies than where the factory happens to be located.

Even Henry Ford understood that he needed his workers to buy his vehicles. Manufacturing efficiencies allowed hourly wages to rise. Today, we are reversing that principle.

Rhodie advocates protecting "strategic" industries. Certainly I acknowledge the need to protect our defense industries. More generally, however I expect ALL governments to govern for the interests of their populace, not business interests. This is where the US is failing right now. I would be perfectly happy for corporate profits to leave this country, so long as the jobs (and payroll taxes) remained here. We already do this in the auto industry. I favor expansion of the same principles to ALL imported goods. Aliens from another planet have widgets they wish to sell in the US? Fine, build a plant here and employ the same people you want for customers. Want to sell Frisbees in Turkey? Build a plant there. I favor ALL nations protecting their workers, jobs, and tax base. Businesses will continue on their current path until it becomes unprofitable or illegal to do so.

 

[funnelguy]

I realize the last paragraph in my post above is too simplistic to be practical. Still, I like the principle of it...

 

[GregLocock]

In a different study JNA plants (Japanese owned North American plants, ie transplants) have efficiencies about midway between JJ (15 h/vehicle) and NANA (20) plants.

However, I have read one article that said the methodology for working out these efficiency figures is biased, because it underrepresents the additional hassle at first tier suppliers caused by JIT, which is more widely implemented in Japan. JNA plants seem to use a lot of JIT, therefore they may benefit from the same skew in the data. I also doubt they factor in the days of lost production when your JIT brake supplier has a fire, Honda.

Note that there is also a systematic error, JNA plants are greenfield, whereas NANA are often built on 50 year old sites where it may be that slight increases in inefficiency are economically sensible if some old facility can be used.

As an example of that, we run the last car of the old model down the line two hours before the first of the new model - not many places worldwide do that. Some places close for six weeks to do the same transition. In order to do that each new model has to be very compatible with the old, which must force cost into the design.

I agree that wage costs need to be factored in... that's why I'd like to see Rhodie produce numbers showing this productivity advantage.

I have worked on a Japanese style assembly line. There is not as much automation as you would think, most of the advantages come from space and organisation, and sensible part design.

One other misconception - the proportion of the cost of a car that is due to the direct labour at the assembly plant is (as you can see from those numbers) actually not all that significant. Third world assembly plants build cars using cheap labour, for sure, but their real advantage is that their parts cost less. I'm unable to remember the exact numbers, but here in Australia there are 4 manufacturers who directly employ maybe 30000 people, yet our first and second tier suppliers bring the total employment up to 100000 or so. Therefore the local wages have an impact perhaps 3 times the crude hours/vhicle would suggest.

I wish I could find more concrete numbers, the trouble is these surveys are expensive, so you only get a few headline numbers in any one article.

Cheers

Greg Locock