Monday, Jul 06, 2009
More nonsense from the media
Counterpunch: Detroit's collapse: The untold story
Ever wondered why, given US technology and know-how and America's early lead in car production efficiency, Detroit ended up making gas-guzzling 'boats' for a shrinking home market. Incompetent management? Greedy unions? No. The reason is that Japanese and Korean home car markets are so protected that their carmakers can make monopoly profits there and use those profits to subsidise predatory pricing abroad and undercut Detroit's home market, leaving Detroit without the investment required to keep abreast. (The J and K home markets are so protected that, though they trade a lot with each other, thet don't export cars to each other.) Meanwhile the high dollar and protectionism has dented a large part of Detroit's export market.
Posted by icarus @ 02:19 PM (699 views) Add Comment
18 Comments
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1. icarus said...
Relevance to HPC? Two themes. It's a case study of how the media can shape "common sense" ideas (in this case about the US car industry) that are wrong. And it shows how little "free trade" figures in the 21st century economy and how important it is for an industry to have influence in government and to have a good press. Detroit had little of either.
2. paul said...
The argument that Japan's motor car industry was protected is a lame one. So were US, UK and German car industries before globalization of manufactured goods really took hold.
This is an apologist view of the decline of detroit - it is not a realistic or truthful interpretation of history.
3. japanese uncle said...
Come back when you are grown up enough to make hybrid cars or electric cars.
Anyway, US mar makers's first complaint about the 'protected Japanese car market' in the 70s was, as I clearly recall, that American cars were forced in an unfairly disadvantageous position because of the country's left-handed traffic! There is no cure for idiots, an eternal truth.
4. montesquieu said...
These right wing rabid nutcases don't really deserve the oxygen of publicity.
In large measure in reaction to colonialism they suffered, with forced globalisation in the mid 19th century through to the 1950s, including in China and Korea's case, Japanese colonialism - many Asian countries have very strong impulse to buy national products, not necessarily backed by restrictive practices or coertion by governments (often not needed).
But to blame this for Detroit's problems is utterly disingenuous (having said that he wouldn't be the first such nutter to make a good career out of this - just look a the run the neocons had, based on a completely fantasy prospectus, phoney facts and bucketloads of denial). American cars are badly designed, badly screwed together by a low-tech workforce, using cheap plastics and old technologies. They deserved to get creamed in world markets (including their own back yard, South America) and they have been, well & truly.
It is indeed ridiculous that the USA makes such crap cars - given its technological prowess in so many areas from aerospace to software to agriculture - but the real blame ought to lie at the hands of the big three's management and the lobbyists they hired to brick in loopholes for trucks and SUVs, and prevent improved efficiency standards being introduced that would have forced US carmakers to get their act together.
If the blame is to be shared around, Washington and Detroit have it pretty equally I would say - not the Japanese or Korean governments.
5. mr g said...
montesquieu said...@4
I agree 100% with your summing up of the article but to call it the work of "right wing rabid nutcases" is miles wide of the mark, unless you hold typically left wing anti American views.
6. icarus said...
On the other hand consider the following:
The Detroit three have European subsidiaries that can compete, so they aren't stuck with 'old technologies'.
There are several ways of protecting home markets other than tariffs and quotas - Eamonn Fingleton mentions some in this article - and the proportion of foreign cars sold in Japan and Korea is extremely low.
It's hard to believe that Detroit misses market trends and fails to keep keep abreast of the technology required to meet market needs simply because of incompetence - nobody explains how such incompetence persists over time and why management in this particular industry is so far behind US management generally.
Dan Coffey in his book The Myth of Japanese Efficiency presents evidence that 'lean' 'flexible' production with just-in-time delivery is not particularly different and game-changing and that crucially these techniques make a difference only when they are allied to a lot of extra investment (such as Fingleton argues is possible because of protection at home).
7. japanese uncle said...
icarus
Actually just-in-time is no good from a bit wider viewpoint, as contractors/parts makers are urged to deliver even a single part to Toyota's assembly plant, which is extremely energy-inefficient and eco-unfriendly. I don't think Japanese car makers are not particularly excellent (Korean makers are not even capable of building engines on their own, they import engines from the Japanese makers, with very little value added in their factories), but US car makers are simply extraordinarily incompetent. First of all engineering culture is gone, in the US as well as UK, which must be addressed now. Also CEOs earning multi-millions must be stopped, to give their workers the feeling that they are working for their own companies. It seems too late though.
8. the number cruncher said...
I heard an excellent reason why the US sucks and the Japanese prevail. The board of Directors of Honda all have engineering degrees and backgrounds. The board of directors of ford, GM and Chrysler all have marketing and finance backgrounds
I think that sums it all up.
We need more business people and politicians with science and engineering backgrounds and less PPE T*ssers from Oxbridge or MBA's
(I do have an MBA so I know how worthless these qualifications are)
9. shipbuilder said...
6. icarus said...
"Dan Coffey in his book The Myth of Japanese Efficiency presents evidence that 'lean' 'flexible' production with just-in-time delivery is not particularly different and game-changing and that crucially these techniques make a difference only when they are allied to a lot of extra investment (such as Fingleton argues is possible because of protection at home)."
That's interesting, icarus, particularly as i've been ranting on about the benefits of lean on a number of posts recently! One i'll have to read, definitely.
10. icarus said...
JU - there are a few bits to this puzzle but maybe the one you emphasise - poor engineering culture - is a major one. Maybe the attraction of the high rewards in the Anglo-American financial sector for top grads in maths, software and even physics is to blame.
11. icarus said...
shippy - please let's hear you verdict after you've read it.
12. icarus said...
I suppose the other great attraction for top physics, engineering, maths etc. grads is the well-funded US military/aerospace sectors.
13. shipbuilder said...
11. icarus said...
"shippy - please let's hear you verdict after you've read it."
Just found out it's £60 on Amazon!......from a bit of searching, i've gathered that the case is made that higher investment in production automation by the Japanese was more of a contributer to efficiency than lean principles, however my own experience is that the evidence shows that lean works and there are plenty of examples of huge efficiency gains, particularly in the 'office' environment, which the book does not discuss, as I understand.
My own opinion is that the best companies are staffed by those passionate in their field and working together in an efficient way - as opposed to the bean-counter-run, sweat shop model that puts profitability in number 1 spot.
14. japanese uncle said...
shipbuilder:
Honda's corporate culture was well known 'hum and buzz' which meant even board members did not have private office and always 'humming and buzzing' how to make a better car at cheaper cost, integrating all available resources across the company. People were not forced to work but worked to please themselves. Sony was within this realm of culture of craftsmanship, but it's long gone sadly.
15. icarus said...
number cruncher @8 - but if the engineer-dominated companies did badly we'd be blaming their failure on 'letting the techies loose'......'no sense of what the market wanted' etc.
shipbuilder - yes, it's my understanding that his analysis is based on production plants, with a large emphasis on car assembly plants, and that heavy investment in automation was the main differentiator. This would fit (but not necessarily corroborate) Fingleton's thesis that quasi-monopoly pricing in the home market enabled Japanese car manufacturers to out-compete Detroit by investing more heavily in automation and by selling at or near marginal cost in the US. (I think Japanese car plants in the US are also located in the places with cheaper labour.)
16. little professor said...
American cars are truly crap. The Asian manufacturers make a far superior product, and therefore sell more - that's capitalism in action.
17. new user 2007 said...
1) In the 1980s, when the US government asked Detroit to improve fuel efficiciency standards, the car lobby prevented the legislation. The Japanese continued with their investments in green technology.
2) American car firms are older with older workers and a stock of pensioners to match, and the lack of US government health and pension provisioning means that the car makers provided and still provide these benefits. Hence the higher costs...
about one-half of the cost of making a car in the US is related to labour costs (direct and legacy). Japanese (and now Korean firms) have younger labour forces with fewer benefits offered...that applies to even their plants in the US.
I suspect, then, a biased article?
18. new user 2007 said...
p.s. the proof about unfair discounting etc rather than efficiency differences would be found in the company annual reports...were margins at Japanese companies lower than in the US prior to the crisis? And if so, would this have been related the gas guzzlers that are no longer popular but were indeed higher margin than the small cars that Japan and South Korea have focused on?