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What Drives Global Manufacturing Competitiveness?

7/25/2013 12:30 PM EDT
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mcgrathdylan
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Ominous predictions for US
mcgrathdylan   7/25/2013 2:16:13 PM
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It's nice to see the US move up on this list. But I'm dismayed by this conclusion: "Expectations are that the country will fall behind in the future due to high labor costs and corporate taxes, GDP growth, and unemployment rates." That does not sound good.

Tom Murphy
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Re: Ominous predictions for US
Tom Murphy   7/25/2013 3:26:58 PM
I'd be a little reluctant to believe that business execs in a US-based survey would be unbiased, even if they were sampled worldwide.  I would expect them to complain about regulations and taxes and how America is falling behind. And it seems they've minimized the many problems facing China, which is more than due for a correction in its growth rate given its labor issues, enormous government spending, and global pressure to float its currency (let's not even get into politics).  No doubt the Chinese economy is growing faster than the US, but largely because of government support; if that were the case in the US, the US would be growing faster, too, but most business leaders here oppose that.

What do you think? Is this a fair portrait of global business conditions? Or more of a rhetoricla tool to push for lower business taxes in the US?

chipmonk0
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We have met the Enemy and its ...
chipmonk0   7/26/2013 12:00:21 PM
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The same drivel from self - serving & biased sources ( Consultants shilling for their Corporate clients ) about mfg. in the US that is regularly fed to the sheep-like media by Corporations, Right wing Think Tanks to protect their Wall St. Hedge Fund Godfathers by misleading the general public.

The only weakness that the US has is the Vampire like Finance industry that Ronald Reagan unshackled from the FDR era controls to prevent any more Great Depression. Well, within 20 years it got us a Great Recession. 

German labor is far more unionized than in the US and is costlier but the Banks are far more responsible - so Germany has no problem in nurturing its Manufacturing industies and thrives on export of manufactured products. Tiny landlocked Switzerland is the most expensive country in Europe but Mfg. is still 27 % of their GDP !

The reason US Mfg. went into decline is because Vampires like Alan Greenspan ( back when he used to be a Money Manager, long before he was made the Fed Chairman ) whose business practices mimic that of arsonists, saboteurs & scrap merchants denied investment to the US Steel industry, then the Auto and so on while blaming Unions, technology etc. all the time through WSJ etc. to mislead. Now that they have total control over DC ( both Left & Right ) the rhetoric has become even more fake & arrogant.

The out of control Finance industry has run amok and to make their quickie billions harmed the US Mfg. industry ( and the US in general ) by siphoning US developed technologies and outsourcing manufacturing to China then tried to cover their crime with slogans like "Creative Destruction" put out by Harvard and other B schools.

Engineers are some of the most data driven & sincere professionals in the World. Its time we shook off our passivity and started challlenging these Big Lies that harm us.

Tom Murphy
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Re: We have met the Enemy and its ...
Tom Murphy   7/26/2013 2:37:57 PM
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Chipmonk0: I don't begrudge you your political perspectives, but please note it was the Clinton Administration that unyoked us from the Glass-Steagall banking regulations that were enacted during the Depression to separate banking from investment operations. I agree it was a mistake to repeal those regs, as do many others. But there's been no move by either the Bush or Obama admins to restore them.

chipmonk0
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Re: We have met the Enemy and its ...
chipmonk0   7/26/2013 5:28:02 PM
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@ Tom : Its sort of one thing that led to another really. If you recall, till Raygun the Banks could not operate across state lines, they had been thus restricted by FDR to limit the damage they could cause. Then using the ruse of better service to Customers the Banks were able to get Ronnie to repeal those restrictions. Soon they started acquiring other Banks, often by taking big financial risks, and grow humongous. My own pretty large full service Bank in a smaller state went through 3 stages of M&A and is now part of the Big 5 in the country - too big to fail and PROSECUTE. Except for Online access ( which, given time, probably would have happened anyway ) no improvement in the Customer Service side. But the downside was that by the time Bubba got into the Oval Office, the Banks had become all powerful and via Robert Rubin, ex Goldman Sachs, and Bill's Sec of Treasury they were able to repeal Glass Steagle as well ( it had to do only with Investment banks like Goldman Sachs not being allowed to do normal Merchant banking ). In his hatred driven Jihad against the Unions, Raygun ( who himself had  been the President of the Screen Actors Guild / Union but in 1949 had turned coat and sold them out ) had already perpetrated far larger damage to the American economy & democracy by handing over the key to Wall St. and Boardrooms. The lower middle-class in this country keeps growing and the political gridlock is permanent as a consequence of the Jihad that smiley faced Ronald Reagan started 3 decades ago.

 

Tom Murphy
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Re: We have met the Enemy and its ...
Tom Murphy   7/26/2013 5:44:21 PM
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Chipmonk:  Money is corrupting influence - one will find that in any country, unfortunately. In the US, what worries me is that the public allow it. Take the banking abuses you noted. If everyone agreed with your view, they could easily choose to use a community bank or credit union, which offer the same services, often with better interest rates or lower fees.  (I do that, and I'm guessing you do, too.)  But the public votes with its dollars, and they have elected to support the big interstate banks. They also elected the leaders -- you can start with Reagan if you want, and end with Obama -- who have made the decisions that you noted. In this country, we have choices.  There is no excuse for corrupt business practices, and I would quickly add there is no excuse for consumers if we do not think carefully before we vote with our dollars and our ballots. 

DMcCunney
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Re: We have met the Enemy and its ...
DMcCunney   7/27/2013 11:01:47 AM
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Those who decry the fact that Glass-Steagall was repealed really need to read the act.  Contrary to popular belief, having it in place would not have prevented the economic meltdown caused by sub-prime mortgages in the seconday market.  The meltdown was all on the banking side.  It spread from there because mortgages were popular investment packages, but Glass-Steagall wouldn't have stopped it.

Most of the proposed remedies I've heard in the aftermath of the meltdown to prevent such things from occurring in the future demonstrate a rather depressing ignorance of how the economy works, and would not do what the proposers think.

rich.pell
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Re: We have met the Enemy and its ...
rich.pell   7/27/2013 3:39:21 PM
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DMcCunney is correct - Glass-Steagall would not have prevented the financial crisis. And while it's easy and popular to lay the blame for the "Great Recession" solely on the "vampire-like" financial industry, there is plenty to be shared with the Federal Reserve, government sponsored enterprises Fannie Mae & Freddie Mac, government agencies/policies promoting home ownership, credit agencies, and consumers who bought homes they couldn't afford.

Tom Murphy
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Re: We have met the Enemy and its ...
Tom Murphy   7/27/2013 3:57:23 PM
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DMc: Well, hold on there...

The repeal of Glass-Steagall made it legal for financial institutions to engage in both retail banking and investment activities. The prohibition had been put in place during the Depression after it was concluded that the combination of the two contributed to many of the same problems that we've had since its repeal.  (Regulations are most often created because they are needed.)  The repeal has created a number of problems, including those cited by the other commenter in his note.  And it can effectively be argued that the housing crisis was greatly accelerated, if not outright created, by large multinational financial institutions that encouraged their own retail bankers in far=flung cities like Stockton, Miami and Las Vegas to issue "liar loans" to retail customers who could not afford them for the express reason of creating new mortgage-backed obligations (MBOs) that could then be sold on the international market through the institution's investment arm. 

Now the housing bubble may have been created by a few different factors, but if Glass Steagall had still be in effect, that huge and ugly portion of the housing crisis simply wouldn't happened. The repeal created a clear and perverse incentive for financial institutions to do exactly that, and little has been done to avoid similar problems in the future.

DMcCunney
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Re: We have met the Enemy and its ...
DMcCunney   7/27/2013 5:05:57 PM
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DMc: Well, hold on there...

No, I won't.


Now the housing bubble may have been created by a few different factors, but if Glass Steagall had still be in effect, that huge and ugly portion of the housing crisis simply wouldn't happened.

Nonsense.  Decades ago, I worked for a bank.  The area I worked in did mortgage loans among other things, and I got an inside view of the process.

Consider what happens when you want to buy a home.  You are highly unlikely to have the cash lying around, so you apply for a loan.  The first question the bank asks itself is "If we give him the loan, will he pay it back?"  It will look at how much you want, over what period, and the state of your finances to determine if you can be expected to make the payments. 

If it thinks you can't afford it, you'll be turned down.  If it gives you a mprtgage, but thinks thre's some risk you might not repay, you'll be charged a higher interest rate as a risk premium.

Once the bank has lent you the money, it no longer has that money to lend.  So banks package batches of mortgages, and resell them on the secondary market, and use the proceeds to make more loans.

Those packages are popular investment vehicles, because they are secured by real property.  They get AAA ratings from the agencies that rate such things on that basis.

Owning a home is the American dream.  A good bit of the banking system, like the nearly extinct Savings and Loan Associations, were set up in the first place to prrovide financing to allow people to buy homes.  Housing starts are an important economic indicator.  The secondary market exists to aid liquidity, and help insure banks have the money to make mortgage loans.

Many folks get turned down for mortgages because they aren't considered credit worthy, but still really want to buy a home.  They are largely lower class and trying to rise in the world.  Ownership of a home is a middle-class attribute, and being able to buy a home raises them from lower class to middle class by definition.

When you have a large number of people like that, a market exists to be served, and people arise to serve it.  Specialized "sub-prime" lenders appeared to make loans to those denied mortgages by banks.  They used financial instruments like Adjustable Rate Mortgages, which charge a low beginning rate which rises over the period of the loan.  The bank I worked for used those in traditional mortgage lending.  It assumed that first time buyers couldn't afford a high rate now, but five years and ten years from now would be doing better and able to afford higher rates, and could therefore be issued a bigger loan whose rate would rise over time.

The problems resulted from greed and stupidity.  "Sub-prime" lenders like Countrywide saw the revenue flowing in, and the mantra was "Book the loan!"  They were simply going to package the loans they booked and resell them on the secondary market, and they wouldn't be on the hook if a lender defaulted.  They didn't bother to do even minimal due diligence.  Many of those loans should never have been made, even by a sub-prime lender.

The secondary markets simply saw securities backed by real property.  They had AAA ratings.  They were added to portfolios.  Nobody looked at the underlying quality of the assets because of the AAA ratings.

Then the economy moved in a different direction than anticipated, and the rates on the ARMs issued went sharply upward.  A large number of lenders who might have otherwise made the payments were thrown into default.

And because of that large number of defaults, people were forced to look at the underlying assets held in the secondary market.  What is a package of mortgage backed securities worth when the underlying loans are in default?  No one knew.   Billions of dollars evaporated from balance sheets overnight.  The survival of a number of large financial institutions was in question.  Credit dried up as panic set in.  The country was plunged into a recession if is still recovering from.

Volker and the Fed grappled with the question "What happens if we let them fail?" and concluded the results would be a lot worse than what we got.  And lots of folks grumbled because various bankers weren't in jail in the aftermath.  Understandable, but the notion founders because you arrest and jail people for breaking the law, and they didn't.  The transactions that created the bubble that burst might have been stupid and ill advised, but they were legal.

But that the meltdown was on the banking side.  Glass-Steagall erected barriers between banking and investment, but the problems were in banking.  If Glass-Steagall had still have been in efect, it wouldn't have prevented the problems that occured.  If you think it would, you need to read the act in question.


Bert22306
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Re: We have met the Enemy and its ...
Bert22306   7/28/2013 7:27:25 PM
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I think what you explain here is pretty much what happened, DMcCunney, except that you forgot one significant factor: the "Nancy Pelosi narrative" of the day. As you point, owning a home is (they say) the American Dream. Owning a home makes responsible citizens. Therefore, the government should do all in its power to make as many people homeowners as possible. It's a "good investment." How many times do we hear politicians coming out with simplistic catchy slogans like that, with absolutely no proof to back them up? (E.g., didn't we hear that Obamacare would save everyone money? Not that I oppose Obamacare. I just oppose lying.)

So the government took it upon itself to guarantee way too many of these subprime mortgages. As bad as it was for lending institutions to lower the bar, the government took away whatever safety guards were left in the system.

Yes, as soon as the interest rate on these ARMs started going up (and why wouldn't they?), foreclosures became rampant. And even "rampant" is a relative term. It didn't take all that many to bring down the whole house of cards, as tightly leveraged as that business is.

Greed was everywhere, though. Not the least was greed from those who bought "investment property" like there was no tomorrow, their recklessness spurned on by government largesse (with our money, of course, that goes without saying). Our long-time neighbor retired and moved away. The new owener was just one such "investor." The house remained abandoned for almost two years, after this genius defaulted.

So I say again, blaming just the bankers is convenient, because there are very few of them.

Tom Murphy
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Re: We have met the Enemy and its ...
Tom Murphy   7/28/2013 7:53:23 PM
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Bert and D Mck:  Really, guys, I don't want to argue with you. As I noted, there were multiple causes for the meltdown, but please don't deny the big banks and their associated investment arms were blameless -- there's plenty of testimony before Congress to the contrary.  That testimony and many former bank officers say the banks were forcing low-level loan officers to rubber-stamp liar loans without adequate research (some loan officers testified they were ordered to approve hundreds a day -- how can you perform due dilligence on those?).  At the same time the bank's investments arms were hyping MBOs, even when they knew they were close to melting down.

DMc: I wish that the big banks did operate the way they did when you worked at them decades ago, but they were under Glass-Steagall then.  In the past decade, some of the largest financial institutions have repeatedly demonstrated gross disregard for the fiduciary interests of their retail customers. And that's been well documented since the meltdown -- not by me, but by Congress,  the Fed, the SEC, and others.

Bert22306
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Re: We have met the Enemy and its ...
Bert22306   7/28/2013 8:53:38 PM
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I guess my main point in all of this is, the economy is SUPPOSED to work correctly with greedy people operating in it. It's SUPPOSED to be self-regulating. So when you describe the bankers' recklessness, you need to acknowledge the causes.

Here's a good scholarly article on the subject, Tom:

http://www.uvu.edu/woodbury/jbi/volume8/journals/SummaryofthePrimaryCauseoftheHousingBubble.pdf

Government complicity in this fiasco is described happening on several levels. Another factor was that banks were infused with foreign investment capital, which made them even more likely to get reckless.

I remember very well that in the few years before 2008, our assessment was going up by insane amounts each year. I'm talking in the 25 to 30 percent range, year after year, starting in the late 1990s or early 2000s. It made me panic. Everyone else seemed giddy with greedy excitement. Of course, the more articially created demand there is, caused in large part by reckless government slogans and practices, the worse the problem will be.

The article describes two such wrenches as being government loan guaranatees for unqualified buyers, and the lowering of interest rates by the fed, during a time when home prices were still rising too fast (pre-2008-2009). You have to expect trouble when government policies deliberately short circuit the self-regulation machinery.

DMcCunney
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Re: We have met the Enemy and its ...
DMcCunney   7/28/2013 10:52:21 PM
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Bert22306:  I guess my main point in all of this is, the economy is SUPPOSED to work correctly with greedy people operating in it. It's SUPPOSED to be self-regulating. So when you describe the bankers' recklessness, you need to acknowledge the causes.

And in fact it is self-regulating and does work.  We simply don't like the consequences.

The old stock market adage is "A bull makes money sometimes, and a bear makes money sometimes, but in the long run, a hog always gets slaughtered."

Lots of folks participated in the real estate bubble and were hogs.  The bubble burst and they got slaughtered. That's self-regulation with a vengeance - make the wrong calls and you go belly up.

I know folks who think the big banks should have been allowed to fail, as the punishment for greed and stupidity.  Unfortunately, I think they underestimate the collateral damage that would have caused.  Volker and the Feds wrestled with that same question in choosing to bail out the big banks - "What happens if we let them fail?" - and didn't like the answers they could see.

The bigger question, which we've been asking in one way or another since the Great Depression, is "How do we prevent such boom and bust cycles?"  My feeling is, we can't. Such things will happen.

What we want and need is a robust, diversified, and flexible economy that can recover quickly when it does happen, and too many well intentioned regulations intended to prevent such problems from occuring don't prevent the problems, but do impede solutions.

chipmonk0
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Re: We have met the Enemy and its ...
chipmonk0   7/29/2013 8:25:11 AM
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I was expecting to see "Engineers" use more facts and figures in their debates - albeit in an area outside their normal competence.

There WAS a BIG connection between Investment Banks like Lehman Bro.s and the Real Estate bubble. Lehman invested heavily in Real Estate securities. Had Glass Steagall been still in force this would have been strictly verboten

DM & Bert have you seen Lehman around lately ? 

rich.pell
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Re: We have met the Enemy and its ...
rich.pell   7/29/2013 9:38:40 AM
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"There WAS a BIG connection between Investment Banks like Lehman Bro.s and the Real Estate bubble."

That's true, almost all of the financial institutions at the epicenter of the financial meltdown (e.g., Bear Stearns, Lehman Brothers, Merrill Lynch, and AIG) were not commercial banking entities.  And most of the commercial banks that got into trouble (e.g., Bank of America and Wachovia) did so as a result of acquiring mortgage lenders.  None of this however has anything to do with Glass Steagall - it simply wouldn't have applied in the case of the former institutions, and wouldn't have prevented the acquisitions by the latter.

chipmonk0
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chipmonk0   7/29/2013 9:58:46 AM
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Obsessing over Glass Steagall is a diversionary tactic. Lets just stick to facts as evident to anyone paying attention to the daily news.

Better yet, return to the original topic of role of Wall St. in denying investment to US manufacturing industries - thus preventing them from modernizing ( steel, Auto till the mid '90s ). Read up about Henry Ford's fight with Wall St. and their smear campaign against him when he hit hard. And for the last 20 years Outsourcing, sending US manufacturing knowhow free to future competitors like China, destroying US competitiveness to make a quick buck, using part of that to buy Politicians and media so as to get favorable legislations, squeezing US industries and then sending the excess profit to invest overseas ( sure any investor would want the highest return but this has almost become Suicide by Free Market ) and then hiding behind lawyers & gated communities ... 

DMcCunney
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Re: We have met the Enemy and its ...
DMcCunney   7/30/2013 1:12:45 PM
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There WAS a BIG connection between Investment Banks like Lehman Bro.s and the Real Estate bubble. Lehman invested heavily in Real Estate securities. Had Glass Steagall been still in force this would have been strictly verboten,

Nope.  Glass-Steagall prevented commercial banks from engaging in investment banking activities It did not attempt to regulate what investments investment banks could make.  Mortgage backed securities are favored investment properties, because they are seen as safe.  They are secured by real property, and the property owners have the strongest incentive to preserve their investment.  (What would you do to keep your house?)  Lots of institutions with investment portfolios held them.  If you are covered by a pension plan or contribute to a 401K, you might indirectly hold some.

The notion that you should try to tell an investment bank what it can invest in is profoundly wrong-headed.  What you can do, and what various regultations try to do is mandate controls so it's clear exactly what the level of risk from an investment is, and require the retention of sufficient capital that a loss in an investment won't sink the firm.

It's gambling: you don't bet more than you can afford to lose, and you know when to fold and walk away from the table.  Too many financial outfits failed to observe those pronciples.

DM & Bert have you seen Lehman around lately ?

Nope.  They went belly-up in 2008.  Exposure to sub-prime mortgage assets was only part of the problem.  A larger part was a confused asset strategy, and being way over-leveraged.  They made bets they couldn't cover when they bet wrong.

Tom Murphy
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Re: We have met the Enemy and its ...
Tom Murphy   7/29/2013 10:48:24 AM
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Bert,  you say: "the economy is SUPPOSED to work correctly with greedy people operating in it. It's SUPPOSED to be self-regulating."

Perhaps Ayn Rand thought so. But the reality is that if it were, we would not need regulators or regulations. Alas, we do, which is why society created them, including Glass-Steagall.

DMcCunney
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DMcCunney   7/28/2013 10:26:35 PM
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Tom Murphy: I never said the big banks were blameless.  The problems began in sub-prime lenders who weren't part of the big banks, but the big banks certainly didn't help.

I simply said that Glass-Steagall would not have prevented the financial meltdown, and it wouldn't have.  Glass-Steagell was intended to prevent commercial banks from participating in the investment banking business, and that bit was a response to the Great Depression.  It did not regulate commercial lending.

As mentioned, the meltdown was on the connercial banking side.  If Glass-Steagall had been in effect, it still would have happened.

Go read the Glass-Steagall act for yourself. You have an inaccurate idea of what it says and what it's intended to do. 

Tom Murphy
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Re: We have met the Enemy and its ...
Tom Murphy   7/29/2013 11:01:25 AM
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DMc:  You're right that there were problems with the activities of subprime lenders, but not so right in saying they weren't part of the big banks.  Here's a list of the Top 25 subprime lenders at the time of the meltdown. They include HSBC, Well, Citi and Chase, and No. 4 was division of Merrill. No. 1, Countrywide, was bought by BofA in 2008.  And those big mortgage brokerage firms feeding the demand for mortgages from big banks, which generated the cash for more loans through MBOs. 

http://www.publicintegrity.org/node/5554

And I wouldn't say the problems were limited to subprime loans by mom-and-pop homeowners. Massive speculative investment in housing in areas like Las Vegas and Miami, where some investors bought up hundreds of homes, or built hundreds of homes to fuel demand, added to the fire behind the meltdown.

All this, of course, is far off track from the story at hand, which is about the outlook for the global economy.  Not about the home mortgage crisis of five years ago.

chipmonk0
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Re: We have met the Enemy and its ...
chipmonk0   7/30/2013 12:13:36 AM
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As Engineers we have all had some exposure to Control Theory and some actually use it every day ( perhaps unknowingly ) in Timing Analyses for Digital circuits. Even normally well behaved and self - balancing systems pushed too far ( speculation ) can easily become unstable ( Liapunov Integrals ). They do not become stable by themselves, you either have to change some control parameters ( regulations ) or even totally redesign the system ( break it up ). If as reasonably well - educated Engineers we accept that as a valid strategy then whats the hang up about controlling the financial system that is clearly out of whack and riven wih feedback ( insider trading, too big to fail ) ?

In spite of our mathematical education are we still hung up on the philosophical musings of some 18 th century Scottish Quack ( Adam Smith and his Free Market Theory ) ?

Or is it just the Kool Aid they've been feeding us ?

 

Bert22306
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Re: We have met the Enemy and its ...
Bert22306   7/26/2013 3:51:42 PM
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I don't think you can blame the entire decline on the finance industry, however. Since you mentioned the auto industry, anyone unfortunate enough to buy US made cars in the 1970s through early or mid 1990s surely must know that they were rather pathetic. An embarrassment.

As far as I could tell, the problems were everywhere, from substandard design to what I would describe as almost criminally negligent assembly by the factory workers. Imagine a country that was still designing cars with solid rear axle located only by leaf springs, in the 1990s. How ludicrous is that? Or cars built in such a way that parts like water pumps were failing even while the car was still in warranty. Or body panels that fell off when the car was still new. Or ground wire connections to the chassis that got wet and corroded early on, thanks to totally incompetent design and assembly practices.

*Huge* turnaround since then. Although regaining a well-deserved loss in reputation can take decades. It's no surprise at all to me that Detroit went banckrupt.

It's not all the money managers. I think of that as the easy way to blame "the other guy," since there are few of these fat cats and lots of regular people who are every bit as much to blame.

chipmonk0
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chipmonk0   7/26/2013 5:04:52 PM
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@ Bert : Why do you suppose the US Auto industry went into a decline in the '70s and started putting out lemons like the Volare or the Pinto ? The most obvious cause is of course the hasty down - sizing reqd by the 73 oil embargo and not enough resources to do a proper job of engineering them. And why were there not enough Engr. resources to pull it off. Starting at GM in the '50s the MBAs had started pushing out the Techies from upper Mgmt. in Big Three and the MBAs of course had a direct link with Wall St. These arrogant MBAs in Detroit modeled themselves after feudal British Barons and rubbed the Unions the wrong way with inevitable consequences like Coke cans banging inside car doors, or poor quality in cars assembled after long weekends.

Its only after the Chrysler crisis that Engr.s like Lee Iacocca could make a comeback in the Boardroom. And within 2 yrs after taking over in 1980, Mech. Engr. Lee was able to put out 2 entirely new classes of vehicles that are still with us - the Minivan and the SUV ( Jeep Cherokee ). The same thing was repeated 2 decades later at Ford when it was run down by a Jackass called Jacque Nasser, an uneducated hayseed of an Australian, a Salesman who had become the CEO and was going round saying that Car Mfg. is nothing more than an exercise in IT -- while Ford SUVs were rolling over and killing people ! It took Alan Mullaly, brought over from Boeing, a guy with a MS in Aerospace who had been the Program Mgr. for the B777, to restore Ford to health.

What really baffles me is why practicing Engr.s have so little self - respect and willingly become punching bags for MBAs, Money Mgr.s and such other criminals. The worst are those who argue against themselves w/o fully knowing the history !

  

Bert22306
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Bert22306   7/26/2013 5:19:07 PM
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"What really baffles me is why practicing Engr.s have so little self - respect and willingly become punching bags for MBAs, Money Mgr.s and such other criminals."

I can't argue with that! My point was that the "criminality" was at all levels, including the attitude of the unions at the time. But I agree that engineers should have the self respect to fight back against management ignorance and incompetence, always. Engineers have to stick their necks out and make things right, when the opportunities arise. Not just sit there passively, as I see so many doing.

Obviously, you can't just become that familiar nay-sayer or troublemaker. People need to express themselves when things are clearly wrong, propose good, viable fixes, and do so consistently. Eventually you build up credibility that way.

DMcCunney
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Re: Ominous predictions for US
DMcCunney   7/27/2013 11:40:25 AM
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Economics 101: work flows to where it can be done cheapest.  Manufacturing has steadily flowed offshore to get lower costs, and the process has been going on for decades.  (Just ask what used to be the International Ladies Garment Worker's Union, as clothing manufacture, a largely manual process, went to places where labor was cheaper.)

China has been attempting to bootstrap itself from Third world agrarian nation to First world industrial power.  Thy've done it the same way others have: move the peasants off the farm to the cities to become an industrial workforce. They used thier cost advantages to attract manufacturing, and grow their economy through export.

People over here express horror at Chinese wages, but all is relative: it costs far less to live in China.  Peasants flocked to the cities to get those factory jobs because they offered lower hours, better woking conditions, and paid a lot better than being a peasant on the farm.  It was a step up for them.

China is in transition.  The pool of cheap labor represented by peasants on the farm is drying up.  Manufacturers are having to compete for workers, with rising labor costs as a result.  (One major Chinese manufacturer reported on in EETimes announced a full court press into robotics as a result.) China is no longer the low cost producer, with places like Vietnam being looked at as replacements.  China is looking to get further growth from expanding its own economy and serving the needs of its growing middle class.

The US is doing better than it was for two reasons I can think of. First, there is sometimes an advantage to having things made close to where they will be sold. Consider auto manufacturers like Toyota with US assembly plants.  It's cheaper and more efficient, all told, to assemble the cars here than it is to assemble them elsewhere and ship them here across an ocean. Second, improvements in robotics make it possible to automate manufacturing operations that had been manual.  HP has talked about returing PC manufacture to the US, and you can bet robotics will be involved.

But while robotics will bring manufacturing back, it won't do a lot for jobs.  The jobs that migrated to Chinese manufacturing were low-skilled/unskilled assembly line work.  Those jobs aren't returning, because no one will pay US wage scales to have them done.  The factory of the future will have a fraction of the work force of the old ones, and the ones who it will employ will be highly skilled - administrators, robot programmers, and technicians to maintain the equipment that does the manufacture.

We have a competitive market economy, where price is an important factor (and sometimes the only factor) in the purchase decision  It's why so much manufacturing went off shore to begin with.  Labor costs are an important part of the costs of making the product, and the lower the costs are, the cheaper a manufacturer can price it, and the better they can compete with other manufacturers in that market.

Taxes are another expense that drives up costs.  Those complaining about big corporations not paying taxes need to remember where the money to pay those taxes has to come from: it will become part of the price of what we buy.  If I'm competing with a foreign manufacturer with a lower level of corporate taxes than I'm required to pay, I won't be happy, because my costs are higher and I have to charge more to cover them.

I'm a bit surprised the US is ranked as high as it is, and I don't expect that to continue.

Susan Rambo
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Blogger
Japan's demise?
Susan Rambo   7/26/2013 7:37:15 PM
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It's notable that Vietnam replaces Japan on the 5 year prediction list.  Will be interesting to see how that pans out.  It's probably too early though to count out Japan and their technology prowess and discipline.

DMcCunney
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CEO
Re: Japan's demise?
DMcCunney   7/27/2013 1:02:34 PM
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Vietnam has far lower labor costs, so where cost of labor is the most important factor, it will have a considerable edge.

Japan came to prominence post WWII.  The Allies did Japan a favor in disguise: strategic bombing intended to curtail Japan's ability to produce war materials largely destroyed their existing industrial infrastructure.  When Japan rebuilt, it did so using state-of-the-art facilties and processes.

The US steel industry got a lesson in the need to remain competitive from Japan, as Japanese steelmakers could produce basic steel with equivalent quality at nuch lower costs.  Steelmaking in the US contracted, with work moving into higher value finished products because US steelmakers couldn't compete with Japan in basic steel on price.

Japan also made a fanatic push for higher quality.  I'm old enough to recall when "Made in Japan" was a synonym for "cheap junk", but that hasn't been true for decades.  Detroit got another lesson from Japan in remaining competitive, because Japanese cars were simply far better built than US vehicles, and became the standards by which auto quality was judged.

But Japan is suffering from the same sort of competition it inflicted on the US in earlier decades.  Korea (and more recently, India), has lower labor costs and has eroded Japan's dominance in steel.  Korea and now China have savaged Japan's consumer electronics manufacture - they simply have much lower costs, and can charge lower prices.  (EETimes has chronicled the travails of Sony, Panasonic, Sharp, and others in the big screen TV market, where they are no longer competitive and are losing enormous anounts of money.)

Japan's challenge is finding things to do and make it can successfully charge a higher price for, because it can't compete on price, and needs markets where price is not the most important factor in the purchase decision.

chadlanser
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Rookie
competitiveness
chadlanser   8/7/2014 8:35:16 AM
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The introduction of a new regulatory system meant to help manufacturing companies from US is vital. Global competitiveness is certainly a top priority for the nation's businesses and by creating better community association management programs everyone could benefit from that.

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