Detroit fears of losing carmaking to Silicon Valley
usatoday.com
usatoday.com
They had the opportunity to help Tesla(or be Tesla), and they made everything on their power to destroy it, remember the GM first electric car. Now it is scary because it survived and it is the future, not them.
This people is frightened by the future so they try to delay it as much as they can.
They are worried about themselves, rent seekers trying not to lose what they have instead of caring about their customers.
In business you have to care(genuinely)for your customers or you are dead. Like dinosaurs.
>Now we have Silicon Valley challenging Detroit's leadership in the auto industry's most promising growth areas — autonomous cars, connected vehicles, eco-friendly powertrains
made me snigger. "Detroit's leadership" - and this applies to many of the overseas subsidiaries of Detroit's companies also - has been mainly in rent-seeking behaviour for years. Since 1970's the only trend they have kept up with is the move to SUVs, missing just about everything else: downsized engines, turbocharging, diesel, reliability engineering, interior design and of course the electric car.
I had a little glimpse through my job at the inside workings of one of the "Big Three" US carmakers. I got the impression that far too few people working there actually, you know, liked cars. The employees were generic dispassionate corporate managers, engineers, accountants etc. They really needed an injection of car enthusiasts.
These aren't startups. Are most IBM or HP employees so passionate about information technology?
The future is civic design around people rather than cars, and that's a threat to Tesla and GM alike
In what way?
Trying to change social behavior (americans like cars) is ridiculously hard.
It's actually quite easy to change people's social behaviour through a very small number of minor modifications to zoning. Copenhagen was very car oriented until the 70's when they decided to change it, and now it's a model of a car-lite city
I 100% do not buy this would work in the US :) There are huge culture differences.
Can you cite any example of a large US city where it has worked? A bunch of them have tried, AFAIK.
> Don't believe that a self driving car changes much beyond who is driving the car
Except everything. Current cars have one occupant a high percentage of the time. That occupant drives the car. Change that and every design parameter changes.
I doubt this. The American car (distinct from cars in general) is not only a utilitarian tool but a cultural artifact. For huge portions of the country it is the manifestation of freedom - especially now that we've demolished all of our urban areas in favor of freeways and strip malls. Look at American culture and you'll see that personal car ownership is intrinsically associated with freedom, coming-of-age, and a huge host of cultural values that Americans take very seriously.
If you think making driverless cars is going to suddenly tilt us away from single-occupant SUVs and into little self-driving pods (Minority Report style), IMO you're sorely mistaken. At best we're going to get SUVs without a steering wheel. Cars will not get substantially smaller without regulatory intervention, people will continue to own personal automobiles, and they will still have more seats than are needed 99% of the time.
Driverless cars will be great, but I think you're severely overestimating their impact on car design/ownership/usage patterns. I know it's popular to imagine a society where people stopped owning cars, where cars are always right-sized for the situation, where cars show up on demand and parking lots made obsolete, etc etc, but that's a 1950s Popular Mechanics style of sci-fi pipe dream.
It does seem kind of plausible. Right now you need a car for everything. To get to work, to buy groceries or anything else from a store, to get to any kind of recreation, etc.
Now suppose there exists an autonomous electric taxi that you can hail from your phone and use to get from one end of the city to another for around $1. You no longer need a car for anything but getting to work. Rush hour is the peak demand so the price of a ride during rush hour would be prohibitive for commuting.
But the same reason the car operators can't justify buying more cars just for rush hour is the same reason commuters won't want to do it. Once commuting is the only reason you own a car you start looking for housing and employment near functioning mass transit. Which is going to bring people back into the cities. And once you do that and people give up owning a car the rest of it follows.
For example, more than 50% of NY households don't own a car[1]. It's easy to argue that NY is a special case, but with 8 million people it's a very large special case. The thing is, there are a lot of special cases[2] that aren't as extreme as NY but in aggregate add up.
[1] http://en.wikipedia.org/wiki/Transportation_in_New_York_City...
[2] http://en.wikipedia.org/wiki/List_of_U.S._cities_with_most_h...
It's certainly not necessary to have R&D and manufacturing in the same location.
Tesla can site battery production away from the car plant because for them batteries aren't the car. They're a part of the car but having a battery plant isn't a core competency. Musk is building one because that's the fastest way to bring prices down. Not because they have to have it in order to continue churning out the Model S.
http://qz.com/32575/ge-a-pioneer-of-outsourcing-is-bringing-...
Detroit may not be as dominant as it once was, but it is the center of the American car industry. There are many manufacturing plants for cars as well as for components, as well as major R&D facilities, etc. Also, there are the world headquarters of GM, Ford, Chrysler (now a Fiat division, but I think still hq'd in Detroit), major suppliers (which are Fortune 500 companies themselves, I believe), as well as the US headquarters of some foreign manufacturers.
Or, to be less snide: Kin selection, but with memetics rather than genetics. To be more simple: cultures whose behavior patterns perpetuate the survival of their members, survive themselves.
Economic theory says we're better off letting other countries do the stuff they're better than us at doing. If Shanghai makes better cars, it helps both them and us "perpetuate survival" if we just go ahead and buy their cars and spend our effort (and our savings!) doing something else.
Efficient markets mention nothing of capital, and the tendency for it to self-perpetuate. I can trade my oranges for your turnips and we both benefit, but what happens when you eat my oranges and I sell your turnips for a pear orchard? You could argue that rational actors would tend toward investment rather than consumption, and I'd point to a negative/extremely low U.S. savings rate. Humans behave like rational actors, but we aren't. Or perhaps we are, but our utility functions are incomputable, or have conflicting interests with different weights at different times of the day, etc.
So, revering markets for their sensitivity, speed, and efficiency, I am nonetheless suspicious of them. Markets didn't take us to the moon, but I'm glad we went. Markets allow the smart to get wealthy, and the stupid to get poor. We should remember the latter as we celebrate the former.
Suppose we takes some cash and use it to buy stuff from Japan. What that means is we give them mere pieces of paper with writing on it and they give us in return actual goods that are useful to us. Now we have some goods, and they have some paper. What do they DO with the paper? There are two options. Either they keep it forever, or they spend it.
If they were to just keep the money (and never spend it on anything), that works out GREAT for us, because it's a lot cheaper to print extra money than to make extra stuff. If the money never came back, we could print more with impunity and never worry about inflation or ruining the exchange rate.
But in all likelihood, they'll spend that money. So again we have two options: Either they spend it on US goods and services directly or - more likely, and most relevant to your question - they spend it on goods from some other country and THAT country (or another one, after a few more hops) in turn spends it on US goods and services. The money is only valuable to the outside world because they can spend it, and when they do that it comes back to US in exchange for some good or service that we make that SOMEBODY wants.
In the case of Japan, we buy their stuff for dollars, they spend those dollars on oil from some OPEC country (they'd actually rather buy oil from Alaska - it'd be a lot cheaper to ship but we've stupidly made it ILLEGAL to sell it to them - and then the oil-producing country in turn buys stuff from us.
So when we trade, our purchasers get a good deal on the products they buy aboard and that turns into demand for other products we sell and investment in our economy at large.
The dislocation caused by switching "making stuff" between two places means that people will be made unemployed and die in poverty.
It doesn't, for instance, counter-balance the trade benefit with an assessment of the societal cost of our production moving overseas.
You can look only as far as stockholders to see how diverse a corporation's ownership is, or you can take the next step and see how it changes hands at three or four levels. You'd be surprised.
The money dispersal you speak of goes to things like parts - most of which don't originate from the US. Which is EXACTLY why we need corporate headquarters here.
Nationalism/Racism => "People are more deserving if [they live in X/are of ethnicity X]."
I met a guy in a bar who was upset that a BP gas station opened up in his community. He wished it was something like Shell. I said "Oh, you mean the Dutch company, Royal Dutch Shell?"
That drove the point home to him, but the deeper point is that the shareholders and employees are of a company like that are global. Even if they weren't, the people that the shareholders and employees of that company give money to (the people they buy toilet paper, cars, and food from) can be and are of any nationality also.
Take a $20 bill and see how many hands touch it in a year. Take that same 20 dollars as a ledger entry and see how many countries have possession over a fraction of it in that same year. It's staggering.
"Buy American" is a complete illusion.
Nationalism is more like, "hey, I live in Tampa Bay so the Buccaneers are the best!" It's groundless presumption that someone or something is better or more deserving because you are close to it. It's a pernicious cognitive bias.
It's not so much that one thing is better as it is that you are more able to help those closest to you, in roughly the order yourself - family - community - country.
Without some degree of nationalism it is hard to justify things like universal healthcare, the welfare state or even politics on a smaller than global level. We invest in our communities because they invest in us.
I think I'll go ahead and challenge the boldness of making that prediction when that's your job title. He might end up being wrong, but even if, for instance, California law prohibits all automobiles or pictures of automobiles within 100 miles of SF for any use, no one would really blame him (and I think it's almost certain he won't be _that_ wrong).
It's really anywhere that's better than Detroit.
I vaguely remember reading that $3000 of the cost or producing a car in Detroit went to the union (pensions I believe) due to agreements made in the 60's to keep salaries down. That's a huge competitive disadvantage.
It's a point that is often made, but a few considerations:
1) How much do labor costs impact overall profitability?
2) There may be advantages to paying workers well in salary and benefits.
3) You weren't addressing this aspect, but certainly there are advantages to the workers, who I have no reason to be less sympathetic with than management, and in some ways to society.
Well in this case a lot. Competitors were able to produce better quality cars at the same price point, since they didn't have approximately $3000 in extra overhead.
> 2) There may be advantages to paying workers well in salary and benefits.
There are advantages and there are good examples for this, but it depends on the industry, the culture, the location as well and a lot of other factors.
> 3) You weren't addressing this aspect, but certainly there are advantages to the workers, who I have no reason to be less sympathetic with than management, and in some ways to society.
Then why did Detroit fail?
> Well in this case a lot. Competitors were able to produce better quality cars at the same price point, since they didn't have approximately $3000 in extra overhead.
Many factors determine quality and costs. Nothing you say indicates that labor was a decisive or major factor. For example, people assume much manufacturing is in China due to labor costs, but many businesses will tell you it's because of manufacturing capabilities and resources, and labor costs are a minor factor.
>> 3) You weren't addressing this aspect, but certainly there are advantages to the workers, who I have no reason to be less sympathetic with than management, and in some ways to society.
> Then why did Detroit fail?
I don't know what exactly you mean by 'fail', or if you mean the city or the car industry. As far as the city 'failing', structural racism played a big role as did the related flight of the tax base to the suburbs, which are doing well. A race to the bottom for workers' welfare didn't help, as factories moved to non-union locations.
For the industry, from what I know bad management was a major contributor, as well as poor engineering. I think labor was too.
When labor costs adds an extra $3000 to your own costs that your competitors don't have to deal with, how is this not a major factor in both quality and costs (either lower quality to meet price points, raise the price, or a mix of both)?
http://www.npr.org/templates/story/story.php?storyId=9864323...
http://archive.fortune.com/2007/01/26/news/companies/plugged...
Since we're on the subject, you haven't provided much meat to your argument either: being that labor was a major factor in US car companies' competitive disadvantage.
> For example, people assume much manufacturing is in China due to labor costs
Low cost, skilled labor was initially one of the major reasons how Chinese manufacturing became dominant.
> but many businesses will tell you it's because of manufacturing capabilities and resources
It's only recently that Chinese manufacturing capabilities got better and it was due to rising labor costs.
As for natural resources, it is not a Chinese competitive advantage. That's why they're very keen on striking a lot of agreements with foreign countries for access to natural resources.
> I don't know what exactly you mean by 'fail', or if you mean the city or the car industry.
I meant the car industry.
> For the industry, from what I know bad management was a major contributor, as well as poor engineering.
Yes to be specific for bad management, it was short sightedness that led management to offer rich pensions in return for lower salaries in 60's. This in turn led to bad quality. How? When you have an extra $3000 of extra costs from pensions for a product that your Japanese competitors don't have, what does management do when they want to be competitive price wise? They lower quality of parts and materials, which led to poorer overall reliability and quality of the entire vehicle. Detroit engineering was not 'poor'; they just had to work at a disadvantage. (A lot of those engineers now work for Telsa and other non-Detroit companies.)
> I think labor was too.
I'm confused. I thought your main argument was that labor wasn't a factor?