It’s been a busy day:
For General Motors Corp., the question is no longer whether it will get a government loan or if Chief Executive Officer Rick Wagoner will be replaced. It’s whether anything can prevent the largest U.S. automaker from sliding into bankruptcy.
And, lest you think this only has to do with the US automakers:
GM and Chrysler have been stretching payables, which means that many auto parts suppliers are in dire cash flow straits. And if auto parts makers fail, it doesn’t hurt just the Detroit car makers, but the foreign transplants as well.
Few people outside of the industrial Midwest really understand the astonishing breadth and terrifying importance of the auto industry, and the central role it played historically in generating the American middle class.
I still think this is a big mistake. Creating the vast infrastructure, human capital and technical expertise needed for even a mediocre automobile industry is no small feat. Take the Koreans, for example, who easily captured the global market for shipbuilding and high-rise construction. Despite billions of dollars in subsidies and decades of effort, the Korean automobile industry struggles to even meet the worst of US markers in quality, efficiency and overall design. The $25-50 billion in loans is cheap, in comparison to what it would cost to restart this industry from scratch—or drag an automaker out of bankruptcy.
Even from an environmental perspective, this decision seems shortsighted to me. If the US automakers are allowed to fail, the $18 billion or so spent every year on R&D won’t come back, even in the rosiest scenarios in which foreign automakers set up more plants in the US. Out of those labs came catalytic converters, airbags and most of the technology that made hybrids possible. Commuting by car to and from sprawling suburbs cannot be made efficient; I still think GM’s approaches to the problem are better than most anyone else.
But, I’m biased.
I grew up outside of Detroit. Since leaving Europe just before World War I, my family has lived in Detroit. My father assembled Thunderbirds to pay his way through school. My grandfather worked for Packard. My Great Grandfather worked at Ford’s Rouge plant. In a strange twist of fate, I’ve become a dues paying member of the UAW—thanks to the unionization of University of Washington’s graduate students. That’s four generations in the UAW for my family. (As my dad put it, when he heard of the grad student unionization, “can’t one of us not pay these assholes dues?”)
About a year ago, I was asked to write a piece on the future of the automobile—combining my background in science and engineering with my family’s intertwined history with the American auto industry.
I spent the year researching—going to auto shows, reading scientific and technical reports, as well as histories. Thanks to the totally collapsed publishing market, the piece is unlikely to ever be printed.
Today seemed as good as anyway to at least post excerpts from it. Perhaps someday the full version will find its way into print.
Chicago’s slaughterhouses in the late Nineteenth Century—drawing deeply from the largess of the tamed American plains—gave birth to the first moving disassembly line. Pigs, cows, and chickens raced past meagerly trained workers, were steadily converted into interchangeable, commoditized, pieces. Pig, bacon. Pig, lard. Cow, chuck. Cow, steak. Chicken, drumstick. Before this innovation, butchering was completed in the same way Europeans built medieval churches—one piece at a time by a trained artisan. The moving assembly line, with interchangeable parts and workers, is just the process in reverse. Iron, steel. Axle, frame. Windshield, car. The Highland Park plant, in Detroit, was the first.
Before the moving assembly line, manufacturing a Model T took the Highland Park plant half of a day. After switching to the moving assembly line, it took only one and a half hours. Even in the most primitive form, this new way of making things was at least eight times as productive as anything before. Ford promptly undercut all the competition on cost and still ran a business that felt like printing money.
These original moving assembly lines, where my great grandfather found work for decades at the Ford Motor Company, bridged two eras. In one end entered the 19th Century, a century devoted to the categorizing, locating, dominating and refining the material wealth of the earth. Out the other end came the 20th Century, devoted to astonishing numbers inexpensive yet intricate machines. Eventually, almost every component of the model T was refined, forged and combined in Detroit’s Rouge River plant—red iron ore was turned into steel in the foundry, sand refined into glass, dyes prepared as black enamel, raw rubber into tires and undesired people (Jews from Europe, blacks from the South) into interchangeable labor. Ford created the industrial mass manufacturing society of today, all under one roof.
Factory work has never been pleasant. The moving assembly line made things far worse for the men (and later women) working—combining the body-wrenching heavy labor with unprecedented mental tedium. Listening to my dad describe his time in the paintshop of the Ford Wixom plant (assembling Thunderbirds) is like listening to an audiobook of Dante’s Inferno. Only excellent pay, or desperation, would keep you, or anyone, at the job.
****
But how could one compete with Detroit? The industrial efficiency of these factories sucked all the air out of the room. The solution of most Western European countries was to slam a door shut, and use restrictive trade and currency policies to create protected markets for homegrown manufacturing. The Japanese were the first to figure out how to enter into the American market with success, using a protected home market to reimagine the factory itself.
By the middle of the 20th century, Detroit’s assembly lines were as intricate and unique as a handmade pocketwatch—devoted entirely to the manufacture of a single design of car, from start to finish. There is no cheaper way to pump out vast numbers of a given model of car. But, switching to a new kind of car, or even improving an existing model, required rebuilding the factory—at extreme cost and with a lengthy time penalty. Huge numbers of intermediate parts built up on the factory floor, typically made nearby or in the same building, slowing further any switch to a revised or new model.
The founders of Toyota had another idea. Why not think of a car as little more than an assembled collection of parts? Instead of making everything from scratch in house, cultivate a network of high-quality suppliers. The final assembly plant would be little more than a place where this deck of suppliers was shuffled and dealt out. While such a system might be a little less efficient (in total hours to complete a car) than a highly specialized plant, one made huge gains in flexibility. Switching models meant little more than switching the orders placed with your network of suppliers—rather than starting from the dirt, and building an entirely new factory. One could react nimbly to changing market conditions, and throw out an incrementally improved model each year with ease. What Toyota, and the other Japanese car manufacturers, changed wasn’t the car itself as much as how the car could be mass-produced. Saddled with vast networks of fixed plants, the US manufacturers were doomed during the two oil shocks of the 1970’s—unable to react as nimbly or quickly as the Japanese manufacturers to changing tastes.
***
Below the main floor of Cobo Hall, below the marquee makes and models on display at Detroit’s 2008 North American International Auto Show, a modest but steady stream of visitors wound their way around an array of unfamiliarly familiar cars. Geely. BYD (Build Your Dreams) Auto. Liebro Motor. Changfeng Motor. For most of these Chinese auto manufacturers, this show is their first inside the United States.
The vehicles are slavish in every respect—engineering, design, styling and manufacture: If a Mercedes had an ill-advised affair with a Subaru, the Geely CK would pop out. Changfeng Motor boasts its Leibao Command vehicle—a rote copy of an older Land Rover—carried the People’s Liberation Army as it recaptured Macao. The influences of Toyota, Lexus, Mercedes, Honda, and BMW are all represented; none resemble any of the American brands.
***
For decades now, we’ve been telling ourselves that perfect machines of nearly limitless efficiency will soon replace the current fleet of gas-guzzling cars. We’ve been lying to ourselves, pretending if we can just replace the fuel we place in the car, and the motor pushing the whole apparatus, we can remake the act of driving into something sustainable and environmentally sound. It’s blatantly false.
The operating efficiency of a car is determined by two big factors: aerodynamic drag and weight. Moving a car through the air at highway speeds is akin to shoving your hand through a block of Jell-O. Narrow, smooth and long (a train) slips through the air with much more ease than the car’s blunt, rough and short layout. Weight costs you with momentum. Remember Newton’s laws: objects at rest want to stay at rest; objects in motion want to stay in motion. It takes energy to start and stop and to go around curves. The heavier the car, the more energy it takes. The motor and fuel chosen does little to change any of this.
***
The future of the automobile will not be fleets of environmentally pure cars, rolling down alabaster roads, beneath a brilliant blue sky. If we fail to change how we live and work, the future of the automobile is the sooty air of present-day Beijing, of sweatshops filled with near-slave labor and of an Earth scoured with increasing desperation for fuel—by stealing food from the mouths of the world’s hungry to create biofuels.
>>Korean automobile industry struggles to even meet the worst of US markers in quality, efficiency and overall design.
This was true 10 years ago, but Hyundai and Kia make many cars that are arguably BETTER than competing models from the Big 3. There are still crap ones, but they turned themselves around with the help of… a new CEO.
Chrysler has a much worse reputation nowadays than Hyundai does.
I’m not a Koreatroll, just lending carnerdery is all.
Do they base infrastructure bills and improvement based on statistics from within the transportation industry?
If a certain committee is legally required to have specific criteria to build lets say a viaduct or highway and that criteria does not exist or support it, then the viaduct or highway cannot be built.
It seems we need a thriving auto-industry as proof we need transportation infrastructure.
Am I simplifying it? Or is it that simple. Just wondering.
Wow. Whatta post. Thank you! It’s been interesting to read (over on the site where you found that cartoon, mebbe?) how many otherwise sensible people firmly believe our domestic auto infrastructure belongs in the trash, and it’s heartening to see someone local writing so clearly about the the breadth of loss that would represent.
Look, I’m going to tell you something no enviro wants you to know:
Even if they crank out plug-in hybrids and electric cars as fast as they can, more than 99 percent of all the cars on the road in 2016 will be gasoline powered.
So, go buy a cheap used gas powered car that gets really good gas mileage.
Oh, and don’t get anything made by GM – there won’t be any parts.
There is plenty of obscene behavior to point to here – today with the Southern GOP Senators blatantly working in the interests of their state’s foreign automakers and against the American (uh-mere-cun) worker they profess to care so much about (c’mon cut yer pay to match the ferner’s – thas right).
Five years ago it was the idiot CEOs in Detroit who saw lines around the block – 6 month wait – for the simple, elegant, and techno Prius and thought – nahhhh.
Bailing these idiots out rankles, but their lives are not at stake. It is the workers on the line and suppliers who follow the designs that come down, and eventually all of us in an ever spiralling economy. The CEOs, with their millions in savings off just the last bonus, will be in better shape than anyone.
So – $400m+ for just Citibank and AIG, $700m for Wall St – no mention was made of cutting those (likely Republican voting) salaries to make them more competitive with Japanese labor. Or whomever would be the equivalent of the greedy rat bastards who sold down the economy for a quick bump in this year’s earnings.
Jonathon – Thank you for the personal insight and historical context. It does feel like we need a paradigm shift – a Car 2.0 as T Friedman was calling for in a recent column. Get Jobs on the phone. Keep up the fight.
For all the people who say “get rid of the unions, the wages are too high” I’ve got a few questions: Why do you think the people who are doing most of the real work should take a pay cut? Shouldn’t it be the CEO’s (Like Alan Mulally with ford, $666,667 salary; a bonus of $18.5 million, $8,682,376 stock options, company jet use per year $172,974, $55,469 for relocation costs, not to mention cell phones/cars & drivers/season tickets to athletic events, and an expense account of $33,229) who should take the pay cut? Yeah, sure they “symbolically” took a salary of $1 dollar, but they sure didn’t give up any of the other perks.
Yes, the foreign car makers only pay $30/hr compared to union/us companies $75.00, but after you do away with the competition for them, do you think they’re going to keep paying their employees $30/hr? In this economy I have a feeling people are going to be pretty desperate for any job and the temptation to dump $30/hr employees for minimum wage employees will be pretty tempting….especially if there is no AWU to threaten them. (Unions keep the wages up for all employees, even ones who’re not paying union dues, just ask my cousin the truck driver in right-to-work Arizona, he’s not a teamster, but he get’s teamster wages in a very anti-union/immigration-slave-labor-state.)
This article is sadly full of FUD. Hyundai and Kia rank above average in reliability ratings and on par with Toyota and Honda according to Consumer Reports. And your claim that R&D will disappear is absurd. Foreign auto makers spend plenty of money on this and create important innovations such as variable valve technology which you’ll find in nearly every modern car and is incredibly important in achieving good fuel economy.
@5 this is no different than washington state working on behalf of boeing. there really shouldnt be the ability to give tax breaks that undermine other states. Interstate commerce and all that.
Looks like you expect a return to a business-as-usual economy.
Spend some time reading up at The Automatic Earth, The Oil Drum, The Anthropik Network, Clusterfuck Nation, The Archdruid Report.
I’d have linked to them all, but last I checked, we’re only allowed one link per comment. Here’s a good one: “Timeline For Unfolding Crisis of Mankin….
Civilisation is fucked. That’s a good thing, ultimately: the American middle-class lifestyle is killing the world (250 species extinctions per day). The world is better of rid of it.
We could do it willingly, in which case it might not unfold too tragically. But we won’t, in which case it’ll end in tears. Probably nuclear war, if I had to guess.
Happy Christmas, everybody!
shitbrain, kill yourself now. let me live in the hell that is our future
Let’s compare professional salaries. The UAW stats I’m grabbing from USA Today.
A starting engineer at an Indiana space/defense contractor makes 50k a year (24$ an hour), after four years in college. As an Intern (3 or 4 years of college), they could make 30k a year (14$/an hour). Five years after graduating, one makes about 70k (33 an hour), which is plenty for batching in the Midwest (eat out every night, have a great apartment, and still be banking dough for a house and retirement).
A UAW janitorial or grounds crew job makes 14$ an hour, starting salary. A UAW manufacturing job makes $28 an hour. These folks don’t have student loans, and they have amazing benefits.
Boeing Machineists have a starting salary of $13/hour in SEATTLE. (source) That’s got to be rough.
I’m not butthurt about all this because I really love what I do…
though perhaps you can understand why I think the auto companies (management and unions) are insane.
5-
Southern GOP Senators should be commended for blatantly working in the interests of the American worker and consumer to insure that there is a viable American auto industry in the future. Artificially propping up a bloated decaying failure with mountains of borrowed taxpayer cash is a poor idea.
Here’s to the American auto industry of the future.
Here’s to the Detroit of the future; Birmingham.
I grew up in a small Indiana Chrysler town that’s been dying since the late 1970s. This could be the death of it. Small towns throughout Indiana rely on jobs at the auto companies. I can’t imagine what things’ll be like in a year.
@11
exactly
Those great benefits you mention add another $45 an hour to already obscenely high wages.
UAW screws American worker.
That $73-an-hour figure that gets bandied about is bullshit. That includes the cost of benefits, including the benefits that are paid out to retirees.
The difference in the actual hourly wage between GM and the workers at Honda or Toyota is closer to $10 an hour.
Read more here (or do your own search):
http://www.timeswatch.org/articles/2008/…
Interesting how everyone on Slog is usually rabidly, unquestioningly pro-union — but give non-union Honda and Toyota a free pass. Selective outrage, I’d say.
Why would you expect Republican senators to do anything in the interest of the American people?
Friend of mine from Detroit just told me they were told GM was shutting down today at 5pm (told me this a few hours ago), and not reopening until February, if they don’t get a federal loan. I don’t know if this was just his plant, or what management is telling people company-wide.
16 cont…
when you are unthinking brainless PC follow-the-crowd zombies with your heads rammed up the Democratic Party’s ass??
Of course, all the plants and all the experience of the people who worked in them will vanish out of existence when GM goes out of biz. Anybody wanting to produce anything like a car in the US will totally have to start from scratch.
@12 – Hey Saxby – I think you mean “ensure”. If we were taking “insure” – like AIG – we’d be all good.
Hey – where the hell’s my julep?
@8 – Bellevue Ave, love your work – but The Big Difference is that Boeing is an American company (though not really Washington’s anymore), and in the standard GOP Weltenshaung (hey – gotta love the Jackson School) – doing anything to favor foreign biz over US biz (regardless of any state’s parochial interest) is goddamn traitorous.
Fucking Commies.
Now, Saxby – about that Julep….
one julep
coming right up
after all,
once a dawg always a dawg;
even in exile.
I too hate to have to give away money to a business that has basically run itself into the ground. However, I think this needs to be done, and not for any of the reasons anyone above has mentioned.
The US economy has increasingly become an economy based on trading information, financials, intellectual properpty, and other services. There’s nothing wrong with having those things be a part of the economy. The problem comes when you stop producing physical items, and the economy takes a downturn. People don’t NEED to spend money on any of those non-tangible things, but they still need actual, physical items, even in a recession. Clothes. Housing (which includes appliances, plumbing, heating, electical, etc). Transportation (cars, buses, trains, planes, etc).
Most things anyone buys that is not food is made in another country nowadays. Your TV? Japan. Your kids toys? China. Your blanket? Anywhere but the USA.
The auto industry is one of the few remaining major manufacturing industries in the US. If it fails, what are all these people going to do for work? Low paying service industry jobs (ie.e, food service, housecleaning, janitorial, landscaping)? For minimum wage? Not the absolute worst thing in the world, but then all of the money spent on cars in this country, and its a huge amount of money, will go overseas, instead of going back into the economy of this country.
I think Obama is on the right track. Keep the industry afloat, but FORCE them to be forward looking and adapt their business model to the future. Don’t let the current cheap gas prices fool anyone into thinking that they can go back to the same old same old. Come May gas will go up (as it always does), and by August we could be seeing gas at $5/pg. If we can pull even with the Asian car companies in battery technology (and basic reliablitly, FFS, sheesh), the industry can become a strong one and stand on its own.
Even if the auto industry pulls through this, the dearth of manufacturing in this country is going to eventually cause the US to lose its leadership position in the world (if it hasn’t already).
interesting discussion, jonathan. you make some good points, as others i’ve been reading have along the same lines recently. hmmmm…..okay, i don’t want to see the entire auto industry go under, and it won’t–there’s still ford–but damn if i can stand the idea of those douche ceo s from chrysler and gm getting ANY benefit from the american people here. i would only support gov’t help under the condition that those assholes step down, with NO bonus. no salary for the year, even.
on second thought, i think we should let chrysler die. it doesn’t even have the volt going for it. it’s a dinosaur.
What about the fact that all three companies operate enormous financial companies to offer loans to car buyers? Aren’t these considered “banks”? And have you ever dealt with a car loan? Repoman. Scary and predatory terms.
Great excerpts Jonathan, and I hope that the entire piece gets picked up for publishing.