More job losses feared among auto suppliers

Milwaukee Journal-Sentinel ^ | 03/09/2004 | Bloomberg News Service

[ninenot]

The Midwest should expect more production shifts like those that have seen thousands of jobs leave Tower Automotive's Milwaukee factory in recent years, a survey of auto-parts suppliers shows.

To meet customers' demands for price cuts, North American and Western European auto-parts companies will close plants and move as much as 20% of production revenue to lower-cost regions by 2010, the survey by Roland Berger LLC found.

Eastern Europe and China will largely benefit as manufacturers move factories to areas where hourly pay is a tenth of the rate in countries such as Germany.

General Motors Corp., Ford Motor Co., DaimlerChrysler AG and other automakers are asking suppliers to cut parts prices 5% or more each year to compete with lower-priced Asian models. The carmakers are buying from lower-costs suppliers. General Motors has said it will spend an additional $4 billion for Chinese parts by 2009. Ford had set a goal for $1 billion in purchases from outside the U.S. by last year.

The study has implications for Wisconsin, Michigan, Ohio and other Midwestern states that have long relied on manufacturing as a key sector of the economy.

Roland Berger forecasts in the study that the global production share for automotive suppliers in the Midwest will shrink by 3.5% every year, with midsize suppliers expected to be most affected.

Small and medium-size automotive suppliers will expand production capabilities in Mexico and the southern United States, while larger suppliers will expand overseas, Roland Berger said.

"The ability to adjust the manufacturing footprint of a company to keep pace with the global industry is going to be an even more important factor in the future," said Troy, Mich.-based project manager Andreas Mai, who compiled data from interviews of 62 companies.

DaimlerChrysler AG announced last month that it will begin buying pickup truck frames now made in Milwaukee from Metalsa, a Mexico-based company that is a joint venture partner of Tower. Tower will stop production of the frames for Dodge Ram trucks in a move expected to cost about 500 jobs.

Tower already moved jobs to Metalsa several years ago when it stopped making parts for heavy trucks in Milwaukee. And Tower isn't alone. Strattec Security Corp. of Glendale has shifted more jobs to Mexico in recent years and Johnson Controls Inc., also of Glendale, shifted production of batteries to Mexico from a Milwaukee factory in the mid-1990s.

Meanwhile, a separate report out Monday warned of more immediate concerns for suppliers. Lower-than-expected sales of light vehicles during the first two months of the year will result in lower sales, production schedules and earnings for suppliers, analysts at Robert W. Baird & Co. said in a research report.

Particularly vulnerable are suppliers to the domestic car brands - General Motors, Ford and Chrysler.

Makers of car body panels and exhaust pipes are responding by moving business from markets such as Germany, France and the U.S., where costs are high, to Mexico and China, where they are lower, Mai said. The effective hourly wage, adjusted for local taxes, employee benefits, regulations and other factors, is $3.50 an hour in China compared with $35.56 in Germany, the study says.

The study determined, based on factors such as security, legal structure and labor costs, that Estonia, Latvia, Lithuania and other Eastern European countries are the most attractive markets for new business, followed by Thailand and Malaysia.

Thomas Content of the Journal Sentinel staff contributed to this report.

[ninenot]

Made in America, eh?

[templar]

America is becoming a country that engages in assembling and consuming stuff made elsewhere instead of a country that creates wealth for itself by turining the raw materials of the earth into products of value.

Our money is given permanent value on the global market by being tradable things we make (and a few exportable services) or temporary value by being tradable for ownership of American assets and property (temporary because we will run out at some point). The amount of stuff we make that is tradable on global markets, in exchange for the dollars we send abroad, is dropping in relation to the amount of dollars being sent into the global market. This is not a long term sustainable condition.

[hedgetrimmer]

To put a fine point on it, our leaders are making America a country that engages in assembling and consuming stuff made elsewhere.

This is called a planned economy, because it is America's leadership that is causing it to come about, it is not an natural progression based on the abilities and the desires of the American people.

It was first revealed in the early 1990's that America would become a "service economy". This was not a prediction based on projection, but a statement based on the decision to make America so.

Looking back the plan has been executed pretty flawlessly. Starting in the early 1990s with the environmental lawsuits (the law had to be changed so the environmentalists could sue) that stopped construction of power plants, dams and roads. Then legislation that took natural resource development away from the people and either gave it to foreign based corporations or locked it up with nongovernmental environmental organizations to preserve it. This put many loggers, miners and heavy construction workers out of business.

Property rights assaults by the government have increased dramatically-- ranchers and farmers were the next group to suffer the forced transition to a "service economy" and now farming which used to be 13% of our economy is down to 2 or 3%.

Finally they started to work on the white-collar jobs, you see tech and even the service jobs themselves disappearing overseas.

This progression has been planned and forced on the American people. It is a puzzle-piece in the sort of planned economy that the USSR was infamous for, except its on a global scale.

One purpose of this planning is to reduce the wealth of the American people, so in the planners minds, the third worlders can have more wealth.

Many of our Congressional leaders are involved in the sellout to the planned global economy. They tell us it is inevitable and it will hurt. Some leaders! They are making it happen and they don't care anything about the people that elected them.

Its time for the American people to make a change, take initiative and leave the economy up to the people, and not a government whose sole purpose it would seem, is to sell us out.

[templar]

That pretty much says it as clearly as can be said. What always amazes me is that so few people see it, or care about it. And even more amazing is that so many people (FReepers included) support and promote it.

[international american]

"Many of our Congressional leaders are involved in the sellout to the planned global economy. They tell us it is inevitable and it will hurt. "

It will not hurt THEM with their business connections, and their fat retirement packages.

[international american]

I don't understand it either. FReepers are intelligent on most issues. The greed for short term profits has taken over american business.

[hedgetrimmer]

You are correct.

Are U.S. senators real 'inside traders'? Study shows stock portfolios outperform market by 12%

[international american]

Insider trading, for sure. No way it is due to anything else. This ought to be all over the news!!

[hedgetrimmer]

I think you can tie China's explosive growth and the taxpayer funded business insurance plans directly to Senator Diane Feinstein among others. She and here husband invested heavily in Chinas steel industry and hotel business in the mid-1990s. Of course they would want programs like OPIC to protect their investment. They would also want programs that moved industry offshore to China so their steel mills would get more business. Some people were able to draw a direct connection between Senator Feinsteins vote for the California Desert Protection act which stopped mining within the park boundaries that competed with Feinsteins financial interests in China.

[international american]

I am familiar with the conflict of interest(to put it mildly) with Feinstein and her husband. She is my senator. There was an investigation into this some years ago........probably a coverup, as it was buried, never to surface again:) The greed of these people is startling!!

[WilliamofCarmichael]

RE: # 4

Yes, very well stated. I just want to mention yet another front in the war on American commerce; to wit, the enviro wackos' "rural cleansing" that almost sparked a revolution in Klamath Falls, Oregon about three years ago. There are many fronts and it would take a book to name them all.

[WilliamofCarmichael]

RE: California Desert Protection Act

THE GREAT GOLD HEIST, The Desert Wilderness Protection Act. By Karen Lee Bixman. Published in: Media ByPass Magazine.

"Senator Diane Feinstein: 'The Modern Jesse James'"

http://www.propertyrightsresearch.org/great_gold_heist__the_desert_wil.htm

There was much discussion of this on talk radio (mostly KSFO in S.F.) at the time.

[ninenot]

In an interesting essay (not related to economics) a piece of this puzzle comes to light: the Hobbes/Montesquieu/Machiavelli school of politics, under which most English (and US) economic and political thought was designed, empahsizes personal gain and monetary satisfaction in its political ends.

This is different from the politics of Aristotle and Plato, which emphasized the "good State/good Person" and virtually ignored material wealth as a political end.

[WilliamofCarmichael]

It's a matter of "comparative advantage." The world's countries' most important "comparative advantage." is Washington, D.C. and taxpayers' pockets.

For example, Comision Federal de Electricidad (CFE), Mexico's state-owned electricity company, will purchase three gas-fired turbines and related equipment from Siemens Westinghouse Power Corp. and other U.S. companies with the assistance of a $140.6 million long-term loan guarantee from the Export-Import Bank of the United States (Ex-Im Bank).

This of course leads to the world's countries' other "comparative advantage," modern infrastructures all ready to go for American corporations' offshoring.

This brings up another of the world's countries' "comparative advantages," corporate boardrooms. All that's left is to hand technology and plants to the "developing nations."

Now, get a bucket and rake in the money from Wall Street's slot machine. Thank you, useful idiots. Enjoy!

Yes, I know that (as of now) Siemens Westinghouse has plants here and this particular Ex-Im Bank action likely meant jobs for Americans. If taxpayers would guarantee loans to me I could spend money with American corporations and create jobs too!

[international american]

Thanks much.

[international american]

Short term profits rule the day now.

[hedgetrimmer]

The Ex-Im Bank was created during the New Deal essentially as a means to underwrite corporate investment in the Soviet Union. Since that time it has expanded to offer loan guarantees for corporate projects throughout the world. Under the Trade Act of 1974, "nonmarket economy countries" such as Communist China are denied access to "programs of credits, credit guarantees, [and] investment guarantees" if most favored nation (MFN) status is revoked. This is why the U.S. Chamber of Commerce and nearly the entire Fortune 500 have been perennial supporters of MFN renewal for China, and why the same constellation of corporate interests favors extending to Beijing membership in the World Trade Organization, which would in essence grant it permanent MFN status.

An Ex-Im fact sheet explains that the bank "exists to support U.S. exporters in making sales to foreign buyers. It does this by filling the gap where private sector export financing is inadequate or unavailable" — that is, it forces taxpayers to underwrite loans the private sector wouldn’t touch. Ex-Im also admits that Red China is its "largest market in Asia" — much to the delight of Beijing’s commissars and their corporate fellow travelers.

Furthermore, Ex-Im lavished taxpayer-subsidized loans most generously on projects that helped build China’s energy infrastructure. Westinghouse received a direct loan of $36,347,390 to produce steam turbines for the Qinshan II nuclear power plant. General Electric benefited from a $260,116,302 direct loan to provide turbine generators for the Nantong II power plant. Siemens was awarded a $47,456,071 direct loan to help construct the Fuzhou 2X35 OMU power plant. The Qinshan III nuclear power plant was built with the help of a $20 million loan guarantee for Houston’s Stone & Webster International Projects Corporation and a direct loan of $383,133,959 to Overseas Bechtel. And the New Jersey-based Foster Wheeler Energy Corporation was treated to a taxpayer-guaranteed direct loan of $408,822, 539 to provide coal-fired boilers for the Yangcheng Power Plant.

Significantly, the three largest direct loans — those granted to Foster Wheeler, Overseas Bechtel, and General Electric — were approved by Ex-Im following a "Presidential National Interest Determination." Bill Clinton granted those determinations at a time when his re-election effort was awash in illegal Chinese campaign contributions.

Not surprisingly, the list of Ex-Im clients for China ventures overlays quite nicely with the roster of Beijing’s corporate lobbyists. Boeing, which received $332.7 million in Ex-Im subsidies in 1996, was a corporate member of the U.S.-China Business Council (USCBC) and the Business Coalition for U.S.-China Trade, in addition to being the corporate co-founder of the U.S.-China Educational Foundation (USCEF). General Electric ($260.1 million in Ex-Im subsidies) also helped create the USCEF and is a member of the USCBC; Foster Wheeler Energy Corporation ($408.8 million from Ex-Im) is also a USCBC member, as are Texaco and Westinghouse. Bechtel is a member of USA-ENGAGE, which describes MFN for China as "a means of encouraging positive change in China and ensuring freedom for Hong Kong."

http://www.thenewamerican.com/tna/1998/vo14no16/vo14no16_corporate.htm

[XBob]

4 - Excellent summary. Many thanks.

[XBob]

4 - I know you two know that there is nothing which can be done to save our country, so you won't try.

But youall should be aware of what is happening, and hedgetrimmer's excellent summary is a good place to start.

Abla Chineseish guys?

[XBob]

By the way, did youall see that piece on ABC nightly news, about how a company in the US is now paying Indian wages to Americans working in the US and getting lots of applications.

And youall want to Bring in the Mexicans to take the rest of our work.

[hedgetrimmer]

By the way, did youall see that piece on ABC nightly news, about how a company in the US is now paying Indian wages to Americans working in the US and getting lots of applications.

I didn't see the program, but I know this to be true in the Silicon Valley. I know when the H1b visa program started happening in earnest, many engineering directors started pushing the H1b visa holders because they were so cheap not because they were good or had the "fire in the belly". They also liked the idea that H1b workers didn't ask for stock options in their employment packages. That left more for the board of directors to shower on their members, rather than the employees.

[WilliamofCarmichael]

Thanks for the link to "Beijing's Corporate Fascism."

It has the kind of subsidy info that I was looking for and the 1998 article's info on Chi-com operations were pretty much verified by the Cox Report.

[hedgetrimmer]

You're welcome. I was actually looking for a report from the USAID group on the amount and kinds of aid India got to build its infrastructure.

In the 1990's India could not compete with us. Many Indian engineers came to the US to work because they simply had an unreliable infrastructure. One monsoon, could put out the power system for days, making India not a very attractive place for a technology business.Then our government with a massive injection of US taxpayer money, built India roads, power plants, water supply and delivery systems and colleges. Our government's investment in India is directly related to their ability to have a tech industry now. In essence, we taxpayers have paid to make our own people jobless.

Still looking for that report. It was posted a couple of weeks ago, as I recall.

[hedgetrimmer]

Here also is another interesting article I just found.

Excerpts to consider when the government tells us trade with China is good:

Americans clearly view China as having a poor human rights record.

An even stronger majority has supported limiting trade with China as a way of opposing China's sale of nuclear weapons technology.

When a March 1999 Pew poll asked respondents to weigh containment of China's militarily against the economic benefits of US-China trade, a plurality (47%) thought it was "more important to contain China's growth as a military power."

A January 2000 Hart Research poll found 61% of Americans think China has "unfair trade policies that make it difficult for American companies to sell products [there]."

During the past few years, a modest majority of Americans repeatedly has expressed opposition to the current policy of granting China normal trade relations or most favored nation status.

AMERICANS ON GLOBALIZATION: A Study of US Public Attitudes

http://www.pipa.org/OnlineReports/Globalization/appendixa/appendixa.html

[FITZ]

Not only that --- India has tariffs three times what ours are --- and is doing quite well with free trade --- obviously tariffs don't hurt a country trying to benefit in a global economy.

[CSM]

"Short term profits rule the day now."

You got that right! Those dang customers that buy the cheapest products and benefitting via their short term savings are killing us!