Monday, January 12, 2009

Car Industry: The erosion of America's manufacturing base

If the Detroit Three gradually disappeared, Toyota, Honda, Nissan, the Koreans, and the Chinese would eventually fill the gap.

In "Factory Man," a new autobiography being published in February 2009 by the Society of Manufacturing Engineers (SME;, author James E. Harbour says there is an even greater long-term risk. Profits from the American auto industry would largely be sent overseas, and millions of shareholders would go broke. Worse, the foreign companies would keep their major engineering operations at home.

In his book "Factory Man," Harbour says what America needs right now is a good jolt of the power of the factory. During recent Washington hearings, he viewed elected officials playing a game of liquidation roulette with the Big 3 without realizing the risk of:

-- Europe, Japan and Korea dominating the American market.

-- China becoming a far stronger, major competitor.

-- Product development will take place overseas and engineering students at American universities may be forced to go abroad to find jobs.

-- A majority of major capital investments, such as stamping press lines, body shops, and engine and transmission tools, going to foreign countries.

-- Foreign manufacturers expanding in southern right-to-work states.

-- The profits of foreign manufacturers from their American operations will flow back to their home countries.

-- Vehicle prices rising because of diminished competition.

-- Little attention being paid to the real possibility that Detroit will recover and repay government loans.

-- The prospect of losing Detroit's historically large support for major charities and foundations, along with actions such as the "Get America Moving" vehicle price cuts that followed the September 11, 2001 attacks and weren't offered by foreign competitors of GM, Ford and Chrysler.

Source: Society of Manufacturing Engineers
Published by Mike Hitchen, Mike Hitchen Consulting
Putting principles before profits