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How the efforts of parts suppliers to get back some of their pricing power is affecting car manufacturers efforts to reduce costs from purchasing parts. Collins and Aikman's decion to shut down a Ford plant on a pricing disagreement shows that parts makers at the urging of hedge fund investors are becoming assertive on pricing issues. Bankruptcy of many suppliers is also making it difficult to achieve cost reductions for Ford, GM Daimler. This will affect their efforts to reduce costs.

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Hyundai is benefitting from the popularity of small cars. Hyundai increased sales in June year over year by 14% when USA auto sales declined by 8%. Its Elantra compact sales went up by 69%, its Accent subcompact sales increased by 91% and sales of its midsize sedan Sonata went up by 24%, according to Autodata. Hyundai which was trying to go upscale with the sedan Azera and the Genesis which was designed to compete with Lexus, is now focussing on small cars and trying to increase its share of the market with smaller cars. It will introduce a new Elantra wagon for the USA this year, the first of about 6 new small car models it hopes to bring out in the next 5 years. Hyundai is also considering manufacturing the Elantra at a new plant in West Point, Georgia, which was previously going to make a pickup and a SUV for its affiliate Kia Motors. The popularity of its small cars and the weaker Korean currency are helping Hyundai post large operating earnings with estimate of $2.3 billion this year, up 25% on sales of $33.7 billion, up 11%, according to brokerage Korea Investment and Securities. Sales of Hyundai SUV's are suffering the same fate that other SUV's are facing, down 41% in June 2008....

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This editorial in the WSJ argues against Trade Representative Lighthizer's move to increase the percentage of North American content in a vehicle so that it creates more jobs. Currently Nafta rules require 62.5% of a duty free vehicle be made in North America. Lighthizer wants to lower the content coming from Asia or Europe. This is not favored by Canada and Mexico and it makes Mexico less competitive than it is now.

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Tom Friedman explains why Applied Materials is one of the largest solar panel manufacturers in the world but makes its panels in 5 factories in Germany, four in China and one each in India, Taiwan and Italy. With no factory in the USA. And all 14 factories put up in the last 2 years, put up overseas. Applied Materials is opening its largest worldwide research facility in Xian, China, in October 2009. Applied develops the knowhow for solar energy at its research facilities for manufacturing technology. These solar panel factories says Applied CEO Splinter go for about $200 million each. Solar panels technology can vary from thin film coated onto glass with nanotechnology using crystalline silicon, to other technologies. Germany is at the forefront of the world solar energy industry. It is the second largest industry in Germany employing some 50,000 people. China is putting a new emphasis on pollution free energy. What Germany has done says Friedman after visiting Applied Materials research facilities, is to allow any business or homeowner to generate solar energy, and if they decide have the power utility to connect them to the grid as well as buy the solar power at apric and duration attractive to the homeowner or business user. Something the USA has still to do. As a result solar energy consumption in the USA lags way behind these countries. Applied Materials largest USA customer is a German owned company in Oregon says Applied CEO Splinter. Splinter points to the fact that solar energy is becoming an important industry, similiar to the way the auto industry assumed importance. For Applied Materials this means revenues of $1.3 billion in the last 12 months, according to Splinter. ...

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Glenn Hubbard is Columbia University's Business School dean. He is also a former chairman of the Council of Economic Advisors. Hubbard came under criticism in "Inside Job," a 2010 documentary about the financial crisis for reported connections with financial services firms. Here he talks to the Wall Street Journal's Melissa Korn on the ways in which Columbia is changing its business school programs to ensure interdisciplinary learning. Hubbard thinks a broader education is needed, not just expertise in a particular area, for today's students turning into the business leaders of tomorrow. One of the big changes today is that a student today may have significant responsibilities and leadership position in a shorter period 5-10 years. Earlier generations of business leaders had a much longer period before they assumed such responsibilities. This makes it even more important for a business student to have a broader education and have broader perspective. In the next ten years Hubbard sees two major changes- continued globalization, and the reshaping of major industries such as financial services. This will require students to have a broader grasp of the changes that will be taking place, which cannot come from merely having expertise in a particular field. He says this kind of education will be needed for business decisionmakers to be capable of preventing a broader economic meltdown. Hubbard believes ethics courses simply marginalize the subject, when in reality ethics and doing the right thing is woven into everything that happens, decisions that take place in so many ways and places, and often over many years. For this reason Columbia seeks to cover this ground in case discussions in different subject areas across the breath of the curriculum. Some of the developments and decisions occur over 25 years as in a GM auto industry case taught at Columbia. ...

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GM's joint venture with Luizhou Wuling Motors has produced a win-win situation for both companies. Wuling was a small, regional manufacturer when the joint venture started. Now Wuling has more than 1 million in unit sales. And GM has benefitted from the rapidly growing sales. Year over year sales were 29% in 2010, and were slowing to 10% in 2011, with the end of government incentives. Wuling vans can now be sold under the GM brand in India, using lower cost manufacturing in China. Looking back this was good for GM. The future however has some twists and turns and could turn out to be different. Wuling joint venture will produce cars at a lower price point under the Baojun brand. These cars were shown at the Shanghai Auto Show, and will be marketed to customers who are looking for affordable cars in the second and third tier cities in China. The Baojun brand joint venture will have one difference. This brand involves intellectual property being held in common with Wuling Motors. This is part of China's new plan for American and European manufacturers in China- the price of access to the Chinese market is greater technology sharing with Chinese partners. In the long run this should enable Chinese manufacturers to be dominant inside China. This process is already underway. According to J.D. Powers, Chinese brands had 32% of the domestic passenger vehicles market in 2010, up from 18% in 2000. Something similiar happened with Japan, where Nissan was making Britain's Austin A40 series in the mid-1950's. By the 1960's the foreign tieups were replaced by Japanese manufacturers dominant in the home market and exporting their own models. ...

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New legislation introduced in the U.S. Congress by Senators Orrin Hatch and Ron Wyden giving fast track and trade promotion authority to president Obama faces intense opposition from Democratic Party members of Congress. Only about a dozen House Democrats are considered to be supporting the legislation. Senator Schumer says "I don't believe in these agreements anymore, I've changed." Senator Warren on the left opposes the legislation. Senator Bob Casey of Pennsylvania says the legislation "as paving the way for another Nafta style deal that costs jobs." The deal if it passes the Senate, would face Republican opposition in the House where 50 or more Republicans are reported to be against the fast track approach and giving too much authority to president Obama without Congressional input. Fast track legislation would allow free trade pacts such as TPP to pass Congress without amendments or procedural delays. Labor groups and auto, other manufacturing companies, oppose the legislation because of the impact on manufacturing, West Coast groups in IT industries favor the legislation. Projections made by Petri, Plummer and Zhao at the Peterson Institute of International Economics, show the impact of Trans Pacific Pact (TPP) free trade pact would be $109 billion in added manufacturing imports to the U.S. to 2025 and $ 53 billion in exports, a net U.S. unfavorable of $56 billion. For IT and services sector the added U.S. exports to 2025 are projected at $42 billion and imports at $8 billion, for net $34 billion. U.S. favorable. Because of the dominant position of the U.S. in IT how much of this $42 billion might still happen without TPP. Other societal impacts also figure in the discussion, such as which sector needs the largest help and impacts the largest number of Americans for a sustained economic recovery in the future. ...

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Toyota moves back to its utilitarian roots, where costs matter and pricing matters. Higher cost technological advances are being rejected in favor of older approaches that accomplish the same thing in the manufacturing process at alower cost. And pricier features like the solar ventilation system option on the new Prius are being rejected so that the price can be made more competitive with American cars. Even the idea of pricing Toyota's cars at apremium of $1000 or $1500 over American cars is being questioned in this market. The new Prius mad due to come out this year, developed at a time when Toyota was coasting as it emerged as the most profitable and the largest auto manufacturer in the world, has a price tag of $28,000 versus the $22,000 for the current Prius. This has alarmed some of the bigger Toyota dealers so much that Akio Toyoda the new CEO visited Southern California to talk to these dealers about what has gone wrong with the pricing. These dealers told him that they were worried about that price when they were drastically discounting current Prius models to maintain their sales rate. This is also happening when Toyotas are piling up unsold on car lots at most ports in the US. As Toyota competed with GM for top spot in sales Toyota's management of Watanabe and Kinoshita, the outgoing CEO and his assistant, say critics inside Toyota, lost sight of the need for caution as the company's manufacturing capacity expanded in Japan and overseas. Now with the selection of Akio Toyoda to succeed Watanabe as new CEO, the decision has been made to make a shift to anew generation of managers, with the retirement of 3 executives including Kinoshita and Watanabe. ...

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This is a companion short article to the longer article of Gordon fairclough's trip in a Chinese company made Cherry A1 compact with friends through the 1700 mile Silk Road in Xingiang Province of China. This is a very important piece of writing as its the first time someone has taken a Chinese small car in for a difficult 3 day test drive through mountainous and desert regions for 3 day in a remote region nearly 1700 miles. The Cherry A1 is advertised by China as a worldclass vehicle for about $7000. Is it really is the question. And Gordon says it passes his test admirably. Note that its built with help from Italian auto design firm Bertone, powered by a 1.3 litre enginedeveloped with help from Austrian engineering firm AVL, and made with parts from Honeywell International and Visteon. And finally assembled in Anhui province, a poor province of China, with workers who earn $1 an hour. The Cherry is a government owned company started in 1997. This Cherry will be marketed under the Dodge brand in Latin America and other developing markets by end of 2008. It will be modified for safety and environmental rules and marketed in USA and Western Europe in 2009. SAys Gordon Fairclough that for a small car the car ride was realyy smooth and quiet and even at 100 miles an hour there was only a slight vibration on the steering column. The airconditioning worked well in the desert. The car had a CD player and a USB port for MP3 players. The acceleration was a bit sluggish considering the small size of the 1.3 litre engine and with 4 passengers on this journey through Xingiang province. ...

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GM's new Cruze to be built in April 2010 in the Mahoning valley area of Ohio hit hard by shuttered steel mills, will give 45 mpg. It will be smaller than a Malibu and larger than a Cobalt, and will be built also in Gm's European and Asian markets, so unlike models from before the car will be sold everywhere and being built on the same platform will share common parts and engineering, which is the automakers are now making their cars. GM will spend $150 million in developing the Cruze and an additional $350 million in building the Cruze plant in Ohio. GM's car strategy is now to increase production of the Malibu which had a sales increase of 79% compared to last July, shut down the Cobalt once the Cruze come in 2010, Cobalt sales increased only by 4% this July over July last year, and have a third shift producing the Impala next year in Oshawa, Ontario. Auto figures from Autodata. GM's CEO Wagoner says he sees small cars making a profit for GM as now the new union agreement helps to reduce GM's costs and he sees customers willing to spend more on small cars. This is evident in the way affluent buyers have signed up to buy the Smart car, once shunned there is now a 1 year waiting list, and Daimler is expanding production at its French plant for the Smart car. See the link to the Smart car. The committment by GM to build the plant in Ohio is seen by the UAW union as GM keeping its part of the bargain to bring new models and new cars with new ideas to capture the next generation of customers to GM plants that were seeing a decline like the Lordstown plant area in Ohio....

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Difficulties facing a Obama administration, taking over in the middle of a huge economic crisis, with so many high expectations aroused by the lofty rhetoric that a letdown would occur for the faithful and young people energized by his candidacy were these expectations to remain unfulfilled. Two wars and their conduct could raise controversy as they cannot be abruptly be wound down and the Afghan war could present surprises as it has for all foreigners. And there are no easy solutions to the economic crisis which could be stubborn and prolonged like the one faced by Japan and its lost decade. Japan had a leader in Koizumi who energized the Japanese during their economic crisis years, some changes ocurred but Japan still labors on and its a different country now without the same hardworking ethic and cando spirit among the young. And there are no easy solutions like investing heavily in infrastructure and energy and providing healthcare to all working people, because with the one trillion dollars going to shore up the financial system and the banks there is only so much Obama and Democrats can do with public spending without much higher deficits and other difficulties. Not delivering on these promises or delivering inadequately could lead to a letdown for supporters. And for black people and Hispanics in the working class, and workers who have lost jobs as unemployment rises especially in the auto industry in the midwest where he got much of his crucial support, the conditions are tough with jobs scarce and rising home foreclosures, for which the government may be able to help but only in a limited way as the economic crisis may take a long time to unwind. ...

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Peter Bernstein's says it is vital to address the household sector that is the root of the problem. And the only way to do this effectively is to change the terms of the mortgages themselves and stop the flow of foreclosures, with the government taking on some of the losses from these changes in the mortgage terms. First, he says, thats where the crisis has originated. Second, in the previous recessions the household sector was not the problem, in this one it is the problem. Without returning it to better health, America cannot reverse the devastating course of this recession. Households are the primary customers of American business, and the wave of foreclosures, dropping house prices and job losses, destroy the optimism and morale of millions of Amrericans. "The risk here is not just humanitarian. Indeed the risk is also the preservation of the social structure of democracy and the future progress of America, " says Bernstein. Essentially Bernstein is saying that President Obama should put campaign promises for health care reform, and other agenda after addressing this issue. Obama has extended unemployment insurance as afirst step, he has responded to Detroit's auto industry needs, and has set up the stimulus package. But in the household sector and on mortgages the response has ben weak, thus letting this problem grow and leaving the roots of the crisis unattended. "To intervene promptly, directly and powerfully to counter the home price debacle" has not happened. Something that the New York Times has repeatedly stated in its editorials, including one last week. And without this hope and optimism is not likely to be built on firm ground. A sudden recovery in the stock markets, as in the 2nd quarter 2009, cannot substitute. ...

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The port of Long Beach which takes in 20% of the container shipping of the USA,, and is next only to Los Angeles port in container shipping, is becoming a story of two economies, the American and the Chinese. Thousands of cars from Toyota, Nissan and Mercedes are piling on port property turning it into one huge parking lot, as dealers across the country say they have no need for them, and piles of paper and metal baled together to be shipped back on these ships to China to be recycled into cardboard for export boxes are also piling up as China no longer needs them. The drivers who drive the trucks are also being laid offf and looking for new jobs, which are signs that a deeper economic downturn is underway and the the Detroit automakers GM and Ford CEO's who told the Banking committee that they are making their estimates for 2009 on the basis of a 13- 14 million vehicle sales year may be in for another rude shock. The figure for the last quarter may be running at 10 million, and if this continues into 2009 as its expected to do, even the producton of cars after accelerated plant closures may have nowhere to go in 2009. Which is why there are so many questions about what is going on in the auto industry and so much need for candour and frank discussion that was missing in the evasiveness apparent in the Senate hearings on November 18, 2008, as CEO and union president skirted around the issues and senators failed to ask many other questions like these on what is happening on demand as well as many others....

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Does the government need to take on GM's pension fund obligations? Based on the hopeful signs that the GM fund has been managed conservatively with mostly interest earning bond investments and stocks only 26% of the portfolio, and yearly interest exceeding the $7 billion owed to retirees each year, it appears that the GM pension fund for retirees is adequately funded for now. Says Charles Millard , Director of the Pension Guaranty Corporation, " we would maintain that GM can afford to keep its plan intact." The strategy changed after the 2000 tech bubble crash and the shortfalls in 2002. That year GM sold $14 billion of bonds and put in the proceeds of the sale of the Hughes Electronics subsidiary for a total contribution of $18 billion eliminating any shortfalls, and then proceeded to overhaul its investment portfolio replacing stocks with bonds. This is now one of the few bright spots in the GM picture offering a glimmer of hope for resolving the crisis. But were additional burdens to be placed on the obligations through large numbers of early retirements as restructuring goes on for a number of years then this may lead to large shortfalls. Which is why the country and GM and other automakers need to create other new jobs in infrastructure and energy with large infusions of government investment supporting the private sector, like the closed Maytag plant employees in Newton, Iowa who shifted to making wind energy generation wind blades at a new plant that the city attracted. See the link. It also points to the need for rapid action from government and a new management at GM that can bring a new vision and the energy to execute it, to transform the auto business that Detroit plans to hold onto....

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June sales are coming in at 12.5 million vehicles. And part of this drop is that there is a short supply of hot seeling small cars like th Honda Fit, Ford Focus, Toyota Prius, aand the Honda Civic.Honda's new plant in Indiana will increase its output of Civic by 200,000 per year. Honda sold 53,000 Civics in May 2008. According to JD Power Prius sell within 4 days of reaching the dealer. Ford has a 20 day supply of Focus cars, and it takes a month after putting a deposit on Honda Fit to have it available. While Honda has flexible production lines Ford cannot produce anything but SUV's at its Wayne SUV plant in Michigan so Ford has a lot of changes to make. About 20% of cars are small cars up from 12.5% and moving up quickly as supplies increase with the demand.

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Ford does not have a good idea why customers buy the F-150 truck even though its a big seller for years. Automakers believe personal -use buyers of the F-150 truck are one fourth to one third of the truck market. Its surprising that Ford does not have a detailed idea of who buys its truck and why for every 25,000 customers breaking it down into smalll segments so it can see it by demographics and other ways so that it can find out where its losing sales, when trucks are down by 41% in June for Ford how much have each of these segments lost in sales volume. Personal use buyers Ford analysts think are buying cars and these customers will be lost forever.

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Issues of inequality and lack of upward mobility came up in the last presidential election. A Federal Reserve Survey for 2018 shows the financial fragility facing many Americans. One quarter of working individuals say they do not have any retirement savings. About 17% of households say they cannot pay all their monthly bills. About 40% of Americans say they do not have enough cash to cover an unexpected $400 expense, and would have to rely on credit cards balances or loans from family to make the payment. This survey by the Federal Reserve is done each year since 2013, after the financial crisis hit in 2009 it became more important. Still Americans are showing unusual resilience and upbeat spirit. About 75% say they were doing Ok or living comfortably up from 63% in 2013. And two out of three described lovcal economic conditions as "good" or "excellent."  This shows that the financial vulnerability resulting in the loss of jobs in the U.S. both from jobs lost in manufacturing going overseas,  jobs lost through automation or industrial decline in some sectors, and the hit from job loss during the financial crisis and its aftermath years of 2009-2014 is still leaving a lot of families financially vulnerable. Low interest rates and stagnant wages also meant savings growth for ordinary Americans was less than it should be in a healthy economy without booms and busts. This is also the environment in which the U.S. is tackling challenges to its technological leadership in 5G following a decline in sectors such as autos and electronics, with job losses to Japan and South Korea. New trade agreements are focussed on correcting the imbalance, first with Mexico, South Korea, and now with China. Focus is also on fair wages and labour overseas to raise American wages in key sectors. The damage done by a low interest rate to savings of ordinary Americans outside the stock markets is also being seen as a downside in the boom bust cycle, that includes loss of jobs for vulnerable American families. The rise of the tech sectors has diluted the traditional protections of working class Americans with the shifts and realignment of the major parties. ...

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Mercedes plans to introduce its Green Diesels in Japan. The penetration of diesel automobiles is expected to go up to 11%. This is well above the high of 6% achieved in the nineties, which later slipped becuase of strict emissions regulations and the perception that diesels were dirty with poor engine performance. German diesel technology has improved to the point where the performance and emissions have improved significantly. The quality of diesel fuel in Japan has improved and the new cleaner diesels provide an attractive option to Japanese car buyers.

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This NYT analysis of fund raising by the Republican and Democratic parties for the 2020 election campaign shows Republicans hardly raising any money from people with incomes over 250,000 and very little from incomes over $200,000 with most funding coming from the base white working class and lower and upper middle class. For Democrats fund raising is significant at the levels of income over $200,000. Geographically the Democrats get most of their funding from the east and west coast areas.  This reflects the changes in the parties starting in the the 2008 elections when higher income groups in software, finance, and in professions of law and medicine and Silicon Valley tech shifted to Democrats. The Democrats also held onto minority votes. In 2016 this changed with a sharp turn with tech on the west coast and finance professionals on the east coast shifting to the Democrats. The PPP agreement under Obama favored tech over the auto industry, and renewal fossil fuels such as solar were favored over the oil industry and fracking. In 2016 this helped shift the votes in Michigan and Pennsylvania to Republicans. Older manufacturing industries, oil and fracking were supported by Republicans who pushed back against ceding global dominance in manufacturing to China. By 2020 these changes are now entrenched with white working class voters in industries decimated and communities destroyed by foreign imports mainly from China, supporting Republicans. Republicans under Trump have made regaining the manufacturing leadership of the U.S. that was the situation after World War II, a top priority for the U.S.  The minority vote shifted with Hispanics moving towards Republicans to a much larger degree than before. The urban rural divide is similar to Europe where the similar impact of foreign imports mainly from China have destroyed older industries and led to sharp decline in older towns and communities outside major cities. This is the situation facing the U.S. and Britain, France, Italy Spain, and Poland. Germany as a manufacturing country dependent on exports is also affected but to a lesser degree. The unwholesome aspect of this is that the larger urban areas are divorced from the rest of the country  and rural small towns, smaller cities. In some form reintegration has to take place. The vast majority of the working class classified in today's terminology as the less educated lacking a college degree and white are  paradoxically with Republicans, and the wealthy professionals and industries in software, finance with Democrats. Nothing makes this more evident than a quick look at the map of the U.S. with blue on the opposite coasts for Democrats and mostly red in between and in the south. This is unprecedented in American history. A rising tide that lifts all boats in the U.S. and the return of the U.S. to the position it held after World War II could change this in the next decade. ...

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AIG is at 35 cents, Citigroup is at $1.02, GM is at $2, GE is at $6 a share, Bank of America is at $3.17 a share. The New York Stock Exchange has temporarily suspended its $1 minimum share price requirements to prevent a wave of delistings. There is a concern about another implosion like Lehman or AIG. GM's auditors said GM is not a viable or going concern. A GM bankruptcy with the support of the government is now something that GM management is considering and the government may take that route.