Wednesday, April 29, 2009
Let carmakers go bankrupt, say Americans
We seem to be seeing a lot of this recently.
CNN's Political Ticker web site wrote, a few weeks back The public used to think that the automakers were too big to fail, but not any longer. In December, two-thirds say auto bankruptcies would create major problems or a crisis for the U.S. economy. Now most say that would only cause minor problems or no problems at all.
And Americans don't see any effect on their own lives if the automakers fail: 55 percent say they would face no problems at all if the auto companies went bankrupt. Only 37 percent say they would buy a car from a bankrupt company. But that number rises to 57 percent if the federal government stands behind the warranty on those cars.
It's all very well for the average american to "think" there will be only minor problems. But what does the average american know about the automotive industry and its related subindustries?
Here are some numbers. The big 3 directly employ 240,000 people. The supplier network for the big 3 employs another 975,000 people, for a total of 1.2 million. There's an estimated 1.7 million additional jobs created by those 1.2 million workers, for a total of 3 million jobs.
People assume that, if one of the Detroit 3 went out of business, about 80,000 (1/3 of the direct jobs) would be lost. But that's not how bankruptcy works.
When a company declares bankruptcy, if a judge grants the bankruptcy, the company is relieved (at least temporarily) from paying its suppliers. Since automotive have long been the poorest payers of any manufacturing customers, most automotive Tier 1 suppliers are owed huge amounts of money by the Detroit 3. Not paying those debts, even if only temporarily during a restructuring, could force many Tier 1 suppliers into bankruptcy. That, in turn, would force Tier 2 suppliers into bankruptcy. What you then have is the beginnings of a cascade failure of significant parts of the automotive supply structure.
But wait! It gets worse. Once you get down below assembly, to the level where actual manufacturing is done, where tools and dies are hefted, when the receiver steps in, he isn't letting go of the tools and dies so easily. You have red tape to go through to get the dies out of the shop in receivership, and into a shop that also has the equipment to run the die.
Once you've got the dies out of the bankrupt shop and into a shop that's still alive and gasping, does the new shop have the expertise to run the job? Eventually, yes, they're all smart people. But even smart people need time to work out the kinks in a new job they've never seen before. And if 50 new dies landed on your doorstep one day, no matter how diligent and how smart, it would still take a week or so per die to get it set up, run, PPAPed and submitted to the PPAP inspection process. That's 50 weeks. Holding up an entire supply chain. Replicated over and over again all through the industry. It will be total meyhem.
And it will create a second cascade failure, running backwards up the supply chain this time, as entire car lines are shut down for the lack of a particular valve stem that can't be made, a particular plating process where the local processor has been closed down and all the parts have to go to the overloaded facility in Kalamazoo, and so on.
I think this has the potential to be very, very disruptive.
CNN's Political Ticker web site wrote, a few weeks back The public used to think that the automakers were too big to fail, but not any longer. In December, two-thirds say auto bankruptcies would create major problems or a crisis for the U.S. economy. Now most say that would only cause minor problems or no problems at all.
And Americans don't see any effect on their own lives if the automakers fail: 55 percent say they would face no problems at all if the auto companies went bankrupt. Only 37 percent say they would buy a car from a bankrupt company. But that number rises to 57 percent if the federal government stands behind the warranty on those cars.
It's all very well for the average american to "think" there will be only minor problems. But what does the average american know about the automotive industry and its related subindustries?
Here are some numbers. The big 3 directly employ 240,000 people. The supplier network for the big 3 employs another 975,000 people, for a total of 1.2 million. There's an estimated 1.7 million additional jobs created by those 1.2 million workers, for a total of 3 million jobs.
People assume that, if one of the Detroit 3 went out of business, about 80,000 (1/3 of the direct jobs) would be lost. But that's not how bankruptcy works.
When a company declares bankruptcy, if a judge grants the bankruptcy, the company is relieved (at least temporarily) from paying its suppliers. Since automotive have long been the poorest payers of any manufacturing customers, most automotive Tier 1 suppliers are owed huge amounts of money by the Detroit 3. Not paying those debts, even if only temporarily during a restructuring, could force many Tier 1 suppliers into bankruptcy. That, in turn, would force Tier 2 suppliers into bankruptcy. What you then have is the beginnings of a cascade failure of significant parts of the automotive supply structure.
But wait! It gets worse. Once you get down below assembly, to the level where actual manufacturing is done, where tools and dies are hefted, when the receiver steps in, he isn't letting go of the tools and dies so easily. You have red tape to go through to get the dies out of the shop in receivership, and into a shop that also has the equipment to run the die.
Once you've got the dies out of the bankrupt shop and into a shop that's still alive and gasping, does the new shop have the expertise to run the job? Eventually, yes, they're all smart people. But even smart people need time to work out the kinks in a new job they've never seen before. And if 50 new dies landed on your doorstep one day, no matter how diligent and how smart, it would still take a week or so per die to get it set up, run, PPAPed and submitted to the PPAP inspection process. That's 50 weeks. Holding up an entire supply chain. Replicated over and over again all through the industry. It will be total meyhem.
And it will create a second cascade failure, running backwards up the supply chain this time, as entire car lines are shut down for the lack of a particular valve stem that can't be made, a particular plating process where the local processor has been closed down and all the parts have to go to the overloaded facility in Kalamazoo, and so on.
I think this has the potential to be very, very disruptive.
Labels: auto
Monday, April 27, 2009
GM to cut 21,000 US factory jobs, shed Pontiac
Goodbye, Pontiac: Nostalgic for MTOs, Firebirds and the long-lived Pontiac Bonneville
In 1955, Lucy, Ricky, Fred and Ethel drove a Pontiac Star Chief convertible cross-country to California in a series of episodes on television's I Love Lucy.
Sad news today, Pontiac being discontinued.
The first family car I drove was a Pontiac. It was a white station wagon, long enough that you could sleep in the back if you folded down the back seats. I did sometimes on long trips, caught a few winks on the side of the road. I even bought, built and painted a model of it in my early teens. It had a truck clutch and no power steering. It was a bitch to park when I proudly drove it to York University to my first summer job, still in high school. Somewhere in a family album somewhere, we still have a picture of the 4 of us, posing in front of that Pontiac. I'm sure I don't have the plastic model any more.
The Globe is asking for your memories of the brand here.
In 1955, Lucy, Ricky, Fred and Ethel drove a Pontiac Star Chief convertible cross-country to California in a series of episodes on television's I Love Lucy.
Sad news today, Pontiac being discontinued.
The first family car I drove was a Pontiac. It was a white station wagon, long enough that you could sleep in the back if you folded down the back seats. I did sometimes on long trips, caught a few winks on the side of the road. I even bought, built and painted a model of it in my early teens. It had a truck clutch and no power steering. It was a bitch to park when I proudly drove it to York University to my first summer job, still in high school. Somewhere in a family album somewhere, we still have a picture of the 4 of us, posing in front of that Pontiac. I'm sure I don't have the plastic model any more.
The Globe is asking for your memories of the brand here.
Labels: auto
Friday, April 17, 2009
Raw Material Pricing - Party like it's 1999
Remember that old Prince hit?
I was dreamin' when I wrote this
Forgive me if it goes astray
But when I woke up this mornin'
Coulda sworn it was judgment day
As I was doing the research for this article, that tune kept going through my head. The events of the last 6 months do feel more like a dream than reality. Judgment day? We'll talk more about that later in the update series.
Raw materials are a large component of costs for metal stampers. So what has happened to the prices of the most commonly used raw materials?
Metal stampers care most about these input costs:
Steel
Copper
Aluminum
something to make the steel not rust (usually zinc or nickel)
For Copper, Aluminum, Zinc & Nickel, prices are back down to 2004 levels. In a few cases, even below 2004 levels. See these charts, courtesy of Kitcometals.com
Steel prices are down below 2007 levels.
So it's not 1999, but in a lot of ways, it's 2004 all over again.
What does this mean for stampers? Well, a major input cost has reverted to 5 years ago levels. Is that enough to ensure a return to profitability? Not usually. Stay tuned for the next part of the puzzle.
I was dreamin' when I wrote this
Forgive me if it goes astray
But when I woke up this mornin'
Coulda sworn it was judgment day
As I was doing the research for this article, that tune kept going through my head. The events of the last 6 months do feel more like a dream than reality. Judgment day? We'll talk more about that later in the update series.
Raw materials are a large component of costs for metal stampers. So what has happened to the prices of the most commonly used raw materials?
Metal stampers care most about these input costs:
Steel
Copper
Aluminum
something to make the steel not rust (usually zinc or nickel)
For Copper, Aluminum, Zinc & Nickel, prices are back down to 2004 levels. In a few cases, even below 2004 levels. See these charts, courtesy of Kitcometals.com
Steel prices are down below 2007 levels.
So it's not 1999, but in a lot of ways, it's 2004 all over again.
What does this mean for stampers? Well, a major input cost has reverted to 5 years ago levels. Is that enough to ensure a return to profitability? Not usually. Stay tuned for the next part of the puzzle.
Labels: aluminum, brass, Copper, nickel, steel, zinc
All Dressed Up, and No Place to Blog
This was originally posted Tuesday, April 14, 2009 and is being reposted today with the proper blogger tools. All's well, I suppose, that ends well.
Well, I don't know if this blog is going to go out. It's certainly not going to go out well. Google has decided, in their wisdom, to force my blogger account to be upgraded to a Google account. I acquiesced, since I didn't seem to have any choice.
The net result was, I now can not access my Blog. Neither by the old account nor the new one. Thankfully, I have access to my own web server, where this blog lives, and so I can get around Bloggers road block, at least for the nonce.
I am posting this by the simple expedient of hacking the blogger-generated output using a 9 year old tool (HoTMetaL, by the way - great tool, which is why they discontinued it, I'm sure).
I had a post researched and ready to go. Alas, doing it this way is like driving on a superhighway with a golf cart. The ride is not pleasant.
I'll wait a while longer then, if they haven't figured out how to fix my accounts, I'll actually post using these stone-age tools.
Well, I don't know if this blog is going to go out. It's certainly not going to go out well. Google has decided, in their wisdom, to force my blogger account to be upgraded to a Google account. I acquiesced, since I didn't seem to have any choice.
The net result was, I now can not access my Blog. Neither by the old account nor the new one. Thankfully, I have access to my own web server, where this blog lives, and so I can get around Bloggers road block, at least for the nonce.
I am posting this by the simple expedient of hacking the blogger-generated output using a 9 year old tool (HoTMetaL, by the way - great tool, which is why they discontinued it, I'm sure).
I had a post researched and ready to go. Alas, doing it this way is like driving on a superhighway with a golf cart. The ride is not pleasant.
I'll wait a while longer then, if they haven't figured out how to fix my accounts, I'll actually post using these stone-age tools.
Friday, April 10, 2009
A taste of things to come
It could hardly have been a worse 6 months to miss. So much to summarize.
Here's what I plan to talk about over the next while.
Direct influences on the Metalstamping industry
Larger economic indirect influences
Here's what I plan to talk about over the next while.
Direct influences on the Metalstamping industry
- Raw material pricing
- Raw material availability
- Lowered demand
- The changing face of labor
Larger economic indirect influences
- The bailout: If you’re in the automotive supply chain, what’s it all mean?
- The bailout: If you’re not, what does that mean?
- Recession/depression/inflation?
Thursday, April 09, 2009
Sometimes it takes a while to get back in the saddle
In December I wrote that I'd be restarting the blog soon. I guess I spoke too soon. It's now April, and the fallout from the death in the family has taken longer to resolve than I expected.
I plan to start blogging again soon. I've already started my research.
My goodness, it's hard to imagine a more eventful time in the history of metal stamping than the last 6 months. I'm going to try to summarize what has happened and make some educated guesses about what at least the near future might look like, over the next few weeks.
I plan to start blogging again soon. I've already started my research.
My goodness, it's hard to imagine a more eventful time in the history of metal stamping than the last 6 months. I'm going to try to summarize what has happened and make some educated guesses about what at least the near future might look like, over the next few weeks.
