German automakers want to make deal with U.S. on tariffs

[vt]

This may mean Europe and Canada may come to an agreement on many tariff matters.

https://www.thestreet.com/world/germ...s-say-14627934

[Mega]

Re: German automakers want to make deal with U.S. on tariffs

He going to force them to build cars in USA..........thats the only deal he push....
Mike

[touchring]

Re: German automakers want to make deal with U.S. on tariffs

He going to force them to build cars in USA..........thats the only deal he push....
Mike

This is the right move because eventually all factories that uses production lines will be completely automated by 2040. Humans will only be maintaining the robots, the software controlling the robots and the factory M&E infrastructure.

This may not sound like a big deal but manufacturing ability is also national security because in times of war, the same factories that produce cars can produce tanks and fighter jet, and the tanks and fighter jets of the future will be unmanned so whoever can produce the most will win wars.

Automated aircon factory in China.

[thriftyandboringinohio]

Re: German automakers want to make deal with U.S. on tariffs

Thanks touchring. Your points on automation remind me of an old story. That story says the factory of the future will only have two employees - a man and a dog. The man's only job is to feed the dog. The dog's job is to watch the man, and bite him if he touches the machines.

More seriously, your comments about increasing automation raise issues that I find fascinating. As the production of food, clothing, and other basics require fewer and fewer people, how will we allocate wealth and how will economies operate? It seems that wages will play a shrinking role as opportunities for employment become more rare. The optimistic people say our great grandchildren will have more leisure time, higher quality of life, and will spend their time mastering skills and teaching each other interesting things, a real city-in-the-sky utopia, a "fully automated luxury communism" . The pessimists say the end game of both capitalism and authoritarianism will have a tiny fraction of humanity owning everything and denying access to the unwashed masses who are sick and starving, a winner-take-all endpoint with billions of miserable losers. Either way it looks like economics and finance will need to change how track and allocate goods and services.

On a different point, I took a quick look at the company shown in the video, the Midea Group. The are huge and growing in appliances and HVAC; listed on the Shenzhen Stock Exchange; seem to have experienced rapid growth; have $24 billion in sales with 100,000 employees and quite a bit of debt; and are opening a new RD center in the US (Louisville Kentucky).

[dcarrigg]

Re: German automakers want to make deal with U.S. on tariffs

This is the right move because eventually all factories that uses production lines will be completely automated by 2040. Humans will only be maintaining the robots, the software controlling the robots and the factory M&E infrastructure.

This may not sound like a big deal but manufacturing ability is also national security because in times of war, the same factories that produce cars can produce tanks and fighter jet, and the tanks and fighter jets of the future will be unmanned so whoever can produce the most will win wars.

Automated aircon factory in China.

That facility looks awfully expensive. Like the type of thing you need a lot of government subsidy for and even then requires massive upfront capital costs that have to be recouped over several years (if not decades), huge electrical costs, outsized operations and maintenance expenses, etc.

Seems to me like the type of thing a Quonset Hut in Mexico with dirt cheap electricity and labor could beat the pants off of in production costs. Especially considering you don't even have to ship the crap across the Pacific when you're done. Walmart and Home Depot are right there in Texas to sell cheap air conditioners. And some substantial portion of American consumers will already pay a small premium for at least a Korean brand they recognize like LG or Samsung, having been bit by substandard Chinese products that fail early and easily in the past. People who are willing to spend a larger premium to get more expensive units (like mini splits or central air) almost always seem to go with an American--with Goodman Armana and Trane (for central air)--or a Japanese brand--with Mitsubishi probably being the most popular from what I've seen with mini splits.

But I'm getting lost in Air Conditioner land. Point is, when Carrier packed up and moved to Mexico, that's the sort of thing I'm betting they realized. And they're not going to need a high-tech plant to do it.

It's going to be a problem in China, I think, that average manufacturing employee costs are about $10,000 per year now. In Mexico, it's only $5,200. 10 years ago in Mexico it was $5,400. 10 years ago in China it was $3,700. Supply-lines are still geared to China, but labor is no longer cheap there. China is just about the only nation on earth where labor is getting more expensive. That one fact alone has been central to "Chinese Exceptionalism" over these last decades and will continue to be the driver and core of what makes China unique in many ways, I think. And this fact is good for the working people of China. But everywhere else, everything else except labor (and a handful of commodities) is super expensive, but labor has stayed cheap or gotten cheaper. And I don't think automation is going to save China from manufacturing labor arbitrage any more than it saved the US. Although the cushion of state-owned-enterprises creating employment might.

But I doubt robots are going to make much of a difference at the core. And these are expensive things to manufacture like air conditioners. Much cheaper crap out there really won't warrant such a heavy capital investment. Here's a fan production line in China for instance. Very labor-intensive still.

So far as converting manufacturing to weapons for national defense goes, I think it's also wise not to assume that what worked in WWII will work in WWIII, nor to assume that the US's relative lack of manufacturing jobs means the US has slowed at all in the defense sector. Just about every single engineer I know in the US works in defense. The only thing the US manufactures any more of any real importance in terms of quality and quantity globally are defense products and their commercial spin-offs. If I had to find you an air conditioner factory or a fan factory in the US off the top of my head, I couldn't. But I can take a little drive this morning from my house and point out where the tomahawk missiles and nuclear attack submarines and guided missile destroyers are built by memory with ease. They're already churning them out faster than the rest of the world combined, and none of them are at/near capacity, so far as I can tell.

So far as tanks and fighters being unmanned goes, maybe you're right and maybe one day we'll get there. But Soviets already had unmanned tanks in WWII. They are vulnerable. A big part of tank warfare is protecting the tank. It's a mobile big gun, but a sitting target by itself. Infantry works not only to pacify things on the ground, but as a coordinator of forces. Modern fighter jets cost orders of magnitude more than a fighter-pilot's lifetime compensation. For cheapo-drones, unmanned is the way to go. But to protect the $100 million aircraft, you put a pilot on it who's going to do everything to stay alive rather than let some kid with an x-box controller run it from Colorado. Because you want that plane coming home. Anyways, if just flooding a place with cheap armored vehicles and drones won wars outright, the US wouldn't still be in Iraq and Afghanistan. There's a lot more to military strategy. Only in a total war could flooding the battlefield with converted air conditioner tanks make much sense--and in that case the nuclear deterrent probably makes it moot.

Clearly best for everyone that civilian factories in any major power never get converted for wartime again.

Meanwhile, I am very interested to see how Chinese cars do in the American market starting next year. I actually think they could bust it right open much more than Korean cars did in the late 90s. This is one area where it will be particularly interesting to watch for tariffs...

[thriftyandboringinohio]

Re: German automakers want to make deal with U.S. on tariffs

That facility looks awfully expensive. Like the type of thing you need a lot of government subsidy for and even then requires massive upfront capital costs that have to be recouped over several years (if not decades), huge electrical costs, outsized operations and maintenance expenses, etc....

Yes, that's why I mentioned their debt. Around here we've talked a lot about China's crazy debt problems, lending money to Chinese firms that really never pay the money back, but the loan shows good on the bank books being rolled over, refinanced, or ignored. This plant might be one of those cases

...And some substantial portion of American consumers will already pay a small premium for at least a Korean brand they recognize like LG or Samsung, having been bit by substandard Chinese products that fail early and easily in the past. People who are willing to spend a larger premium to get more expensive units (like mini splits or central air) almost always seem to go with an American--with Goodman Armana and Trane (for central air)--or a Japanese brand--with Mitsubishi probably being the most popular from what I've seen with mini splits...

Madia is looking at buying the Whirlpool brand to overcome that objection. Another major Chinese appliance maker, Haier Group, bought the GE appliance brand to get good sales in the U.S.

[dcarrigg]

Re: German automakers want to make deal with U.S. on tariffs

Yes, that's why I mentioned their debt. Around here we've talked a lot about China's crazy debt problems, lending money to Chinese firms that really never pay the money back, but the loan shows good on the bank books being rolled over, refinanced, or ignored. This plant might be one of those cases

Yes, agreed. Easy to max out debt on capital promising to supplant labor.

Madia is looking at buying the Whirlpool brand to overcome that objection. Another major Chinese appliance maker, Haier Group, bought the GE appliance brand to get good sales in the U.S.

That is the way to do it. It will fool many. Some will look for the 'made in' tag. Others will just gripe about how quality dropped on brands they trust. But so many brands have done this now, I think more people have caught on, especially for big purchases. Then again, maybe not...

[Mega]

Re: German automakers want to make deal with U.S. on tariffs

As i said yesterday
https://www.zerohedge.com/news/2018-...cars-coming-us

[touchring]

Re: German automakers want to make deal with U.S. on tariffs

As i said yesterday
https://www.zerohedge.com/news/2018-...cars-coming-us

I don't see why anyone needs German cars. They are expensive and not as good as Japanese cars.

[GRG55]

Re: German automakers want to make deal with U.S. on tariffs

I don't see why anyone needs German cars. They are expensive and not as good as Japanese cars.

LOL. Reminds me of a comment attributed to Nikita Khrushchev about what a waste of resources it was for the USA to build more than one kind of washing machine.

Last year one of my yahoo neighbours bought one of these. Do the Japanese make anything like it?

[GRG55]

Re: German automakers want to make deal with U.S. on tariffs

Bought two things yesterday that support the point about Mexico.

A pair of Wrangler jeans marked "Made in Mexico from USA cloth" and a garden variety hardware store Masterlock padlock marked "Assembled in Mexico of USA and Global components".

As to robotics, the vehicle assemblers are arguably one of the most advanced industries when it comes to installing robotics on their lines. But I note they still seem to favour low labour cost jurisdictions for their new plants, whether in the USA or abroad (except Tesla, which did exactly the opposite). That should tell us something?

[touchring]

Re: German automakers want to make deal with U.S. on tariffs

Bought two things yesterday that support the point about Mexico.

A pair of Wrangler jeans marked "Made in Mexico from USA cloth" and a garden variety hardware store Masterlock padlock marked "Assembled in Mexico of USA and Global components".

As to robotics, the vehicle assemblers are arguably one of the most advanced industries when it comes to installing robotics on their lines. But I note they still seem to favour low labour cost jurisdictions for their new plants, whether in the USA or abroad (except Tesla, which did exactly the opposite). That should tell us something?

Actually, they should make it compulsory to list of the origin of all parts of a product. This is especially important for processed food. I've already stopped buying packet fruit juice for many years because you never know where the concentrate comes from. I avoid museli because the origin of the dried fruits is unlisted. There's a reason why cancer rates are rising.

By the way, I bought a pair of these yesterday. I was surprised when I saw them as sneakers are thought to be made in low income countries like Vietnam and Pakistan. Even China doesn't make more sneakers any more due to high costs caused by a shortage of factory workers and soaring wages in recent years. The Chinese government is trying to move China up the value chain into hi-tech goods manufacturing.

Regardless of whether there will be tariffs, inflation will come because the wages in China are rocketing and there is currently not much alternative. This is what the global corporations won't tell you.

[Milton Kuo]

Re: German automakers want to make deal with U.S. on tariffs

I buy New Balance sneakers, too, because they are the only brand I'm aware of that is made in the U.S.A. They are relatively expensive, though. The ones I bought cost about $140 or so (I imagine they're even more expensive in Singapore), far more expensive than the $50 or $60 crappy sneakers cost. Still, even at $140, that's much less expensive than the sneakers that are "designed" and endorsed by professional athletes and I cannot imagine the quality being worse.

[touchring]

Re: German automakers want to make deal with U.S. on tariffs

I buy New Balance sneakers, too, because they are the only brand I'm aware of that is made in the U.S.A. They are relatively expensive, though. The ones I bought cost about $140 or so (I imagine they're even more expensive in Singapore), far more expensive than the $50 or $60 crappy sneakers cost. Still, even at $140, that's much less expensive than the sneakers that are "designed" and endorsed by professional athletes and I cannot imagine the quality being worse.

I got them in a clearance sale so it was much cheaper than the list price. Let's see if it will last, I might have got a dud, my last Timberland sole came out after 6 months, I suspect it might be a replica.

Here's an article that claims the labor to make a pair of sneakers is only $4, out of a total factory cost price of $15. Chinese factory workers are paid about 3000 RMB a month, excluding accommodation and meals which are provided by the factory, so assuming this costs another 1500 RMB, a Chinese factory worker will cost 4500 RMB a month ($688). Assuming a factory worker in a rural town in the US (texas?) earns $3000 a month, benefits included? I'm sure this is on the high side as you don't even need high school education to make shoes.

So this would mean the labor cost to make the same pair of sneakers in the USA will be 4.5 times that of China - $4 x 4.5 = $18. Let's round it up to $20, so the total factory cost price of a made in USA sneaker is $20 + $11 = $31.

Using this simplistic calculation, the factory cost of making a pair of sneakers in the US is only $16 more than making it in China.

https://sneakerfactory.net/sneakers/...ake-a-sneaker/

[thriftyandboringinohio]

Re: German automakers want to make deal with U.S. on tariffs

Actually, they should make it compulsory to list of the origin of all parts of a product. This is especially important for processed food...

The US used to require at least part of that, but we rescinded those regulations.
The giant food corporations and their trade groups defeated it. They can make more money when they buy the cheapest food from unregulated and non-inspected countries, but wrap it with brand names from the US. Most shoppers will assume the food meets U.S. standards. A TV personality put it best a couple years ago:

Consumer: "Where does this food come from?"
Food Corp: "It comes from go %#$@ yourself"