Auto Sector: No free lunch

[kingcopper]

Re: Auto Sector: No free lunch

I don't know anything about the household appliance industry from the inside, but can make this observation. In 1992 my wife and I did a major kitchen renovation in our old, inner-city home. As we progress the bunker we are back in the major white goods market for the first time since 1992. Imagine my surprise to discover this past week that I can purchase the current version of the same high-end refrigerator, with the same brand name, for less money today than in 1992. It has more plastic and less metal than the previous model, uses less power, and I have no idea how long it will last, but 16 years later it takes fewer working hours to earn the money to buy one.

The household appliance industry would appear to be brutally competitive at the moment. Not only is it dealing with the collapse of the US home building industry, but I see there are all sorts of major brands in the market, like Korea's LG and Samsung, that were nowhere to be seen back in 1992.

Well all I can tell you is that all new appliances are sh*t. They have high efficiency motors that are no more than a starving gerbil on a wheel. They have multiple circuit boards that fail within the first couple of years. They weigh nothing because they are made out of nothing.

Older stoves held heat much better and cooked better because of the even distribution. Older fridges held cold air better because they're thicker. The insulation was in the product, not in the technology. Now, the manufacturers are trying to improve by bringing back some of the older practices of using more material for efficiencies' sake. If they use their new high efficiency technology and add in the heavier product of the past, they'll have truly improved on the appliances.

They have still increased in price as far as I'm concerned. Your new appliances will not last 15-20 years. They won't. Now, in the HVAC business there is one product that I guarantee will run and run and run. That is the TRANE air conditioners. They have a special coil that looks like a porcupine and is patented and PROTECTED. The other manufacturers are now offering 10 year warranties in order to compete. TRANE is having to drop their prices in order to compete against this.

Incidentally, GE developed that porcupine coil and I've got apartments with 40+ year old GE air conditioners; no sh*t!

[GRG55]

Re: Auto Sector: No free lunch

My point exactly: we didn't protect our home turf and other countries not in the grips of the free trade madness did.

The outcome has been terribly obvious to all of us who make things for a living. At one time I worked for the Great Yellow Father in Peoria, one of the tightest ships in America IMHO, so, yes, at one time I ~did~ make something of use to society. Take a good look at the industries that have gone, or are in the process of going, away :

Furniture: check
Textiles: check
Electronics: check
Auto industry: check
Commercial ship building: check
Commercial aviation: down to one and it outsources everything
Steel: absolutely beaten to a pulp

The backbone of American industrial might gone.

~poof~

Are we to believe that out of all of these key industries we could not find a single one where America has a comparative advantage on her own home field? Not even one?

Will

I wouldn't assume that all the trends established in the long cycle of the FIRE economy will persist. Unlike the domestic car industry, there are a lot of well managed American companies. A couple of examples:

Although recent declines in oil prices and a rising US$ may influence the pace of these trend reversals, as transport costs rose this decade, and the US$ was falling, a reversal was underway to once again locate furniture manufacturing in the Carolinas. Many of the offshore makers were buying their specialty hardwood from the Carolina mills, shipping the lumber to Asia, and shipping the furniture back to the USA market. A falling dollar and high oil prices make that model economically unviable.

The integrated US steel industry [most own the iron ore and hard coal supply to make the stuff, unlike many of their overseas competitors] is now the lowest cost producer in the world. The recession/depression is killing everyone, everywhere in this business. But I am quite certain when the dust finally clears it will be the low-cost US steel makers that will be first on their feet. In any downturn it is the low cost commodity producers that survive.

The next 25 years won't look like the last 25.