Friday, June 30, 2006


Honda Hearts Hoosiers: How Indiana Wooed the Automaker to Decatur County

After weeks of fevered proposal-slinging, Honda announced on Wednesday that its sixth North American factory will be built in Decatur County, Indiana. The new facility will employ 2,000 workers and turn out 200,000 cars every year. Honda hasn’t yet revealed which cars will be made at the Indiana plant, but its press release says the new plant “will have the same type of flexible New Manufacturing System that is found in Honda’s other auto plants in the U.S. and Canada”. The $550 million-dollar facility will begin production in 2008.

Indiana offered Honda a buffet of incentives, including local highway improvements and funds for worker training. But from what’s known of the details, the packages offered by rival bids from Illinois and Ohio (which has two Honda plants already) were no less juicy. What seems to have won Honda over about Indiana has more to do with supply chain sense than with externalizing costs. Honda says it picked Indiana because of its proximity to auto parts manufacturers and suppliersIndiana and the surrounding states are thick with smaller automotive component makers, notably the Anna, Ohio Engine Plant that makes 4- and 6-cylinder engines for Honda. The president of American Honda also seemed tickled about being close to the Indianapolis Speedway, where a Honda engine purred under the hood of every car in the 2006 race.

In spite of Honda’s decision to pick Indiana, Illinois and Ohio are not exactly licking their wounds. The new plant’s needs will have a ripple effect throughout the region, providing additional work for component makers and automotive parts suppliers as well as for some of the many thousands of experienced autoworkers looking at unemployment after layoffs and buyouts at Ford and GM. And the creation and design of the plant itself should extend the circle of largesse even further: Honda intends for the Decatur County plant to be its most environmentally friendly plant in North America, with minimal energy consumption, emissions, and “zero waste to landfill”, according to a company statement. Building a green plant tallies with Honda’s overall interest in creating environmentally-innovative products. Makers of green manufacturing equipment and system components must be rubbing their hands together.

Related: Honda Indiana Plant Fact Sheet (WISH TV, Indiana)

Thursday, June 29, 2006


A Half-Century of Highways

On June 29, 1956, President Eisenhower signed the Federal Aid-Highway Act of 1956, creating the interstate system. The development of the highway system has paved the way (ha!) for easy cross-country travel, fast shipping, and an excuse for people to create baffling roadside attractions. In terms of helping the country grow economically, the interstate is probably the single most important part of our infrastructure.

The Federal Highway Administration has been marking the anniversary all year with events and special articles on its website, including this compilation of road songs (your tax dollars at work). We’re marking the anniversary by…um, mentioning it, and by noting some important transport and energy related stories in the news.

1. Ethanol, ethanol, ethanol! The UK’s Independent has a handy rundown of the different types of ethanol, how they’re made, and a candid cost-benefit analysis of ramping up production. The Wall Street Journal (registration required) looks into the pros and cons of cellulosic ethanol, which is ethanol made from grass stalks, wood chips, and trash, rather than from corn-based ethanol (which is what most companies are interested in making).

2. Logistics Today has the dirt on a new hydraulic hybrid vehicle designed for delivery routes. It has a super-efficient diesel engine coupled with hydraulic pumps and storage tanks that store energy. Its fuel efficiency is 60-70% better than that of a standard delivery truck and it emits 40% less carbon dioxide. UPS is testing it in Detroit now.

3. The House of Representatives will vote on the Deep Ocean Energy Resources Act (DOER) as early as today. This bill would allow off-shore drilling to tap into the US’s massive natural gas reserves. The US has the largest natural gas reserves in the world… but pays more than anyone else, per head, for its natural gas. Congresspersons in Florida are concerned about potential impact extraction rigs might have on the tourism industry.

4. In September, Ford set a goal to start pumping out 250,000 hybrid engine vehicles (read: gasoline-electric) per annum by the year 2010. Today they’ve announced that’s not going to happen; the automaker, along with DaimlerChrysler and GM, has decided to focus on flex-fuel vehicles instead.


Don’t Be Such A Stranger

In a volatile raw materials market, re-evaluating sourcing strategies may be the key to salvaging the bottom line. Expect to see more of your purchasing agent.

Early this morning Tokyo stocks fell based on fears that manufacturers’ bottom lines are being spanked by dramatically spiking costs for raw materials and other commodities (a barrel of crude oil fetches $72 as of yesterday). Procurement boffins forecast a 9% rise in the overall cost of raw materials for 2006, but by spring it was pretty clear they’d have to revise that upwards—in April, according to, the cost of raw materials had already risen 10%. Costs have continued climbing since then, and are affecting everyone from packaging manufacturers to the makers of batteries. Chemicals, lumber, metals, rubber, paper—nearly everything used to make anything has risen in cost.

What can procurement agents do to make sure they’re getting the best value per spend dollar? According to a recent Aberdeen Group report, “The Direct Materials Sourcing Benchmark Report”, (PDF, free registration may be required) communication helps. Re-evaluating sourcing strategies and company needs more frequently can help procurement agents adjust their buying habits in a volatile market. Procurement agents can pick the brains of designers and accounting personnel at their company to determine alternative materials that might not sacrifice quality or to decide on a new source.

Tuesday, June 27, 2006


Big Steel Gets Bigger Yet: Urge To Merge Creates Biggest Steelmaker by Factor of Three

After a long bitter fight Arcelor and Mittal Steel have finally agreed to terms of a merger, pending approval by Arcelor shareholders. The $34 billion deal was inked on June 25th, and creates a steel fabrication company three times larger than its next biggest rival that will control 10% of the world’s total steel market. Russian steelmaker Severstal was geared up to combine with Arcelor, but had its bid rejected at the last minute in favor of Mittal’s offer. Severstal is most likely going to look for a new acquisition target.

While Europe’s steel companies pair up for summer flings, the US steel industry is concerned about its image. The New York Times reports today about a new multi-million dollar PR blitz commissioned by steel makers aimed at cleaning up the industry’s, um, dirty image. Turns out when most people are asked about the steel industry, they think of 1940s Pittsburgh, PA. As it happens, steelmaking has become an increasingly clean, lean enterprise in the US. The American Iron and Steel Institute is heading up the campaign, and have the ads available on their website.


Monday Blotter

News Nuggets for the Precaffienated Brain

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