Thursday, July 13, 2006

 

That Factory Sure Has A Lot of Flagpoles

English autoworkers from the West Midlands will not be vacationing in Oklahoma anytime soon. A little over a year ago, storied British car maker MG Rover went belly-up (which British folks refer to as being “in administration”; aren’t they polite? The BBC has an excellent archive of the Rover meltdown here) and closed its plant in Longbridge on the southwestern edge of Birmingham. The closure took 6,000 jobs with it. Chinese carmaker Nanjing Automotive bought the plant, along with the rights to the MG Rover brand, and promised to re-open the plant in 2006-2007 to re-start production of the MG TF roadster. NA only offered to replace a tenth of the original jobs, but at least there would still be some work at the plant—and the MG Rover brand wouldn’t vanish completely from the UK.

That deal seems to have changed now, because Nanjing has announced it’s going to start manufacturing MG cars again in Ardmore, Oklahoma, employing about 350 people to build a new MG TF coupe. The new plant arrives after General Motors closed a manufacturing facility in Oklahoma City, sinking 2,400 jobs. More significantly, the factory will be the first plant run by a Chinese auto manufacturer on US soil. Nanjing claims it still has plans for Longbridge, which it will announce on Monday.

Got that? It’s an English car, whose brand was bought out by the Chinese, and it’ll be assembled in the US from parts made in China and the UK. Globalization in action, baby.


 

The Spirit of 76 Dollars a Barrel: Price Pains Extend from Pumps to Purchasing Offices

Oil prices will probably hit a new high today due to rising geopolitical drama (Iran, Israel vs. Lebanon, Don King Jong-Il in North Korea). In New York, crude prices have risen 24% so far this year, and the soaring costs are hitting businesses left, right and center. It’s not just reflected in fuel and energy surcharges, either. Since petrochemicals are so versatile and productive—industrial chemistry’s small forward, if you will—costs are climbing for a bevy of different materials and making life difficult for purchasing officers in the back rooms of nearly any company that makes or builds things.

Construction, especially road construction, is feeling the pinch. It costs more to fill up and run machinery, and it also costs more to lay down asphalt—liquid asphalt costs are rising, which could affect the rate at which your local roads get repaired (see also How The World Works’s ramble on the subject here). Asphalt is found in roofing shingles, textile waterproofing and wood treatments as well as streets and parking lots. Even though asphalt pavement is the single most recycled substance in the U.S.—80% of it gets reused—new asphalt is still needed, and it’s getting more expensive.

Another insidious price hike linked to the rise in a barrel of crude is the climbing cost of plastics, the majority of which are petroleum-derived (or contain petrochemical additives). While most manufacturers are absorbing the costs at present, Plastics Technology magazine notes, just before rattling off a list of cost jumps, that “The holiday is over.” If plastics prices squeeze manufacturers hard enough, the costs of everything from bottles to Barbie dolls could inch upwards. Increased plastics prices (especially those for resin-based plastics) is already causing molders and other manufacturers who purchase plastics to change their buying plans. Purchasing.com took a survey, and has seen an uptick in the number of companies who will reduce their buying as a result of the climbing costs.

Recycling capacity for plastics has increased and broadened, which is good. And scientists are working harder to create plastics made from other sources—good old rubber and other plants—that perform as well as the hydrocarbon-based kinds. But until those two trends become mainstream (or the Middle East calms down, whichever comes first), your purchasing agents will have petroleum-derived headaches. We suggest a gift basket of Excedrin. Just make sure you walk to the drugstore, and buy the variety that comes in a cardboard box—not a plastic bottle.


Wednesday, July 12, 2006

 

Would Your HR Team Know The Difference?

Here’s a little piece of investigative reporting from yesterday’s New York Post: an undercover journalist in Queens was able to get a forged green card for $110 and a few hours’ waiting.

“Immigration experts who reviewed my fake green card agreed the document looks authentic - but said that upon closer examination, slight flaws became obvious. I would say a person that does not deal with these green cards will take this as a genuine one," said Maria Delgado, who has seen hundreds of green cards at the Immigration Center at the St. Francis of Assisi Church in Midtown. "A potential employer is not familiar with green cards - and besides, they need the workers, so they won't really question the legitimacy of the cards."

There’s a stereotype that all illegal immigrants land jobs either as nannies, restaurant chefs, construction laborers, or crop pickers. But many illegal immigrants work in industrial food processing (meat packing or poultry processing, say) and manufacturing as well. With the Federal Government debating various bills and promising crackdowns on companies that hire ineligible aliens, you’d think there would be a rush to send potential employers information about how to spot fraudulent green cards or other residency documentation. It would save companies having to defend themselves against charges that they knowingly hired an illegal, and it would protect the rights of legal immigrants who are trying in good faith to get a job. It would make sense, right?

Here’s what the government says about employer responsibilities when hiring:

You must examine the document(s) and, if they reasonably appear on their face to be genuine and to relate to the person presenting them, you must accept them. To do otherwise could be an unfair immigration-related employment practice. If a document does not reasonably appear on its face to be genuine and to relate to the person presenting it, you must not accept it. You may contact your local ICE office for assistance. To get the address and telephone number of the ICE office nearest you, please click the ICE district office directory.

Fair enough. We’re not encouraging discrimination against people who speak English with an accent or who “look foreign” (what does that mean in America anyway?), but how does an employer who has never seen a green card, or who hasn’t seen very many, judge whether a document looks genuine or not? For some people, “Well, it was laminated…” could seem like proof enough. We spent a lot of time on the INS website (and on Google) looking for a compare-and-contrast graphic, or a helpful chart showing common forger’s errors—you know, like the ones you can get to spot counterfeit dollar bills—but no dice. While the HR people at your company shouldn’t have to play “CSI: INS” and spend hours scrutinizing fonts or spectroanalyzing plastic samples every time there are I-9s to fill out, they should at least know what legitimate documentation looks like.

By dint of combing through a few PDFs, we found that there is a publication that will show you what many common identity and immigration documents should look like. It’s called the “Guide to Selected Travel/Identity Documents” form, and you can order it by calling the US Citizenship and Immigration Services’ forms bureau at (800) 870-3676.

Here are a few other interesting articles on the subject of illegal immigration:


 

Chips are Up, Chips are Down

It’s the one sector of the manufacturing business in which the US enjoys a trade surplus with the rest of the world, and it’s set to have its biggest year ever. The semiconductor equipment industry is booming. As chips are needed for everything from kitchen appliances to smart running shoes, sales of chip fabrication, packaging and test equipment are up a whopping 18.6%. The semiconductor equipment market was worth $17 billion in 2004 and could be worth $37 billion in 2008, according to the head of the largest chip-making equipment firm, Applied Materials.

But some pundits say there’s a slowdown in the making. From Chris Kraeuter at Forbes.com:

“There are too many new factories coming that will soon start pumping out too many chips. ‘It's almost like a tsunami coming,’ says George Burns, president of Strategic Marketing Associates, a research firm focused on semiconductor factories. He expects a good finish to this year for equipment purchases but predicts that order cancellations will be the norm by the second quarter of next year.”

Even if that’s not true, the US’s dominance in this high-tech field could be under threat anyway. Andrew Leonard, in his “How The World Works” blog (please note, that’s a Salon.com link and you may have to watch an ad), looks at a recent US Trade Commission report (PDF document) on the semiconductor industry and sees an alarming statistic: employment fell 46% between 2000-2004. Part of that’s due to a crash in 2001, but the hemorrhaging of jobs hasn’t stopped as the industry has reversed its fortunes.

Also, while the EU and Japan, our two main competitors in the semiconductor equipment industry, are still far behind us, their respective governments are pumping more and more R&D money and incentives into their companies. Federal support for the US semiconductor industry (and many high-tech industries generally) has fallen drastically and will probably continue declining for the rest of the decade (if you don’t believe us, here’s some Senate Committee testimony we found at HTWW). Will 2006 be the first year of a new golden age for this industry, or will it be remembered as “the good old days”?


Tuesday, July 11, 2006

 

Corn: Is There Anything It Can’t Do?

Manufacturers’ R&D Departments Turn Humble Ear Into Gold

When we talk about the “agriculture business” today, we rarely mean small farmers or even large corporate farms that mass-produce simple foodstuffs. Increasingly, agriculture is linked to energy production and the chemical products industry. Food scientists at some of the largest companies are taking corn and soybeans into the lab and coming back with compounds that are used in pharmaceuticals, polymers that find their way into the body of your car, or oils that lubricate industrial machinery more reliably. Via Sunday’s Chicago Tribune, we’ve learned about the R&D miracles happening in just one company’s laboratories: Tate & Lyle. From the article:

“Decatur [IL], home to the largest of Tate & Lyles' labs, is the key to the company's plans. Another 40 or so food scientists work at a lab in Belgium, while a handful more work near the company's London headquarters. Early this year, Tate & Lyle acquired a dairy research firm in Sycamore, Ill., in a bid to expand its research expertise into that area.

Nearly 160 food scientists, each with their own laboratory, are working to develop the next additive that could allow Kraft Foods Inc. or Sara Lee Corp. to create healthier cookies with greater taste appeal or develop the next polymer that can be used to create a new fabric. Since 2002, the company has boosted research and development spending by about 50 percent.”

Tate & Lyle are a British company, originally just a sugar refiner, but now they’re one of the world’s premier food ingredient manufacturers. Have you used the artificial sweetener Splenda? That’s a Tate & Lyle product, and there are hundreds of others that make your food creamier (but with less fat), crispier (without needing to be fried) or more savory (without requiring more salt).

In recent years T&L have turned their attention towards making renewable and sustainable ingredients and products. In partnership with DuPont, they’ve developed a corn-based polymer called Bio-PDO (PDO is for “1,3, propanediol”). DuPont is building a plant in Tennessee that will use this polymer to make a green version of its synthetic fabric, Sorona. It’s being hailed as the nylon of the 21st Century. We think it’s even better: making Bio-PDO uses 30-40% less energy than production of its petroleum-based counterpart. And speaking of the cereal crop that does it all, Tate and Lyle are also getting in on the ethanol game: they’re building a refinery in Fort Dodge, Iowa, that will eventually process 100 million gallons of the fuel yearly while also providing starches for the paper industry.


Monday, July 10, 2006

 

Big Love: Automakers Eye 3-Way Alliance

GM announced late last week that it’s going to consider becoming the third partner in the Renault-Nissan alliance. Not that it needs to enter the global stage—GM already has brands in production all over the world. It’s just that an international partnership might abet GM’s North American restructuring attempt by lowering the overall cost of materials and parts. If the move happens, the three-pronged conglomerate would produce nearly a quarter of the world’s automobiles. GM’s board met on July 7 to begin mulling over the deal.

One of GM’s biggest shareholders, Tracinda Corp. (led by Kirk Kerkorian), has been agitating for the move for a while now. Tracinda Corp isn’t pleased with what it considers the slow progress of GM’s restructuring push, and feels that a global partnership could help the company lower costs of materials. While GM is still the world’s largest automaker, it posted $10.6 billion in losses last year, and rival Toyota is nipping at its heels. Cutting operating costs overseas could help the manufacturing giant at home in the US.

The head of the Renault-Nissan partnership is one Carlos Ghosn (pronounced “cone”), a/k/a “Le Cost Cutter”, who more or less single-handedly steered Nissan away from the brink of bankruptcy by slashing costs after persuading it to partner up with Renault in 1999. Business analysts are looking askance at the alliance; they’re doubtful if it would have long-term benefits beyond a short-term drop in operating costs due to increased purchasing power. One analyst says that large-scale cost reduction would only be possible if the three automakers agreed to collaborate on a project-by-project basis. GM isn’t quite in the horrible state Nissan was seven years ago, so it’s probably not going to want to take orders from France. It entered into a partnership with Italian automaker Fiat (your humble blogger knows a mechanic who claims FIAT stands for “Fix It Again, Tony!” We digress…), and then last year backed out after Fiat continued posting losses.

Pros, cons, and forecasts aside, mass mergers may be the wave of the future for the auto industry. If the GM-Nissan-Renault deal happens, IndustryWeek (among others) says to expect a rash of corporate marriages, including a possible DaimlerChrysler-Volkswagen partnership.


 

Monday Short Bits: News Digested for the Post-Weekend Brain

Here are the stories—in policy, politics, and elsewhere—that will dominate the week for business and manufacturing:

This Saturday the G8 will meet for three days in St. Petersburg. The summit promises to be just as much about the West’s relationship to Russia as anything else. (Reuters, BBC News)

Paul Wolfowitz, president of the World Bank, calls on the US to cut agriculture subsidies ahead of the G8 Summit. (Reuters via Yahoo! News)

On Wall Street they’re rubbing their hands over this week’s earnings reports. After recent upsy-downy results due to fears about interest rates and the economy, second-quarter earnings have the street feeling upbeat. On deck to report this week are Alcoa, General Electric, PepsiCo, and Genentech, Inc. (Wall Street Journal)

Foreign Policy Fun:

Tomorrow the Iranians will issue a preliminary response to an incentives package offered them by EU nations in exchange for ending their uranium enrichment program. It was hoped Iran would give a final answer about whether it’d accept the package, but it says that will wait until August 22. Oil prices slid back down below $74/bbl due to optimism about the package. (Reuters, Forbes.com)

Badly rattled by Kim Jong-Il’s missile tests last week, Japan is mulling over the constitutionality (and feasibility) of a pre-emptive strike on North Korea. (Seattle Times, Associated Press)


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