Editors' Notes

It’s nice to be noticed

2008-04-22T20:22:00Z

I won’t use our own numbers to gauge the forging industry’s affinity for Web-based information sharing and gathering, but I will interpret the following as very good news:

The American Iron and Steel Institute has launched the Bar Steel Fatigue blog, extending the service of its Bar Steel Fatigue database into an online tool for automotive engineers seeking innovations and information on fatigue.

"Now in its 10th year, the Bar Steel Fatigue Database is accessed regularly by automotive engineers, as the information and technologies are constantly evolving, providing additional time and cost efficiencies," states David Anderson, director of AISI's Long Products Market Development Group. "The blog will take this powerful tool to the next level, as it creates new opportunities for interactive collaboration with fatigue and industry experts."

The blog administrator is Dr. Thomas Oakwood, one of the developers of the Bar Steel Fatigue Database. He is a metallurgical engineer with over 40 years of industrial experience in steel and related industries.

Engineers involved in steelmaking and ground-vehicle design are welcome participate in the blog, as are supplier design engineers, powertrain/chassis engineers, materials engineers, application engineers and FEA techicians, as well as users of the Bar Steel Fatigue Database and visitors to the AISI Automotive Web site.

Some of the topics open for discussion will be comparisons of fatigue properties of high-carbon steels for various processing cycles, and the fatigue properties of medium-carbon steels in the normalized, quenched and tempered conditions.

Valuing exports

2008-03-28T16:04:00Z

Free-trade skeptic Alan Tonelson is a sharp guy, and you always know where he stands on matters related to U.S. foreign trade policy. He's presented an interesting list (LINKED HERE) of "products" that represent the highest value U.S. exports. He's making a point about something that has intrigued me for several months — i.e., whether or not our devalued U.S. currency commutes into a net gain for manufacturing because it makes imported goods more expensive, and it makes U.S. exports more affordable to foreign buyers.

When the dollar tanked last September, a lot of manufacturers saw it as a new opportunity to improve their export potential. Well, Tonelson isn't addressing whether or not U.S. manufacturers are gaining because imports are more expensive; but his list of U.S. exports is useful. His point is that these exports don't enhance our manufactuirng businesses too much.

One item on the list, "waste/scrap," is part of a much broader and more complicated subject — the fact that the low-cost manufacturing nations like China and India have no domestic scrap processing and trading infrastructures, or at least none that are sufficient to serve their metal producing activity. So, China and India import a lot of scrap metal. And, a lot of that scrap metal comes from the U.S. (This is part of the explanation for Nucor Corp. and Steel Dynamics Inc. paying billions of dollars in recent months to buy their scrap-processing sources.)

I suspect that all of the items on the list have similarly complex backstories. "Nonferrous ores," for example, undoubtedly are increasing in value because of the global raw materials demand. And, "turbines and turbine generator sets" represent an important segment of the basic manufacturing economy, and I wouldn't gainsay the benefits of exporting more of its products.

In any case, my curiosity about the rising competitiveness of U.S. manufacturers thanks to the devalued dollar is still not resolved. I think the U.S. Treasury Dept. should be doing much more to stabilize and support the dollar, for lots of reasons, but I'm not convinced that this list refutes the "pro-competitiveness" argument.

Thoughts on the American Axle strike

2008-03-13T04:14:00Z

When the United Autoworkers union initiated a strike at five American Axle & Manufacturing plants February 26, there was little indication of the impact 3,650 workers might have on the automotive industry — and General Motors in particular. One early analysis depicted a glass-half-full scenario, as GM had stepped up truck production in January, allegedly because truck sales were rising, not because it expected a strike.

The latest count has as many as 30 GM plants idled or slowed. Some Chrysler operations may yet be affected, and various automotive supply chain members may be swept along, too. The union and American Axle aren't even talking now, which only prolongs what has been a noticeably tense "dialog" — and a problem that is set to take off into new territory. (UPDATE: On March 13, an American Axle spokeswoman announced the negotiations had resumed.)

From the earliest hours of the strike, American Axle has been arguing aggressively about labor costs in U.S. automaking – a subject that has been discussed before, of course, and been the cause of many strikes. The Big Three automakers faced it last year, but they made it through 2007 with new labor contracts in place, and effectively offloaded the big issue by parking their pension and benefits obligations into “voluntary employees beneficiary associations, or VEBAs.

Now comes the matter of resolving these same problems for the rest of the automotive supply chain. American Axle contends its “all-in” labor cost is $73.48/hour per union worker — and that this figure is approximately three times what its domestic competitors (Dana Corp., and Ford and Chrysler’s captive axle-producing divisions) are paying union workers.

Note that Dana recently exited bankruptcy, with a new labor contract, of course, and Ford and Chrysler workers are covered by those companies’ recent UAW deals.

American Axle is comprised mostly of former GM operations that were spun off in the early 1990s, but kept their union workforces. Its chairman and co-founder Richard E. Dauch has cut a high profile, restructuring the organization as a focused, Tier 1 supplier, and expanding it globally. He came out swinging when the strike began:

"The market competitiveness of AAM's labor cost structure in the United States of America is the key issue we are discussing with the UAW. AAM cannot accept terms and conditions that put the company at a significant competitive disadvantage in the U.S. automotive supply industry," Dauch stated, alluding to issues that reach far beyond American Axle and this negotiating impasse.

The specific point of the American Axle position — $73.48/hour — seems like it would be easy to refute if it were not true. But the workers, judging by some Web postings, deeply resent the implication that they’re overpaid, and proudly proclaim their devotion to U.S. manufacturing competitiveness, blue collar values, hard work, and so forth — even as they are fully convinced of the decline of the U.S. middle class. (Dauch’s 2007 salary and bonus and the company’s successful growth overseas, has made this point even more vividly.)

In a political season that has re-legitimized arguments about “corporate greed” and the “betrayal” by companies’ manufacturing overseas, the union side has returned to the no-budging position that was mostly out of sight in last year’s negotiations with the Big Three.

Portraying its labor costs in such a way is a bold first move, but what does American Axle expect to happen? The union cannot forego members’ health care and pension coverage, and chipping away at hourly wages is hardly going to bring American Axle back to a competitive position with its rivals. VEBAs will work for the Big Three, who can afford the initial funding, but that’s not a credible option for smaller companies in the supply chain.

This argument is a stalemate, waiting for new facts to reach a resolution.

Don’t conclude from all their acrimony or obduracy that the American Axle strike is not benefiting various parties. For example, the automakers and their other suppliers now idling production have gained a new detail to explain ongoing losses.

A clear winner is American Axle, which is getting to make a bold, clear argument about labor costs in manufacturing — nearly a textbook case for all those manufacturers who are slowly but surely finding their voices to support a government-run health-care program.

The strike benefits the UAW and its political allies, too: they have regained their bravado, and if it can help build an argument for government-sponsored health-care coverage that would also be a victory because separating this issue would lessen the pressure on union members to concede salary and benefits gains.

Finally, such a resolution would be a boon to all those who argue for greater federal action to “protect” domestic manufacturing against foreign competition. It will be a win-win-win … or so they imagine. They may not appear to be enjoying this strike, but in their misery they've moved considerably closer to where they've wanted to be for a long time.

Paying for it, but not buying it

2008-02-26T18:01:00Z

It costs a lot of green to be “green,” as anyone involved in manufacturing can confirm. It isn’t just the cost of new controls and technologies to make plants and operations compliant with evolving regulations, nor the cost of investments to achieve “sustainability.” For companies like Alcoa, and many others, there are significant expenses for lobbying federal and various state legislators on issues relating to manufacturing’s energy costs and climate-change issues. They also lobby on a range of other matters, too, of course.

They pay for it, but that doesn’t mean they’re buying it. General Motors Corp. chairman Bob Lutz stirred up some trouble for himself when he observed to a crowd of reporters that last month that global warming is a “crock” — an opinion he offered along the way to discussing the cost of developing new fuel-cell technologies and other automotive products. This week, Lutz used his blog to discuss the furor that followed: “My beliefs are mine and I have a right to them, just as you have a right to yours,” Lutz wrote with a bit of frustration, as though this shouldn’t need to be reasserted. “But among my strongest beliefs is that my job is to do what makes the most business sense for GM,” he continued. There’s more, and it’s worth reading.

What happened to China?

2007-12-12T21:00:00Z

What happened to all the anxiety about Chinese currency manipulation?

No one doubts that China unfairly suppresses the value of its currency, chiefly by buying and holding foreign currencies — specifically the dollar and the euro. Several years ago the China Currency Coalition was formed by a range of industrial, service, agricultural, and labor organizations, to press the U.S. government to seek an immediate end to this Chinese policy. They estimate the undervaluation of the yuan versus the dollar to be at 40% below a fair exchange rate.

Or, in any case that's the last figure available on the matter from CCC. I don't know if I believe that number, but I agree with the CCC's overall concern and I endorse their effort. (China's social and industrial policies worry me much more than its fiscal philosophy, however.)

But, something else has been going on lately. The ongoing meltdown in U.S. financial stocks was prompted by the exposure of those institutions to defaulted home loans. Among the effects of their crisis has been an increase in inflationary pressure on the U.S. economy, and the most obvious indication of this has been a gradual but steady decline in the value of U.S. currency.

The trigger to the currency decline, however, is the shifting preference of foreign currency traders, including central banks, like China's. They're not buying as many dollars as they had been buying prior to the housing and financial stocks' reversals.

Oddly, about the time this situation began to unfold — June 29, to be specific — was the last time I heard anything new from the China Currency Coalition. That day the CCC offered their endorsement of Currency Reform for Fair Trade Act of 2007, a bill introduced to the House of Representatives at that time. There's not been much discussion of that effort in recent weeks, either.

Where have all the concerned voices been since June? It isn't as though there have not been opportunities for a statement. Late last month, China acknowledged its practice of widespread industrial subsidization, and agreed to end subsidies for its steel, wood products, and IT industries by January 1.

This week, the U.S. and China have had new discussions, part of the intermittent China-U.S. Strategic Economic Dialogue, aiming to broaden the economic interdependence of the two nations. If ever there were an opportunity to raise the ongoing issue of currency evaluation and its effect on U.S. industries, this ought to be it. But the CCC, among others, has not drawn the connection.

I don't believe the Chinese have quietly come into line on the matter of their currency legerdemain. I suspect, however, that the decline in U.S. currency — and the consequent improvement in U.S. manufacturers export opportunities — has taken the steam out of groups like the CCC.