March 22, 2005
KING OF THE HILL, FOR NOW:
Once maligned, Hyundai aims to conquer US market: Korea's No. 1 automaker has the world's most reliable car - and a new US plant. (Donald Kirk, 3/23/05, The Christian Science Monitor)
These days, Hyundai is winning international accolades for design and reliability as it battles to catch up with Japanese, European, and American rivals on global markets. Its mid-sized Sonata was just rated the most reliable car in the US market, according to Consumer Reports.Now Hyundai is poised to make an even bigger splash on the US scene. Earlier this month, Korea's No. 1 automaker opened a $1.1 billion plant in Montgomery, Ala., designed to crank out up to 300,000 cars a year. It's expanding at a rate reminiscent of the inroads Japanese cars made over the past two decades. The rise of Hyundai and other Korean car manufacturers is being eyed by China, which dreams of bringing its fledgling auto industry to the world stage some day.
"The quality of Korean cars is increasing dramatically," says Peter Underwood, an independent consultant and analyst of the Korean motor vehicle industry. "They're making the Japanese concerned. They're getting better all the time. They're at the point where they can charge more."
Chinese manufacturers currently compete only on their own turf, selling low-priced vehicles to buyers who cannot afford foreign cars. "It's a big industry that's expanding," says Mr. Underwood, But, he says, "Whether it's a five- or 10-year time frame, the Koreans ought to be worried."
And China will get its 5 to 10 years before being supplanted by a less developed nation. Advanced economies don't manufacture goods. Posted by Orrin Judd at March 22, 2005 6:13 PM
And when all countries are "advanced"?
Posted by: ghostcat at March 22, 2005 7:01 PMLook at the speed with which the formerly developed world is declining. Europe is the 4th World.
Posted by: oj at March 22, 2005 7:11 PMI doubt that outcome, and your retort is an artful dodge. But a clever one, indeed.
Posted by: ghostcat at March 22, 2005 7:22 PM"Advanced economies don't manufacture goods."
Not so. For example, "U.S. manufacturing output has actually increased dramatically, more than eleven-fold from 1940 to 2000." That advanced economies don't manufacture is a completely inaccurate myth, that is, unfortunately very widespread.
Posted by: Bret at March 22, 2005 7:55 PMAdvanced economies are first and foremost diversified. But also, as in Roman times, it is the regions that specialize in moving money and goods around that are the ones that are most affluent.
Posted by: bart at March 22, 2005 8:12 PMBret:
Are you seriously comparing the pit of the Depression in a country of a hundred million whatever to an $11 trillion dollar economy in a nation of 300 million? Find a comparison of the percentage of labor force work hours spent on maufacture and if it's gone up since 1945 I'll apologize.
Posted by: oj at March 22, 2005 8:41 PMLet's start the count after demob, eh?
Posted by: ghostcat at March 22, 2005 9:10 PMearth is the third world (from the son)
Posted by: cjm at March 22, 2005 10:19 PMoj, your statement was "advanced economies don't manufacture goods". That statement is false. Period. If you followed the link I provided in my comment above (or one of numerous others) and looked at the graph, you would see that our manufacturing output has steadily increased throughout the period and has increased strongly since 1990. We manufacture almost as much as China even though we have 1/4 the population.
If your statement was something like "the percentage of the labor force dedicated to manufacturing in advanced economies is lower than non-advanced economies" then you'd get no argument from me. But that is a completely different statement than the one you made.
Posted by: Bret at March 23, 2005 12:14 PMAdvanced economies don't manufacture goods. But they don't stop overnight.
Posted by: oj at March 23, 2005 12:21 PMApparently it doesn't stop overnight, nor over centuries. Consider the following:
"manufacturing's share of the U.S. economy, as measured by real GDP, has been stable since the late 1940s.... It is impressive for any private activity to maintain a stable share of GDP, since government spending has risen from about 20 percent of GDP in the early 1950s to 30 percent since the 1980s."In other words, as a percentage of the non-government sectors, manufacturing output has actually increased relative to GDP in the last half century. Posted by: Bret at March 23, 2005 1:49 PM
Of course we can crank up output, we've a modern economy. But manufacture, already down in the teens in your cite, is in inevitable decline:
http://www.cbo.gov/showdoc.cfm?index=5078&sequence=0
Posted by: oj at March 23, 2005 2:12 PMNot so. Manufacturing employment is declining but is made up for by manufacturing productivity resulting in very steady overall manufacturing output as a percentage of GDP.
Again, I agree that manufacturing employment may be in inevitable decline. However, manufacturing output as a percentage of private sector GDP is (a) not in decline at all and (b) certainly not in inevitable decline.
Posted by: Bret at March 23, 2005 3:18 PMBret:
Lesser nations can make the same stuff cheaper, after we do the high paying design work. No parent dreams of their child working on an assembly line anymore. That's why it's down to 16% even in the favorable article you cite.
Posted by: oj at March 23, 2005 3:42 PM"Lesser nations" such as China are fairly competitive at high volume manufacturing, but even with the low Yuan, the companies I work with wouldn't even think about China (or other lesser nations) with volumes under 10,000. For lower volumes, you have to consider dealing with China, setting up and monitoring the production line, testing, quality assurance, and shipping. So they can make and deliver some stuff cheaper, but not all of the same stuff.
Posted by: Bret at March 23, 2005 4:49 PMThat's crafts, not manufacture.
Posted by: oj at March 23, 2005 4:53 PMOh, so this is another of those oj definitional issues. I didn't notice that there was a "crafts" sector in the breakdown of economic statistics.
Posted by: Bret at March 23, 2005 5:06 PMNo, economic statistics are blunt instruments. But we'll accept for the sake of argument yours that the sector is down to 16% of GDP. Advanced nations don't manufacture.
Posted by: oj at March 23, 2005 5:32 PMOK, if you want to (a) consider the 2nd largest manufacturing output in the world as "not manufacturing" and (b) believe that 1/6 (16%) is the same as zero, then sure, the United States doesn't manufacture.
Posted by: Bret at March 23, 2005 8:13 PMYes, our size makes manufacturing seem to matter more than it does. But, in fact, Ford and GM are likely to close their doors soon and the domestic steel industry was only saved by tariffs. If we were to stop building weapons too there'd be bupkus left.
Posted by: oj at March 23, 2005 8:39 PMFord & GM are likely to close their doors soon? Ford had a profit around $5 Billion last year, so I don't think they'll be going under real soon.
Let's see if this prediction of yours fares better than the 50-0 election prediction.
Posted by: Bret at March 25, 2005 12:12 AMFord's pension obligations exceed its market capitalization (I think GM's does too, if not it's close). They are only going concerns because of their names and reputations.
Posted by: oj at March 25, 2005 12:19 AMIn theory,
M = A + E
where M is market cap, A is net assets, and E is the discounted value of predicted future earnings. Net assets include liabilities such as pensions which are subtracted off. Thus, Ford still has substantial value even after the pension obligations are taken into account.
I predict that in ten years, Ford will still be in business and selling vehicles. I also predict that the manufacturing output of the United States will be larger than it is today. I'd even put money on it but it's too difficult to keep track of bets over long periods.
Posted by: Bret at March 25, 2005 12:18 PMBret:
http://www.businessweek.com/@@AiVYG4YQeiIH1RYA/magazine/content/05_06/b3919117_mz017.htm
Yes, we'll manufacture more but it will be a smaller share of GDP and it won't include human-made cars.
Posted by: oj at March 25, 2005 12:35 PMBrandon:
http://www.forbes.com/business/2005/03/24/cx_em_0324generalmotors.html?partner=rss
Posted by: oj at March 25, 2005 5:32 PM