Earlier this month, there was an “amazing article” at The Drive about the current semiconductor shortage, written by some “tech-writer” chump who’s never set foot inside a dealership. I know it was amazing because all of the usual suspect idiots on Twitter told me so. It’s a wonderful example of the Gell-Mann Amnesia effect, except in this case I absolutely remember that everything else written at The Drive is also complete and utter garbage, not just this particular piece of writing that falls within my expertise.
Outside of the technical content that anybody with an internet connection could verify, all of the conclusions that this author drew are completely false, some of them harmfully so. I really don’t want to do this, as my heart rate doesn’t need the additional stress, but I feel an obligation to you to point out how incredibly stupid everything in this article was.
Let’s start here:
“Toyota was initially unaffected by the shortage. The Japanese automaker—already arguably the industry leader in logistics management—had learned to stockpile electronics following the 2011 nuclear disaster at Fukushima and had remained in good standing for months compared to other automakers. But over time, it acknowledged that it would build fewer of some models, like the Tundra pickup, to ensure that it had continued capacity of units with higher margin or volume. However, the automaker recently had to idle its Toyotetsu plant in Ontario, Canada to combat an outbreak of COVID-19 cases. This led to a suspension in production for the Toyota RAV4 and RAV4 Hybrid, as well as the Lexus RX 350 and 450h Hybrid. While not directly semiconductor-related, it is a prime example of how fragile the global supply chain really is.”
This is a wonderful example of calling the manufacturer’s PR department, most of whom you’re really good buddies with, and simply copying and pasting the email they sent you. Wouldn’t you assume, after reading this, that Toyota dealerships are doing just fine with inventory?
And then you’d do a search at your local Toyota store and see that they have approximately 18 new Toyotas in stock. Total. And then you’d notice that half of those don’t even have pictures, because they’re not even really there yet—they’re still on a truck or a boat or possibly not even built yet. One of my Toyota clients has asked me to please stop advertising that they have new cars, because they don’t have any left.
Dear editors at The Drive: try some journalism next time.
Let’s see what they have to say about Hyundai:
“Hyundai’s North American operations appear to be largely unaffected at this time, as its Alabama plant continues to churn out vehicles. The automaker told The Drive that it continues to manage its semiconductor and microchip supply effectively and that its purchasing team at its Alabama plant is working with its global teams to prioritize allocations based on market demand. While Hyundai’s vehicle supply seems fairly stable, the automaker did temporarily idle its Ulsan, South Korea plant in April, which builds the U.S.-bound Accent.”
I went to a Hyundai store in a larger market the other day, and their comment was, “Well, we might not be able to sell any cars, but you can land a fuckin’ plane on our lot, no problem. Could be a source of extra income.” I have three Hyundai clients. All of them are completely out of Venue, Santa Fe, Tucson, and Palisade. I don’t know if y’all know this, but Hyundai mostly sells Venue, Santa Fe, Tucson, and Palisade. One of my clients is receiving a total of one new Hyundai to sell in the month of May. ONE. Good news though—they got TWO Genesis!
Mr. Drumpf added this bit of insight later on in the piece:
“The United States only produces around 12 percent of the world’s supply of semiconductors, which has easily created a foreign dependency on components critical to most amenities used by Americans every day. In his recent infrastructure proposal, President Biden called for $50 billion to boost U.S. production of semiconductors by creating productive incentives and the establishment of a National Semiconductor Technology Center for research and design.”
Here’s a tweet by the author:
The U.S. invested heavily in plastics and dumped steel long ago; China still considers steel worthy of being subsidized and can produce it for pennies on the dollar compared to our cost now. Protectionism tariffs do not help the consumer.
— Rob Stumpf ⚡️ (@RobDrivesCars) July 21, 2018
I wish I had the time to go back and research every time that somebody at The Drive made fun of “America First,” or “Make America Great Again,” I really do. Just assume it was a lot and that he’s completely unaware of how we got into this situation in the first place. There’s also a stunning lack of self awareness on the part of The Drive’s editorial staff, but nobody is surprised by that. These are some of the same people who used to insert gender neutral language into every review I turned in at Jalopnik.
Nowhere in the piece (of trash) does our author even begin to mention the root cause of this inventory shortage—on-demand manufacturing. You know why? Because then he wouldn’t be able to talk about how awesome it would be if everybody could order cars directly from the manufacturer.
No, wait a second, I’m giving him wayyyyy too much credit. It’s not just improbable that he doesn’t understand how vehicle allocation works at dealerships, it’s “Detroit Lions Win The Super Bowl” levels of impossible. But talk to literally any GM of any dealership, and they’ll tell you that the reason we have no inventory on the ground is because OEMs have refused to just keep the assembly lines running in the past—had they done so in 2019 or 2020, we’d be fine now. But they didn’t compete with laptop or video game console manufacturers for microchips, because they were building to SAAR levels instead of just producing inventory.
Okay, so that’s all fine and good and I got some vitriol out of my system. But what does all of this inventory shortage stuff mean to you? Let’s see…oh it means exactly the opposite of what The Drive told you!
God damnit, here we go again.
“So if you’re looking for the best deal on a new ride, now might not be the best time to buy, especially if you don’t want to be upside down on your loan in a few months.”
This is an epically fucking stupid thing to say.
Trade-in values are at an all-time high. I repeat, trade in values are at an all-time high. Every dealer realizes that he or she will be in the used car business for quite some time to come. The amount of money that you can get for your trade now will likely more than make up for any lack of discount that you may or may not receive on the new vehicle, especially if you’re buying a less popular model or trim.
But what you should really do right now is lease, doubly so if you have a trade. But do not apply the trade to the lease. Simply sell your old car for top dollar, pocket the cash, and then lease a new one at a promotional rate with zero down.
And here’s the kicker—you might be able to trade in that lease for a profit in 12 months or less, pocket more cash, and then do it all over again, because there is no sign that the semiconductor shortage is going to resolve itself any time soon. Even if it does, there are other supply chain issues coming down the pike (tires, foam) that will fuck everybody again.
So let’s come back to that Gell-Mann Amnesia bit again—the next time you are even remotely considering taking anything that The Drive says seriously, remember how completely and utterly wrong this article was, and then remember that they are largely run by people living in NYC who don’t own cars, and then you can remember that they also can’t drive their way out of a paper bag.
And then, please, delete your cookies and browsing history, just to make the rest of the internet safe for information about the auto industry. Somebody should nuke their servers from orbit. It’s the only way to be sure.
The US Steel Mill in Granite City, IL was fired up due to steel demand helped by tariffs. Close friends got to continue working and it benefitted my wonderful nearby hometown economically.
That’s great news! It’s also half of the equation.
What was the cost to the rest of the country?
Tariffs protect the economy and the market. Free trade is anything but. Notice the state our country is currently in. One embargo from china, and we are done.
You can’t build an economy by exporting all of your jobs to other countries.
Once you are dependent on another country for everything you need, you are that country’s bitch.
Since Fred Lee and JMcG have given identical responses I’ll assume this is the new globalist strategy for defending offshoring jobs.
And you expect me to write some dissertation on why keeping jobs here is beneficial? If it’s not obvious to you then you wouldn’t be smart enough to even understand a response. Or you’re just a troll. I’m not sure which is worse.
My response was actually to Fred Lee’s statement that he was getting subsidies on his electric car. Since he wanted to know what the cost to the rest of the country was as a result of the steel mill reopening, I asked what the cost to the rest of the country would be from his subsidized electric car.
My comment was so far down the page that the significance was lost.
I am committed to buying American as far as is possible and I am extremely supportive of the American working class as opposed to the financial class.
I live in Japan and work in the chip industry, and there was a big fire about a month+ back at a Renesas semiconductor fab over here that has also really pinched the chip supply. Renesas is one of the larger suppliers of the cheap logic chips used In everything from back-up sensors to adaptive cruise-control. I believe they’re also the main contract holder for most of the Japanese auto OEM suppliers. These contracts between fabs and OEMs is why Global Foundries capacity is tied up pumpIng out chips for iphones, but Delco can’t put together a back-up camera. Furthermore, the US government has spent the last 2 decades building chip capacity in China while shuttering it in the US to avoid the environmental regulations; Silicon Valley is home to more Superfund sites than anywhere else in the US- nearly all former fab sites.
I’ve had many a laugh at customers that offshored work (after COVID what could go wrong, right?) only to recognize that their MBB-developed plans counted on $3000/container freight, instead of the $13000 freight it currently costs to land a container from Asia. Oops.
That issued will be rectified once new ships come on line. But it’s an indicator that the brakes are totally off of the offshoring efforts now. Every last US job must be exported.
What we are seeing is undoubtedly the flip side of the two-edged sword of JIT supply-chains.
What is not clear is if the benefit of JIT outweighs what will now be a long and costly rebuilding of supply chains. In other words, is it better to have slack in the supply chain when it is needed at a cost of inefficiency when that slack is not needed, or is it better to have a disruption in the supply chain but have additional efficiency when there is no disruption?
Obviously it depends on the industry. And I’m sure there’s a lot of re-thinking going on right now, and probably also a lot of heads-in-the-sand.
Anecdotally I’m right now able to sell my 2 1/2 year old 20,000 mile Nissan Leaf for only a few thousand dollars less than a new Nissan Leaf with 50% more range, a few new features that I don’t care about, and a fresh warranty will cost me (counting, of course, the taxpayer subsidized EV rebate). That is a no-brainer for me.
One thing I’ve found, in this time of car shortages, there is no shortage of Leafs! $7500 manufacturer rebate, dealers throwing a few thousand more on top of that, and top-dollar for trades. And even with that my local Nissan dealer has about 40 of them on the lot.
“What is not clear is if the benefit of JIT outweighs what will now be a long and costly rebuilding of supply chains. In other words, is it better to have slack in the supply chain when it is needed at a cost of inefficiency when that slack is not needed, or is it better to have a disruption in the supply chain but have additional efficiency when there is no disruption?”
This is the multi-billion dollar question. Where I sit in the value chain, JIT works great when primary inputs and outputs generally have a 500 mile radius and don’t cross a border. Too many variables beyond that.
I asked an economics professor if efficiency was always the right goal, and then I felt his palpable desire to stab me.
Yes. I suppose one could argue “Yes, efficiency is the right goal.”. But what goes into efficiency? Efficiency to create a single product under optimal conditions? Efficiency to create a million products under “normal” conditions? Or shall we factor in efficiency under extraordinary conditions (as we now find ourselves in).
I mean, everyone can hopefully agree that JIT food growing is a really bad idea if, once every 50 years, it takes a few weeks to grow a piece of food and thus everyone dies. Sure, maybe more efficient for 49 of those years but then you’re dead.
Of course there is also the problem of preparing for the most recent crisis. The next one will be different. So some general slack in the supply chain *must* be accompanied by the ability to adapt very quickly. We hear now stories of continued mask shortages at hospitals while there are copious (American made!) masks available. But the regulations aren’t flexible enough to allow for their use.
You won’t die with out food in two weeks. You would lose 7lbs however. To the benefit of virtually all Americans.
Throughput is the goal, as Eliyahu Goldratt teaches.
Fair point. I have a copy of The Goal sitting on my desk right now, as it happens.
I had to read that book for MBA class. I hate you all for bringing it up and everyone working in supply chain. /sarcasm, but not really.
I thought the real reason for JIT had more to do with IRS tax laws on inventory in stock, than on anything else?
There’s all sorts of good reason for JIT – one of the best is that it lets you discover defects quickly. If you accept a few parts at a time, you can use it in production immediately and discover problems – and then yell at your supplier or fix your process. If you accept a parts by the crate, and you take years to use them, you’ll probably be stuck with the junk if you notice that the parts suck when you use them in production.
There is not nearly as much rethinking as you’d expect. We are so reflexively trained to parrot lean principles these days, I still see people doing amid these ongoing supply shortages.
Not many are smart enough or sophisticated enough to calculate what I’ve started referring to as, “the cost of lean” due to lost sales from supply disruptions.
The “cost of lean” is a fantastic way to look at things, and something the lowest-common-denominator purchasing hack fails to grasp.
My personal break-even is when the cost of going without an item or an acceptable substitute for any period of time gets close to carrying costs. I don’t think its a rigid equal to or greater than function because of the error rate in predictions.
That’s half of the equation. What’s the cost to the rest of the country?
Which is one of the two reasons Colonial Pipeline paid the ransom. The other of course being that it was about to cost them more by being shut down than the price to restart.
I laughed and laughed. I have two good friends who work at local dealers. Both know I’m looking to replace the Town Car before next winter. Both said, do NOT buy anything now, wait a few months at least. I’d pay probably an extra five grand on the make/model of my choice if I bought now vs. late summer or early autumn.
And McLaughlin, which usually has about 12-15 new Caddys and 30+ new Subarus on the lot, is down to maybe 3 Cadillacs and 10 Subarus. And that was two weeks ago; now it’s probably 1 and 5. Or none.
Help me out here. If there are no new cars, how am I supposed to trade in my used car and lease a new one? I’m not really looking for anything new but I have 2 used cars I could trade in if I wanted to. The value for my ’08 335i doesn’t seem worth it for how much I like the car but I also haven’t been nailed by a huge repair bill yet.
It’s not that there are NO cars, there are just fewer than there normally are. And there are still plenty of models with attractive lease offers available. Of course, you may find that a car you want is simply unavailable, like the Toyota Tundra or Hyundai Palisade. In which case, my advice to buy or not buy is irrelevant. 🙂
Man, wish I could get my hands on one of those GMC Arcadias.
Hopefully is a “So Red is the Rose” edition…..
Think that was a tie in with Joan of Arcadia…
Yes, Toyota has grain silos full of semiconductors because they are prophetic logistics wizards. Everyone knows that one of the primary tenets of following the deep magic known as the Toyota Production System, sorcery which the other automakers cannot even begin to fathom, let alone adopt, is to maintain large inventories of material. This makes even more sense in light of the Fukishima disaster, because hand waving segue.
Yes, Tesla is the only company capable of substituting parts to avoid shortages. No other OEMs could possibly be doing this, because Tesla is high speed / low drag while the legacy OEMs are all Fudds. If only these automakers could break out of their bureaucratic chains and respond like Tesla, but alas their contracts are chiseled out of stone, their Gantt charts cast in bronze, and their minds still muddied by the limited synapse count of the common Neanderthal.
Where do they find these guys?
On the unemployment line trailing out the back door of the Huffington Post.
The last “The Drive” clickbait article I read had basic facts about certain vehicle models completely wrong. I quit clicking them after seeing that. As far as those scammers go, I don’t suffer Murray’s Amnesia.
I think the Dunning-Kruger effect is responsible for much of what Gell-Mann described. A lot of journalists and people in the media don’t know what they don’t know.
Completely agree with Ronnie about everybody thinking they have expertise they do not have (especially in media). It is admittedly frustrating. But I must say– half the posts on here now carry a predictable valence: MAINSTREAM BAD, US GOOD. Both writers and commenters on this site expend an exasperating amount of time and energy whining about how dumb the “normies” are and how “mid-wits” are ruining the world and how if only people like us were in power things would be better. It’s the same general resentment of ‘straight society’ you find in college Brocialist tumblrs, only here at the Green it is filtered through a marginally different populist prism. In neither venue is it especially illuminating or attractive. I love the car and music content and occasional heterodox take on current events, but there’s only so much self-pitying “WE R VICTIMS OF MODERNITY” rhetoric I can wade through to get it. From commenters complaining that giving women the right to vote tanked the US to the kind of constant discussion of IQ you’d expect to find on a 4Chan page targeted at incels, this place has gotten grosser over the years I’ve been reading. We’re not victims. Everything is not going to hell. Some magazines are bad. It’s fine.
For the record, things would not be better were I in charge. I’d make Commodus look like Eisenhower.
Alternate theory for you, should you choose to examine it: the commentariat has been the same for eight years. The world is changing, not us. Sure, we are getting older, more hide bound, but the pace of change is accelerating. Imagine explaining the America of 2021 to your 1991 self. What would you say?
I don’t like banging the IQ drum, I’m not Vox Day. But this is the world of the 120IQ American midwit who only understands social science and who has cheerfully and forcibly outsourced the rest to Asia. That’s how you get to where we are now.
Seems to me the main problem with JIT and lean manufacturing is the assumption that your suppliers will always be alble to provide you with the items you need. Better to have some inefficient slack in the supply chain than to build a system that depends on 24-7 flawless operating conditions to even function.
I thought the primary goal was to structure the contracts such that the penalties for missing deadlines costs more than missing the deadlines.
Push the risk on to the supplier.
Maybe some electronics manufacturing will return to the United States. Intel is building two chip foundries here and Samsung is building one as well.
As I said in a different thread, electronics manufacturing is so automated and capital intensive that the cost of labor really shouldn’t affect the cost of production much so there’s little reason to not manufacture electronics here.
Most steel mills are the same way – labor is well under 1% of cost. The days of Jane Ell ended a long time ago.
If we agree that this article was bad, how dare they give a not on point but wet smooch to Hyundai and Toyota while skipping Honda. Has anybody written a good article on the subject? A lot of us do question when inventory will return at the retail level. I am beginning to worry that dealers will get used to carrying little inventory and to functioning as order takers. High end Euros were already there.
The War Zone, which is I guess like a semi-autonomous zone of The Drive, is genuinely fantastic. Tyler Rogoway is an EXCELLENT defense-industry reporter. Truly good at his job.
Also re: inventory levels, hoooo boy Bark I have a bunch of dealer clients as well. From GM, to Toyota, to Hyundai, to Volvo, the story is all the same. A shockingly high number of units are sold before they touch the ground, which is wreaking havoc with our numbers but that’s a different story. Shit like a Telluride is sold as soon as the dealer can get an allocation and at like $10k over sticker.
Used cars are a bit better, as they actually exist, but it ain’t great. Some are paying the inflated auction prices to keep a steady inventory. Some are keeping *everything* they can get on trade. I’m talking big name franchise dealers keeping shit like a 2004 Neon with 150k miles on it to retail.
A couple are just watching their inventories shrink to nothing. Unable — or unwilling — to afford auction prices, too afraid of what may happen if the bubble bursts.
Interesting times for sure.
“The War Zone, which is I guess like a semi-autonomous zone of The Drive, is genuinely fantastic. Tyler Rogoway is an EXCELLENT defense-industry reporter. Truly good at his job.”
Interesting to hear — everyone I know who is currently serving thinks Rogoway is an idiot, but there might be a bit of elitism involved in that. Certainly he’s improved since his Jalopnik days.
Really? Cant say I’ve gotten that impression from the guy, but I’m admittedly not the most well-versed in defense industry reporting either I guess. Nor have I ever asked an active duty armed forces member their opinion of him. If you have other suggestions for decent reporting on such matters, I’d be happy to look at them.
His recent piece on the UFO phenomenon certainly stands as one of the better ones concerning that topic in wide circulation.
Reporting in most industries is shit. People who know the most don’t like to talk and the idiots who like to talk know almost nothing.
Remember, the primary occupation of reporters and journalists is self promotion.
Hmm, I was meaning to recommend Rogoway to you Jack. I’ve been a fan of his since his Foxtrot Alpha days, it’s a surprise to hear these criticisms of him
Mazda dealer sent me a letter stating they’ll put me in a new 6 GTR with X dollars with my 2018 6 GTR trade in.
There isn’t a single 2021 6 GTR in the state I live in. I’m surprised they have as many CX5s on the lots right now.
I bet my company sent you that letter.
Possibly. The dealer sent a letter stating how much equity I have in the car. I can use that equity on a brand new Mazda and have the same payment. I think think they are underestimating how much I have left on the note or they are going to give me 500 dollars under the prices I’m seeing for low mileage 2018 Mazda 6 Grand touring reserve. Obviously they have to make more than 500 on the deal.
They look like they come from the dealer, but they come from us 🙂 what’s the dealer? I can probably see a little more info about your deal.
I got a similar letter regarding my 2018 Mazda 3, offering to put me into a Brand New 3 For Less Than My Current Monthly Payment!!
What I’m laughing about a little, is that I’m almost certain whatever entity sent me this letter (3 times now, each time the offer seems a bit more generous…) fails to realize that my 3 is a 6MT. Not only that, but I’m almost certain that they’d try to put me into a new 3 with an automatic. So, not only would they be ending up with a stick shift (and probably slow-moving) hatch, but they’d be trying to find me a car that for all practical purposes doesn’t exist.
Not going to waste my time.
Mine lowballed the crap out of my mazdaspeed3 whereas the internet boys offered me 10,500. I told the dealer I was happy to get a new Mazda but wanted that same offer. No call back, hmmm………..
I’m getting solicitations for my 2015 Honda Fit, and new Fits sell so poorly that Honda discontinued the model in the U.S., so dealers are looking for whatever they can find.
Why would I trade it in? It’s got about 80,000 miles on it, still runs like a top.
On the note in regards to journalisming, none of that is getting done. Public and private people are getting slandered and misrepresented by the typical rags and no one can sue because of NYT V. Sullivan.
The bar should be negligence, not malice for proof of libel.
I hope James O’Keefe wins his lawsuit.
I’m pretty sure the idiots at The Drive would frown upon leasing and insist that driving some rusted out pile is a better option.
Careful Duong, a lot of the stable geniuses and their spreadsheets around here have also hit upon the rusted out pile Japanese econobox transportation option. They sometimes call it the position of F— You. Ask them about their ideal country shacks to go along with it and try not to laugh.
JIT in a globalized era: outsource components to a cheap country like China that has zero transparency on WuFlu origins and infection rates and/or uses slave labor, expect the finished components to be put on various trucks, trains, and ships on-time and with no delays/problems during shipment half-way across the world, where your components will unloaded by unionized dock-workers who might strike for any number of reasons, but who will eventually load you components into a truck driven by a overweight 55+ year old driver who is working over-time because no 25 year old wants to learn a trade that will soon be automated (and lose his Covid bonus unemployment benefits), and hope there are no health, accident, or weather related delays in the drive across the country to your factory where the components are expected arrive minutes before they are needed on the line – assuming your loading dock personnel are not busy with their anti-racism training. What could possibly go wrong?
You got me to check…
21′ LT1 Camaro (6 speed, riverside blue, bose, exhaust, painted wheels),10k miles a year, $0 down, $350 a month for 48 months.
Shit, that might be fun.
Where’s this blue camEro at?
checked that out on chevrolet.com. the LT1 lease is cheaper than the 1LT lease. seems like a great deal.
Both Carvana and Carmax offered me more money than the MSRP of my truck, a 6sp 2017 Tacoma Off-road. I know KBB isn’t exactly accurate, but trade in a private party prices for my truck were 6-8k over MSRP. It is completely insane. I would be an idiot to not trade in and pocket the cash.Unfortunately every Toyota dealer laughed at me when I asked if it was possible to get a 2021 Tacoma in manual.
We are casually in the market for a “small” 3-row crossover. I brought our RDX in for service and got a new MDX as a loaner. Wife liked it OK so she told me to go back and see what they’ll do on one.
In the 7 minutes I sat in the sales guy’s office he said “low inventory” once and “chip shortage” twice while telling me I should be glad for the opportunity to pay sticker for one. Except I could see NINETEEN of the things on the lot. A neighboring dealer has 30 of the other front runner, the Highlander. Maybe there’s a shortage, but not from where I sit in Chicagoland.
Also should have seen the frantic ness when I mentioned I already had a Carvana quote that I’d probably take on the “trade in”. Telling me “oh they’ll nickel and dime you” right before telling me “we all use the same book, let’s go have a look” so they can nickel and dime me.
Sales guys gonna sales guy I guess.
I’ve had similar experience with my 18 Silverado. The dealer has been hounding me to buy it back but I have yet to return their call. Vroom/Carvana are offering a little over what I paid originally ($30k) and KBB/NADA are saying that it’s “worth” another $10k on top of that or so.
I could lease a full-size SUV for what I’m paying now and pocket a decent chunk of money. At this point I’m just unsure if I can live without being able to throw things in the bed.
I was at the local BIG Toyota dealership a couple of weeks ago for a service and was shocked at the lack of inventory. No new Tundras, two Tacomas, and only three RAV4s. This at a dealership who normally has 20-30 Tundras and just about every color / option combination you can get on RAV4 on the lot.
Guess I’ll be holding onto my current fleet for a few more years.
The United Steel Workers union must have agreed with Matt Farrah that steel production has no place in the USA, which would explain why they endorsed Beijing Joe Biden. Now they’ll have a harder time collecting rent…I mean dues. Maybe some out of work steel worker will read Matt Farrah’s tweet and save him money on dark eye makeup.
Wonder if Trump’s second term had been allowed to happen if he would have used that National Defense Act to take over plants and make chips like he did with complex ventilators. I suspect Intel would have fought him as hard as 3M and GM. You can’t expect that out of Biden. His idea of infrastructure is day care centers.
Interesting the free market doesn’t seem to work with the chips. Wasn’t the disruption supposed to mean higher prices that instantly right the ship with extra supply. Guess free traders only fool around with cripto now and pray Gates or Musk doesn’t say anything before they hit their sell order hits. Maybe if a phone app could build a factory.
The free market still has to deal with the realities of construction time. You can only ramp up production if you have the capacity to do so.
As for the election, the chip shortage was inconsequential when compared to shutting down much of the economy for no good reason.
One great thing about being in a country that used to do things for itself, is there are all these underutilized facilities. So many of our skills are also being underutilized. Speaking for myself, if Uncle Sam sent out the call to ask me to use some long neglected skill, I would come a running. Yes even for Biden.
Oof.. Good catch on that one Mark. It’s a wonder these guys write so much about the car industry but don’t take the five minutes to pick up the phone and talk to the folks actually selling the damn things. Dealers are probably the best source of boots on the ground info there is even if they can be a bit short sighted. I semi took advantage of this situation when I traded in my MDX. They gave me close to retail, saved me the time and effort of selling it private party which I normally would have done. Of course… I went ahead and bought a CPO Volvo to replace it at almost full pop, but at least my wife is happy now!
I’m hearing that at the end of the year, we’re going to see the exact opposite problem. Manufacturers are supposedly going to release a tidal wave of allocations and dealers won’t have enough buyers. Think there’s any truth to that?
I think yes on a few models in particular (F-150) but overall, no.
JIT manufacturing in my organization is referred to as “just late”. In pursuit of efficiency manufacturers have pushed inventory up the supply chain but there IS still a need for inventory in some form. One of the consequences of JIT and outsourcing is that the “manufacturer” gives up a lot of control and profitability. The suppliers take the majority of risk in the deal and therefore should reap the majority of profits. EXCEPT where China is involved, the so-called manufacturer can keep pretty much all the profit too. Hell, if you sell a knife, like WESN, all you need is some computers and marketing flacks. China Inc. does all the heavy lifting. You get to wear skinny jeans, be cool, and eat locally sourced food with the other smart people.
COVID has exposed much of this house of cards and the Billionaire Class that is behind it. For this theft to continue working the Billionaire Class has to hold on to control of media and Government at any cost. The Drive is a tiny microcosm of the larger problem.
JIT was inflenced pretty heavily by the Japanese kanban factory supply system. As with so much a generation ago, it seems in retrospect the benefits were over rated and the risks unexplored. There is a chain of inter-ownership in Japan that MacArthur tried to get rid of but failed. It at least kept suppliers on the same page. Notice however the Japanese still did not do too well with this supply disruption, whatever The Drive says.
It seems to me the professors I had during my MBA have something to answer for. It turns out that they were tying their credibility to the boomer gonzo journalism fad of Japan is great and we stink that boomers loved so. It after all stuck it to and shocked their parents to whom they never measured up. If you think I am overstretching tying it to the period journalism and it’s modern echoes, let me point you to the two former TTAC EIC’s website still called The Daily Kanban. That it seems to be a bot site bolsters my point that we were listening to the wrong people.
For all the “idol worship” of Toyota quality the company hit a wall after squeezing suppliers to the breaking point in the early 2000’s. The model worked until Toyota decided, or finally understood, they needed to improve profitability but had limited means to do so with so much of a Toyota manufactured by others. Corroding truck frames, camshaft failures, and sticking accelerator pedals being the most well known. I too was taught a lot of shit in business school that hasn’t reconciled with real experience. There are some fundamentals of business that can’t be escaped forever; no risk, no reward is first among them. In vestment is the United States has been on a vicious decline for several decades. DJT had the backbone to try and reverse the decline and he was was run out of Washington for his efforts.
I agree on investment, it is so much easier to roll your money into cripto or GME than try to get a factory going again. In the early days of DJT, I had some hope that Bannon would go county by county to make sure there was something to point to by reelection time, but it wasn’t to be.
About the Japanese suppliers, it is interesting how making the manufacturing worldwide and the economic reverses and disloyalty did to their suppliers what MacArthur couldn’t from the inside 70 years ago. The way they threw Takata and JATCO under the bus, shows how frayed families can get.
JohnC, right but on JIT, it is as they say “complicated”. JIT was devised to address a cost (cost of storage of excess parts inventory in automotive/heavy equipment mfg.). This occured as their was systemic change in all cost regarding manufacturing. Huge union driven wage increase, high inflation (late 1970’s), and constant change in technology. I agree that we have now reached a point where if there is a disruptor event, things can fall apart real quickly. But in theory (and is it not always) JIT should work. However there are a lot as we have seen variables any one of which can cause issues.
For example, not so long ago your neighborhood, Kroger, Safeway, Pubix, Meijers all had a meat department where the highest paid employee was the butcher. In fact only the store GM made more and sometimes not as the butcher was hourly and the GM was an exempt salary employee. Today all the meat is cut at a commissary and distributed to the individual stores for almost all the major chains. This has a cost savings to the individual stores but carries a marginal risk that any comtamination at the commissay will effect all locations. Here again another example of JIT but in a different area.
Lynn, in general terms, for all the “wasteful” practices of 1950s-1980s manufacturing, the customer got his money’s worth, and it was a multiple of what previous generations had. As the practices were “streamlined”, the savings just went to the top with everything below starved as never before. Remember as late as the 1990s, some of the best investments were national build outs of new concepts in retail or restaurants. Now giant AT&T can only afford the next cell phone generation by cutting their dividend, selling their sidelines for peanuts because of how leveraged up they made themselves. Trump tried to fight the acquisitions that put the company in the mess, but the former CEO was too stupid to listen. He then was replaced by the blood sucker promoting the foolishness. What genious!
JohnC, I would not disagree. However, your point while absolutely true about the 1950’s-1980’s is true, I would point to one of the more enlighting comments I ever heard. Before his passing Steve Jobs was pulled before some House or Senate Committee about offshoreing. Typically “witnesses” tell the members what they think they want to hear but when asked by one member, why Apple is not manufactuing more products in the USA, Jobs in non-typical fashion said “Those jobs are never coming back.” My point is ‘corporate citizens” of the 1950’s to 1970’s were members of the community, such as mill towns of Danville VA, or steel towns like Weirton WV, or automotive mfg or Norcross, OH, or any number of other examples. While the work may not have been the best, and the benefits may not have been top drawer the “companies” were members of the community. And like what Mr. Job’s so directly said to Congress, those jobs are not coming back… I know our President tried to put the brakes on but he may have slowed it down but the train has left the station. While GM and others stepped up to the plate last year to make venilators and were inovative in doing so, it was just a blip on the screen. My two and half cents worth…. 🙂
It is just to bad that Jack could not have an annual meeting of the individuals that post on this site, I know there would be hours of insightful conversations. 🙂
JIT can work when your supplier is across the street from the factory and is culturally/socially/financially closely tied to the manufacturer, which was the case in Japan in the 1960 to 1980s, and when Honda, Nissan, Toyota, etc. built US manufacturing plants their Japanese suppliers often followed and built component plants right across the street in the US also. Global supply networks that cross oceans, cross-cultures, and where loyalty is based on lowest bid rather than social connections or interlocking financial connections makes JIT very high risk.
Jobs hit it on the head with that one. His decision to make a premium high tech product in China will forever haunt his legacy. Notice even the other side of politics does movies about him showing him to be a jerk.
I would be up for a meetup of commenters and hopefully hosts if it were arraigned.
Many of the “pro union” denounce the Japanese companies flocking to southern states not requiring unions. Where I live, we have several automotive plants and a brand new Toyota-Mazda plant. In my experience the people who work there and to some degree, the people running the plant, are invested into the community.
I will say that Toyota, locally, has a bad habit of hiring half their workforce through temp agencies. While this allows them to be much more flexible, it also puts a bad taste in the mouth of many of these temp workers, especially those working for a year or more that don’t get hired on with better wages and benefits.
The whole problem is more indicative of the society as a whole. Do people want cheap stuff or do they want to build their community? I’m not sure both can be done.
Japanese lifetime security jobs were prominently discussed when Japan was taking over the world in the 1970s and 80s, but it turned out that was only for Japanese males and females and non-Japanese had no security and could be hired and fired as needed. Temp agencies serve the same purpose today.
Jalopnik has also been opining with stunning inaccuracy about the automotive business lately. It’s clear that the writers don’t have the background to explain the business end, nor the time/inclination to do the actual investigative journalism work.
In the olden days, Jalopnik, Autoblog, and The Drive would repackage whatever Automotive News was saying. That was inevitably influenced by the PR people and ad dollars that determine Automotive News’ editorial priorities, but it assured a basic level of fact-checking. But I guess G/O Media cut that $169/year subscription to Automotive News out of Jalopnik’s budget.
I’m tempted to start writing my own industry analysis on Medium or somesuch, but honestly if I’m going to do that, it’s a far more lucrative proposition to position it as a paid newsletter for retail stock traders.