Tuesday, December 27, 2005

Wheel Straps for GM Cars? The landscape of change in US macroeconomy.

Excerpt from an email I received today:

"GM is building new convertibles with no frame holes for chain. Based on conversations he is convinced that GM will go 100 percent tie downs in the next 3-5 years."

Tie down chains for auto transport trailers seem to be going the way of the Dodo bird. Then again, they might reappear, like the ivory-billed woodpecker down in Arkansas.

Screw actuator trailers, the movement toward wheel strap tie-downs instead of cluster chains in the auto transport industry, auto transport companies leasing on drivers as owner-operators-- there is quite a bit of structural change going on in the car industry.

If you look at the auto transport industry against the backdrop of all the structural, macro-economic change, it gets dizzying just trying to keep up with it all: rising US budget deficits, rising interest rates, regional housing economy bubbles, nascent inflationary trends, and stubborn trade deficits as Americans buy more and more foreign-made products.

A lot of the dynamic is counter-intuitive: corporations are off-shoring and down-sizing in growing numbers. The job-loss recovery talked about in the (insanely liberal media) is a reflection of structural change, not cyclical change.

Toyota is poised to pass GM as the largest automaker in the world.

A lot of these jobs aren't coming back. Period.

On the other hand, companies like Toyota and Subaru and Honda are expanding their capital investments in the US, optimizing their supply chain and distribution web logistics by having cars manufactured here. Some jobs are being created.

We're going to experience an acceleration of the rate of change as the economic system responds to the stimulus that the developments in information technology have created: ever more liquid pools of capital and labor that can be harnessed in a productive manner.

Pessimists have viewed this as "Labor in separate nations being forced to compete in a race for the bottom." We've seen some of this, as the toy industry moved from the US, to Mexico, and ultimately to China. Same thing for the textile industry.

On the other hand, what doesn't get noticed is the amount of revenue brought home to the US by consultants as a result of global trade.

It probably doesn't comfort the GM worker's wife to know that consultants who used to make 200,000 a year are now making 500,000 as a result of these structural changes in the economy. However, this money will keep circulating in the economy in various ways. The consultant might hire her husband's new landscaping company. The formerly out-of-work auto worker will buy trailers and equipment for his business start-up.

One thing is for sure: this kind of change is fertile ground for even more change. It seeds the ground for further changes, some of them good, and some of them not-so-good. Call it the landscape of future change.

Then there's all the cyclical change: interest rates, fuel prices, consumer confidence and new-car sales. These are the "trees" close to us that sometimes obscure our view of the forest-- or still further, the landscape of future change.

Not to worry, though. Americans have always been innovators. That's one thing that never changes.