Can the Auto Industry Retool Itself To Build Rails?

knapper_tech writes "The scope of the auto industry troubles continues to increase in magnitude. The call to retool and develop new vehicles has been made several times already, but with all of the challenges from labor prices and foreign competition, how exactly can the industry retool itself to be more competitive? In light of superior competition facing losses, there doesn't seem to be enough room in the industry moving forward. In the context of finding a new place in the auto industry, the future isn't bright. Calls for no disorderly collapse of the cash-strapped big three and a reluctant congress can only point to an underlying lack of direction. However, consider two other standing economic challenges. The airlines have continued to struggle due to fuel prices and heightened security. Consumers backed off of SUV's due to high fuel prices, and while those prices have eased in the face of global recession, the trend will pick up again with growth in China and India leading the fight for resources. In short, things are moving less, and the industries that support the movement are in need of developing new products while consumers are in need of a cheaper method of transportation." Read on for the rest of knapper_tech's thoughts. knapper_tech continues:
"Looking abroad, it's clear the US has far less invested in local and regional rail systems. With regard to high-speed rail systems, the US is conspicuously behind. France's TGV is moving people at 574km/h. China operates the world's first commercial maglev line while the famous Japanese Shinkasen goes without mentioning. In the US there is only one line in operation between DC and Boston with a few more planned as a result of the 2008 election in California.

The traditional barrier to implementation of rail systems is the initial investment costs, but in the context of economic stimulus, such investment sinks are actually desirable. The auto industry has clearly taken note with proposals from companies like Caterpillar for huge new infrastructure projects.

A friend who recently bought a house observed that real-estate prices are on the rise nearer to city centers, where the fallout of mortgage problems and expensive, time-consuming drives from the suburbs can be avoided. Recalling the huge number of urban revitalization plans and efforts to increase the viability of older city centers, it seems as though many municipal governments would also be in line to gain from the added density of rail systems and increased activity they can support in downtown areas.

Putting it all together, it seems like now would be a good time to direct the industrial capacity of the automotive and supporting industries to developing local and regional, high-speed rail systems to provide a more efficient and effective infrastructure basis for US cities while essentially creating a new market where competition from foreign car manufacturers will not be a problem. At the same time, a huge labor force would be required. The task would call for engineers for development, factory workers for manufacturing, operators, and maintenance workers. Caterpillar still gets to sell construction equipment. The inevitable stream of stores popping up around stations would provide new commercial areas. Last-mile bus and taxi services would also have a new place. The list goes on.

Besides the savings in fuel, the US could also gain international prestige and possibly help lead China and India away from our mistakes, helping to stem the rising demand for oil globally and avoiding the attendant international tension. Climate change is yet another win in this scenario.

It seems like we're not exactly headed in that direction, and I'm curious to see what Slashdot readers think of all this. What pieces need to be in place to make the investments pay off? What are additional resources that are required? Can the industries really make such a change of direction? Do we have everything we need in the US? How would such systems work out long term? Would the initial investments be able to pick up fast enough to stimulate the economy?"

Comments

Re:SUVs

[chill]

I chose not to respond to the "300% higher" comment because you were right, and it didn't need comment. Their wages aren't 300% higher, they're more along the lines of 30-50% higher in most cases -- NOT new hires, which are now lower than their competitors. This discrepancy has been mostly addressed.

Yes, the Big 3 have focused way too much on high profit margin, large vehicles and it is going to cost them. But keep in mind that for the longest time small trucks outsold cars in the U.S. They were building what people were buying. AND those models have higher profit margins than the smaller cars. Had the Big 3 been focusing on smaller, lower margin cars, they'd have been in this position sooner.

Yes, there is indignation in what the executives get at the Big 3, and rightfully so. But, it is hand-waving. The CxOs could work for $0 and it wouldn't make any appreciable difference to their bottom line. These companies are hemorrhaging BILLIONS, and you want to scream about a few ten millions. Yes, it needs to be addressed, but that issue is like carping about the amount of money spent on the National Endowment for the Arts in proportion to the Federal Deficit. A pittance, and a distraction from the real issue.

And I was just as vocal about the bailout for Wall Street. Feel free to check my journal, but don't put words in my mouth.

The simple fact of the matter is, according to GM's most recent 10-Q filing with the SEC (quarterly statement) is "post-retirement benefits other than pensions" and "pensions" make up the largest single chunk of their liabilities, at 26.6% -- down from 30% a year ago. "Long term debt" and "Accrued expenses", whatever the hell that is, make up another 25% each.

I'm not primarily blaming the unions, though they do shoulder some of the blame. I mostly blame GM, Ford and Chrysler who orchestrated this scheme way back when in their glory days. Their pension and benefits plan is similar to the U.S. Social Security model, where current employees pay for retiree benefits. That crap only works if "current employees > retirees". Once there are more people drawing benefits than paying into the pot, you start rapidly going into the hole. GM and Chrysler are now very deep in that hole. This is really nothing more than a legalized Ponzi Scheme. That scam only works if you have an ever increasing number of new investors (employees), which is eventually impossible. It is what gutted the U.S. steel industry and is now going to do the same to the U.S. auto industry.

I'm not targeting unions. The Big 3 made their bed and should be required to lie in it, even if it kills them. But the unions need to realize that their retirement packages ARE a big chunk of the costs. Those benefits are directly tied to the Big 3 still being in business -- unless you feel confident about the U.S. Pension Benefit Guarantee Corp taking over. It is time for the unions to deal with the reality that the Big 3 made promises they couldn't keep.

The unions share part of the blame for blindly accepting such deals. If someone promises you the moon, you have a certain responsibility to find out if they can actually deliver on those promises. "But you promised!" doesn't have any pull outside the playground.