So in 2004 dollars GM spent about $1,399,417,348 back in 1986. Instead of the Proctor Gamble numbers, I would be more interested in Toyota's ad budget, or that of any of the other players in the US auto market. While you have demonstrated that both advertising budgets have increased since 1986, you have not demonstrated that this caused them to "cut cost in other places...result[ing] in manufacturing facitilies or service operations moving where labor is cheaper and/or taxes are less." What were the total budgets for each of the two companies for those years? What is the relative costs for advertisement in 1986 and 2004?

 

Even when you adjust Ad spending of $839,000,000 in 1986 for inflation it would only equal $1,399,417,347 in 2004. So even when adjusted for inflation GM is spending nearly triple on advertising and don’t forget the huge legacy costs increases over that same period as well. GM spends more on healthcare per car/truck made then they do on steel.

These increased costs have to be made up somewhere, especially when marketers do major studies to find what retail price points the product needs to hit so there has to be a cap on cost at some point and severly cutting AD spending is not a realistic option.

 

Where have you been for the last 4 days?!?!
Great perspective... Exceptional post.

Per your quote... "I'm sure they have a large amount of interest in seeing that the whole affair keeps moving in the current direction."...
I happen to know first hand that Duke Energy and Westinghouse are both actively pushing to get infrastructure jobs in Malaysia and Africa. The boardroom discussions are that once China has become "saturated" and their infrastructure can no longer handle the volumes of work/movement/growth, these will be the next countries that industry will target for movement. There was an article in Businessweek late last year about early prospectors already leaving China and taking their business to the next low-cost country too. The main issues are clean water and power supplies... if those are present, industry will soon follow suit.

We need only to look at the past for the same trends...
Everything was made in Japan back in the late 70's and 80's.
Then in the late 80's/early 90's, everything was made in Taiwan.
Then NAFTA hit and everybody was moving plants to Mexico and Central America.
Now, NAFTA and $.60/hour jobs in Mexico are being beat by $.20/hr in China, so everyone is moving there.
Even my former employer is moving product lines out of Hermosillo, Sonora, Mexico to the Guangdong province of China for further reduced labor cost.

As you said Eric, we are selling ourselves out long-term, for short-term gains. And we are really denying ourselves the opportunity to advance our position technologically because we are simply jumping to a cheaper labor source instead of developing efficiency-enhancing technology. (nice spin on things there too... never heard it put that way.)

 

This sparked some tiny shread of hope for me this morning...

China suspends industrial projects citing environmental risks

It demonstrates both good and a bad points I've been preaching about...

"The plants would have been worth a total of 189.5 billion yuan (23.6 billion dollars) in investment, said the bureau's website. The location of scores of chemical, petrochemical and power plants along major rivers means they still pose a major risk to the environment, according to the bureau's interim results from a major assessment."
This $24-billion in Beijing is a tiny drop in the bucket compared to what is going on in the whole country, demonstrating the magnitude of what's happening there.

"Previous government reports have said that more than 70 percent of China's rivers and lakes are polluted, while underground water in 90 percent of Chinese cities is polluted."
I'd say - after being there and seeing/smelling the canals and lakes around central/coastal China - that calling them polluted would be like calling the new Z06 "fairly quick". To say the water is polluted in general is a huge understatement. I've been harping on how companies there dump and spew pollution carefree and wreckless. This gives another unfair advantage to companies in China over Companies in the US or Europe. At least the Chinese are starting to acknowledge they have a problem, and are willing to forego the immediate financial gains to "preserve" their environment... a little.

I'd love to know if this decision was made purely based on their own desire to start protecting their environment, or if they are starting to yeild to international pressures...

 

Maybe they realized that having a great indutrial infrastructure means diddly squat if all your citizens are sick/dying/dead?

 

People who I know who do electrical testing and visit hundreds of different manufacturing operations in Mexico as well as US facilities that are close to the border have mentioned to me how some of those mexican operations are now going to China. Some of those mexican operations have only been there 5 years or so but it appears the Chinese have a better work ethic in 'their' (owner's and supervisors of those facilities) opinion.

The trend I see is that larger and bulkier items that don't have the appropriate 'dimensional weight' stay in Mexico to be made .Those items would be too expensive to ship from China and would erase any additional coast savings over it being built in Mexico.

I remember reading somewhere a factory owner in China said Chinese women are the best for putting small/intricate items together because of their long-skinny fingers.

 

I will second those comments from your acquaintances.
I moved electrical connector equipment from Greensboro, NC to Hermosillo from 1995 thru 1997 almost continuously. We found that their skill levels were not up to par, and they had a hard time keeping the equipment running... everything from inverter and plc programming issues to precision grinding and routine sharpening of stamping dies to periodic wire EDM work on tooling. They simply couldn't do it. AMP (now known as Tyco Electronics) proceeded to invest $110-million in a new manufacturing facility in China right about the time I left them for my current job. My old buddies - whom I stay in touch with and occasionally lunch with - have told me that the company is moving more products from Mexico to China than from the states.

On the same note - we have an engineer working on our job in China that has a Master's degree in Aeronautical Engineering from the University of Beijing... he is making less than $200/month, and is supervising contract labor how to assemble and install some of our domestically designed and built utility equipment in the building. The guy is SUPER-sharp, speaks english very well, and would be an asset to any US company - here or there. I like the guy as a person, and have nothing bad to say about him.
So yes, China is/does have a better basic pool of skilled workers developing.
Now that's not to say everyone is like my pal above - far from it in fact, but there are far more technically skilled people in China than in Mexico to be sure.

As for your comment on the women... to make wiring harnesses for cars, trucks, etc, our company was VERY astute on dexterity and productivity. After doing many surveys and studies, it was decided that not only were women faster and more accurate at looming the wires and terminations, but at age 24 their productivity starts to fall of. As a result, ALL of our terminators and loomers in Mexico were females, age 16-24. When they reached 25, the best workers (ones favored by male managers of course) would be relocated to other jobs in the plant, or simply let go. (You don't need an excuse to fire someone in Mexico, and the workers have no legal recourse against the business for doing so either... makes it REAL easy to turn over a workforce that is not performing for you.)

SIDE BAR : I have some old pictures of one of our main wire harness assembly plants that had over 1800 Mexican girls, age 16-24, all dark-skinned, long black hair, wearing dark blue uniforms, all sitting shoulder to shoulder at tables, all in one big open floor with no walls. WHAT A PICTURE!
When a tall white American dude walks into that room, every one of those girls turns and looks at you like a peice of meat <a.k.a. a ticket to "the good life">. I was actually quite uncomfortable in that place. It gave me new respect for what attractive women put up with from male cheauvenists.

Anyways... your buddys were telling you the same story that I saw, and still see. Nice post.

 

The scary thing is, I try to tell the Chinese guys that certain chemicals are bad for them, cause cancer, to use rubber gloves when they handle it, etc.
I try to get them to wear safety glasses when grinding steel.
I try to get them to watch for oil spills when filling reservoirs, etc.

I think they hear me, and they change their behavior while I am there, but as soon as I am out of sight they go back to doing like they did before I said anything. I don't think they really understand their perils, and it's kinda sad because I can't explain to them how clean the air is here in the states, and how nice it is to just jump in and swim in our lakes and oceans, and drink municipal water from a tap, etc. They simply can't picture it.

I quit complaining about catalytic converters after my first trip to Mexico... my throat burned for a week after I got back home. My doctor noted that I had upper respiratory stress, inflamation, and all sorts of "indications" as he called them, and asked me if I had recently started smoking!!! I've never touched a cigarette in my life. China is just as bad, if not worse in the metropolitan areas. The sun simply disappears in the sky about 4pm most afternoons, and the sky just kinda "glows" until it actually gets dark at 7:30 or so.

 

I'm still waiting to hear why people think it's OK to own a german-owned, german-made car but not even ride in a japanese-owned primarily domestic-made car...

 

Because Audi/BMW/VW/Mercedes aren't about to overtake GM as the largest automaker in the world?

 

I agree with all the above except the one thing they don't tell you about the savings rate is it is calculated as wages minus spending, not INCOME minus spending. So although most people might be spending more than their paychecks, they may be making money in investments or real estate and therefore their real net worth is still increasing.

Protectionists IMO have a limited view of how economics works and the interdependency of free markets. Protectionism would COST us jobs in the long run, raise prices and lower our standard of living.

What needs to be done is to play hardball with other markets like China to open up to our goods and drop tariffs, rather than closing up and hiding our heads in the sand.

 

Interesting read.

http://www.caranddriver.com/features...of-models.html

 

That's is interesting sir, but this isn't a shampoo forum.

 

just wait until they start selling made in china cars in front of Walmart...That will be first sign of the fall of the American standard of living.

 

This is an interesting topic you are talking about!
What I am seeing, and please tell me your opinion if you disagree (you probably know more about this than I do), is that we are getting to the point that our thinkers, are beyond our laborers.
In the sense that we have engineers, scientists, and organizationalists (I'm using this to define bankers, executives, etc. that just move things around to generate money, and don't create things) that are now giving us the technology to make up for the average laborers. Now, we don't have robots and computers doing everthing for us, but they are doing alot. We don't need to pay a guy to wash our cars, that stuff is automated. and there are lots of examples. Its to the point that we have alot of people that either didn't want to be educated, or weren't taught properly and have no drive to continue to higher education. Do you want to pay someone with just a GED to enter numbers into a computer $15/hour with benefits? Or do you want to pay someone in another country $1/hour, with no benefits and download it?
I think that the education factor is what is creating this problem.

But back the car wash example, you will pay someone money to detail your car, which is sort of why I think we will see a rise in specialty/artisan type work similar to pre-revolutionary war days.