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Collapse of the auto industry

Discussions about the economic and financial ramifications of PEAK OIL

Collapse of the auto industry

Unread postby JohnDenver » Sun 23 Aug 2009, 19:33:45

In another thread, thuja listed "the collapse of the auto industry" as an effect of peak oil in 2005.

This is emblematic of a problem I see over and over here: assuming that the US is the world, or that problems in the US mean that civilization as a whole is unraveling.

Compare:

As Detroit Crumbles, China Emerges as Auto Epicenter
America's auto titans are dismantling their global empires. But across the Pacific, it's as if the global economic forces that have pummeled Detroit never struck. Chinese auto sales are up, and this year China is projected to displace Japan as the world's largest car producer.
Link

On the whole, I think it's fair to say that this group is very insular and America-centric, and I believe this distorts the interpretation of peak oil. Think about it: most of the harsh effects usually attributed to peak oil are almost entirely American -- collapse of automakers, foreclosure crisis, ballooning foreign debt, collapse of banks etc. Why is it that peak oil is so selective? It seems very odd, and makes me think that the problem lies in America itself, not peak oil per se.

The default argument here is that peak oil is causing world crisis because problems are occurring in the US, and the US is the world.

I would argue for another interpretation: the US is a tired superpower whose model is failing, and it is being supplanted by younger, hungrier rivals such as China, India and Islam. This is an age old story, and very similar to how the UK supplanted Spain and the Dutch, or how the US supplanted the UK when their models began to wane, a la Paul Kennedy and The Rise and Fall of the Great Powers.
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Re: Collapse of the auto industry

Unread postby TheDude » Sun 23 Aug 2009, 19:36:44

Chinese property sales are up 60% in the first 7 months of '09, too. Real Estate Intelligence Service:NAREDCO: 60% jump in China property sales to fuel realty bubble Soon we'll be exporting them granite for their countertops...
Last edited by TheDude on Sun 23 Aug 2009, 21:16:49, edited 1 time in total.
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Re: Collapse of the auto industry

Unread postby diemos » Sun 23 Aug 2009, 20:50:47

Perhaps it hits the US hardest because the US is the largest per capita user of oil.
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Re: Collapse of the auto industry

Unread postby coyote » Sun 23 Aug 2009, 21:11:48

I'm sure you noticed how the collapse of the American financial markets reverberated across the globe. The sun will set on America as the sole superpower, it's practically a certainty of history - but for now at least, what happens to us happens to the world.

However, it's a two-way street: other parts of the world have already experienced issues of resource depletion, climate change and economic ruination, that we here in the U.S. will not experience until later. What happens to us happens to all, but in the end what is happening to all will happen to us. Globalization gave the first world the illusion of being in control, but it is only a temporary insulation from the storm growing outside, a storm of our own conjuring. The poor are outside, banging on the bolted gates, and we're inside, and in the end it won't matter: the walls will come down, and we'll all either find a new way or go down with the old.

America's days as a superpower are numbered. Will there be another after us?
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Re: Collapse of the auto industry

Unread postby JohnDenver » Mon 24 Aug 2009, 00:54:56

diemos wrote:Perhaps it hits the US hardest because the US is the largest per capita user of oil.


Yes, that's certainly part of it.

On the other hand, consider this data point:

Only 25% of students in Detroit graduate from high school. Link

I don't believe high oil prices have anything at all to do with the above statistic. Lowering gas to $1.00 a gallon isn't going to affect the graduation rate.

But it's a critical parameter when you're trying to run an auto industry. How can you have state-of-the-art auto manufacturing and high employment/wages in a city where 75% of young people only have a junior high school education?

It's factors like these that make me think that the problems of the US auto industry go much deeper than peak oil.
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Re: Collapse of the auto industry

Unread postby IslandCrow » Mon 24 Aug 2009, 01:53:05

JD I agree with you that this site has a major US bias...

As a European I find it interesting that the defining historic reference for a crash in the Peak Oil world is the Great Depression.

Almost no consideration is given to how people in Europe coped with the disaster of World War II, with its much greater distruction and death rate as well as disruption of trade, farming, AND OIL SUPPLIES. There are probably many lessons in surviving crises that are being lost because Peak Oil people are so US-centred.

I would have thought that WWII would fit far more into image of the doomer world - it is much closer to the Zoombie bands, and it is more recent in time us than the Great Depression. If one wants a better doomer situation to study then I would recommend looking at places like the Ukraine at the time of the Russian revolution, which had bands of Anarchists bent on revenge and distruction as well as the Reds and Whites fighting, then add in several epidemics, and mass starvation due to means of farming being destroyed (ie all the horses taken).

I am also sure that Asian history could add a lot, but I don't know enough about it to contribute meaningfully to discussions here, as well as the collapse of several American civilazations before the white man with his fire stick arrived.
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Re: Collapse of the auto industry

Unread postby Pops » Mon 24 Aug 2009, 08:01:41

IslandCrow wrote:I am also sure that Asian history could add a lot, but I don't know enough about it to contribute meaningfully to discussions here,

I'm sure that's the reason Americans don't talk about Europe much.

...
Of course oil price has much too do with auto mfgrs problems, it did in the '70s when I'm sure they laughed at VW, Honda and Datsun, they clammed up for a while and Iococa begged for a bailout but then laughed even harder when oil was $15 bbl in the '90s - I can't see a reason a three year run up in fuel prices wouldn't have hurt them this time.

I'm not saying they were victims, they were building what US buyers wanted and no one else was making - big suburban assault vehicles.
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Re: Collapse of the auto industry

Unread postby dorlomin » Mon 24 Aug 2009, 08:31:18

JohnDenver wrote:I would argue for another interpretation: the US is a tired superpower whose model is failing, and it is being supplanted by younger, hungrier rivals such as China, India and Islam. This is an age old story, and very similar to how the UK supplanted Spain and the Dutch, or how the US supplanted the UK when their models began to wane, a la Paul Kennedy and The Rise and Fall of the Great Powers.

Nope. I dont think the US is being replaced yet. Certainly not from a millitary perspective. From an economic one, the world is so dependent on US shoppers, that other nations 'rise' is merely getting a bigger chunk of the US consumer pie. If they US goes, the pie goes to.

Island Crow wrote:I would have thought that WWII would fit far more into image of the doomer world - it is much closer to the Zoombie bands
During the seige of Leningrad there were allegedly canibal gangs in the city. The Russians had a real bitter hatred for Army Group North when they managed to trap them against the Baltic.

But yep, WWII is an excellent example of how, when people to their will to it, they can re-engineer society to deal with the unthinkable. Before WWII it was assumed that the twin engine bomber fleets would be enough to create mass panic in the civilian populations. One people were able to adjust to the threat they were able to maintain production under helling bombing.
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Re: Collapse of the auto industry

Unread postby kjmclark » Mon 24 Aug 2009, 08:37:20

IslandCrow wrote:Almost no consideration is given to how people in Europe coped with the disaster of World War II, with its much greater distruction and death rate as well as disruption of trade, farming, AND OIL SUPPLIES. There are probably many lessons in surviving crises that are being lost because Peak Oil people are so US-centred.
I wrote:And there are important corollaries of #33, "We are headed for resource wars, which will result in much resource and infrastructure destruction" I'm reminded that WWII was a resource war, and started about a decade after the 1929 crash (German invaded Poland in September 1939). War with China over the middle east could mean confiscation of private weapons and ammunition for the war effort, rationing, confiscation of vital resources (gold and silver being necessary for electronics, after all), etc. -Here.

Certainly, we would all be better off if all the nations of the world learned the European lesson from the 70s and taxed oil now to reduce the impacts later. If all were to go smoothly, then Europe should be little affected by peak oil. Unfortunately, the US is the world's remaining superpower, and is not interested in following Europe's model, and "It does not do to leave a live dragon out of your calculations, if you live near him."
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Re: Collapse of the auto industry

Unread postby kjmclark » Mon 24 Aug 2009, 08:49:30

JohnDenver wrote:Only 25% of students in Detroit graduate from high school. Link

I don't believe high oil prices have anything at all to do with the above statistic. Lowering gas to $1.00 a gallon isn't going to affect the graduation rate.

But it's a critical parameter when you're trying to run an auto industry. How can you have state-of-the-art auto manufacturing and high employment/wages in a city where 75% of young people only have a junior high school education?

First, very few (I can't think of any, actually) of the factories are in the city of Detroit. Some of the factories are in the "Detroit Metropolitan Area", which means they're in the suburbs, and most of the factories are nowhere near Detroit. Most of the employees in the metro area also come from the suburbs, where the graduation rates are much higher. Just about the only auto-related jobs in Detroit now are in the GM headquarters in the RenCen and the various used-car dealerships and chop-shops. Ford is headquartered in Dearborn, Chrysler in Auburn Hills, and even the GM tech-center is in Warren, all suburbs.

And low gas prices certainly did contribute to the above statistic. They encouraged the building of the expressways that allowed the wealthier part of the population to move out of Detroit, putting the city itself into the downward spiral that it's been in for decades. The auto jobs were part of what moved out.
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Re: Collapse of the auto industry

Unread postby JohnDenver » Mon 24 Aug 2009, 09:47:57

Pops wrote:Of course oil price has much too do with auto mfgrs problems, it did in the '70s when I'm sure they laughed at VW, Honda and Datsun, they clammed up for a while and Iococa begged for a bailout but then laughed even harder when oil was $15 bbl in the '90s - I can't see a reason a three year run up in fuel prices wouldn't have hurt them this time.

I'm not saying they were victims, they were building what US buyers wanted and no one else was making - big suburban assault vehicles.


Pops, I think you mean "Of course oil price has much to do with AMERICAN auto mfgrs problems..." In the 70s, high oil prices were an opportunity, not a problem, for foreign mfgrs, and that remains true today.
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Re: Collapse of the auto industry

Unread postby vision-master » Mon 24 Aug 2009, 09:55:40

Pops, I think you mean "Of course oil price has much to do with AMERICAN auto mfgrs problems..." In the 70s, high oil prices were an opportunity, not a problem, for foreign mfgrs, and that remains true today.


How so? My full-sized American car get's 30+ mpg on the road.
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Re: Collapse of the auto industry

Unread postby JohnDenver » Mon 24 Aug 2009, 09:59:24

kjmclark wrote:
JohnDenver wrote:Only 25% of students in Detroit graduate from high school. Link

I don't believe high oil prices have anything at all to do with the above statistic. Lowering gas to $1.00 a gallon isn't going to affect the graduation rate.

But it's a critical parameter when you're trying to run an auto industry. How can you have state-of-the-art auto manufacturing and high employment/wages in a city where 75% of young people only have a junior high school education?

First, very few (I can't think of any, actually) of the factories are in the city of Detroit. Some of the factories are in the "Detroit Metropolitan Area", which means they're in the suburbs, and most of the factories are nowhere near Detroit. Most of the employees in the metro area also come from the suburbs, where the graduation rates are much higher. Just about the only auto-related jobs in Detroit now are in the GM headquarters in the RenCen and the various used-car dealerships and chop-shops. Ford is headquartered in Dearborn, Chrysler in Auburn Hills, and even the GM tech-center is in Warren, all suburbs.

And low gas prices certainly did contribute to the above statistic. They encouraged the building of the expressways that allowed the wealthier part of the population to move out of Detroit, putting the city itself into the downward spiral that it's been in for decades. The auto jobs were part of what moved out.


Thanks kjmclark, I stand corrected.

However, the fact remains that peak oil (which current figures suggest occurred 4 years ago) has not even come close to destroying the global auto industry. In fact, some parts of it are thriving, and the vast majority of it is hanging in there just fine. The only part that seems to have gotten really crushed, are two of the Detroit automakers: GM and Chrysler. How do you explain the differential impact?
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Re: Collapse of the auto industry

Unread postby Hawkcreek » Mon 24 Aug 2009, 10:04:52

But it's a critical parameter when you're trying to run an auto industry. How can you have state-of-the-art auto manufacturing and high employment/wages in a city where 75% of young people only have a junior high school education?


I've worked in industry most of my life. Most production centers hold continuous training for jobs that require a higher level of expertise, but the majority of jobs on an assembly line don't require more than a junior high school education. What people don't know can be taught in a short time.
Higher level jobs in the design and engineering areas do require more education, of course. And even most of the technician positions for the people who set up the robots and PLC controlled equipment are filled by non-degreed people (that has changed in the past 10 years or so as 2 year AA degrees are becoming more prevalent for technicians).
And none of my statements above address the extra value of having older folks available with their life skills gained from experience.
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Re: Collapse of the auto industry

Unread postby JohnDenver » Mon 24 Aug 2009, 10:05:52

vision-master wrote:
Pops, I think you mean "Of course oil price has much to do with AMERICAN auto mfgrs problems..." In the 70s, high oil prices were an opportunity, not a problem, for foreign mfgrs, and that remains true today.


How so? My full-sized American car get's 30+ mpg on the road.


Case in point:

“Cash for clunkers,” the immensely successful program designed to stimulate demand for new automobiles while also “greening” America’s roadways, is proving to be much more successful for foreign automakers, according to data released Tuesday by the federal government.

According to the data, four of the top five selling vehicles in the program are manufactured by foreign automakers.

The top selling vehicle is the Ford Focus, however, it is followed by the Toyota Corolla, the Honda Civic, the Toyota Prius and the Toyota Camry - all Japanese brands. Just four of the top ten vehicles bought through the program are American made.

Not only are Americans purchasing more foreign cars through the program, they are also trading in their American cars to buy the foreign models. The top ten vehicles traded in as part of the program were all American.


Link
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Re: Collapse of the auto industry

Unread postby Pops » Mon 24 Aug 2009, 10:18:04

JohnDenver wrote:I'm not saying they were victims, they were building what US buyers wanted and no one else was making - big suburban assault vehicles.


Pops, I think you mean "Of course oil price has much to do with AMERICAN auto mfgrs problems..." In the 70s, high oil prices were an opportunity, not a problem, for foreign mfgrs, and that remains true today.[/quote]
Sure, like I said they weren't victims unless it was to US tastes - unfortunately Dallas and LA weren't made like some 1,000 year old european or asian city, they were made for a 500cid Cadillac!

Prior to the peak in the US and the embargoes big steel boats were all the rage - the US big three were selling more than transportation and that's what Americans wanted, See the USA, in a Chevrolet...

With the oil embargoes they halfheartedly (I think) tried to change and came up with the Pinto, Pacer and Corvair.

I bet they danced a jig when oil loosened up in the 80s. and they could sell minivans, pickups and SUVs to the boomers. Unfortunately again, they ignored what was going on all around them and chose to make 10 different model decals to stick on the same basic vehicle instead of looking down the road and taking a hint from the competition.
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Re: Collapse of the auto industry

Unread postby JohnDenver » Mon 24 Aug 2009, 10:18:44

Hawkcreek wrote:
But it's a critical parameter when you're trying to run an auto industry. How can you have state-of-the-art auto manufacturing and high employment/wages in a city where 75% of young people only have a junior high school education?


I've worked in industry most of my life. Most production centers hold continuous training for jobs that require a higher level of expertise, but the majority of jobs on an assembly line don't require more than a junior high school education. What people don't know can be taught in a short time.
Higher level jobs in the design and engineering areas do require more education, of course. And even most of the technician positions for the people who set up the robots and PLC controlled equipment are filled by non-degreed people (that has changed in the past 10 years or so as 2 year AA degrees are becoming more prevalent for technicians).
And none of my statements above address the extra value of having older folks available with their life skills gained from experience.


Okay, but I think what you say applies to industry and factory work in all countries. It doesn't provide any information on why Chrysler and GM bit the dust due to peak oil, while virtually all foreign automakers didn't. What's your explanation for that?

Consider the contrast:

US auto industry:
*About 1,000 GM, Ford, and Chrysler auto dealers went out of business last year, and about 2,500 more dealerships are expected to close in 2009.
*Manufacturers are shelving plans to open new facilities.
*Hundreds of suppliers are on the verge of going out of business in the next two months because US auto production has virtually stopped.

Chinese auto industry:
* Dealerships have stopped offering discounts on 80% of their sales because of strong demand.
*Manufacturers are investing in new plants and expanding workshop floors.
*All Chinese auto makers are predicting growth for 2009, with some aiming for 70 percent jump in vehicle sales.
Link

What is the reason for that differential?
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Re: Collapse of the auto industry

Unread postby Pops » Mon 24 Aug 2009, 10:29:23

JohnDenver wrote:However, the fact remains that peak oil (which current figures suggest occurred 4 years ago) has not even come close to destroying the global auto industry.

Oh jeez, it isn't bad enough we've had to listen to Overnight Armageddon is Nigh from a bunch of Rambo Typists for 5 years, now we will also have to put up whatever happened to Overnight Armageddon from the 'Everything is fine, Honey' crowd?

Aren't there any reasonable people here?
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Re: Collapse of the auto industry

Unread postby SpringCreekFarm » Mon 24 Aug 2009, 10:31:01

Pops wrote:Aren't there any reasonable people here?


Not much anymore.
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Re: Collapse of the auto industry

Unread postby JohnDenver » Mon 24 Aug 2009, 10:41:34

dorlomin wrote:
JohnDenver wrote:I would argue for another interpretation: the US is a tired superpower whose model is failing, and it is being supplanted by younger, hungrier rivals such as China, India and Islam. This is an age old story, and very similar to how the UK supplanted Spain and the Dutch, or how the US supplanted the UK when their models began to wane, a la Paul Kennedy and The Rise and Fall of the Great Powers.

Nope. I dont think the US is being replaced yet. Certainly not from a millitary perspective.


I think Paul Kennedy would argue that the US has already lost its preeminence because it doesn't have the financial wherewithal to support its military. It has to borrow money to make ends meet and that's a big strategic vulnerability.

From an economic one, the world is so dependent on US shoppers, that other nations 'rise' is merely getting a bigger chunk of the US consumer pie. If they US goes, the pie goes to.


That is becoming increasingly less true. Auto sales in China exceeded auto sales in the US in the first 6 months of this year. Link
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