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In Granholm Book, Cautionary Economic Lessons From Michigan

September 18, 2011 by Leave a Comment

After all, years before the rest of the country fell into recession, Michigan, so vested in the automobile industry, was wrestling with a single state downturn — and one that just kept going until the rest of the country unhappily caught up. And years before the rest of the states found themselves trying to patch state budget holes because of falling tax revenues, Michigan was staring at gaps to fill.

And yet, Jennifer M. Granholm, the former Democratic governor of the state, who led it through much of its rocky last decade, says she sees a key lesson from Michigan — a warning, perhaps, more than a model — for the rest of the nation as it tries to create jobs and emerge from an economic funk.

“Everything that is hitting the country hit Michigan first,” Ms. Granholm said in an interview, reflecting on eight years in office in which the state’s economic crisis overshadowed all else. Her response to the crisis, she said, was to cut spending, cut government jobs, cut taxes — the very approach now being promoted elsewhere, particularly after Republican victories in statehouses around the country in 2010.

“We tried all of those prescriptions, too,” said Ms. Granholm, whose final term ended with the start of this year. “We did everything that people would want us to do, and yet it didn’t work.”

She added: “Laissez-faire, passivity, tax cuts, hands-off does not work. And, really, that’s the lesson from this laboratory of democracy which is Michigan.”

The only approach that showed glimmers of success, she said, came when the federal government stepped in — to bail out the auto industry, for instance, and to send stimulus funds that encouraged companies like the ones in Michigan now creating lithium-ion batteries for electric vehicles.

In a state where Republicans took over the governor’s seat in the 2010 election and control both chambers of the legislature in Lansing, Ms. Granholm’s critics say they are unconvinced both by her conclusions and by her claims that she pared back taxes and spending as far as one might; had she truly cut the tax burden and big government, some Republicans said, the state’s picture might now be utterly different.

In truth, even Ms. Granholm, who, along with her husband, Dan Mulhern, has laid out her conclusions in a new book, “A Governor’s Story: The Fight for Jobs and America’s Economic Future,” expressed disappointment in her own ability to fix the state’s limping economy. When Ms. Granholm, a former state attorney general, was elected the state’s first female governor in 2002, she was seen as a rising political star.

“As the person who was in charge of the state at the time and who campaigned on trying to fix it, it was very hard for me to accept myself that I didn’t have the tools to be able to wave a magic wand and fix the loss of manufacturing jobs and the loss of market share of the auto industry and the bankruptcies,” said Ms. Granholm, who is now teaching at the University of California, Berkeley, and says she is “absolutely not interested” in some future political office. “It was hard for me as somebody who’s always been able to succeed at stuff to be able to accept that and move on.”

Ms. Granholm was unwilling to comment on the performance of Rick Snyder, her successor as governor, who this year has approved measures aimed at cutting business taxes.

“The question is for the nation: Is there something that can happen now to prevent it from happening to the whole country and having a prolonged recession in the way that Michigan did?” Ms. Granholm said. “I think there are ways to stop it but it can only happen with a partnership with the federal government, because individual states simply do not have the tools to compete against China or the globe.”

Article source: http://feeds.nytimes.com/click.phdo?i=33eb1b8a518448e17fbfee3eeda3ccf8

Filed Under: Economy News Tagged With: , ,

A Japanese Plant Struggles to Produce a Critical Auto Part

April 28, 2011 by Leave a Comment

No wonder the magnitude 9.0 earthquake that knocked out one of the world’s leading automotive computer-chip factories struck such a severe and lasting blow to the global auto industry.

Since the March 11 earthquake, the lack of chips from this plant is a big reason automobile production has slowed to half its normal rate in Japan, and is at a crawl in some factories in the United States and elsewhere.

And plant officials here on Wednesday acknowledged that this critical link in the supply chain would be restored only gradually, despite the round-the-clock efforts of an army of workers to repair the cracked walls, collapsed ceilings and out-of-kilter equipment caused by the quake.

The factory here, 70 miles northeast of Tokyo, belongs to Renesas Electronics, which supplies about 40 percent of the world market for those crucial chips, known as automobile microcontrollers.

If it were the PC industry, customers by now might have found alternative suppliers for their standardized chips. But because of the way the automobile industry has evolved in the digital era, microcontrollers are usually customized for each car model.

That makes it difficult for automakers to quickly switch suppliers. And it has left manufacturers desperate for Renesas to resume production as soon as possible.

“We have an important role and responsibility,” Tetsuya Tsurumaru, senior vice president in charge of manufacturing at Renesas, said on Wednesday, during the first plant tour for reporters since the disaster. “We are aware of this and are doing our best to restore the supply chain as soon as possible.”

Mr. Tsurumaru said the company hoped to restart microcontroller production on June 15, about a month earlier than previously estimated. But output will initially be only 10 percent of capacity, he said, declining to predict when Renesas would resume full production.

To help meet demand, the company is shifting some production from the factory here to another Renesas factory in Japan not damaged by the quake. It is also farming out some manufacturing of automobile controllers to GlobalFoundries, a contract manufacturer in Singapore that has produced microcontrollers in the past. But shortages are expected to persist for months.

“Let’s show Renesas’s inner strength and unite our hearts to restart in June,” read banners hung from the buildings here. “Customers from all over the world are waiting.”

Thus exhorted, workers have repaired the factory’s ceiling, as well as a crucial air filtering system intended to keep out dust particles that can ruin the microscopic circuitry of the chips.

Test production has begun. Workers in white suits with facemasks and hoods worked in the clean room to repair and realign sophisticated machines that must be precise to billionths of a meter. But red lights next to most pieces of equipment indicated they were not in operation.

To be sure, Renesas is not the only parts supplier knocked out by the earthquake and, in some cases, by the tsunami that followed.

Toyota said recently that it faced shortages of 150 critical parts, not only electronic controllers but also rubber parts and paint additives. The company, Japan’s biggest automobile manufacturer, said it would not be able to resume full production until the end of this year.

Still, as a sign of how crucial this plant is, Japanese automakers, auto parts companies and other customers have sent as many as 2,500 workers to help repair the factory, called the Naka plant.

Automobile companies are not the only ones dependent on Renesas. For instance, Ricoh, maker of copiers and office equipment, gets some customized chips from Renesas. Ricoh executives say the Naka factory is their biggest concern among parts suppliers.

But microcontrollers, which are called mi-con in Japan (pronounced my-kone), are extremely important in automobiles because they act as the brains of electronic control systems.

Article source: http://feeds.nytimes.com/click.phdo?i=d40374b80068ebe83cd15aad54a6f912

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The Assembly Line Is Rolling Again, Tenuously, at Honda in Japan

April 19, 2011 by Leave a Comment

A little more than a month after the earthquake and tsunami devastated the automobile industry’s supply chains in Japan, Honda — like the other main Japanese car makers — has resumed domestic production.

Slogans or no, however, it is a tenuous triumph.

Honda’s factory here in Sayama, a suburb of Tokyo, was not damaged in the disasters. Neither was its other major plant, about 200 miles southwest of here. But auto production in Japan is at only half the normal level for Honda — as it is for Honda’s bigger rivals, Toyota and Nissan.

That is mainly because many of the 20,000 to 30,000 parts that go into a Japanese car come from the earthquake-stricken region in northeastern Japan, where numerous suppliers were knocked off line. Unless part makers can resume production soon, the auto companies might have to shut down once again.

“We cannot continue for a long time,” said Ko Katayama, the general manager at Honda’s factory here, declining to specify how long production could continue. “Sooner or later, it’s going to run out.”

Honda is now making only 400 to 450 vehicles a day at the factory in Sayama. That is down from the daily pace of 800 to 900 before the earthquake, said Atsushi Nemoto, a company spokesman.

The production shortfalls for Japan’s biggest automakers will crush earnings that had just begun to recover from the global slump caused by the world financial crisis. Over the long term, the Japanese industry could lose global market share — in recent years it has been nearly 30 percent — as overseas customers sample other brands.

Analysts say Japan’s car companies might also resign themselves to making even more of their products offshore. Even before the March disaster, Japan’s top three automakers were producing most of their vehicles outside the country. (In Honda’s case, only about 27 percent of its 3.6 million cars last year were made in Japan.)

Of course, if vital parts remain unavailable, some factories outside Japan are also being affected, though not to the same extent as those in Japan. Honda, for instance, has said it will produce at a reduced rate in North America at least through May 6.

Noriyuki Matsushima, automobile analyst at Citigroup, estimates that global production by Japanese automakers will decline 15 percent in the fiscal year that ends next March. He predicted full Japanese auto production would not resume until October.

“In a worst-case scenario,” he wrote in a recent report, industry operating losses in the first half of the fiscal year would be “the biggest ever, surpassing even those posted at the time of the Lehman Brothers bankruptcy.”

The limited scope of the recovery at the Honda factory here, known as the Saitama plant, was evident on Monday. The company had invited reporters to observe operations that had resumed a week earlier. But access was limited to a single spot near the end of the assembly line, where workers in white company jackets and trousers put finishing touches on Elysion minivans, a model sold only in Japan.

A Honda official acknowledged that if reporters had viewed the entire factory, they would have seen stretches of the assembly line containing no cars.

Toyota, too, which had resumed production in all 17 of its domestic factories as of Monday, is working at only half volume, said Shiori Hashimoto, a spokeswoman. It plans to shut factories again from April 28 through May 9 for an extended version of Japan’s Golden Week — a period containing several national holidays. And even after production resumes at half volume, Ms. Hashimoto said, the situation is uncertain beyond June 3.

In the last week Nissan has also resumed production at all five of its car factories and two engine factories in Japan — including the Iwaki engine plant that was heavily damaged by the earthquake. But Nissan, too, is producing only about half as many vehicles as usual, Mitsuru Yonekawa, a spokesman, said.

Koji Endo, a managing director at Advanced Research Japan, an equity research firm, said automakers “could have a June crisis” when inventories of crucial parts run out. “There is a very good chance they will have to shut down again,” he said.

Article source: http://feeds.nytimes.com/click.phdo?i=5e3dafa2df468793d6d4284b718e7f0a

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