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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (21487)	1/16/2005 10:43:21 PM
From: regli	Read Replies (1) \| Respond to of 116555

> What I intended to say that technology at this juncture will add relative little to savings in manufacturing even if the technology itself improves substantially (see the clips cost in this article < The supply chain length is still an important part of the production process. The risk for disruption grows with increased distance and delivery time of the item. Another element is shipping cost which has been significantly affected by higher energy costs. Therefore, there is some room for increased labor costs in the developed world assuming the item is destined there. Technology is not only used to lower costs but also to increase product quality and consistency. As cost reductions of the labor part has the potential to move reasonably in sync with Moore’s law, even reduced labor costs cannot compete with the benefits of automation. On the whole, we have entered the period of labor commodization across continents even including white collar professions. This allows for much better leverage in labor negotiations and therefore cost reductions. Obviously these efforts are cost effective as labor still makes up a considerable portion of the production process. Here just a few interesting developments on that front. “We recently signed a contract with the United Auto Workers to go from $65 an hour for current employees to $23 an hour for new hires. That's part of the transformation if we are to be competitive in the long term, and it is significant. The unions understand that you can't pay $130,000 any more if you are going to grow. You're going to have to take 65 percent less than that. Is that low enough? Probably not, to be competitive on a global basis, but it's a big move and will allow a significant number of jobs to stay in the U.S.” Message 20955854 “In Delphi, we have 17,000 engineers and about 40 percent of them are offshore now. We've just added 1,500 more in Shanghai and we have electronics engineers and software engineers in India, Mexico and Poland, for example. The R.& D. work is moving rapidly, in my opinion, offshore. Congress needs to make the U.S. government's R.& D. tax credit permanent. It's amazing, to me, that they haven't.” “Expected U.S. gains from Beijing's entry into the World Trade Organization in December 2001 "have yet to materialize" and instead China is increasingly competitive in more advanced sectors such as autos and aerospace where the United States has long had a big advantage, the report said.” money.cnn.com Clearly the hope that the developed nations could maintain their standard of living by keeping their edge in higher end production and services is starting to look ridiculous. As we see developing nations increasingly climb the production food chain to higher profit items and services, the labor market in developed countries faces huge adjustments. Just look what concessions Opel recently asked from its German labor unions if they want to maintain the Vectra factory in Russelsheim: No increases until 2009 Increase work hours from 35 to 40 hrs a week Reduction of the Christmas and vacation bonus to 55% Many, many more heute.de Where will consumer spending come from a few years down the road?