Tag Archives: manufacturing

Attention Titans of Tech – This is What $ Billions and Billions are For

This post got delayed and there haven’t been quite as many multi-billion tech investments in the news this week.  But for any coming down the pike, I’m voting for more steel (or carbon fiber or whatever) in the ground.

Tesla’s announcement a few weeks back of their plans to invest $5 billion to build a 10 million square foot “gigafactory” in the US to build batteries for its vehicles and solar businesses is worth underscoring as we debate the future of work, innovation, and what to do with billions and billions of dollars you may have on hand.  Here are my top 5 reasons Tesla’s announcement is important:

Photo: Tesla from the company's powerpoint on the project at:   http://bit.ly/1dANXNY

Photo: Tesla from the company’s powerpoint on the project at: http://bit.ly/1dANXNY

  1.  It provides a vivid counter to the hand wringing around jobless innovation that followed the Facebook/Whats App acquisition. Certainly some new technologies today (as in every era) may threaten today’s jobs, but we should be careful to separate the impacts of disruptive technologies from other trends that keep us from getting the benefits we should from innovation. Too much emphasis on big, quick payouts over longer term productive investment and on innovation alone over the things that embody that innovation has been damaging job creation for years, and the gigafactory is a salutary counter example. Turning innovation into jobs requires investment not just in ideas, but in building the products that embody those ideas. Not only does choosing to build cutting-edge products in the U.S. enhance the overall economic value of innovation to the American economy, but feedback between technology innovation, manufacturing, system integration, and product improvements are critical to sustaining an innovation edge. 
  2.  High tech manufacturing is a compelling path to job growth in the US.  Tesla is projecting 6500 jobs at the new factory.  Is that as many direct jobs as a $5B investment would have created 30 years ago? Of course not. Today’s manufacturing is much more capital intensive.  But it’s approximately 500 times as many jobs per $ billion as the WhatsApp investment.  Furthermore, the capital intensiveness of today’s advanced manufacturing is part of what makes the US newly competitive.  Today even comparatively well paid labor is a small fraction of total product cost, so quality, co-location of engineering with markets and the supply chain, scale (see below), and the relationship between management and workers (that’s another blog) can be much more important.
  3.  If Tesla’s stock price doesn’t already have you convinced, the EV – and the energy storage market – is SO not dead.  The gigafactory as described will have the capacity to build more batteries alone than total global production today. Tesla has the necessity or the luxury of being more single minded, but virtually every automaker worldwide is investing, and some like GM are investing heavily, in vehicle electrification, in batteries, and in the connection of vehicles to the home, business, and to clean energy generation.  Numerous energy companies are similarly focused.  This isn’t just because of the economic, environmental, and political attractions of leaving the gas station behind.  It’s because electrification, energy storage, and machine to machine technology, are on the cusp of delivering cars, homes, businesses and energy systems with transformative functionality.  Put differently the gigafactory – and these other U.S. investments in advanced vehicles, energy storage and energy management –  leverage disruption in cars and power, both central to the American way of life and to preventing runaway climate change, and do so in ways that help ensure the American economy and American workers are part and parcel of this disruption, not left behind by it.
  4.  And speaking of American ingenuity…its payback time.  Let’s take some time to heap scorn on those who naysayed the government’s overwhelmingly successful investment portfolio in clean energy and advanced vehicles technology.  The DOE’s Advanced Technology Vehicle Manufacturing loan program provided Tesla $465 million loan (that’s nearly half a billion dollars) at a time when it, like the rest of the industry, was in dire economic straits and when the financial sector was unwilling to take on risky automotive projects.  Tesla used that loan to retool its factory in Fremont, California to build the Tesla S (a factory that in another era was the site of an innovative partnership between GM and Toyota), it paid taxpayers back that loan early, and now the US economy is seeing an additional payback at even greater scale.
  5.  Finally, it’s hard not to love/hate/envy a guy who gets a cameo in Iron Man.  But I have to credit Elon Musk for being what I hope is the leading edge of a cultural and strategic shift in Silicon Valley –  a hot IPO, corporate statements on Twitter, plus steel in the ground.
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Is Detroit on the cutting edge of reinvestment in America?

I have a guest blog up on EPI’s Working Economics blog today.  Its a riff on Bill Vlasic’s recent NYT piece “Last Car Plant Brings Detroit Hope and Cash”.  I elaborate:

“Only two days later, the City of Detroit filed for the nation’s largest ever municipal bankruptcy. “Hope and cash” suddenly sounded like too little too late. It’s not.”

I argue that far from being the ‘last’ plant, JNAP is actually a bellweather of a shift in investment, corporate culture and civic engagement that can bode well for Detroit, and the rest of America.

detroit street viewI know the auto sector best, so that’s what I focus on in the blog, but I’m quite sure there are many more examples of proactive reinvestment in the city that real Detroiters could provide.  And I’ve been seeing articles all week long in response to the bankruptcy that suggest that there is pent-up demand nationwide to put what we have – whether that’s private equity or sweat equity – into tangible projects that strengthen communities, cities like Detroit, and the nation.

Check out my guest blog here – and comment (with examples), please!

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Who MAKES That?

Contemplating robots, cranes, boats, and sugar at Baltimore Dept of Public Works "Big Truck Day"

Contemplating where robots, cranes, boats, and sugar come from at Baltimore Dept of Public Works “Big Truck Day”… and trucks!  Photo: Z Lipman

In praise of manufacturing and supply chain stories

We’re not short on brilliant ideas. And we’re in a bit of a invention revival.  But we’re still seized with collective doubt that we have what it takes to meet the complex challenges of a chaotic and interdependent world.  Maybe we’re not telling enough of those stories.

A few weeks back the New York Times Magazine expanded their “Who Made That” column on inventors into a full issue.  When I saw the disassembled ATM on the opening spread, I thought for a moment it was going somewhere even more exciting… to “Who MAKES That”.

The people, innovative components, and complex supply chains that make our products possible are as fascinating as the products themselves.  They make our abstract policy and economic debates concrete, and they’re a window into how the world works today.

Foreign direct investment, cyber security, Alcoa’s stock price, and jobs in dozens of states are in your new car or pickup truck.  Business attraction in small-town Tennessee*, domestic solar manufacturing, and efforts to combat tropical deforestation are in your movie candy.  Relax as you slide into an MRI by thinking of the Affordable Care Act and the Strategic Helium Reserve.**

Part of Ford's more fuel efficient EcoBoost engine.  Photo: Z. LIpman

Engine block from Ford’s fuel efficient EcoBoost engine. Photo: Z Lipman

The supply chain stories that we think of first are the ones gone wrong, like the recent tragedy in Bangladesh. And continuing to daylight malfeasance is essential.  But looking deeper into the things all around us will show just as many examples of people and organizations demonstrating the creativity, collaboration, responsibility and good governance it takes to turn great ideas into progress in a complex world.

Don’t get me wrong, the Times’ “Who Made That” , Wired’s “Whats Inside” and similar columns are wonderful in their own right.   These columns showcase innovation and history, demystify science, inspire us and make thought provoking connections.  (Thanks to the latter, I learned that cordial cherries digest themselves inside the chocolate coating.  I love that.***) But they’re missing the supply chain that ties ‘whats inside’ together and gets the invention into our hands by the millions.

So lets tell all these stories. It’s time for more “Who MAKES That”.

Here are a few of my favorites that start down this path… 

— Who makes the new technologies in your car? And why? Check out the  videos  at DrivingGrowth.org .

— Read Christopher Joyce on how power gets to people in NYC – one small piece of an exciting product that could use a lot better storytelling: Electricity.

— We have heard a fair bit about the iPhone’s supply chain.  Add Bryan Gardiner’s “Glass Works” (on Corning and Gorilla Glass) and Mariana Mazzucato on government R&D to that picture.

What am I missing?

*Actually, its a small city; **One more, couldn’t resist; ***and in the interests of inspiring the next generation to collaborate through culture and chemistry, you might complain to Wired that the cordial cherry story is not available online!

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Standing up for standing up for making the next generation of technology in America

I was distinctly second billing, but I was still happy to stand up for the Department of Energy’s Advanced Technology Vehicle Manufacturing Loan (ATVM) program at the House Oversight Committee’s hearing on Fisker last month.

My testimony is here, and my argument, briefly was that:

“today, not just companies, but countries are competing aggressively to lead in the next generation of advanced energy and transportation technology. In a global economy we don’t need to be the only player in these rapidly growing industries but we need to be one of the leaders if our economy is to remain strong into the future.”

Whats more, “manufacturing is a critical component of our innovation policy” without which we fail to capture the full benefits of R&D or generate the next round of innovation.

“The success rate of DOE’s larger loan portfolio is extremely high, but even the ATVM portfolio with a much smaller number of projects looks very good.  Even if the full $193M to Fisker must be written off, that loss is less than 2.4%of the funds loaned and less than 3% of the budget authority for this program. The taxpayer is doing well, and communities and businesses are doing even better.” In contrast to years of neglect and decline, we are now seeing revival in critical manufacturing sectors.

While we can and should debate how best to structure partnerships between the public and private sectors to speed advances in advanced technology and manufacturing, we should be past debating whether to do it.

We need to structure our public-private partnerships in such a way that we ” balance the risk in individual projects with the bigger risk for our economy if we fail to move quickly to compete with other nations in the next generation of clean energy and fuel saving technology.”   We need a structure that focuses on, reinforces, and grows the success we are already demonstrating we can achieve.

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