A key problem of General Motors – going metric too late and not full speed

A subtle but important cause of the high manufacturing cost of U.S. car manufacturers is the late and limited use of of the metric system, the standard measuring system for automotive parts in the rest of the world. Thus U.S.  car manufacturers use of global, low cost, standardized parts was limited. In contrast Japan adopted the metric system and DIN  standards mainly defined by the German machinery industry before serving the world market. Other parts of the U.S. industry made the transition to the metric system much earlier (e.g. IBM in the 80’s ) and were able to reduce their manufacturing cost of mechanical parts by typically 50%.  Even when a U.S. manufacturer officially introduced the metric system, engineers were still designing in “inches”. This attitude still complicates cooperation of U.S. car manufacturers like G.M. with European and Japanese manufcaturers. Whereas Ford has adapted the metric system much earlier.

The power of standardization is seen in the software industry where U.S. companies set the standards and dominate the markets.

The retirement trap – are people saving too much?

In his article “Revenge of the Glut”, Paul Bernanke points out that WW people are saving lots of money which they try to secure in “safe” countries like US or the big European countries. Thus these countries especially the USA are flooded with cheap money creating a huge trade deficit.  A good example of “saving countries” are Japan, China or Germany, where people are traditionally saving a large part of their earnings to be prepared for hard times. In good old days this money was used by farmers, entrepreneurs and large companies to finance profitable investments. Today even large excellent companies like IBM don’t have lots of ideas how they could create profitable new business. Most of the IBM profits was spent in 2007 on share repurchase ($ 18.8b share repurchase versus $6.2b for R&D) . As a result IBM much like other big businesses did not grow as analysts expected in the 1990s.  Developing countries could absorb huge investments. However, they do not have to infrastructure to invest and maintain the assets providing reliable return to the investors. USA is still one of the most interesting targets when people want to secure money for the future although US was consuming much of the incoming capital flow in the past.  However, people do not believe anymore that they will get their money back when they need it e.g. for their retirement. In addition the amount of money people need for retirement is growing fast because people live longer, healthcare cost are exploding and companies do not provide pension plans (financed out of cash flow) for their employees anymore.  This is one major reason why people gave their money to banksters promising high revenue.

Now even middle class people must realize that they will not be able to make enough secure investments to maintain their lifestyle during 25 + years of retirement. The only viable solution is probably to scale back much like our grandfathers and grandmothers did.  You must not be a member of a expensive golf club, you don’t need an expensive house in an affluent area, youd don’t need expensive vacations etc.  I even think that our ancestors were happier with their modest style of living growing their vegetables in the backyard than today’s retiree’s. Unfortunately this attitude will decrease the GNP because consumer spending in an aging population will decline. Is there any reason why a wealthy country should not be able to manage such a change?   The answer is probably – yes. we can.