[Update] Note: Yes, I am using a presentation by Bill Ford to make a point...can we please move off the "Ford bashing" and focus in on the topic of discussion: The American Worker and Energy Policy
Speaking at the
National Press Club yesterday, CEO William Clay Ford, Jr. addressed the topic of American Innovation in Manufacturing (publically issued transcript contained in "there's more" below).
While some of it is focused on the Ford public image, other parts of it touch on subjects discussed in Jerome's diaries on energy sources. In particular, Mr. Ford brings up the subject of government investment in the worker and the need for a comprehensive energy policy.
BILL FORD
NATIONAL PRESS CLUB
WASHINGTON, DC
November 22, 2005
Thank you, John. And my thanks to Business Roundtable for sponsoring this event.
As you may know, Business Roundtable focuses on issues that affect the economic well-being of the nation. Today, I'm here to talk about the energy challenges facing our country and how we must rise to those and other manufacturing challenges through American innovation.
It's difficult to conceive of any issue that touches more of our lives than energy. It drives our mobility, our appliances and our choices about how far we can live from our jobs. It affects our environment, our national security and our household budgets. And when the price of gas goes up to $3 a gallon, as it did just a few months ago, all Americans feel it in their pocketbooks. And from where I sit, as Chairman of Ford Motor Company, it affects the decisions I make every day.
For longer than we had reason to expect, this country has been relatively immune to the violent swings in supply and demand of a finite commodity. I think most of us suspected we were living on borrowed time; the volatility of the past year confirmed it.
When I became CEO, I decided to invest in new products that were more fuel efficient. I believed back then that the days of cheap gasoline were numbered. That led to the creation of the world's first hybrid-electric SUV, the Ford Escape, and inspired our decision to build up to 250,000 hybrids a year by 2010. Our hybrids get up to 500 miles on a tank of gas - eighty percent better fuel economy in the city than its gasoline counterpart. Our drive toward innovation also fueled our renewed commitment to flexible-fuel vehicles, like our ethanol-powered lineup of cars and trucks. We already have more than a million on the road, and we plan to produce another quarter-million in 2006. These vehicles can run on fuel that's grown in the heartland of America.
Both of these innovations have simple objectives: to provide relief to Americans at the pump and to lower our country's dependence on foreign oil.
I believe that as an American company, we have the responsibility to the nation to take these steps. Not just because they will help our bottom line - although they ultimately will - but because it's where our future lies. And if we want to succeed as a company - and as an industry - we must drive innovation into everything we do: into technology, into safety, into design and into real-world solutions for environmental issues, like the impact of energy usage on our world.
This is not a new prescription for success, but the urgency couldn't be any greater. Innovation is always what's made American manufacturing the envy of the world, the engine of ideas, the means by which our nation protects its freedom.
Consider my own company's history.
(....snip....)
Beyond the auto industry, going back to our nation's founding, innovation has been the driver behind America's leadership. For nearly a hundred years, from 1850 to World War II, innovation was largely driven by entrepreneurs sensing needs and proposing solutions. The Cold War era ushered in a new dynamic to American innovation: the collaboration between government and business. Look at all that partnership has spurred: the polio vaccine, the Internet, GPS systems, cell phones. The list goes on.
Now, more than ever, with the competitive pressures of globalization, America needs to respond to the economic challenges of our time. This is not the moment to stop investing and concede our competitive edge in vital parts of the economy. Just the opposite, we must take the lead and show the world that there is only one, true innovative manufacturing giant. And it has three distinct initials: U.S.A.
As I said, that's a mandate that we must heed in the domestic auto industry. It's at the core of my decision-making. If we don't get in front on the challenge, if we don't adapt to a changing market and shifts in consumer demand, then, like any business, we deserve to suffer the consequences. However, if we innovate and take the necessary steps, we will succeed as we always have, with the might of America behind us. That's what we've done throughout American history, through the ups and downs of war and tough economic cycles. Our government must view the challenges of this era through the same lens - and stand by American workers, and American industry as it always has.
On that note, I'm somewhat amused by advertisements I've seen lately from one overseas carmaker bragging about its first new plant in America. That's something Ford did in 1903. And it's something the forerunners to GM and DaimlerChrysler did right around the same time - and have done hundreds of times since.
(...snip...)
U.S. automakers also provide health care benefits to more than two million U.S. employees, retirees, and their families. And we pay more than $11 billion in pensions each year to 800,000 plus retirees and surviving spouses. To put it simply, we invest in America - and in Americans -- every single day. Plus, our dealers and suppliers are in nearly every community in America.
The fact that American auto making has been a powerful engine for jobs, research, and economic development has not been lost on other nations. They see the great potential. That's why they are investing collaboratively with their domestic auto companies to expand into markets such as ours. Take Japan, for example, where the social costs of labor, such as health care and pensions, are spread across the entire population.
Note: I was astonished that Mr. Ford brushed lightly on this very subject and then moved on. He just mentions the basic factoid that underscores one of the most prevalent challenges dragging the American Worker down the drain: Healthcare Costs in a private healthcare system (link is to a European Tribune Diary on Finland's public health/education system and the positive impact it has over a longer term) and then moves past it. sigh At least it has been said by a major corporate CEO! The first step is the admission that you are drowning!
The (edit: Japanese) government there has actively helped fund advanced technologies that would offer their businesses a competitive advantage in the future. The hybrid batteries are an example of that. Nearly a decade ago, the government offered subsidies to their domestic auto suppliers to build hybrid batteries, which are one of the most expensive components of today's hybrid vehicles. That gave them a head-start. Today these batteries are in high demand and in short supply. We need to develop the capabilities to build these batteries here in the US -- or we will find ourselves increasingly hostage to foreign components.
That's not to say American businesses have stood pat. Ford, General Motors, and DaimlerChrysler alone invest more than $16 billion on research and development every year -- more than any other U.S. industry. Some of those efforts led to our own hybrid, which was designed, engineered and built in America. And it led to the nearly 100 new patents inside. That's an example of true American innovation.
....and an example of American companies spending money out of their own pockets for something that another government subsidized! I applaud our industries for making those investments...but when you're doing it on your own in a challenging economic environment, those dollars are pearls beyond price and are paid for in the blood/sweat/tears of employees.
Still, we have more work to do, especially in developing a stronger, healthier domestic supplier base.
Like all new inventions, the first few years of any new product are the most cost-intensive and the least-profitable. It takes time to roll-out your products in sufficient volume to recover your costs. And it becomes harder and harder to make those long term investments alone. Just as other countries have found manufacturing important enough to make a priority, this country should as well. It ultimately means more jobs, more tax revenue, and a position of strength and leadership in the world. Japan recognizes what's at stake. So does South Korea. And China. And others are getting in line. They're obviously onto something.
There are some who shrug their shoulders at all this. They say American manufacturing is yesterday's news and that we should rely squarely on the service sector. They say it's okay to be a consumer society and to leave the production to other parts of the world. They say that the only thing that matters is that we get our goods as cheaply as possible - that we shouldn't worry about the collateral damage.
Well, I'm not convinced.
I believe that with the right investments, America - and the American manufacturing sector - can win. It can maintain its leadership stature in the world. And we can reduce our dependence on foreign oil. All at the same time. But we can't get there alone.
Insert appropriate economy diary here...from Jerome, bonddad (in fact he wrote today), and all the others who have written so eloquently and so often here. There is a strange paradox at work here in that we so often deride corporate welfare but know, deep down, that our companies are fighting an uphill battle against foreign competition. That very uphill battle, when put before VERY conservative folks (bean counter management) result in a "trench warfare" mentality where the troops on the frontline are 100% expendable. This is, of course, not the right strategy every time. "Trench warfare" is only good if it's being used to hold the enemy locked in to a point of attack while a counterattack is being organized.
Today, I want to talk about several measures America can take in the short run that I believe will bear fruit for years to come.
First and foremost, we all know that research and development is the lifeblood of manufacturing. But as I said, it's costly and the payoffs are longer-term. That's why I urge Congress to invest in America and dramatically increase the R&D tax credit to more directly support companies working on advanced vehicles, components, and fuel technologies. Technologies like hybrids, ethanol, hydrogen, and clean diesel. This investment would help build a supply base right here in America for critically-needed energy saving fuels.
I agree..to a point. I think, rather, that the US Gov't should utilize education/research grants to be awarded to Universities in partnership with industry. That way the contribution of the taxpayer is going directly to education, and the intellectual property gained is available to a US Company to bolster our competitiveness. Tax Credits Don't Work!!!! Invest, don't cut!
Second, I'm sure you've read about the turmoil that global competitors have thrust upon domestic auto suppliers. Part of the problem, as you know, is the simply fact that there are too many plants with old technology that's becoming more obsolete with each passing day. That's especially true in light of advanced technologies that are created outside our borders.
I believe there is an opportunity here to convert some of our industry's existing plants so we can build advanced technological vehicles and components. I urge Congress to consider tax incentives to help American manufacturers convert existing -- but outmoded plants -- into high-tech facilities.
Again, you can't Tax Cut your way to growth. Just like you can't JOB CUT your way to profitability. This is "present tense" planning. Thinking about five minutes from now and the next quarter's stock report instead of the long term success.
Of course, WE the investors, don't help. Think about it, how often do you look at a company in which you've invested and get frustrated when they have a bad quarter. Now multiply that across a few million antsy, impatient investors. How many times do those companies have to report a low profit quarter (even if it's with the statement that the loss of profit is because of substantial investment in capital, training, etc.) and see their stock price plunge to refuse to do such things? WE are part of the problem...our whole culture is so impatient and short-term focused that other countries can take ruthless advantage of our seeming lack of courage.
Yes, I said we seem to lack courage. Courage is taking a strategy, making it work, and STICKING WITH IT even when it looks bleak. It takes good leadership to weather the derision and fickleness of investors and make the long-term plan succeed. That's in short supply these days, but there's no end of CEOs or massive payouts. That all comes from us and with our implicit acceptance. (steps off soapbox)
Third, converting facilities is only part of the equation. We also need to invest in the American workers who build the products with training programs and incentives to upgrade worker skills. That will help us move into the future while preserving American jobs.
Again.. Mr. Ford, speaking as an industrialist, sees things from a tax cut or corporate subsidy perspective (give US the money and WE'LL use it wisely). I don't trust bureaucratic organizations, frankly. Invest in public education programs and make various basic training courses free to all citizens (offered through local companies) and establish that knowledge base as a given from the local population. That way, ALL companies and workers benefit from the taxpayer outlay.
Fourth, building advanced fuel vehicles is essential. But getting Americans into them is equally important. We need to reduce our dependence on foreign oil. Hybrids and ethanol vehicles are the most practical ways to do that right now -- not in the distant future. But hybrids are still more expensive to make than pure gasoline-powered cars. The 2005 Energy Act provides up to $3,600 in tax credits for Americans who buy hybrids. For example, beginning January 1st, our Ford Escape and Mercury Mariner hybrids will be eligible for those consumer tax credits. By encouraging consumer support for a promising new technology, our government is supporting innovation and investing in our nation's future. We should look for other ways to encourage Americans to buy fuel-saving vehicles.
And governments should be leading the way. By 2010, for every need that can be met with a hybrid, governments at all levels should be buying only hybrids or other alternatively fueled cars.
I totally agree. He could go further with this...but I do agree. Public transit vehicles could be totally powered by CNG or propane...heavy haulers for gov't could be all diesel-hybrid or CNG powered, for example. That way the public is served (cleaner burning, better fuel use) and it supports efforts to reduce fossil fuel use. shrug
Fifth, I spoke earlier about our ethanol program. The 2005 Energy Act encourages the use of ethanol, in particular the higher content E-85 fuel. It's a great, innovative first step - but it's only a first step.
The U.S. auto industry has produced more than five million flexible fuel vehicles -- but there are only 500 fuel pumps in America. So while we're building vehicles that can handle ethanol, Americans have few places to go and fill up their tank. If we're serious about reducing our dependence on foreign oil, we need to get serious about making ethanol available to customers.
Ford is working with VeraSun and other partners to expand retail ethanol pumps in gas stations around the country. But we can't meet the infrastructure needs by ourselves. All of us, including fuel providers and the government, need to do more to build an infrastructure -- so we can go from hundreds of fuel stations to thousands.
Good and good! Let's look for other sources for E-85 production, so it's not just a huge gov't subsidy for corn growers. I believe some people have argued here that soybeans and other staple crops are better sources of ethanol than corn. Let's look for all those options...particularly if there are large amounts of grains left over every year unpurchased (make those farmers give up SOMETHING for the subsidies - like any surplus grains they might be just wasting and composting at the end of the year).
Sixth and finally, in September I wrote President Bush a letter suggesting he convene a group of automakers, suppliers, fuel providers and government agencies to address America's energy challenges. Later today, I'm meeting with members of his administration to discuss this idea further. Because now, more than ever, I believe we must take action. If we put our heads together, and keep in mind our shared interest in America's future, I'm confident that we can innovate our way toward the right solutions.
Let me conclude by saying this: Nothing I spoke about today is a partisan issue. It's not Democratic or Republican, red state or blue state. If we make the right investments today, in the right innovations, our country will benefit for generations to come.
This Thanksgiving weekend, as you're driving to visit family and friends, think about the mobility we all take for granted. We all depend on an energy supply that is increasingly scarce and expensive and a world beyond our borders that is filled with unrest. We should all pause and think about what we need to do as a nation to face and overcome these challenges -- and to be thankful for all the blessings that we enjoy.
Thank you, happy Thanksgiving, and I'm glad to take a few questions.
Overall, well said. You can tell it's from a heavy industrialist, but it still points in the right direction. The challenges facing US manufacturing are manifold. Cost pressures of globalization compounded by competition from countries that subsidize healthcare/pension costs. You have changing commodity prices and increasing demand-competition from around the world.
We, as a country, need to formulate an overall response to the current situation...sooner rather than later. A comprehensive policy must be hammered out before we ALL get left behind in the dust.
I propose the following:
A twice weekly open thread dedicated to discussion and idea generation for such a policy (heck, Jerome already offers that opportunity with his posts). There should be PDF minutes made available on a web page of the results of those threads (so the ideas that float to the top can be distilled and preserved separate from the usual thread-weaving discussions).
With those open thread discussions, there should be a push to get participants to attend meetings with their US/State/Local government bodies/members and push the consensus talking points during open floor time. The advantage of these open threads is the ability to leverage the analytical ability of the dailykos snark gallery. I'm serious! I mean the people who appear in a diary comment list to snark at a missed detail..it pisses me off when they do it to me, but they do raise valid points on a regular basis. Data can quickly be brought forward, discussed, challenged, and captured.
Jerome's (and others') threads are good starts, but we should dedicate the time and effort to collect the best ideas and arguments and then push them into the public awareness.