Manufacturing Monday: Week of 12.28.2008

(8 am. – promoted by ek hornbeck)

Greetings folks, I hope your holiday season is going well.  In case you were wondering, there was no Manufacturing update last week, family and health related issues.  This week will be kinda short, my apologies, but I wanted to cut some of the gloom and doom for the holiday season.  We got stuff on solar energy, a new grant system for electric car innovation, milestones on wind, and something for the kids!  But as always, we hit our first section…

The Numbers!

This week we quarterly Gross Domestic Product figures and Durable Goods Orders.  First the big one, the GDP numbers for the Third Quarter. The latest shows a continuation of the drop of GDP inside this decade, with Q3 coming in at – .5%.  This was at the top of the range of consensus, which was between – .8% and – .5%.  Now this is a revision of a previously released Q3 GDP report, which initially showed Gross Domestic Product dropping only .3%.  It doesn’t take a genius to figure out that things have gotten worse.  

As one probably guessed, Q3 is the “summer months”.  All sorts of blame is being slapped on these numbers.  The folks at Economic Populist hinted that “experts” were saying it was because of Hurricane Ike. Others are pointing to a drop in spending by consumers.

Now the bigger annual picture is showing that as a whole, the economy is growing at about 2.8%.  Well, that’s the “official” number, but I think one should be skeptical about such statistics.  The quarterly numbers have been bad, and experts (well the ones that don’t work for the government at least), are saying that Q4 will be very bad.  There is even a possibility of annual GDP being reported as a negative number!

“People just aren’t out there shopping their hearts out,” said David Wyss, chief economist for Standard & Poor’s, who also blamed the contraction on a decline in business-related spending and construction.

Despite the seven-year low, Wyss referred to the 0.5% decline as “a very slight negative.” He projected that the fourth-quarter GDP will plunge by 6%, which would be the biggest decline since 1982.

– excerpt from “GDP dropped 0.5% this summer“, CNN Money, 2008

Oh crap, so much for avoiding bad news for the holidays.  

Our last indicator is the Durable Goods Orders.  Now for those new to this, this is a measure of new buys for domestic manufacturers for immediate or future delivery.  Each report is for the previous month, so this one would be for November, so its one of those rear view mirror kind of econ figures.  It’s important because, as we saw with GDP, it gives us an idea how the quarter is going to turn out.

Looking at the chart above, things are not so bueno (that’s Spanish for good, for you neo-con or Social Conservatives out there).  Now this may sound bad, but the numbers for Durable Goods Orders actually aren’t that bad.  What with the credit crunch and the market doing it’s version of Chernobyl in the previous month, to say that there was pessimism for the DGO number would be an understatement.

Durable Goods Orders came in with another contraction, falling 1% for the month.  I know what you’re thinking…that’s good?  What are you, Venom, a schmendrick or something?  Ok, I grant you, positive numbers would be good.  But when you see that the consensus was for drop between 8% to 3%, only losing 1% looks relatively good. And that the previous month, the DGO came in at – 6.2%, it could’ve been worse, is all I’m saying.  Now next month, who knows, it’s all up in the air, though I’m not being hopeful that we’ll see a positive number.  

Michigan gets some investment sunlight

The move towards green manufacturing took another step forward in the beleaguered state of Michigan.  The Detroit News is reporting that Dow Corning is going to invest upwards of $1 billion dollars on a new facility.  The whole thing is a joint venture with several other companies, all to produce a vital component for those cells used to generate solar power.

Hemlock Semiconductor Corp., the world’s largest maker of polycrystalline silicon for solar cells and semiconductor chips, is a joint venture between Dow Corning Corp. and two Japanese companies. Construction at the plant located in Hemlock, Mich., the company’s headquarters, will begin immediately.

This is the third major expansion of the Michigan site announced by the semiconductor company during the last five years, making its total investment to the location about $2.5 billion. At the plant, Hemlock plans to start manufacturing monosilanes, a key material used to make thin-film solar cells, company officials said. It is also building another new manufacturing site in Clarksville, Tenn. to increase production of the silicon materials.

– excerpt from “Dow Corning investing $1 billion in Michigan plant“, Detroit News, 2008.

Given the spate of bad economic news, what with the autos and such, I hope this is the start of a new chapter for the state. It should be noted, that this isn’t the first investment in the state and the solar industry, there have been others before this Dow deal. The state has seen other green initiatives regarding older industrial facilities as well.  Who knows, perhaps Detroit could go from being Motown to Solar City.

Sen. Bayh’s proposal sparks new life in electric cars

In many parts of the world, industrial policy is put forth to help domestic companies.  This is especially true in places like Japan, Korea, and France. One plank is investment in new technologies that said homeland industries could take advantage of. Ultimately, the goal is to keep the jobs in those mentioned countries. For these countries, new technology wasn’t just their localized Silicon Valley, but in other industries from automobiles to tool parts.  America hasn’t had an industrial policy like those of it’s competitors.  

We’ve invested in tech, like the internet, but what about other domestic industries?  While DARPA focused on the internet, Japan’s METI (Ministry of Economy, Trade, & Industry ), formerly known as MITI (Ministry of International Trade and Industry), help plow development dollars (yen in their case) into things like televisions and other video technology.  There’s a real stark contrast here between them and us.  DAPRA‘s main goal was to facilitate the military’s needs at the end of the day, while in places like Japan, it was the consumer markets.  They key has always been grants and other such investments (along with trade barriers). Well now it seems one US Senator is putting forth a similar plan for a US-based electric car industry.

Sen. Bayh’s proposal to provide $1.63 billion in federal grants through the U.S. Department of Energy is designed to ramp up production and drive down costs of hybrid and electric drive systems. The package includes:

   * $1.0 billion in competitive grants to expand the U.S. manufacturing base for advanced batteries and other essential components.

   * $295 million for R&D on new battery technology.

   * $90 million in grants for state and local business and governments to build the infrastructure and other resources such as rapid-recharging stations to support plug-in and other technologies.

   * $95 million in grants for near-term truck and maritime port electrification, which saves energy and dramatically cuts dangerous pollution.

   * $150 million for research and development of “smart-grid” technology that can save consumers money and help integrate plug-in vehicles while improving capacity and reliability of the nation’s aging electric system.

By comparison, Gassenheimer points out that Japan’s combined public and private investment in advanced battery development has outpaced that of the United States by as much as 10-fold for most of the past decade. Some in the industry are already worrying about what an emerging “battery gap” might mean for their ability to procure enough of these essential components for fuel- efficient autos.

– excerpt from “Grants to Help Electric Car Industry“, AZ Cleantech, 2008.

One of the challenges of the electric car segment is the battery.  The Toyota Prius and soon-to-be released Chevy Volt have hybrid systems.  Yet down the road, the need for pure electric or mixed alt-energy (That doesn’t involve petroleum) will grow.  As the article noted, we’re talking at least $150 billion dollar market here!

Our competitors are already ahead of us.  Japanese automakers, and soon the Chinese, are utilizing their links to battery companies that right now produce for things like laptops.  The worry has been, given that the vast majority of the supply is Asia-based, that they will have more access to those components putting US manufacturers at a disadvantage.  If one thinks about it, it could turn into a similar situation like OPEC.  I know that sounds nuts, but could we really afford to have just one region supplying us with these batteries or other fuel components for our transportation system?  I say kudos to Sen. Bayh, but I say we need to do more.

Noting Advancements in Wind

The country, it has been said, requires different sources to provide the nation’s electricity.  That to simply mostly rely on coal, nuclear power, and petroleum is more than just dangerous for the environment and economy.   Now I grant you, if that whole clean coal thing works out or they find a good way on handling nuclear waste, then those former energy sources sound good.  But there is another source that’s been getting noticed, and I dare say growing; that source is wind.

If you have a chance, please take a gander at a piece put out by IndustryWeek.  They basically go through the current situation with the Wind industry for the past year.  They go through some points like how the US is now #1 in Wind (though, if that’s true we shouldn’t rest on our laurels, we could do more in investing in wind).  

U.S. becomes ‘Number One’ in Wind:

During the summer of 2008, the U.S. wind industry launched past the 20,000-megawatt (MW) installed capacity milestone, achieving in two years what had previously taken two decades (the 10,000-MW mark was reached in 2006). Also this summer, the U.S. passed Germany to become the world leader in wind generation. By the end of September, the U.S. had over 21,000 MW of wind capacity up and running. With additional projects coming on line every week since, the wind industry is on its way to charting another record-shattering year of growth. That 21,000 MW of capacity will generate over 60 billion kWh of electricity in 2009, enough to serve over 5.5 million American homes and eliminating the burning of  30.4 million short tons of coal (enough to fill two 1,000-mile-long coal trains),  91 million barrels of oil per year, or  560 Bcf of natural gas (about 9% of the natural gas used for electricity generation).

– excerpt from “Top Wind Industry Accomplishments of 2008“, IndustryWeek, 2008.

Overall, it’s an interesting read.  I still say we need to invest more not just in new wind farms, but in the tech that goes into them.  Here in the Midwest, I’ve been told that the region is the Saudi Arabia of wind.  If that’s the case, then there’s really no reason why we can’t take advantage of that.  Couple that with solar power initiatives for the home and business, and my stars, you got something!

Something for the kids and teachers!

While looking for stuff on manufacturing, I came across this interesting site.  It’s aimed for students, in hopes of getting them into engineering.  Called “Manufacturing Is Cool”, it’s a well polished site made to look like a student’s desk.  Clicking on the objects will take you to a different part (for example clicking on the mobile phone will take you to a message board that looks like those you see on a school campus).  

Beyond the flash and glitz, the site, which is put out by SME Education Foundation and the National Center for Manufacturing Education (NCME), give a lot of detail in a fun manner.  There is also stuff for homework, and summer opportunities.  For those kids who like to tinker, they may find some useful information on here.  I particularly liked how there was information on college programs for those interested into getting into engineering.

Once more, the website is Manufacturing Is Cool, and for you parents or teachers out there, give the site a try.  For students, who are thinking about entering the field, you just may find answers to your questions about engineering and either education or employment prospects.

Well that about wraps it up.  I want to wish you all a Happy New Year, and may you stay safe so that I can hear from you in 2009.

cross posted from Economic Populist and Venomopolis