Thursday, October 25, 2007
The SUVs on 14th Street predict US economy
LOOKING AHEAD by Wally Dobelis
This writer has been tallying SUVs on 14th Street for several years, ever since the gas prices started rising. The actual numbers, adjusted by the blocks covered, have mostly varied by less than 10% up or down, and could be considered as about even. Therefore my most recent census of SUVs along the southern edge of Stuyvesant Town on 14th Street was bothersome, showing a nearly 20% increase in gas-guzzlers. This, in an era of oil prices up to a record $88, with car sales down, a substantial US exports deficit and a crisis in subprime mortgages ( will the Chinese take over Bear Stearns?) seems hard to explain.
It is particularly worrisome because during a recent two-week touring trip in Israel we saw no American cars on the roads. Israeli friends and cabdrivers explain it as a function of quality, price and gas mileage. A few SUVs, used as trucks, were seen parked at the main street shouks (bazaars) in wealthy Daliyat al-Karmel, the Druse town near Haifa (Druses are Arab members of an Islam-derived secretive religious sect, who serve in the Israeli army). Trucks throughout Israel are mostly Mercedes or Volvo.
Israeli taxis are invariably 2.0 liter Mercedes, and private cars are South Korean, Japanese and European, with 2.0 and 1.6 liter four-cylinder engines, bravely climbing hot hills with the AC temporarily turned off . Gasoline costs 8 shekels (abbreviated as NIS) a liter ($8 a gallon), and gas mileage reportedly runs upwards of 32 miles a gallon. Israelis drive a lot, there are many religious holidays, the country is only 500 kilometers long, north to south, and the resort towns around Kinneret (Sea of Galilee) are enticing. As to the sources of gasoline, a port official explains, with a smile, that oil has no flavor, and ships appear in the ports with their high-price cargo carrying clean manifestos, no questions asked. Some might be from Mexico, a trading partner, some from any of the Gulf States.
Israel’s high price gasoline problem is duplicated all over the world. This truly dooms the present-day America automobiles as export products. Small American cars, with $1-2K per car added to pay for the benefits of retired UAW workers, are too costly, and the large ones, with the costs better distributed, are too expensive to drive, many producing only 8 miles per gallon.
The Israelis tell the story of Egged, the state supported cooperative bus company that supplied 60% of transportation in the country. The pay scale in Israel is generally low, a senior policemen after 12 years of service, nets 5,000 NIS ($1,500) a month, and most people have two jobs, a regular and a part-time. Egged’s drivers earn 45-50 NIS an hour (to $12.50), not bad, but the public transportation costs were growing, with many retirees drawing benefits. The government finally sold off packages of regional Egged routes to entrepreneurs paying 25 NIS per hour to their drivers, with retirement age at 55 (too high, per my airport taxi driver, an ex-Egged stalwart). As to the costly retirement benefits, they were made a state responsibility.
Is this some kind of indication of the direction of a declining US economy? I think not. With General Motors jobs costing at the $73/hour rate, of which $19 goes into benefits and $22 into retiree benefits, and Toyota at $47/hour ($32 pay, $15 benefits), we will just have to let GM and Ford export business go gently into that good night, as the steel industry did. Guys, you are producing strictly for the US market. Chrysler is already being partly dismantled by its new owner, Cerberus.
There is minor domestic production in 2.0 and 1.5 liter engines, and some reputable hybrid –powered models, but a major technological effort is needed to recover export car business for US-based factories. The Chinese are into an under S10,000 model, and the Indians may have a $2,500 mini in the works.
This is not a new direction; since the 1950s US GDP has turned its 50% manufacturing prevalence into a less than 20% component, meanwhile shifting into service industries to take over the slack. Obviously, service does not produce cars, electronics and household equipment for export, not even for domestic consumption. We operate on the philosophy of letting low-pay foreign countries – Japan was the first one – do the production, until their standard of living rises enough for them to employ other 3rd world producers – such as the Little Tigers of Southeast Asia - and so on. Now we are in the third generation of the pass-along economies, with China and India the leading producers, and the US is still merrily chugging along, like biblical Babel or Berlin 1920, whistling at impending doom. We still maintain an edge in aircraft production, and the massive US agribus can still feed the hungry of the world, as long as the greenhouse effect does not ruin our water supply, and Mexicans come. American technology is still a fraction ahead of the world, and its finance industry gets to invest in developing countries, giving away domestic jobs to low-pay workers in various foreign maquiladoras, while bringing back big bucks for the capitalists. The laid-off Americans are encouraged to retrain for service or tech jobs, or can go into construction, building MacHomes for the wealthy. There’s also the reverse Mexican effect – American emissaries going abroad to work for our multinationals, sending bucks or Euros and such back home to the families.
Are US politicos dealing with this threat scenario? An educated electorate is a disgusted electorate, but as long as sports and Britney are in the news to keep us focused, the officials are safe. No worry, mates.
This writer has been tallying SUVs on 14th Street for several years, ever since the gas prices started rising. The actual numbers, adjusted by the blocks covered, have mostly varied by less than 10% up or down, and could be considered as about even. Therefore my most recent census of SUVs along the southern edge of Stuyvesant Town on 14th Street was bothersome, showing a nearly 20% increase in gas-guzzlers. This, in an era of oil prices up to a record $88, with car sales down, a substantial US exports deficit and a crisis in subprime mortgages ( will the Chinese take over Bear Stearns?) seems hard to explain.
It is particularly worrisome because during a recent two-week touring trip in Israel we saw no American cars on the roads. Israeli friends and cabdrivers explain it as a function of quality, price and gas mileage. A few SUVs, used as trucks, were seen parked at the main street shouks (bazaars) in wealthy Daliyat al-Karmel, the Druse town near Haifa (Druses are Arab members of an Islam-derived secretive religious sect, who serve in the Israeli army). Trucks throughout Israel are mostly Mercedes or Volvo.
Israeli taxis are invariably 2.0 liter Mercedes, and private cars are South Korean, Japanese and European, with 2.0 and 1.6 liter four-cylinder engines, bravely climbing hot hills with the AC temporarily turned off . Gasoline costs 8 shekels (abbreviated as NIS) a liter ($8 a gallon), and gas mileage reportedly runs upwards of 32 miles a gallon. Israelis drive a lot, there are many religious holidays, the country is only 500 kilometers long, north to south, and the resort towns around Kinneret (Sea of Galilee) are enticing. As to the sources of gasoline, a port official explains, with a smile, that oil has no flavor, and ships appear in the ports with their high-price cargo carrying clean manifestos, no questions asked. Some might be from Mexico, a trading partner, some from any of the Gulf States.
Israel’s high price gasoline problem is duplicated all over the world. This truly dooms the present-day America automobiles as export products. Small American cars, with $1-2K per car added to pay for the benefits of retired UAW workers, are too costly, and the large ones, with the costs better distributed, are too expensive to drive, many producing only 8 miles per gallon.
The Israelis tell the story of Egged, the state supported cooperative bus company that supplied 60% of transportation in the country. The pay scale in Israel is generally low, a senior policemen after 12 years of service, nets 5,000 NIS ($1,500) a month, and most people have two jobs, a regular and a part-time. Egged’s drivers earn 45-50 NIS an hour (to $12.50), not bad, but the public transportation costs were growing, with many retirees drawing benefits. The government finally sold off packages of regional Egged routes to entrepreneurs paying 25 NIS per hour to their drivers, with retirement age at 55 (too high, per my airport taxi driver, an ex-Egged stalwart). As to the costly retirement benefits, they were made a state responsibility.
Is this some kind of indication of the direction of a declining US economy? I think not. With General Motors jobs costing at the $73/hour rate, of which $19 goes into benefits and $22 into retiree benefits, and Toyota at $47/hour ($32 pay, $15 benefits), we will just have to let GM and Ford export business go gently into that good night, as the steel industry did. Guys, you are producing strictly for the US market. Chrysler is already being partly dismantled by its new owner, Cerberus.
There is minor domestic production in 2.0 and 1.5 liter engines, and some reputable hybrid –powered models, but a major technological effort is needed to recover export car business for US-based factories. The Chinese are into an under S10,000 model, and the Indians may have a $2,500 mini in the works.
This is not a new direction; since the 1950s US GDP has turned its 50% manufacturing prevalence into a less than 20% component, meanwhile shifting into service industries to take over the slack. Obviously, service does not produce cars, electronics and household equipment for export, not even for domestic consumption. We operate on the philosophy of letting low-pay foreign countries – Japan was the first one – do the production, until their standard of living rises enough for them to employ other 3rd world producers – such as the Little Tigers of Southeast Asia - and so on. Now we are in the third generation of the pass-along economies, with China and India the leading producers, and the US is still merrily chugging along, like biblical Babel or Berlin 1920, whistling at impending doom. We still maintain an edge in aircraft production, and the massive US agribus can still feed the hungry of the world, as long as the greenhouse effect does not ruin our water supply, and Mexicans come. American technology is still a fraction ahead of the world, and its finance industry gets to invest in developing countries, giving away domestic jobs to low-pay workers in various foreign maquiladoras, while bringing back big bucks for the capitalists. The laid-off Americans are encouraged to retrain for service or tech jobs, or can go into construction, building MacHomes for the wealthy. There’s also the reverse Mexican effect – American emissaries going abroad to work for our multinationals, sending bucks or Euros and such back home to the families.
Are US politicos dealing with this threat scenario? An educated electorate is a disgusted electorate, but as long as sports and Britney are in the news to keep us focused, the officials are safe. No worry, mates.
# posted by Wally Dobelis @ 9:06 AM 
