Auto Industry at a crossroads………….#innovation

Despite claims to the contrary there is little doubt that the Automotive Industry has lagged behind major social trends in terms of energy efficiency, global climate change & emissions.

For decades the industry did little to improve fuel efficiency until the oil crisis of the early 1970’s brought about the demise of gas guzzling V8’s & V12’s.

The industry now faces a perfect storm of stricter emissions controls particularly regarding Nitrous Oxide emitting Diesels & consumer pressure for a ‘green’ alternative.

This has all been exacerbated by the Volkswagen emissions scandal although to be fair to the Automotive suppliers they have been reacting to social pressure to reduce carbon dioxide emissions (from petrol cars) backed by Government incentives to increase diesel motors at the expense of petrol. This has been promoted in the U.K & elsewhere by reducing Road Tax on Diesel cars & making petrol relatively expensive.

Governments seem to conveniently forget it takes 5-7 years to bring a new model to market from initial concept to volume sales.

Whereas most of the major manufacturers have invested heavily in electric & hybrid alternatives they face disruption from ‘new’ players in the market like Tesla. Indeed future competition will come from the Technology sector & not the traditional Automotive sector.

It has been estimated that up to 80% of new cars are bought via ‘cheap’ finance, readily available due to historically low global interest rates. This cannot last & already there is talk of a finance bubble ready to burst.

The Auto industry faces many challenges over the coming years & needs to be fleet of foot & responsive to customer needs if they are to survive the next decade when technology & social changes will only become more pronounced.

Chris@amberhill.biz

www.amberhill-associates.com

Globalisation is Good………………………………..#innovation

design-processMuch has been said about the ‘evils’ of Globalisation & the impact on impoverished workers resulting in Brexit in the U.K & Trumps victory over the pond. But what about the positive impacts of Globalisation which are rarely trumpeted (excuse the pun)

The export of manufacturing jobs from the West to Asia has undoubtedly impacted on job security in the West but what about the subsequent cost reduction in the price of consumer products.

Also, hundreds of millions of people have been lifted out of poverty in China & Asia as a result.

Those very same products are bought by the same people who moan about foreigners stealing their jobs. A TV which can be bought for £200 in a UK supermarket would cost may times that if manufactured in the UK.

Protectionism is no answer to under employment. All that will happen is the Countries affected by Tariffs will introduce their own in ‘revenge’, take the auto industry as an example.

Every car manufactured in the U.S contains hundreds of components which are made abroad. If each of these components increases in costs the unit cost of the car goes up reducing competitive advantage & ultimately the business is bankrupt.

In the end everyone loses as bureaucracy strangles innovation & the economy shrinks.

The only way to ‘protect’ jobs is by investing in education & innovation. By producing individuals who can develop & create the products & services of the future. These will be made wherever it is cheapest to do so lifting the impoverished up the socio economic ladder & increasing their own economic power.

In the UK manufacturing is only 10% of the economy but we have some of the worlds best design & development Engineers earning good salaries creating innovative products even if they are manufactured overseas.

Apple is recognised as one of the Worlds most successful & innovative corporations employing thousands in well paying jobs – but not a single iPhone is made in the USA.

‘Putting America first’ may give short term gains but will ultimately end in disaster.

chris@amberhill-associates.com

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Gnomes predict AI to cause 7 million job losses……….#technology

artificial-intelligenceIn the U.K today salaries have barely risen in real terms in the last decade & despite decreasing unemployment many find themselves in the precarious position of holding short term contracts with minimal security.

It is hardly surprising that the introduction of Artificial Intelligence & automated technology fills many with dread.

The subject was recently discussed in Davos at the annual WEF meeting & the World Economics Forum predict a total loss of 7.1 million jobs, offset by a gain of 2 million new positions. (in 15 leading countries)

Like all new technologies there will be gainers & losers, most of the job losses will be in customer service industries & healthcare whereas the 2 million jobs will be mainly highly paid engineering & scientific roles to deliver these new technologies.

Of course none of this is inevitable. ‘The Future’ is not a destination which already exists & to which we travel inexorably. We all create the future & it is largely a result of the political & ideological choices we make on the journey.

Happy 2017.

chris@amberhill.biz

www.amberhill-associates.com

 

10 things we can learn from the #chinacrisis

 

 

 

 

 

 

CHINA07

1) What goes up MUST come down – I know it’s obvious but some people really believed it was possible for an economy to grow at 7% per year indefinitely – just ask the punters on the Shanghai Index.

2) Gordon Brown didn’t abolish boom & bust – but then we all learned that 7 years ago. Capitalism, for all its pros & cons, is inherently cyclical.

3) Every Market is interconnected – more so now than ever before, any crisis in China will be replicated to one extent or another around the globe.

4) No Government controls the market – whether its the State Capitalist Chinese or the Western Democracies – intervention is limited in its affect.

5) Transparency is a concern – Is the Chinese economy still growing at 6%, 5% or much less – no one knows & there is a distinct lack of trust in the data supplied by the Chinese government.

6) It will impact us all :- The Chinese economy is the second biggest market in the world & although exports vastly exceed imports the purchasing power of the Chinese middle classes will be severely curbed.

7) Social upheaval will follow – The political tensions in China will erupt (to one degree or another); The Chinese Government will struggle to keep a lid on the educated middle classes who have got used to continuous growth & increased wealth.

8) Capitalism is in crisis – as boom follows bust & vice versa Capital flows to the point of highest growth – leaving chaos in its wake.

9) What comes next ? – no one knows – but maybe we should be looking to develop a sustainable society based on full-filling human needs rather than continuously expanding Gross Domestic product ?

10) The sun still rises in the East, sets in the West & the world keeps on turning.

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#Insource is the new #Outsource

workersA recent report from Deloitte suggests that bringing jobs back in house (Insourcing) is a small but growing trend against the much larger tendency to Outsource which has dominated western industry for the last thirty years.

Companies are increasingly realizing that Outsourcing is no longer the best value option. Anyone who has been involved in Outsourcing knows it is never as simple as it’s made out, often requiring intensive effort from Managerial & Engineering staff & extensive, frequent travel. Not to mention increased wage costs in China & India, increased shipping costs and numerous supply chain delays.

The biggest issue Western companies face with Insourcing is the lack of trained, skilled staff to deliver the service. Having made thousands of workers redundant in the pursuit of cheaper Outsource options this is somewhat ironic.

This need may be met by making good use of the highly skilled Freelance professionals who operate in the market to satisfy just such demand.
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Why #innovation will fail in China

chinese-workersThe Chinese Government is pouring millions of yen into R&D in an effort to stimulate innovation in industry to stimulate growth in it’s internal markets.

This effort is aimed at increasing added value and moving China away from being the assembly shop of the world – and it’s doomed to fail miserably unless it is accompanied by sweeping political reform which, in itself, is extremely unlikely.

In order for innovation to thrive it is necessary to have a culture which allows open debate, which allows the challenge of pre-existing dogma & beliefs. It encourages the active participation of workers at all levels of the organization from the cleaner to the CEO. Innovation requires an open culture which values individualism.

All of this is impossible in a system which is strictly hierarchical, which jails political dissidents & artists & where the Party has the ultimate say in everything. Innovation is impossible in a culture of fear.

Unless the Chinese State Communist Party embraces democracy & undergoes serious reform any efforts to stimulate Innovation will fail miserably.
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The true origin of the Internet…………..#innovation

nixonIn July 1969 President Richard Nixon &  CIA director Richard Helms paid a secret visit to UCLA for a meeting with Head of Computational Studies Walther Fuchs.

It was after dark and Nixon & Helms were smuggled in a rear fire exit. Both were disguised and wore false beards and glasses in case they were spotted by some inquisitive student working late on her dissertation.

In the study of Fuchs  the 3 relaxed with Havana cigars and Hennessy Cognac. The study was lit by moonlight filtering through the thick drape curtains & a single green reading lamp on the worn teak desk.

The walls were lined with antique leather bound books and a few more modern tomes with titles like “packet mode switching” and “The fundamentals of Electricity”

Nixon exhaled slowly, blowing a couple of smoke rings before taking a large sip on his Cognac.

Helms eyes moved around the room constantly as if searching for something elusive.

Nixon – “Walter, we need your help & what you do must remain absolutely secret, you can’t even tell your Mother”

Fuchs – “Of course, anything for my Country Sir”

Helms – “we want you to develop a system which we can use to capture peoples communications”

Nixon – “….it should appear entirely voluntary, so that they divulge their innermost secrets at will”

Helms – “It will develop over time with more & more people becoming increasingly interconnected…..”

Nixon – “if you help us we will invest billions of dollars here at UCLA & develop a whole new industry to support it’s growth….”

Helms – “we will use it to fight International Crime & to defeat the Commies…”

Fuchs – ” there……there is something I’m working on it’s called ARPANET”

Helms – “sounds good but why don’t we call it the International Net……..or INTERNET..”

Nixon exhaled and blew smoke rings across the room.

Cameron’s Indian Takeaway………….#business

David Cameron has been visiting India again in an effort to drum up bilateral trade. Very laudable indeed. As we can see from Tata’s  investment in Jaguar Land Rover the company has come on leaps and bounds since the Indian Conglomerate took over the ailing British company in 2008 with billions of pounds investment.

There are also many areas where UK companies can help India, particularly in developing infrastructure which is one of the main bottlenecks to growth in the country & in improving telecommunications.

India is a vast country both geographically and economically. With a GDP of nearly 2 trillion GBP it is on target to become 4th largest in the world around 2020 at current growth rates.

Of course, India is not without it’s problems:-

  • Infant Mortality – 63/1000
  • 320,000 deaths from diarrhea per annum
  • Sanitation coverage 31 %
  • Only 15% of rural population has access to a toilet.
  • 29.8% below poverty line, most living on less than $2 per day.

India has come a long way in the last 20 years but it also has a very long way to go in eradicating poverty & disease within it’s own boundaries. Hopefully David Cameron can persuade his hosts to address these issues as well as selling them a few helicopters.

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Buy British because it’s British ? #business

There has been some debate in the Media recently about buying British products as a way of reducing the impact of the recession & preserving British jobs; so is this a good idea ?

We live in a Capitalist society (whether we like that or not) based on competition. The consumer has a free choice of which products to buy or not to buy & we tend to seek good value for money, regardless of origin. As a consequence we are pretty good at identifying products which deliver most “bang for the buck”.

In the 1970’s most of our Electronic products originated in Japan. Some people complained this wasn’t fair to British manufacturers but consumers continued to buy Japanese products because they were better quality and hence better value for money.

Now most of our electronic products are manufactured in China or Korea & people buy them because they are cheaper & better quality than their Japanese counterparts.

Jaguar Land Rover has been in the News recently because sales are up over 30% compared to last year, is this because these products are manufactured in Britain or because they are of exceptional quality and, though expensive, represent good value for money.

Over time products evolve and the companies which make them either grow – & their shareholders get richer or, if their products deteriorate the company shrinks, the shareholders lose money & eventually the company is bust.

So, in the long run, is the best way to preserve British jobs to buy inferior goods just because they are British or to buy the best value products whatever their origin & ensure quality increases & the fittest survive ?

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Our New Year hopes for 2013

2012 has been a pretty miserable year with freakish weather on both sides of the Atlantic, in the U.K  the highest rainfall since records began saw people washed out of house and home and businesses ruined. In the USA Hurricane Sandy battered the East Coast and several lives were lost, homes ruined & businesses destroyed.

Scandal followed scandal in the world of banking, PPI miss-selling, Libor fixing, Rogue traders etc etc

As austerity measures bite, wages decline & the economy bumps along the bottom like a flat baloon.

OK, so that was 2012, what do we want from 2013:-

  • Less emphasis on GDP and more on sustainability. The current system based on mass consumption, Consumerism & unsustainable growth fed by mountains of debt is bust ! We need to replace it with a more responsible, ecologically sound system based on managing the worlds scarce resources more effectively and equitably.
  • We need to take environmental change seriously. Whether there is a direct link between recent extreme weather & man made global warming is up for debate but there is irrefutable Scientific evidence that carbon dioxide emissions are having a direct impact on average global temperature. The long term consequences could be cataclysmic.
  • More People Power – the disaffection with the banks has led to huge defection to “community” banks like the Co-operative bank. Long may this continue. We are the mass consumers and we can have a massive impact by promoting ethical business practice & behavior.
  • Reduce our thirst for Oil – despite most of the Western world being in  recession (or near) the price of Oil remains stubbornly around $100 a barrel. There are a number of factors at work here but there is little doubt we have reached “peak oil” where future supplies will gradually decline and the price rise. We need to break the cycle by urgently seeking alternative energy sources AND reducing consumption. The Automotive industry has made great strides in recent years but nowhere near enough. Much more Innovation is needed in this area.
  • A flatter playing field – whilst workers real wages & salaries have reduced year after year the income of Senior Management & Board members has continued to rise. The gap between rich & poor gets larger every year. This defies rational thought. It is up to us to change things by greater political action, workers representatives on company boards, greater shareholder influence on remuneration committees etc etc. There is NOTHING inevitable about allowing this obscene poverty gap to continue increasing.

So there are some of our wishes for 2013. Whether they come true is up to me and you. All the best.
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