Transcript Slide 1

Oil Shock I and II – 1973 and
1979
Made in Japan
Six Stages of the Energy Crisis
• Between 1955 and 1971, demand in the
U.S. was outstripping supply
• 1972 rise in oil prices – OPEC
• 1973-74 – Embargo and panic
• 1975-78 -- President Ford – focus almost
entirely on supply – no long term policy
• 1979 – Iran and a Second Oil Crisis
• 1980-84 – Regan Era – OPEC
overproduction and new sources
Nye – pp.222-3: “The oil shock of 1973-74 was a
symptom, not a cause. The shortages revealed the
energy dependence and the vulnerability that the
United States had been building up for decades.
The high-energy middle-class standard of living
was not a victim of the energy crisis; it was the
source of the crisis. Compared with equally affluent
Europeans, Americans used roughly twice as much
energy per capita. Half the difference was directly
attributable to their transportation systems, and
much of the rest was due to their preference for
widely spaced detached houses.
We will mine more, drill more, cut more timber."
--Secretary of the Interior James Watt
World energy use
Total
~400 Quadrillion Btu
Coal
Geothermal, wind,
solar, etc.
Gas
RE
Biomass
(13.4%)
Nuclear
Hydro
Oil
(34.9%)
World: ~84 million barrels/day; US: ~21 million barrels/day
U.S. Energy Consumption
Energy Information Administration / Annual Energy Outlook 2006
U.S. Energy Production
Energy Information Administration / Annual Energy Outlook 2006
Electricity Generation
Energy Information Administration / Annual Energy Outlook 2006
Fertilizer Production Efficiency
Turning Petroleum into Food or
Fuel
Frank Moore – Black Pillow (1996)
Energy and Crop Yield
World per capita cereal production
0.39
Tonnes/person
0.37
0.35
0.33
0.31
0.29
0.27
0.25
1960
1970
1980
1990
2000
2010
Cereal Shortfall
MITI – Ministry of International Trade and Industry – Behind the
Success of the Japanese Automobile Industry
• Organizational Structures
• Policy Programs
• Conscious Planning
W. Edwards Deming – 14 Points
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Create and communicate to all employees a statement of the aims and purposes of
the company.
Adapt to the new philosophy of the day; industries and economics are always
changing.
Build quality into a product throughout production.
End the practice of awarding business on the basis of price tag alone; instead, try a
long-term relationship based on established loyalty and trust.
Work to constantly improve quality and productivity.
Institute on-the-job training.
Teach and institute leadership to improve all job functions.
Drive out fear; create trust.
Strive to reduce intradepartmental conflicts.
Eliminate exhortations for the work force; instead, focus on the system and morale.
Eliminate work standard quotas for production. Substitute leadership methods for
improvement.
Remove barriers that rob people of pride of workmanship
Educate with self-improvement programs.
Include everyone in the company to accomplish the transformation.
Complex Factors Contributing to the Japanese
Success Story
• Floating Yen to Dollar Values
• Tariffs
• Import Quotas
1936 Toyota
1957 Toyota Crown
1969 Corona
Honda History
1969 Datsun 240Z
1968-1971 –The American
Automobile Industry Began to Die
• John Jerome, The Death of the
Automobile: The Fatal Effect of he Golden
Era, 1955-1970 (1972).
• Helen Leavitt, Superhighway-Super-Hoax
(1970).
• Kenneth Schneider, Autokind vs. Mankind
(1971).
• Emma Rothchild, Paradise Lost (1973).
American Lemons of the 1970s
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1970-1976 Ford Pinto
1971-1975 Chevrolet Vega
1971-1977 Ford Torino
1975-1980 AMC Pacer
1977-1980 Dodge Aspen
1978-83 GM 350 Cubic inch Diesels
Post Oil Shock II Nadir -- 1979
• The small-car share of the U.S. market
doubled from 27% in 1978 to 54.2% in
1979, then rose to 61.5% by 1981.
• The share of the U.S. market held by
imports correspondingly increased from
17.7% in 1978 top 27.9% in 1982
The Key to Management – A
Quarterly Review System
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What are your objectives the next 90 days?
Charting goals with your immediate supervisor
It holds you accountable
Decisiveness!!!
Managers must be motivators
You Must be able to communicate your ideas
You Must be able to listen
You must love everyone on the team
Tom Paxton – “I’m Changing my
Name to Chrysler”
Oh the price of gas is rising out of sight,
And the dollar is in sorry shape tonight What the dollar used to get us,
now won't buy a head of lettuce No the economic forecast isn't bright
But amidst the clouds I spot a shining ray, I can even glimpse a new and better way
And I've devised a plan of action, worked it out to the last fraction
And I'm going into action here today
cho: I am changing my name to Chrysler,
I am going down to Washington DC
I will tell some power broker what they did for Iacocca Would be certainly acceptable to
I am changing my name to Chrysler, I am headed for that great receiving line
And when they hand a million grand out I'll be standing with my hand out
Oh yes I'll get mine
Lessons from the Chrysler Bailout
• Many people forget that Chrysler was
forced to come up with $2 billion in
concessions from unions, white-collar
employees, dealers, suppliers and
banks as part of the deal. State and
local governments connected to plants
provided tax concessions, and Chrysler
was required to adhere to tight
government supervision after they
received the loans.
Japanese Automobile Production, 1955-1984
Year
1955
1960
1965
1970
1975
1980
1984
Production
68,932
481,551
1,875,614
5,289,157
6,941,591
11,042,884
11,464,920
From Mass Production to Lean
Production – 1980s onward
• Lean Production uses less of everything
compared with mass production
• Half the human effort in the factory
• Half the manufacturing space
• Half the investment in tools
• Half the engineering hours to develop a
new product in half the time
• Half the needed inventory on site
The goal of lean production is
perfection
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Continually declining costs
Zero defects
Zero inventories
Endless product variety
Mass Production vs. Lean Production, 1986, GM vs. Toyota
GM, Framingham, MA Toyota, Japan
Gross Assembly
Hours per Car
40.7
18
Defects Per Car
130
45
Assembly Space Per
Car
8.1
4.8
Inventories of Parts
2 weeks
2 hours
Japanese Assembly Plants in North America, to 1989
Firm
Location
1989 Production
Capacity
Honda
Marysville,OH; East
Liberty, OH; Alliston,
ON
351,670
360,000
NUMMI, Toyota/GM
Fremont, CA
192,235
340,000
Toyota
Georgetown, KY;
Cambridge, ON
172,000
290,000
Nissan
Smyrna, TN
238,640
480,000
Mazda
Flat Rock, MI
216,200
240,000
Diamond Star,
Chrysler/Mitsubishi
Bloomington, IL
91,839
240,000
SIA, Subaru/Isuzu
Lafayette, IN
120,000
CAMI, GM/Suzuki
Ingersoll, ON
200,000
North American Assembly Plants Opened or Closed by AmericanOwned Automobile Companies, 1987-1990
Company
Plant
Year Closed
GM
Detroit
1987
GM
Norwood,OH
1987
GM
Leeds, MO
1988
Chrysler
Kenosha, WI
1988
GM
Pontiac, MI
1988
GM
Framingham, MI
1989
GM
Lakewood, GA
1990
Chrysler
Detroit
1990
Chrysler
St. Louis
1990
GM
Pontiac, MI
1990
Robots: 26,000 in use by 1987 in
the U.S.
• Flexible robotics thus has reconciled
Fordism and Sloanism, with truly
revolutionary implications for automobile
manufacturing.
• The result: more diversity of product,
manufacturing techniques are more
precise, quality improved, labor costs
reduced.