Bringing It All Back Home

Automotive News reports that expansion in the use of robotics and the increased use of battery packs will drive the repatriation of car production to Europe and the US.

Not many people work in the factory of the future: Reuters.
Not many people work in the factory of the future: Reuters.

The gist of the story is that it will make less sense to have production of vehicles in places such as China (far from the West) when robotics can replace labour, when the parts are costly to ship and when the cost of over-seas labour is rising. The effect will be to make it once more economically sensible to have car production in the US and Europe that might previously have been unprofitable.

Such a development can be judged from a variety of view points. The Chinese won’t like it as they are very keen to have the jobs and the exports. Those employed in new, more automated factories will be happy. And those who see the total amount of labour falling might be unhappy as the question arises who will buy the cars if fewer people are employed globally. For individual firms, there is a relative competitive advantage in reducing labour. You can lower your unit cost and increase profits.

The problem arises when everyone has done this or gone to the wall. And the process can’t be stopped. Once the technology exists to make a thousand widgets with ten people instead of fifty, that technology will become universal. Only growth in the market overall can cause an increase in labour demand so that maybe an eleventh or twelfth body is added to the workforce. Where do the other forty people go in the meantime?

The closure of Rover in the UK was followed by a study of where the labour force went. Most had jobs 18 months later or had retired. Of those who found jobs, the majority had taken a pay cut.

You can understand the pattern of labour loss as something like this (the numbers are for illustration): 10,000 production line workers in Europe, 5000 in China, 1000 back in Europe. Globally, 9000 workers are surplus to requirements.

Author: richard herriott

I like anchovies. I dislike post-war town planning.

12 thoughts on “Bringing It All Back Home”

  1. Somebody has to make the machines that make the machines that make the machines ad infinitum

    1. What if it is machines that make the machines that make the machines ad infinitum?

    2. If and when that happens mankind will have ceased to exist since the machines will certainly have no need for us. Actually we have reached a point today where we are so dependant on machines that if every system stopped there would be catastrophic loss of life.

  2. I will believe it when I see it. The car companies will need more and better engineers to keep those future robot factories running. In Europe there’s already a shortage of engineers. In developing countries however there are plenty. My conclusion: it’s not unlikely that the plants will remain in the developing countries…

  3. The engineer shortage is perplexing. Why aren’t younger folk flooding into this sector? Any suggestions? I think the machine makers will be busy forever. It’s the blue-collar labour that is problematic. It is widely believed by futurologists that this period of innovation will not see jobs created by technological disruption equalling those lost. I’d love to be optimistic but can’t see grounds. Inductive arguments don’t carry much weight with a curmudgeon like me.

    1. I think it’s because we (the younger people) are being told over and over again how we’re “unique snowflakes” and should all be great artists/entrepreneurs/celebrities. Thus, engineering appears as a boring, rigid career choice, which also requires people to actually learn something meaningful.

  4. I wonder what the context was behind the Magna International CEO’s quotes that form the basis of the story. It sounds like something to reassure investors or stakeholders such as governments with Magna facilities in their jurisdiction that there is still a viable future for components production in Europe and North America rather than those plants and jobs disappearing to China. In terms of manufacturing capability moving back to Europe from China, local content rules for manufacturing in countries like China will mean that some percentage of component manufacture will have to take place locally, rather than being shipped-in from a hyper-efficient robofactory in the EU.

    The shortage of engineers in ‘developed’ countries is a huge topic. I can’t speak for the
    latest crop of students and why they aren’t looking to engineering for a career. But for me engineering disappeared as a viable higher education & career pathway behind a wall of mathematics, that versatile number-based barrier to proceeding with a career in science and technology. I know there’s more to engineering than mathematics, but that’s like telling someone with a peanut allergy there’s more to a snickers bar than peanuts.

  5. Yes, the amount and complexity of stuff one has to learn and understand as an engineer is a natural barrier for this kind of career. But I see more behind it. At least in Switzerland, there is an alarming tendency to strengthen language subjects in school on the expense of mathematical / scientific topics. Add to this a general anti-intellectualism and scepticism against science (although we’re not on the level to ban evolution theory yet). And in the end regarding careers, the big money lies in banking, finance and management, not engineering.

    1. I agree, ‘maths allergy’ was my problem but doesn’t explain away the rise of business schools and a job in financial services as an easier path to wealth.

  6. Germany is for sure a country with high wage costs, but Ford is still able to produce the Ford Fiesta, a relatively cheap car, in Cologne – and Ford earns money with the Fiesta. So i am a little bit tired of hearing the same argument for at least twenty years.

    Being a good location for producing cars depends not only on wage costs, it depends on so many infrastructural aspects. Education is very important, the absence of corruption and political turbulences too.
    And in my opinion, a normal car should be produced by men who can afford to buy this car from their wages.

    1. Your last point is an excellent one, Markus. Instead of using new technologies to make cars cheaper, we’ve use them to make them more complex. Unlike, say, TVs, the average car has, roughly, increased in cost with average European wage levels. Of course there are environmental reasons why we might not want super-cheap cars but, generally, the road to decadence is a society that likes its luxuries, but expects another society to produce them all.

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