Saturday, November 29, 2008

Manufacturing cuts in Japan

Manufacturing cuts are a rule now. Check this link that talks of cuts in the supposedly super efficient companies from Japan.

The production cuts would of course be useful only if they create a substantial reduction in the costs. For companies with a high level of fixed costs in the form of expensive machinery or pension expenses, the cuts would not help much. They might be better off in reducing prices and hoping (and praying) that the demand picks up.

I am sure there would be other things to do. Companies of course have a reserve fund that they can use to survive in such periods. But there should definitely be other techniques that manufacturers can leverage on in these hard times. Reducing production and firing people seems to be a knee jerk reaction. I do not have a solid proof on what I am saying, but I hope I can create a complete picture in the next few posts.

Saturday, November 15, 2008

An America without manufacturing

Check this passionate appeal to save the automobile companies in the United States..
Part 1
Manufacturing has this unique ability of generating jobs for a lot of people directly and indirectly. An automobile factory needs vendors, who would themselves need vendors and so on. Since this is a sector on which so many people depend, and that has such a wonderful legacy of promoting the weaker sections (African Americans), should it be allowed to shut down? If we say no, are we not going against the basic principles of capitalism? Is the purpose of a firm job creation or is it profit?
If I take another view, is the motive of a firm its own profit or the benefit of the nation in which it conducts business? Would it be okay for an American company with invenstments from India to take a step that is in American interests but may not be slightly detrimental to the company?
Part 2
America has a rich history of innovations. They have a strong knowledge economy. Can the nation survive on the basis of this knowledge economy without owning their own source of manufacturing?
Part 3
America is supporting financial institutions. If these companies can be supported why not the Big 3?

I do not have answers. maybe at some point someone reading this might come up with something. I might add something myself later.