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 – Embargo and panic President Ford – focus almost entirely on supply – no long term policy 1979 – Iran and a Second Oil Crisis – Regan Era – OPEC overproduction and new sources

Nye – pp.222-3: “The oil shock of 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 Coal Nuclear Oil (34.9%) Gas Hydro Biomass Geothermal, wind, solar, etc. RE (13.4%) Total ~400 Quadrillion Btu 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

Frank Moore – Black Pillow (1996) Turning Petroleum into Food or Fuel

Energy and Crop Yield

Cereal Shortfall

M. King Hubbert October 5th, October 11th, 1989 "Our ignorance is not so vast as our failure to use what we know."M. King Hubbert

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 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

–The American Automobile Industry Began to Die John Jerome, The Death of the Automobile: The Fatal Effect of he Golden Era, (1972). Helen Leavitt, Superhighway-Super-Hoax (1970). Kenneth Schneider, Autokind vs. Mankind (1971). Emma Rothchild, Paradise Lost (1973).

American Lemons of the 1970s Ford Pinto Chevrolet Vega Ford Torino AMC Pacer Dodge Aspen GM 350 Cubic inch Diesels

Post Oil Shock II Nadir 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 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 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

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 me 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 Tom Paxton – “I’m Changing my Name to Chrysler”

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, YearProduction , , ,875, ,289, ,941, ,042, ,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 Continually declining costs Zero defects Zero inventories Endless product variety

Mass Production vs. Lean Production, 1986, GM vs. Toyota GM, Framingham, MAToyota, Japan Gross Assembly Hours per Car Defects Per Car13045 Assembly Space Per Car Inventories of Parts2 weeks2 hours

Japanese Assembly Plants in North America, to 1989 FirmLocation1989 ProductionCapacity HondaMarysville,OH; East Liberty, OH; Alliston, ON 351,670360,000 NUMMI, Toyota/GMFremont, CA192,235340,000 ToyotaGeorgetown, KY; Cambridge, ON 172,000290,000 NissanSmyrna, TN238,640480,000 MazdaFlat Rock, MI216,200240,000 Diamond Star, Chrysler/Mitsubishi Bloomington, IL91,839240,000 SIA, Subaru/IsuzuLafayette, IN120,000 CAMI, GM/SuzukiIngersoll, ON200,000

North American Assembly Plants Opened or Closed by American- Owned Automobile Companies, CompanyPlantYear Closed GMDetroit1987 GMNorwood,OH1987 GMLeeds, MO1988 ChryslerKenosha, WI1988 GMPontiac, MI1988 GMFramingham, MI1989 GMLakewood, GA1990 ChryslerDetroit1990 ChryslerSt. Louis1990 GMPontiac, MI1990

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.