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March 26th, 2012
“I don’t even know what street Canada is on,” Al Capone once said. But Canada’s prime minister, Stephen Harper, is determined to make sure he puts Canada on the map with one key global power: Japan.
If he accomplishes his goal, it could have ramifications for the automobile industry, agriculture and the Midwest in general.
Harper opened negotiations this weekend with Japan on a free trade agreement. Negotiators were careful to caution against any quick resolution, because it can take years to negotiate such deals, and Japan isn’t known for speedy decision making.
But, a Canada-Japan trade agreement would join one between Japan and Mexico — and leave the United States as the only North American country without one.
There are some big trade numbers involved. Canada ships $4.6 billion in goods each year to Japan, and imports $12.8 billion, largely in automobiles and auto parts.
“Canadian businesses have much at stake in these negotiations,” said Jayson Myers, president of the Canadian Manufacturers and Exporters association. “Japan is a strategic commercial partner; however it is also a country with whom we’ve had a persistent trade deficit when it comes to manufacturing.”
There’s no guarantee that a trade agreement would change the trade deficit, but there could be some significant changes as a result. For example, Canada charges a 6.1 percent tariff on imports of Japanese autos and auto parts.
The United States charges a 25 percent tariff on imports of small trucks, and it’s imposed various penalties in the past.
A free-trade agreement could help sway Japanese automakers, who recently have been on an expansion drive at their American factories and could send more production overseas due to the strong yen.
Toyota recently indicated that it might expand at its Cambridge, Ontario, plant, and friendly relations between the two countries might influence Toyota, or another Japanese automaker when it’s time to choose a plant site.
And the pact could mean more opportunities for Canadian farmers, who have always faced obstacles in shipping products to Japan.
As you’re thinking about Canada, here’s list of 10 songs by Canadian artists about our neighbor, with some familiar songs and others you may never have heard of. And no, the list does not include Blame Canada.
March 12th, 2012
A year ago, people in the Midwest were realizing the damage that the massive earthquake and tsunami had done to Japan. And, while the region affected by the earthquake is starting its long recovery, everyone here has learned some permanent lessons.
1) We are all connected. To borrow a phrase from the Symphony of Science, the earthquake on the coast of Japan reminded us of how closely linked everyone is on earth. The earthquake disrupted parts and vehicle production for automakers overseas and in the United States for months — and had a significant impact on the Midwest.
All across the region, companies, charities and even chefs stepped forward to help people affected by the disasters in Japan, sending everything from portable toilets to gas tanks and of course, cash. At Takashi, in Chicago, an all-star team of restaurant owners from around the city stepped up to cook a meal whose proceeds benefited the American Red Cross.
2) Recovery is not instantaneous. We live in a world of the 24-hour news cycle, where word of events happening in one place can be beamed around the world within seconds via Twitter and Facebook. But the comeback for Japanese companies has been a step by step process.
One example is the automobile industry, which is vitally important to our region. Toyota, Honda, Nissan, Mitsubishi and Subaru all have factories and employees in our states.
In March 2011, the same month as the earthquake, Japanese automakers held 40 percent of American sales, according to statistics from Autodata, Inc. By June, with parts and vehicle deliveries disrupted, that fell to 30 percent of the market.
Last month, Japanese automakers held 37.8 percent, their highest share since the earthquake, but they are not yet back to where they were.
3) Diversify your production base. Over the past year, Japan’s currency has been at an all time high against the U.S. dollar. That, plus the disruptions caused by the earthquake, is causing a number of auto companies to hasten the shift of production from Japan to the United States.
Toyota told journalists in Toronto last month that it is looking at shifting Lexus and Prius production east from Japan, due to the super-strong yen.
That’s on top of a $400 million expansion that’s taking place at Toyota’s Princeton, Ind., plant, which will become its only global location for the Highlander, a sport utility vehicle. And, Toyota’s new plant in Blue Springs, Miss., which opened in November, is already up to its full component of 2,000 workers.
Honda is expanding in Ohio, where it’s building a new engine and transmission family. It also will build the NSX sports car, which returns in 2015 for the first time in a decade, at a new facility in Marysville.
4) Know your nukes. The weeks-long crisis at Japan’s nuclear power plants caused many Midwesterners to realize that our region also relies in part on nuclear energy. There are 24 nuclear power plants around the Great Lakes, including 11 reactors in Illinois.
Michigan has four, Wisconsin has three and Ohio has two. There are none in Indiana. Meanwhile, the U.S. Energy Information Administration offers an in-depth look at each state’s nuclear power status. Here are their entries for Michigan, Illinois, Ohio, and Wisconsin.
December 19th, 2011
Here at Changing Gears, we can’t let 2011 go by without marking a revolutionary anniversary. Fifty years ago, in 1961, GM installed the first industrial robot. It altered the course of manufacturing forever. Unimate was a robotic arm that unloaded hot pieces of die-cast metal. Joseph Engelberger, known as “the father of robotics,” saw the invention as a way to replace dangerous, dull and dirty jobs.
Unimate actually had two fathers – George C. Devol, who died in August at age 99, and Engelberger, who is still alive. Back in 1966 Engelberger joined Unimate on “The Tonight Show” with Johnny Carson, where he (the robot) sank a putt and opened a can of beer. We were struck by the wonder of that moment, the enthusiasm for the power of automation. Chrysler and Ford followed GM’s lead, but it was Japan that fully embraced the new robotics.
Pete Bigelow · Midwest Memo: Budget Cuts Concern Chicago Aldermen, Japanese Currency Adjustment Angers Michigan Contingent
November 2nd, 2011
Three stories making news across the Midwest today:
1. Chicago aldermen send Emanuel letter. Saying proposed Chicago budget cuts would hurt public safety and quality of life, a majority of the city’s 50 aldermen have called for Mayor Rahm Emanuel to alter his 2012 city budget. Our partner station WBEZ reports that 28 aldermen signed a letter that said the cuts would cause too many layoffs at city libraries, close too many mental health clinics and endanger public safety. Also, the letter stated they have “reservations” about the doubling of fees for city parking stickers for SUVs.
2. Projected layoffs drop across U.S. After planned layoffs across the U.S. hit a 28-month high in September, they dropped 63 percent to 42,759 in October, according to a new report. Government and financial sectors keyed the rebound, said outplacement consulting firm Challenger, Gray & Christmas. But “the two sectors are not out of the woods, by any means,” John Challenger, CEO, tells the Chicago Tribune. Employers have announced a total of 521,823 planned layoffs so far this year, a jump of 16 percent from 2010. The report comes in advance of Friday’s October jobs report from the federal government.
3. Michigan Senator Slams Currency Adjustment. U.S. Senator Debbie Stabenow of Michigan and a trade group that represents Detroit automakers criticized a decision by the Japanese government to lower the value of the yen. “Currency manipulation gives other countries an anti-competitive advantage and directly translates to lost American jobs, especially in Michigan,” Stabenow told the Detroit News. The automotive trade group that the move, the third this year, essentially subsidizes Japanese exports to the United States while weakening U.S. exports to Japan.
September 26th, 2011
Throughout his economic development trip to Asia, Michigan Gov. Rick Snyder has had an unlikely ally.
Detroit Tigers ace Justin Verlander.
The sure-fire Cy Young award winner isn’t actually traveling with the governor – he’s busy helping the Tigers contend for the American League pennant. But Snyder has been chatting about Verlander and his team’s success with his Japanese counterparts before meetings turn to the subject of bringing business investment to Michigan. He’s been giving gifts of Detroit Tigers hats.
“I presented several of them to different people today,” he tells MLive.com. “I gave one to the Japanese commissioner of baseball. And they love the Tigers. They know all about Verlander and how the season’s going.”
Will Snyder and his entourage find similar success on his overseas visit? The Detroit Free Press reports Wayne County officials are pitching a 1,000-acre site that straddles Plymouth and Northville ownships to battery suppliers in hopes of creating a “cluster of high-tech battery makers and suppliers” in western Wayne County.
“There’s a lot of emphasis this trip on battery development and energy,” Robert Ficano, the county’s CEO, told the newspaper.
Snyder sold the virtues of a revamped tax structure to his Japanese hosts on Sunday and Monday, saying it has made Michigan’s business climate friendlier to outside investment, and that a two-year balanced budget has increased the state’s fiscal stability.
“We have been busy reinventing Michigan, breaking some bad habits of the past and embracing new opportunities for our future,” he said in a written release. “We have come to open new doors for trade and business between our state and Japan. We see many great opportunities ahead for all of us to do more business together.”
His trip began Sunday, and includes stops in Japan, China and South Korea. On Monday morning, he said Japanese firms employ more than 32,000 Michiganders and that he’s intent on growing the relationships that create those jobs during the course of his visit.
This is his first official overseas visit as governor, but it’s hardly a new strategy in the Midwest. In June, Changing Gears reporter Dan Bobkoff examined Toledo, Ohio, and the efforts of the city’s leaders to court investments from China. Former Missouri Gov. Bob Holden is now chairman of the U.S. Midwest China Association, an advocacy group that believes in a regional approach to wooing Chinese business.
And under Ficaro, Wayne County, already operates four offices in China: Chonquing, Wohan, Nanjing and Beijing.
It’s been five months since the Japanese earthquake and tsunami. The human toll from the disaster has been well documented, along with the ongoing nuclear safety issues. And, Japan is seeing a food safety issue, as well.
As I reported back in March, the economic ties between Japan and the Midwest are strong. Governors from Illinois, Iowa, Michigan and Minnesota are attending the 43rd annual joint meeting of the Midwest U.S. – Japan Association in Tokyo next month, the Japan External Trade Organization reported in its most recent newsletter.
Most recent manufacturing output data shows that the U.S. auto industry has been able to bounce back from disruptions because of the earthquake, Reuters reports.
But it’s not just the auto industry. Also in the JETRO newsletter: the story of healthcare giant Abbott Laboratories, which has its global headquarters just north of Chicago, and how it dealt with the earthquake.
Abbott has 2,400 workers in Japan, and said it learned lessons about how to deal with its people and its operations. For example, the company found that it had good relationships with its first and second tier suppliers. Further down the chain, with its suppliers’ suppliers, was just as vital, but harder to track.
“We saw first-hand the importance of drilling down to identify the basic components of the product supply chain and developing contingency plans for every element, especially for single-sourced items,” said Corlis Murray, an Abbott vice president of global engineering services. You can read the whole story here.
Pete Bigelow · Midwest Memo: Cook County’s Foreclosure Crisis, and How a Debt Default Could Affect Michigan
July 29th, 2011
Three stories making news across the Midwest today:
1. Cook County’s foreclosure crisis. Despite proclamations that the recession is over, officials in Cook County, Illinois are nonetheless concerned about the 70,000 outstanding foreclosure cases within their borders. They held an emergency summit Thursday to discuss possible responses, according to our partner station WBEZ. Community organizer Leon Finney says the group will consider “home-ownership counseling, tighter bank regulations and stronger courts.”
2. Debt concerns reach Michigan. The state of Michigan receives approximately $400 million per week in federal funds, receipts that make up 44 percent of its $45 billion budget. John Nixon, the state’s budget director, isn’t sure how Michigan will continue to make payments next week if the federal government defaults, according to the Associated Press. Gov. Rick Snyder is concerned. “We’re prepared for a number of scenarios,” he told the AP.
3. Japanese manufacturing rises. Japanese manufacturing activity, which has strong ties to the Midwest economy in the U.S., saw activity increase at the fastest pace since the March nuclear disaster in July, according to Reuters. The Markit/JMMA index rose to a seasonally adjusted 52.1 in July, up from 50.7 in June. It’s the third straight month the manufacturing sector expanded, and an expert says if the trend is sustained, it will be “a vote of confidence in the economic outlook.” Earlier this year, Changing Gears examined the ripple effects of the Japanese economy throughout the Midwest.
Toyota’s reputation for quality suffered a significant blow the past two years in the wake of millions of recalls. Now, a blue-ribbon panel of outsiders says the Japan-centric carmaker must give its managers and employees in North America more authority to jump on problems, in order to prevent another such crisis.
The Toyota North American Quality Advisory Panel also said it found Toyota paid less heed to problems reported by its customers, regulators and outside experts, than it did to those inside the company. Moreover, its quality and safety efforts were hindered by its slow decision making process, the panel said.
“Although Toyota is in the car manufacturing business, it — like most modern corporations — is also a decision factory,” said a report from the panel, issued this morning. “Toyota’s reputation in North America increasingly will be based as much on the quality of its decision making as on the quality of its vehicles.”
In a statement, Toyota chief executive Akio Toyoda said he appreciated the panel’s candor. He said the report had given the company “further insights into how we can achieve our vision of exceeding customer expectations with the safest and most responsible vehicles.”
The panel was assembled last year as Toyota was under heavy scrutiny from Congress and the Transportation Department over defects in its cars. It does not shed new light on the causes of sudden unintended acceleration in Toyota cars, but focuses intently on the way Toyota is run.
The panel’s conclusions have special significance for the Midwest. Although its headquarters remains in Japan, Toyota has hundreds of engineers, designers and safety experts at its operations in Ann Arbor and York Township, Mich. Its North American manufacturing headquarters sits just outside Cincinnati, and it builds vehicles in Princeton, Ind., as well as in the South and Ontario.
_________________________________________________________________________________________________________ Do you own a Toyota, or have an association with the company? What do you think of the report’s conclusions? Tell us in the Comments section below.
The panel, whose work will continue, is headed by former Transportation Secretary Rodney Slater. It began work as Toyota was besieged by reports of sudden unintended acceleration in its vehicles, including a series of high profile accidents. Toyota recalled more than 8 million vehicles worldwide for two problems: sticking accelerator pedals and floor mats that could become caught in the pedals.
At the time, a number of experts suggested the problem’s root cause lay partly in Toyota’s aggressive drive the past decade to become the world’s biggest carmaker. Despite having the Toyota Production System, which is designed to emphasize quality and eliminate defects on the factory floor, Toyota had stretched its resources too thin.
Though it had expanded world wide, decision making authority still lay primarily in Japan, where a cultural emphasis on consensus routinely means action is slower than in other parts of the world. Moreover, the company sometimes took action on problems in one part of the world without informing operations elsewhere that the issue had occurred.
The panel, which was given access to Toyoda and other company executives, plants and other operations world wide, said that approach worked against the company in its efforts to stem the recalls.
In North America, it said, Toyota still lacks a chief executive in charge of all its divisions (such as sales and marketing, general corporate, engineering, and manufacturing). Instead, there are individual heads of each division, each of which reports directly to Japan, resulting in what management experts call “silos.”
“This structure contributed to several of Toyota’s quality and safety issues in North America,” the report said. The Japan-centric approach “hindered information sharing and contributed to miscommunication” and “delayed response time to quality and safety issues, fueling criticism that Toyota was being unresponsive to regulators and customers.”Because Toyota traditionally combined its quality and safety operations, Toyota did not have an senior executive designated with overall responsibility for safety until recently. Nor, the panel said, could the group identify “a clear management chain of responsibility for safety.”
Toyota executives have often insisted that everyone in the company bears responsibility for safety as well as quality.
However, the panel members said they were concerned that “this safety philosophy might suffer from the old adage, ‘when everyone is responsible, no one is accountable,’” the report said.
The lack of a single executive responsible for safety on either a regional or company-wide basis “might diminish accountability for safety issues raised both inside and outside the company.”
Because of its inward focus, Toyota did not give the same weight to complaints by its customers, and others outside the company, such as federal regulators and analysts, the panel said. That is seen as serious criticism for a company that has always emphasized the importance it places on customer feedback.
On the vehicle assembly line in Toyota factories, any worker can pull a rope called an “andon cord” to slow or stop production so that the problem can be quickly fixed, the report said. “But when external sources have complained about quality and safety issues, it has often taken Toyota too long to pull a metaphorical andon cord and quickly try to solve the problem.”
Instead, Toyota initially reacted to consumer complaints and other issues “with a degree of skepticism and defensiveness,” the panel said.
The report “confirms our view that Toyota’s culture–one that works well in times of stability–left it uniquely vulnerable to a fast-moving crisis, such as the safety issues that enveloped the company last year,” said Jeremy Anwyl, the chief executive of Edmunds.com, a web site that offers car advice to consumers.
However, the panel members said they were optimistic that Toyota would improve its quality and safety, even though the work will have to take place as Japan is rebuilding from the March 11 earthquake. At a news conference today, panel members said they had seen “many, many changes” internally, in response to the crisis.
“Toyota is clearly a great company that is capable of doing great things for drivers, for the countries in which it operates, and for the world of business,” the panel said.
Read the full report here. EMBARGOED_COPY_Toyota_Quality_Advisory_Panel_Report
In the month since the devastating earthquake that struck Japan, groups from all over the world have raised millions of dollars for relief efforts. They include students from the University of Michigan, who have raised over $21,000 to help those affected by the quake and tsunami.
To celebrate this, and thank those who donated, the Ross Japan Business Association is holding “Japan Night,” an event Thursday evening. Japan Night will feature sushi, a martial arts performance, and a traditional Taiko drum performance among other things.
Shujiro Toyofuku, president of the association said a variety of student groups at Michigan decided specifically to do something related to education. They turned to “Peace Winds Japan,” an nongovernmental organization (NGO) focused on aid in Japan and elsewhere around the world. Together, they came up with a solution.
“All of the proceeds that come from the series of fundraising events will be used to help the mental recovery of the children affected by the series of tragic events,” said Toyofuku.
Specifically, the funds are going to mental recovery efforts for the children of Kesennuma, Japan, a city that was especially hard hit by the earthquake and tsunami.
Toyofuku’s family lives in Tokyo and Southern Japan, so they escaped the worst of the earthquake and tsunami, but are shaken by the damage to their country as well as constant after shocks.
The group is taking donations through the end of the month on their website.
You can listen to some of my conversation with Toyofuku here.
Or check out a demonstration of a traditional Taiko drum performance:
It’s been more than a week since Japan was ravaged by the first of a series of earthquakes as well as a tsunami. The harm from those natural disasters is still unfolding, as the world watches what happens to several damaged nuclear reactors in Japan. But in the Midwest, companies are trying to figure out what the events in the island nation will mean for businesses here.
Changing Gears reporter Niala Boodhoo filed a report for NPR’s Morning Edition looking at Japan’s economic ties to the Midwest. There are about 160,000 people in the Great Lakes region working for Japanese businesses, from Caterpillar Inc, which employs more than 5,000 people in southern Japan and Tokyo, to smaller companies like ITA, which counts 18 people on its payroll.