Creative Destruction

The transition to electric is creating a dynamic called creative destruction. As new technology advances certain industries have to adapt or change. In this, some jobs are lost and new ones created. Think of the photo-film industry, or the more basic camera industry where Smartphones are replacing cameras. Another example is there is no longer coal delivered to homes for heating. Creative destruction is also present in the automotive industry. It takes many fewer parts to manufacture an electric car engine than a gasoline engine. No catalytic converters to be stolen either. The auto strike is not just about wages, but the sense the union has that fewer jobs will be required in the future with the move to electric vehicles. Ford claims their new $1 billion battery plant, on which they have currently suspended construction, is being held hostage by the UAW.  In the meantime, Biden, who has been touting electric vehicles, visited the picket line for 15 minutes, spoke for one minute before heading to a fundraiser in California. 

The "big" three in the US, Ford, GM and Stellantis, have significant headwinds in competition with the union ask. The union, among many other things, seeks a 40% pay increase, but a 32 hour work week (essentially a 75% pay increase). Other head winds include the US publics continued support of purchasing non-union made vehicles. More than half the vehicles built in the US are foreign brands that are made in non-unionized factories. The Honda, Toyota, Subaru, Kia, etc. buyers are all buying non-American worker union assembled vehicles. For example, in Massachusetts over 70% of vehicles sold are foreign brands, California, the most populous state in the Union, is fourth at almost 65%. Non-union jobs at the plants generally result in lower wages, more temporary workers, and more profit than the three unionized brands in the US. 

Auto workers on strike

Of the ten states that purchase the highest percent of non-union assembled vehicles, all but one was a "blue" state, and of ten with the highest percent of union assembled vehicles were all "red" states. Apparently, there is a lack of support for the Biden American worker union agenda, at least the UAW. The American fascination with foreign vehicles is hurting the American union worker more than the bigwigs at the three companies.

Besides higher wages, lower profit margins, and lack of US union assembled vehicles being purchased, the union demands also come at a time of transition, or that creative destruction process. More so than at any time in the past, auto manufacturers need to invest in research and development to best accommodate the move away from gasoline engines. The transition to electric, and even perhaps hydrogen (or even another unknown fuel source) demands different ways of thinking and developing product. More money paid to labor means less funding available for research and development. With all these headwinds, can it be concluded that the US auto manufacturers are on a shoe string? Another head wind also comes from the Biden Administration in their proposed 58 mpg average gas mileage standard for 2032. It has been estimated that the big 3 will owe a whopping $10.6 billion in penalties a year, provided they are still in business, with $6.5 billion from GM. To put this in perspective, the total penalties paid TO DATE for not achieving past and current in place average mpg is $1.5 billion. When I was growing up with the oil crisis in 1979, many people talked about how the auto companies could make cars with 60 mpg or higher. That was a false narrative. One may get that with a hybrid, but if a gasoline engine could power a standard sized auto at that mpg, I don't think a manufacturer would hesitate to have put it on the market over the pasts two generations.

Electric vehicles face problems. A planned photo-op went awry when a Biden appointee was in an electric vehicle and her staff rode ahead in their gas powered cars and sat at a charging station, to reserve it for her when she arrived. Before her arrival, a couple showed up who needed the charger for their electric vehicle and her staff refused to let them charge their car. Law enforcement eventually was called in. Partially, this shows the unavailability of charging stations. In August, a Canadian man traveling to Chicago had to abandon his electric truck due to lack of charging stations. He completed the trip in a rented gas powered truck. It takes a lot longer to charge a vehicle than to fill it with gas, and coupled with generally much shorter range, electric cars are good for the normal commute, but not for vacation and road trips. I don't think an electric car could make it to Minneapolis on one charge from Madison. Further, it is said, the electric grid in most housing areas lacks the wire and power capacity for many homes to charge a vehicle at the same time. we love electricity, but do not like the high voltage power lines required to provide the electricity. An electric car is a viable option as a commuter car, but don't expect a long road trip. As usual, the American public, and perhaps the government, want it both ways.

Another measure of desiring both ways, is the batteries required to power all of this stuff, but not the mining to provide the minerals and resources at least in the US. The Biden Admin made a deal with the Congo for mining of some of the minerals, apparently not caring about the lack of environmental standards and the resulting pollution, much less the child labor that is used. It is apparently acceptable for the US to outsource mining (and oil wells), with little regard for the pollution and people. Apparently out of sight out of mind. The nation is externalizing the negative impacts of industrialization. The US gets the benefit and the Third World or developing countries get the negative side effects. If the nation had to put up with the negative side effects of industrialization, perhaps people would be more conservation minded.

People have responded not necessarily by buying an electric only car, but a purchasing a hybrid. The hybrid allows the long range desired on a gas engine, but to save some emissions when in city use. Hybrid cars themselves use something like 24 rare, or near rare, earth minerals. In desiring how "green" an item is, should not its overall footprint on the earth's resources be taken into account? 

Yet, for batteries, could help be on the way with battery power? Technology is ever changing. University of Central Florida scientists, following a few hurricanes, noticed how the typical lithium ion batteries can more easily catch fire after saltwater intrusion. Gas car fires go out quickly as that is the way gas burns, but lithium battery fires go on and on, posing greater risk, and a great deal more water and effort to extinguish. The UCF battery actually uses naturally occurring metal ions found in saltwater--sodium, potassium calcium and magnesium, and in the process create what they call a dual-cation battery. The brilliant application is not necessarily the use of saltwater, but the methods to avoid corrosion, as reported on the CFU website: 

To solve problems with instability, dendrite growth and corrosion, the researchers engineered a forest-like 3D zinc-copper anode containing a thin zinc-oxide protective layer on top.

The novel, nano-engineered surface, which looks like a birds-eye-view of a forest, allows the researchers to precisely control electrochemical reactions, thereby increasing the battery’s stability and quick charging ability.

Quick charging could take minutes rather than hours. One news article claimed about 3 minutes. If that short, it is less time to walk into a gas station while traveling to use the bathroom. It is amazing what technologies are being developed. This may seem like a win for the US manufacturers, but the university will likely auction off the rights to the highest bidder, and with lack of money it plays right into the hands of foreign auto makers--none of whom have a union shop. 

Yet to calm the negative impact of creative destruction, and keeping an eye on gas prices, Biden supports oil production--from overseas. NBC News reported on 10/8/23 that Saudi Arabia and Israel were nearing a normalization of relations, and with that the Saudi's promised Biden that they would increase their oil output. Iran opposes any Arab country from normalizing relations with Israel (Zionist state in their words) and that may have been a reason for the Hamas attack on Israel which occurred Oct 7. 

Technology may be moving fast, but I am guessing that the use of gas powered vehicles will be with us for a long time. Apparently Joe Biden, in wanting the Saudis to increase production, is too. Range, charging infrastructure, and just the lack of adequate power in the grid of a typical suburban or urban street means that not all people can have an electric vehicle and charge it at the same time. Further what will happen on the hot, sticky summer nights when air conditioners are running? We already have our thermostat controlled by Alliant during hot days, so they can turn up the thermostat to limit power during peak use. Then there is the issue of the amount of rare earth minerals often required in batteries, which take a great deal of input for little gain. Although catalytic converters are stolen  for their platinum, palladium, and rhodium. 

Creative destruction is not new, it has occurred over the course of history. There are a good number of old crafts that used to be at the local level that exist no more. My Reiner great grandfather was a shoemaker. He adjusted to creative destruction of the industrial revolution by opening a grocery store and tavern in Chicago. For generations, from the 17th to at least 18th century, my Hovel ancestors weaved linen from flax, that is now done by machine. When my grandfather Hovel had an auction on his move from his Iowa farm to his farm in Sun Prairie in Dec. 1929, one item was a sulky--a horse drawn plow, on which the human sits to control the horses. This would have been replaced by a plow pulled by a tractor. Sulkies are pretty much obsolete, but for a museum. Of course, we could all afford to be more conservation minded. That would be truly creative destruction.

Source on UCF Battery--https://www.ucf.edu/news/new-ucf-developed-battery-could-prevent-post-hurricane-electric-vehicle-fires/#:~:text=To%20solve%20problems,quick%20charging%20ability.