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Miami 08 Oxford Scholars
***GENERIC***
Worldwatch Institute & Center for American Progress, 2006, American Energy: the renewable
path to energy security, September, p. 11
Despite strong public support and rapidly rising interest in renewable energy, the United States has not kept up
with the strong growth in renewables over the past decade; as a result its market share has fallen steadily. For
example, while US solar cell manufacturing has risen year by year, the nation’s share of global production has
declined from 44 percent in 1996 to below 9 percent in 2005. Time is growing short for the United States to get
back in the game and compete for what could be some of the largest new markets of the next few decades. A
strong partnership between government and the private sector is essential if that kind of leadership is to be
achieved.
( _ ) U.S. lags behind other industrialized countries in providing incentives to clean energy
technology
Ron Pernick & Clint Wilder, Clean Edge, Inc., (research & publishing firm) 2007, The Clean Tech Revolution:
the next big growth and investment opportunity, p. 12-3
Unfortunately, even as local governments are acting, the administration of George W. Bush has fallen far behind
other nations in pursuing aggressive clean-tech initiatives and providing long-term guidance and incentives.
While Japan and Germany have been championing clean tech for some time, the US federal government has
basically been missing in action. Once the US federal government finally gets on board, in an aggressive way,
it will augment significant developments already in place at the state level and around the globe.
( _ ) Inaction is leaving the US out of the race – we’re losing key markets
Sustainable Development Law & Policy, Spring 2007, p. 1
Climate change is recognized as an international issue necessitating action from the global community. However,
energy issues must be examined at the forefront of any effective climate agenda. For example, within the United
States, energy-related carbon dioxide emissions resulting from fossil fuel combustion make up approximately 82
percent of our anthropogenic greenhouse gas ("GHG") emissions and 25 percent of all global emissions. As the
legal community tackles global warming, a reevaluation of energy consumption and production must occur
because these activities are the largest contributor of GHG and the resultant climate problem. In short, our
energy dependencies have resulted in the need to increase regulation and decrease consumption. As one of the
few industrialized nations left without comprehensive GHG regulations, the United States is loathe to be left out
of the race in the development of new, clean, and efficient technologies to sustain our consumptive energy
needs. The United States' global competitiveness and international credibility to support sound energy
policies has been dim. However, the recent Supreme Court case Massachusetts v. EPA results in a glimmer of
hope that change is on the horizon. This decision allows the EPA to regulate carbon dioxide and pushes the federal
government towards curbing GHG emissions from automobiles. This also strengthens the position of individual
states leading the way with progressive energy regulations and GHG reductions. The future of energy policy in the
United States is unknown, but as the greatest contributor of GHG gases, change must occur.
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Miami 08 Oxford Scholars
US Behind Europe
( _ ) Europe is leading the transition to the alternative energy future
Ian H. Rowlands, associate professor environment and resource studies-University of Waterloo, Canada, 2005,
Switching to Renewable Power: a framework for the 21st century, ed. V. Lauber, p. 73
Additionally, it appears that Europe may have an advantage in terms of the “alternative energy system” often
being proposed as a response to the challenge of global climate change. Most significantly, Europe is the global
leader in wind power technology. Not only is almost three-quarters of the world’s windpower capacity presently
in the countries of the EU (with only 15 percent in the US) (AWEA, 2003), but 90 percent of the world’s wind
turbine manufacturers are based in Europe. Economic advantage, therefore, might be forthcoming for European
companies. Thus, different trans-Atlantic actions may be explained in terms of respective interests: while the
US does not feel particularly threatened by global climate change, it does feel that it would be badly hurt by a
change in the fundamental structure of its energy system; alternatively, Europe feels that it would be
significantly affected by climate change and it also foresees many benefits (in addition to environmental ones)
arising from increased use of new energy systems.
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Miami 08 Oxford Scholars
We firmly believe that a transition to a clean-tech future will not harm or hinder our economy, as some
entrenched interests and critics would like you to believe. On the contrary, clean tech is serving as the next
great generator of high-paying jobs, technological innovation, and global competitiveness. We embrace what
we call a “pragmatic optimism” that outlines realistic and achievable pathways to change by deploying the
best emerging technologies, the most effective government policies and initiatives, and the most proven
financial and market-based solutions.
( _ ) Renewables are the key new market – they heavily impact competitiveness
Miguel Mendonca, Researcher-World Future Council, 2007, Feed-in-Tariffs: accelerating the deployment of
renewable energy, p. 130
Instead of losing almost 80,000 jobs from chemical companies moving plants overseas to escape high natural gas
prices, the US and other industrialized countries could be creating highly skilled RE jobs. Installing and operating
wind turbines and solar panels and growing energy crops are jobs that cannot be outsourced. US power plant
CO2 emissions - a major contributor to global warming - would be 15 per cent lower with such a shift to RE. As
mentioned in Chapter 4, Germany expects the renewables sector to employ 500,000 people by 2020. Spain predicts
that by 2010 their figure will be around 100,000. To assess this elsewhere, more research must be carried out on the
potential for RE jobs in different countries in the developed and developing world. China will almost certainly be
making headlines over the next few years with regard to how many people find employment in all areas of the
renewables sector, particularly in the manufacture and export of cheap solar panels and wind turbines. While
this will bring down costs for end users, it will undermine domestic production opportunities elsewhere and
should be taken as another signal to accelerate engagement with the industry, especially where suitable
expertise, innovative capacity and infrastructure already exist. The workshop of the world that China has
become will not wait for countries like the US to get its act together. Narrow, vested interests are delaying the
development of renewables in every country one examines, yet the potential for improving the economic fortunes
and energy security of industrialized nations in particular is only being exploited by a few countries with
Germany again taking a lead in this respect.
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Miami 08 Oxford Scholars
At a time when the US economy sputters in fits and starts and faces unprecedented challenges from high energy
prices, depleted natural resources, volatile sources of foreign oil, record deficits, and unprecedented
environmental and security challenges, clean tech offers the promises to be the next big engine of business
and economic growth. Companies, investors, entrepreneurs, job seekers, and governments have a choice to
either embrace and lead in this brave new world of clean-tech innovations or risk falling behind a host of
competitors. At stake: trillions of dollars in economic opportunity and prosperity for the companies and
individuals at the forefront of this next great growth and investment opportunity.
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Miami 08 Oxford Scholars
Indirectly, reducing road fuel consumption is important for competitiveness of the nation’s industrial base,
which is quite sensitive to higher oil prices and price volatility. If drivers hog a large fraction of the oil, the
industrial base is forced to pay more. And while 40 or 60 bucks a month in fuel savings doesn’t sound like much
at the individual level, the national economic benefit of freeing up that much cash is large: 230 million
registered vehicles times $40 per month is over $9 billion a month, or $110 billion per year. That’s a lot of
consumer spending that could grease the economy in productive and globally competitive ways. Of course,
there are also other direct benefits in terms of a better environment, or, conversely, the added indirect costs
of a dirty environment and volatile climate, if things keep going as they are.
Even under normal conditions, oil dependence has severe economic consequences. In 2005, direct outlays for
imported oil accounted for a third of the country’s $800 billion current account deficit. In 2006 prices, these outlays
have gone still higher. By diverting funds away from domestic consumption and investment, oil imports put a
drag on U.S. economic growth and undercut the nation’s long-term competitive position.
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Miami 08 Oxford Scholars
***AUTO INDUSTRY***
For many years, the model for the global car industry was the United States - the single largest car market in the
world. But now the US represents less than one-quarter of the world industry, and its market share will
decline further. The US car market has already reached saturation point. Stephen D'Arcy of
PricewaterhouseCoopers believes all the growth in the global auto industry in the next decade will come from
emerging market countries such as India, China and eastern Europe.
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Miami 08 Oxford Scholars
Goldman Sachs Group Inc. (GS) and Bear Stearns Cos. (BSC) dropped after Bernstein's Brad Hintz slashed his
profit estimates by more than 40 percent. Automakers also declined after Carlos Ghosn, chief executive of
Nissan Motor Co said this morning that the U.S. auto industry is already in a recession, even if the overall
economy continues to grow. "We are very lucid on the situation of the industry that there is a recession in the
United States, at least in the car market Ghosn told reporters. But he predicted the downturn would not last long.
American auto executives scaled back their forecasts for the U.S. market after last month's grim sales results,
although they took some comfort from booming demand for vehicles in Russia and other fast-growing economies.
The worsening outlook for U.S. auto sales also weighed on European executives, who see signs of weakening
consumer confidence in their market, and expect little or no growth this year. "It feels pretty tough right now,"
GM Chairman and Chief Executive Rick Wagoner told reporters Tuesday on the first day of the Geneva auto show
press preview. "Oil will stay high, housing doesn't look like it has bottomed out, and the biggest issue is,
what's going to happen to consumer credit? We're going to try to stay on the leaner side until we get a good
view." GM and Ford Motor Co. both announced production cuts in North America Monday after reporting February sales that fell
more steeply than the market's overall 6.3 percent decline. Chrysler LLC President Jim Press said the Auburn Hills automaker already had cut back its production
"The auto industry has been in
plans sufficiently but offered a grim assessment amid the flash and glitz of new car unveilings at the show here.
recession for a while," he said, adding he did not anticipate a rebound in the United States until next year.
"You don't really see any signs today of a trend turning around," Press said. Chrysler's full-year sales estimate for the
overall market is now at the low end of the 15.5 million to 16 million vehicles range its executives predicted early in the year. Some Wall Street
analysts are even more bearish. "Sales look to come in at a 15.3 million annualized pace, down approximately 7 percent year-on-year," said
Robert Hinchliffe, an auto analyst at UBS Investment Research in New York. "Based on the results of our monthly dealer survey, we are not
anticipating a near-term turnaround," he wrote in a note to investors. "The automakers are not either, as
evidenced by GM and Ford's 5 percent and 10 percent respective year-on-year second-quarter production cuts."
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Miami 08 Oxford Scholars
Ratner – a professional that works in the world’s largest business network: linkedln – 5/27/2008
(Jonathan, “U.S. auto industry posed to get worse,” Market Call Industry)
http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/05/27/u-s-auto-industry-poised-to-get-
worse.aspx
How bad will the U.S. auto industry get? Bad enough that investors should reduce their earnings power
expectations for some of the continent’s biggest automakers and auto suppliers well into next year, Citi Investment
Research says. Citi analyst Itay Michaeli cut his price target and estimates on several companies late Monday. They
include Magna International Inc., which he reduced to a target of US$96 per share from US$90 while retaining its
buy rating. He also downgraded General Motors Corp. to “hold” from “buy” and cut to its target to US$21 from $32.
A relentless rise in oil and steel prices, a growing shift away from more profitable big SUVs and pickup trucks, and
persistent credit constraints all mean industry fundamentals are poised to deteriorate well beyond this year, Mr.
Michaeli argues in a research note. Europe is also becoming less reliable as an offset to U.S. market weakness.
“Although the industry coped well with these conditions in Q1 2008, fundamentals have deteriorated further in
recent weeks,” the analyst said. “While we do not believe investors should necessarily cease to bottom fish for
appealing value stocks positioned for an eventual U.S. recovery, the importance of a company’s financial ‘staying
power’ through these difficult quarters must take greater emphasis.” Among Mr. Michaeli’s four buy-rated auto
stocks, BorgWarner Inc. is his favourite based in part on its business diversification and strong balance sheet.
DETROIT - The U.S. auto industry is in a recession, but General Motors Corp. has prepared for it by cutting costs
and rolling out new products, GM's president and chief operating officer said Tuesday. Fritz Henderson , the
automaker's No. 2 executive, said GM is selling below trends for the third straight year. He blamed the sales drop
on the troubled housing market, tight credit and higher gasoline prices that are sending consumers from trucks to
cars at a rate much faster than the company has ever seen. But Henderson told a conference of banking and
insurance industry officials in Warren that GM also is seeing sales growth in emerging markets. He said the first
quarter was about in line with GM's expectations, but April's sales drop surprised the company. He said GM sees
more downside risk than upside opportunity for the remainder of 2008. The Detroit-based automaker cut its
industrywide U.S. sales outlook for 2008 to between 15.3 million and 15.5 million light vehicles from 16 million at
the beginning of the year, largely due to plummeting sales of trucks and sport utility vehicles. That's still higher than
Ford Motor Co., which is forecasting 15 million. Some industry analysts have gone below 15 million, a 14-year
low. Henderson said the 11-week strike at parts supplier American Axle and Manufacturing Holdings Inc. has had
only a minimal effect on the company's retail sales, largely because it had built up a large inventory of pickup trucks
and sport utility vehicles at a time when the market shifted to smaller vehicles.
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Miami 08 Oxford Scholars
The crisis at General Motors is not of its making. The economy is weak, gasoline prices are at record levels and the
U.S. auto industry is in a big slump. Much of the blame lies elsewhere, but the auto giant is in peril. It has been no
secret that the GM (nyse: GM - news - people ) bank account has been shrinking by $1 billion a month, maybe more
right now. It just introduced a new round of sales incentives to help reduce inventories. At this rate, the money runs
out in two years--or even sooner. We also hear that the company is rethinking its product plans--nothing unusual in
that--and thinking about borrowing money. The figure I hear is $10 billion. It would have to mortgage everything to
get it, and pay a shylock's interest. This does not have to be the end of GM: Car companies can survive serious
downturns. In recent years, management turned around Fiat (nyse: FIA - news - people), and Nissan (nasdaq:
NSANY - news - people ) escaped near death. Chrysler was born again several times in my lifetime, and maybe a
few of you remember the miracle at American Motors in the ‘50s and early ‘60s. In each case, a great leader led the
resurgence. At Fiat, Sergio Marchionne is the man. At Nissan, a Frenchman, Carlos Ghosn, with roots in Lebanon
and Brazil is doing it. At Chrysler, it was Lee Iacocca. At American Motors, it was the great George Romney. Other
crisis leaders: Ernest Breech saved Ford after World War II; Robert McNamara led the Ford division a half-century
ago; Edward Cole created the greatest engine in GM history; Bunky Knudsen and William Hoglund saved Pontiac;
Robert Lutz led the last revival of Chrysler and is now doing his best to save GM; and Philip Caldwell bet Ford
Motor (nyse: F - news - people ) on the original Taurus. The issue is not whether there can be a rescue at General
Motors; the issue is whether the current management can save it. The record is not good. Since 1992, GM's U.S.
market share has fallen steadily--from 34% that year to 19% in May. Many of GM's leading executives are from the
finance side of the business, but the financial failures are numerous. The company wasted $2 billion on an
investment in Fiat and many billions more on the Delphi (other-otc: DPHI.PK - news - people ) spin-off.
Management also wrecked GMAC (nyse: GJM - news - people ), its car loan subsidiary, by lending mortgage
money to people who could not pay it back. That aside, what should GM managers do now? For starters, it needs to
launch a serious campaign to convince the U.S. government and public that the domestic industry is at risk and that
it needs a "vacation," from any new regulations, including safety requirements. We have no right blaming Mexico
for our job losses when our own government is helping to put companies out of business. GM also should be
demanding government action to try to bring down the price off oil by reducing speculation in oil futures.
Carlos Ghosn, President, Knight, and big cheese at Nissan Motor Company and Renault, says the U.S. auto industry
is in recession. Ghosn told the Associated Press, "We are very lucid on the situation of the industry that there is a
recession in the United States, at least in the car market." With Nissan division sales in North American down 7.8
percent from this time last year (and the word "recession" literally meaning "the act of receding") few can contest
his statement. The Associated Press report adds that deflated U.S. car and light truck sales in 2007 marked the worst
sales year in a decade. Brushing the rising cost of raw materials as yet another concern for automakers off long-term
concerns, Ghosn is optimistic the market will improve. Yet, he cites. Maybe the best solution to Nissan's current
problem is to quintuple production of the GT-R, sell it as both a Nissan and an Infiniti, and bait us all with attractive
lease deals? Yes, that would definitely do the trick.
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Miami 08 Oxford Scholars
Vlasic –award-winning business reporter for The Detroit News specializing in automotive
industry– 3/20/2008
(Bill, “U.S. Auto Industry Facing a Grim Year,” International Herald Tribune)
http://www.iht.com/articles/2008/03/20/business/auto.php
DETROIT: The U.S. auto industry is bracing for what may be its worst year in a decade. Several industry
forecasters have sharply cut their projections for new- vehicle sales to less than 15.5 million this year and have
abandoned rosy predictions for a rebound in the second half. The gloomy outlook, reflecting credit turmoil, the
housing crisis and the softening economy, will probably lead to more production cuts by car companies. But the
good news for buyers is that they can expect better deals to draw them into the showroom. The broader economic
woes prompted the marketing firm J.D. Power & Associates to cut its annual forecast to 14.95 million vehicles,
which would be the lowest sales level since 1995, from 15.7 million. "The auto market is entering into a true
recessionary phase, which is something we have not seen in the last 10 years," said Bob Schnorbus, the firm's chief
economist. Multimedia Graphic » View Related Articles Volvo to pay $19.6 million in Iraq kickback probes Today
in Business with Reuters Heavy industries join stampede to raise pricesU.S. home prices continue slideLife on the
fringes of U.S. suburbia becomes untenable with rising gas costs The industry has been selling at an annualized rate
of 15.2 million vehicles through the first three months of the year but appears headed for an even worse spring
season. Analysts are hedging predictions for a stronger second half of the year despite the U.S. Federal Reserve's
continued cuts in interest rates.
( _ ) The U.S. Auto Industry is bad now due to economic pressure with high oil prices
Vlasic –award-winning business reporter for The Detroit News specializing in automotive
industry– 3/20/2008
(Bill, “U.S. Auto Industry Facing a Grim Year,” International Herald Tribune)
http://www.iht.com/articles/2008/03/20/business/auto.php?page=2
Aside from broader economic concerns, April and May are normally when gasoline prices undergo an increase. The
national average for unleaded gasoline this week hit $3.28 a gallon, or nearly 87 cents a liter, a 26 percent increase
from a year earlier, according to a regular survey done for AAA, formerly the American Automobile Association.
One oil industry analyst said prices might rise further. "Prices will probably hit a high of somewhere between $3.50
and $3.75 a gallon in April and May," said Tom Kloza, chief oil analyst at Oil Price Information Service. With all
the other economic pressures on consumers, higher gasoline prices can only make a bad auto market worse,
Schnorbus of J.D. Power said. "Everybody thought the first quarter was going to be the worst quarter of the year,"
Schnorbus said. "Well, it doesn't look that way anymore."
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Miami 08 Oxford Scholars
In short, with today's high Oil prices and report after report from the big automakers cutting production, the answer's
a resounding No! There's simply nothing compelling out there valuation wise in the Automotive space. Ford (F)
Virtually slashing it's popular Truck line in half with delays and production cuts, and the only car worth talking
about, besides police departments contracts, is the Mustang which now has been stagnant for almost half a decade.
General Motors (GM) $40Billion in the hole and counting... Not to mention probably the ugliest set of cars in
America next to Chevrolet. Truly incredibly uninspiring automotive design. Toyota (TM) Actually the only
compelling value out there with a P/E of 9. However, whispers of US sales expectation management are seeping
through the proverbial cracks, which will put some serious pressure on upcoming earnings reports. The company has
the clout of being the "leader" in the Hybrid segment going for it but could the Prius possibly look any worse, and if
the respectable Jeremy Clarkson of Top Gear is to be believed, in a race the Prius provided worse fuel economy than
a BMW M3! (*Obviously the car was not run under normal conditions*) Toyota at levels below $100 is one to put
on the watch list, however times will continue to be rocky in the Automotive segment as a whole until Oil
speculation subsides and consumers instill in themselves a renewed confidence to go driving again. Of the
companies traded in the US, the only one continuing to do reasonably well is Honda (HMC). Is it a big secret that it
is up 4% Year to Date while others are off significantly? F (-20%) GM (-40%), DAI (-30%), TM (-10%). Honda's
secret sauce? Fuel efficient well engineered cars, that have very good engines, are impressively reliable and most
importantly, don't make you loathe getting into them every single morning. It isn't hard to understand that successes
like Accord and Civic, year after year show up on best lists and best seller lists. The Acura luxury line continues to
produce winners as well, but a watchful eye on the headlines is a necessity in this sector. With Toyota starting to
whisper statements that US sales targets will be "tough to meet" it doesn't require multiple graduate degrees to
surmise Honda may be in for some dry spells to come. While at this stage Honda is a Hold in this book, closer to
$30/share is an attractive entry point for an innovative car company, that yet sees almost none of the corporate
stumbling blocks faced by its US peers and has a big enough worldwide presence to funnel out good small cars all
over Europe and Japan.
U.S. auto-parts makers, the backbone of the North American automotive industry, are bracing for a summer that
promises to cut profits, increase layoffs and may drive more companies into bankruptcy. Suppliers such as American
Axle & Manufacturing Holdings Inc., Lear Corp. and Visteon Corp. are scrambling to realign their work forces and
production as U.S. auto makers slash production of sport-utility vehicles and pickup trucks because of plunging
sales. Last week, Ford Motor Co. announced deeper production cuts than those unveiled just one month ago. With
the pace of the sales decline accelerating, concerns are mounting that General Motors Corp. and Chrysler LLC also
might be forced to move more aggressively. "It is far worse than anyone had anticipated at this point," said Jim
Gillette, an auto-supplier analyst with CSM Worldwide, a market-research firm in Michigan. "I don't care what
name you throw out there. There isn't any one out there that is going to be safe."
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Miami 08 Oxford Scholars
But every day that the Detroit automakers resist changing technologies and increasing fuel economy, they lose
market share and jobs to other, more efficient producers. The trend has been going on for a while. Despite some
profitable years, our U.S. automakers have been consolidating, falling behind, and struggling. Some of this is due to
health care costs and other pressures, and as a nation we need to resolve the health care challenge. But there's a lot
more to it.
In fact, America's growing oil dependency is overwhelmingly rooted in the automobile. The nation must look
there to boost competitiveness across the entire economy. Asking people to buy smaller vehicles hardly generates
much enthusiasm or action from the masses. There is always a socially or environmentally conscious segment of the
population that is willing and even eager to make the sacrifice, but this is not enough to make a big difference.
Market forces, through higher prices, do help people become more conscious of the problem by lightening their
wallets. But in the United States it's still difficult for people to voluntarily trade in their vehicles for ones that get,
say, 25 percent or more fuel economy. Putting aside the nontrivial issue of perceived safety and the mentality that I-
need-an-SUV-to-haul-all-my-gear-around, the cost of trading up for a new fuel-efficient vehicle is large. A $24,000
vehicle that is four years old has typically depreciated down to half its original value. In the absence of subsidies or
a strong social conscience, a driver that is being asked to trade in for a vehicle with a higher fuel economy has
to recoup $12,000 in gasoline savings in a reasonable period of time to make the switch worthwhile. At $2.50
per gallon of gasoline, a driver with average habits commuting, 12,000 miles per year will save $42.00 per month by
trading up to a vehicle that gets 30 miles to the gallon instead of 20. At $4.00 per gallon, the monthly savings are
$67.00. While those are notable savings, financially, it’s not enough to sway someone to lay out an extra
$12,000 for a new vehicle.
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Miami 08 Oxford Scholars
Emerging carbon constraints could significantly impact the automotive industry, primarily through pressure to
increase the fuel economy or lower the CO2 emissions intensity of vehicles. As carbon constraints take hold, OEMs
[original equipment manufacturers] able to produce vehicles with lower carbon emissions could see global market
share increase and financial performance improve. In contrast, OEMs that produce more carbon-intensive vehicles
may have diminished ability to compete in global markets with adverse consequences for their shareholder value.
Carbon constraints are already in place in major automotive markets. The European Union and Japan have both
made strong commitments to lower the CO2 emissions rates of vehicles. To date, the United States has made less of
a commitment. However, debate over federal Corporate Average Fuel Economy (CAFÉ) standards continues, while
a 2002 California law seeks to regulate vehicle CO2 emissions for the first time. As an indicator of growing
pressure in this area, over 60 percent of global vehicle sales in 2002 occurred in countries that have ratified the
Kyoto Protocol.
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Miami 08 Oxford Scholars
America’s automakers – DaimlerChrysler Corporation, Ford Motor Company, and General Motors Corporation –
have played a central role in the development and growth of the American economy and remain at the heart
of industrial America. The American automobile industry is the single greatest engine of economic activity,
which drives raw materials development, financial systems, advanced materials and manufacturing
improvements, safety, energy, and environmental innovations. Our companies face unprecedented
competitive challenges from auto producers around the world. We are meeting these challenges by investing
billions of dollars in the United States in new products, facilities, advanced technologies, education, and training.
Changes in domestic and international policies, especially in the areas of health care, pensions, currency
manipulation, and trade are critical to ensure that our industry continues its contributions to the U.S. economy and
the American people who depend on the jobs and benefits we provide.
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Miami 08 Oxford Scholars
The auto industry is getting sideswiped by the U.S. housing crisis. Auto lenders and banks, closing their wallets,
have prevented hundreds of thousands of American consumers from getting financing for a car. Home equity loans,
which had been used in at least one of every nine U.S. auto purchase deals, when lenders were more generous, are
no longer a source of easy money for many prospective buyers. And used-car prices have fallen nearly 6 percent
as repossessed cars and gas-guzzling trucks and sport utility vehicles flood auction lots. Those forces, on top
of the softening economy, are putting enormous pressure on the auto industry in the United States as it faces
what may be its worst year in more than a decade. About 15 million vehicles are expected to be sold in 2008, down
from 16.2 million last year, as sales reach the lowest levels since 1995, according to the marketing firm J.D. Power
& Associates. The effect on the broader U.S. economy could be profound. Not only is the car a consumer's
second biggest purchase after the home, but the auto industry remains one of most important economic
engines in the United States. With less money available to fuel the industry's growth, the businesses that
support it are also facing the prospect of a sharp slowdown. Global auto makers like Toyota are also feeling the
pain. ''It is a bleak picture, and it all hinges on the availability of financing,'' said William Ryan, a financial analyst
at Portales Partners who has followed the auto business for years. ''The whole universe related to the auto
industry is touched in some way - parts suppliers, manufacturers, salespeople, trucking people, the paint and
metals industries. Even semiconductors.'' Within the auto sector, problems stemming from the continuing
tightening of credit have already started to spread. Auto lenders like Chase, Capital One and GMAC are finding it
harder and more expensive to obtain money for loans. Profits also look dimmer as the lenders absorb losses from
defaults and pull back from making new loans. Car dealers and manufacturers will probably face months of
weaker profits as they offer more incentives to sell new vehicles. Luxury car sales, which provide outsized profits
for auto companies, are off 13 percent from last year, according to the Autodata research firm. And consumers,
facing potentially higher mortgage payments and $4-a-gallon gas, or more than $1 a liter, are delaying purchases of
midmarket cars. ''The housing crisis, defined with the credit crisis, has really knocked consumers back on their
heels,'' said Michael Jackson, the chairman of AutoNation, the largest U.S. automobile retailer.
WASHINGTON - The automobile industry continues to be America's largest manufacturing industry, although the
majority of those jobs are in supplier and related industries, with total auto industry and related employment
numbering 13.3 million jobs, a new Center for Automotive Research study shows. "When you look under the hood
of today's automobile, you'll see goods from America's greatest industries," said Senator George Voinovich (R-
Ohio), co-chair of the Senate Auto Caucus. "These include goods not only from Ohio and other Midwestern auto
manufacturing states, but also from suppliers in every region across the country. It's a national industry with a huge,
job creating impact on our economy." "No other single industry is more linked to U.S. manufacturing or generates
more retail business and employment. New vehicle production, sales and other jobs related to the use of automobiles
are responsible for 1 out of every 10 jobs in the U.S. economy," said Sen. Carl Levin (D-Mich.), co-chair of the
Senate Auto Caucus.
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Miami 08 Oxford Scholars
Here's the big picture: The motor vehicle industry is the largest manufacturing sector in the United States, and
it has a huge economic impact on every segment of on our nation's economy--from construction to retail. It goes
without saying, of course, that no region in the United States feels that impact more strongly than the Detroit Region.
[ILLUSTRATION OMITTED] As the undisputed center of the North American automotive industry, we feel
this industry can make or break our economy. With so much dire news about Ford Motor Co. and General
Motors Corp. recently--and, in fact, the entire industry--just how is that playing out on our entire economy?
The U.S. automotive industry is still the largest automotive industry in the world. No other single industry is
linked to as much of U.S. manufacturing or generates as much retail business and employment. The industry
owes its relative size and importance, of course, to the popular use of its product, the motor vehicle. This fact has
remained constant despite the overall downturn in U.S. economic activity in 2001. Figure 1.1 ranks the largest
national markets in 2002 in terms of total vehicle sales. The U.S. market, at 16.8 million vehicle sales, was almost
three times larger than the next largest market in Japan. Figure 1.2 ranks the largest vehicle-producing nations in
2002 in terms of vehicle production. The U.S. industry produced 21 percent more vehicles than the next
largest vehicle industry in Japan.
( _ ) *Past upturns prove- whats good for General Motors, is good for the country*
Only the auto industry can soften the blow from other collapsing sectors
McAlinden, chief economist at Center for Auto Research and Ph.D, 2003 p. www.cargroup.org/pdfs/Alliance-
Final.pdf
Measured in constant 1996 dollars, automotive output increased by 51 percent during 1987-
2002. More importantly, recent growth in automotive output contributed significantly to the
record growth of the U.S. economy. The contribution of automotive output to the U.S. GDP has
remained substantial despite structural change in the overall economy. As shown in figure 1.6,
U.S. motor vehicle output represented 3.3 percent of U.S. GDP in 2002, well above the
industry’s average share in the early 1990s. This level of GDP share is highly uncharacteristic
during a period of overall economic weakness in the U.S. economy when the private sector’s
share of the economy usually declines – and underlines the role of the industry in softening the
harshness of the recent slowdown in the U.S. economy.
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To put the employment and compensation contributions in some context, these contributions are represented in
table 1.1 as a share of the total private sector economy for the United States. The economic contribution of direct
and indirect automotive manufacturing activities in 1998 represents 1.8 percent of the private sector jobs and
2.6 percent of the private sector compensation in the U.S. economy. The compensation share is greater than the
employment share because compensation in the auto industry is higher on average than in other industries. In the
bottom panel of table 1.1, we show the total spin-off effect, which includes the expenditure-induced effect in
addition to the indirect effect. Our estimate of the expenditure- induced effect is 2,290,700 jobs which, when added
to the 2,417,300 direct plus indirect jobs, equals 4,708,000 total jobs. The corresponding employment multiplier
equals 7.6 (4,708,000 total jobs ÷ 621,300 direct jobs). The corresponding contribution to compensation in the
private sector is approximately $177 billion, measured in 1998 dollars. These contributions represent 3.5 percent of
the private sector jobs and 4.1 percent of the private sector compensation in the U.S. economy. In summary, the
employment contribution currently associated with automotive manufacturing activity in the United States is
estimated to be about 2.4 million jobs in the private sector attributable to the industry directly and its
suppliers, and 4.7 million when all spin-off effects are included. The compensation contribution is estimated
to be about $111 billion attributable to the industry directly and its suppliers, and $177 billion when all spin-
off effects are included.
In order to manufacture vehicles, the automotive industry purchases many products and services from other
American industries. Industries as diverse as apparel, construction, and business services are necessary for
the automotive industry to function. Conversely, many sectors of the service-producing economy rely on the
automotive sector as a major, or the major, customer of their output. In 2001, for example, the automotive
industry’s use of the trucking and warehousing industry contributed 70,700 U.S. jobs. In total, the automotive
industry contributed over 2.1 million jobs to other industries in 2001.18 19
The automobile industry is a vital component of the North American economy. The two-way flow of trade
between Canada and the United States represents the largest bilateral trading relations in the world. Over $1.6 billion
a day in goods crossed the U.S.-Canadian border in 2002, totalling over $600 billion for the year. Thirty-three
percent of U.S. assembly plants and 25% of Canadian assembly plants are within 100 miles of the Windsor, ON-
Detroit, MI border, and 23% of the U.S. Tier 1 supplier plants and 19% of the Canadian Tier 1 supplier plants are
within 100 miles of this border. Since the signing of the Canada-U.S. Free Trade Agreement in 1989, trade between
the U.S. and Canada has grown over 210% from USD $166 billion to almost USD $514 billion in 2000, according
to Statistics Canada. New vehicle production, sales, and other jobs related to the use of autos are responsible for one
out of every 10 jobs in the U.S., according to a 2003 report on the “Contribution of the Automotive Industry to the
U.S. Economy” prepared by the University of Michigan and the Center for Automotive Research (CAR). America’s
automakers are among the largest purchasers of aluminum, copper, iron, lead, plastics, rubber, textiles, vinyl,
steel, and computer chips. The automotive industry has a tremendous impact on the U.S. economy in terms of
employment, Gross Domestic Product (GDP), economic output, research and development, and exports.
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But, locally, the automotive sector is a giant, contributing about 7.5% to the country's gross domestic product (GDP)
and employing around 36 000 people. The government has identified the automotive industry as a key growth sector,
with the aim of increasing vehicle production to 1.2-million units by 2020, while significantly increasing local
content at the same time. Between 2000 and 2006, the industry's investment in production and export infrastructure
quadrupled, from R1.5-billion to R6.2-billion, before slowing to R3-billion in 2007. Capital investment is expected
to be around the R4-billion mark in 2008. Most of this has been foreign investment, with the parent companies of
local car manufacturers expanding local operations to improve production capacity, export facilities and supporting
infrastructure.
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***IMPACTS***
Competitiveness Key to Hegemony
( _ ) Economic competitiveness is key to US hegemony
Zalmay Khalilzad, Research Analyst at the RAND Institute, Spring 1995 (“Losing the Moment? The United
States and the World After the Cold War” – Washington Quarterly) p. lexis
To sustain and improve its economic strength, the United States must maintain its technological lead in the
economic realm. Its success will depend on the choices it makes. In the past, developments such as the agricultural
and industrial revolutions produced fundamental changes positively affecting the relative position of those who were
able to take advantage of them and negatively affecting those who did not. Some argue that the world may be at
the beginning of another such transformation, which will shift the sources of wealth and the relative position of
classes and nations. If the United States fails to recognize the change and adapt its institutions, its relative
position will necessarily worsen. To remain the preponderant world power, U.S. economic strength must be
enhanced by further improvements in productivity, thus increasing real per capita income; by strengthening
education and training; and by generating and using superior science and technology.
The regime is working to make sure the Chinese people understand its strategy as well. In 2006 and 2007,
Chinese television aired a twelve-part series, The Rise of the Great Nations, clearly designed as an act of public
education.8 Given the intensely political nature of the subject matter, one can be certain that it was carefully vetted
to present views that the government wished to be broadcast. The series was thoughtful and intelligent, produced in
BBC or PBS style, and it covered the rise of nine great powers, from Portugal and Spain to the Soviet Union and the
United States, complete with interviews with scholars from around the world. The sections on the indi¬vidual
countries are mostly accurate and balanced. The rise of Japan, an emotional topic in China, is handled fairly, with
lit¬tle effort to whip up nationalist hysteria about Japanese attacks on China; Japan's postwar economic rise is
praised repeatedly. Some points of emphasis are telling. The episodes on the United States, for example, deal
extensively with Theodore and Franklin Roosevelt's programs to regulate and tame capitalism, highlighting the
state's role in capitalism. And there are a few predictable, but shameful, silences, such as the complete omission of
the terror, the purges, or the Gulag from an hour-long program on the Soviet Union. But there are also startling
admissions, including considerable praise of the U.S. and British systems of representative gov¬ernment for their
ability to bring freedom, legitimacy, and political stability to their countries. The basic message of the series is that
a nation's path to greatness lies in its economic prowess and that militarism, empire, and aggression lead to a
dead end. That point is made repeatedly. The final episode—explicitly on the "lessons" of the series—lays out the
keys to great power: national cohesive¬ness, economic and technological success, political stability, military
strength, cultural creativity, and magnetism. The last is explained as the attractiveness of a nation's ideas,
corre¬sponding with concept of "soft power" developed by Joseph Nye, one of the scholars interviewed for
the series. The episode ends with a declaration that, in the new world, a nation can sustain its competitive
edge only if it has the knowl¬edge and technological capacity to keep innovating. In short, the path to power
is through markets, not empires.
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Uncertainty deriving from the U.S. economy is placing pressure on the global economy. However, the active an
rapid measures taken by the United States administration and the FED reduce the risk of the uncertainty turning into
a global crisis. Regardless of everything Turkey, where performance is falling, needs to rapidly reduce
itsvulnerability," said Deloitte Turkey Strategic Planning, Development and Sales Partner M. Sait Gozum.
WASHINGTON - The United States is headed for a recession, dragging world economic growth down along
with it, the International Monetary Fund concluded in a sobering forecast yesterday that underscored the
damage inflicted by the housing and credit debacles. The IMF's World Economic Outlook served as a reminder of
just how swiftly economic fortunes in the United States and beyond can unravel, affecting people, investors and
businesses around the globe. The fund slashed growth projections for the United States - the epicenter of the woes -
and for the world economy. The fragile state of affairs greatly raises the odds that the global economy could fall into
a slump, the IMF said. Financial problems that erupted in August 2007 "spread quickly and unpredictably" and
caused "extensive damage," the IMF said. Economic growth in the United States is expected to slow to just 0.5
percent this year, which would mark the worst pace in 17 years, and a feeble 0.6 percent in 2009. "The U.S.
economy will tip into a mild recession in 2008 as the result of mutually reinforcing cycles in the housing and
financial markets," the IMF said. The report expects the world economy, which grew by a robust 4.9 percent
last year, to slow sharply. The fund projects the global economy to grow by 3.7 percent this year and 3.8 percent
next year.
Bank of Japan Policy Board member Tadao Noda said Wednesday that downside risks to the global economy have
been growing, affected by the slowing U.S. economy and impact from the current credit market turmoil. Noda
said that decreasing exports to the United States from East Asian countries may lead to a decline in Japanese exports
to the region
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(JD): Are you a believer, Ferit, from Turkey through to China, with South Asia included that this belt of growth is
going to be the driver for the global economy, almost the rescuer of the global economy? (FS): Of course when
things happen, like the subprime mortgage problem in the U.S., that's originated from a market like the
United States, it affects us very much. But what we are seeing is the developing world is going to be the engine of
the world, definitely. We are living in a globalized world. I am expecting not only India and China but the whole
growing world will affect the growth of the economies.
Finance leaders from the world's wealthiest nations warned Saturday that global economic woes could get
worse from the slump in the American housing market, but offered few specific remedies. In a statement issued
after meetings in Tokyo, the finance ministers and central bank chiefs of the Group of 7 industrialized nations
offered a more pessimistic view of the global economy than they did four months ago, after their last meeting. They
also said the fundamental elements of the global economy remained strong and the United States was likely to avoid
recession. The finance leaders from the United States, Japan, Germany, France, Britain, Italy and Canada warned
that global growth could continue to slow as a result of the credit crisis set off by America's subprime
mortgage problems. The statement also pledged joint action to calm shaken financial markets, but it was short on
specifics, especially on steps to rekindle growth.
But, if the US economy/society in general is becoming increasingly inefficient, how can it maintain its high living
standards and engage in expensive imperial adventures? The author answers this question by pointing to America's
ever-increasing borrowing from the outside world, mostly from Asia. But why do these countries continue to lend to
the US? Why at some point do they not dump dollars or treasury notes? Here the author once again rightfully points
to the peculiar position of the US in modern society and the reason it still has an almost free ride - at least for a while.
The global community, or at least much of it, wishes to diminish the US role in global affairs, but very few wish it to
collapse. With an interdependent global economy and the dollar as the global currency, the collapse of the US would
send a shock wave all over the world, leading to unpredictable and possibly global catastrophic consequences
similar to those that followed the Great Depression of 1929.
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Trade Deficit
( _ ) Boosting competitiveness lowers the trade deficit
The U.S. Department of Commerce today reported that the merchandise trade deficit reached a record level of
$631 billion at an annual rate in the first half of 2004, an increase of 15.3% over the same period in 2003 . The
aggregate U.S. trade deficit, which includes both goods and services, was $575.5 billion at an annual rate, a
15.7% increase. Growth in the deficit reflects surging imports and continuing, rapid decline in the
competitiveness of U.S. manufacturing industries. The merchandise deficit as a share of U.S. gross domestic
product (GDP) increased to an unprecedented 5.3% in the second quarter of 2004.
If a country with a trade deficit improves its competitiveness, then the degree of real currency depreciation (or
wage cuts) required to balance trade in the long run is reduced, and hence the sacrifice of domestic living
standards necessary to restore external balance is diminished. As three influential economists have written, The
macroeconomic adjustment that the United States faces over the years ahead [in order to reduce the trade deficit]
is linked to the microeconomic issues of competitiveness in particular products and the general performance of
U.S. exports and import-competing industries. How well we compete will determine how far the dollar needs to
fall, which in turn makes a major difference to the costs in terms of our standard of living of bringing our trade
deficit down. ( Dornbusch, Krugman, and Park 1989, p. 9, italics added) In this view, micro-level policies are
essential to alleviate the future costs of adjustment to the United States external imbalance. The more the United
States can enhance the competitiveness of its own industries, as well as open up markets for its products abroad,
the less the dollar and real wages will have to fall in order to eliminate the trade deficit, and the higher will be
the sustainable standard of living associated with balanced trade in the long run.
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