Is Automation the Missing Piece in the U.S. Energy Economy?

The recent failure of the Detroit automakers has given the government the headache of creating jobs for a newly unemployed mass of blue collar workers.  The high cost of these American workers, we are told, is responsible for the lack of competitiveness of GM and Chrysler.  The “legacy costs” of these automaker’s promises to their employees have resulted in an “all-in” wage of $75 per hour, compared to $40 to $45 prt hour for other car companies.  According to a report in Popular Mechanics, the estimated disparity can range from $600 to $2000 per car.

However, the relevance of this math may be fading.  Disparities between rates for domestic construction of cars are almost a moot point given the larger disparity between labor rates in the United States and other countries like China and India.  The U.S. may no longer be competitive for labor-heavy industries at all.

All this brings me to the “green jobs” we are now creating.  Using the same cost structure to build electric vehicles instead of gasoline vehicles will not save Detroit from cheap imports.  Take for example, Detroit Electric, which is attempting to produce electric vehicles with a 200-mile range costing approximately $30,000 by 2010.  A great product if they can deliver.  But despite its name, Detroit Electric is actually based in the Netherlands and plans to manufacture its vehicles in China.  Hardly “An American Revolution.”

Simply shifting these problems to another industry won’t fix anything.  Retraining a person to weld wind turbines instead of cars won’t guarantee their job security when someone across the world is willing to work for an order of magnitude less money.  If we want job security over the long term, we have to fundamentally increase the value-added of the American employee.

Perhaps what the U.S. economy needs is to shift its cost equation away from labor.  If we accept the premise that labor will never be as cheap in the United States as it is in China and India, even adjusted for productivity differences, then we must find a way to undercut their costs in order to be competitive.  This is where automation can play a role.

Take for example Heartland Robotics, which is looking to build the next generation of intelligence-enabled, low cost industrial robots.  In an article in Next Big Future, founder Rodney Brooks, a former cofounder and CTO of iRobot, maker of the Roomba automated vacuums, says his mission is “to effect a powerful evolution in the world’s labor markets, and my current focus is to develop low-cost robots that will empower American workers.”  Entrepreneurs like Rodney Brooks offer an opportunity for the U.S. to change the equation back in its favor.

With the old fleet of American vehicle makers slipping into bankruptcy, the new guard of electric vehicle makers and associated “green energy” manufacturers should take automation seriously.  Simply applying the old recipe to new products won’t be enough to overcome the sustained challenge of low-cost competition from developing countries.  American automakers need to find a new “special sauce” to put them back above the competition.

   Read the Popular Mechanics article