My obligatory post on General Motors; The future of R&D ?

So, there's plenty of news regarding Delphi and GM in the automotive press as noted here:

http://www.autoblog.com/entry/1234000803071587/

GM is in some trouble financially. They are likely to be exceeded as the world's #1 automaker by Toyota, a strike looms in the future at Delphi, SUVs rot in crowded dealer lots, etc. All of the bad news has resulted in well-reasoned speculation that GM will be forec to close its doors. So far, the only reason I have heard but forward is that GM cannot go out of business "because no company that big can go under".

Then there's this piece...of work from CEO Rick Wagoner.

http://www.opinionjournal.com/extra/?id=110007641

I have long held that America companies should be begging for universal healthcare. In his...piece..Mr. Wagoner comes close. I suppose he's asking either for some protectionist measures like tarriffs (that worked great for the steel industry), or maybe, just maybe we should start thinking of universal healthcare.

(Disclaimer: Not that universal healthcare is a great solution to the health care problem, it would still need to be paid for through taxes or tariffs. Both of these would reduce consumer spending and so on down the line. However, if we want to be competitive in the world marketplace we might want to consider the option. Oh, and did I mention that maybe it would be the right thing to do.)

Wagoner also claims the auto industry spends more on R&D than any other sector in the U.S. I suppose that may be true in the United States, but in the world as a whole the automotive sector is second behind "Technology and Hardware Equipment" according to IEEE Spectrum.

http://www.spectrum.ieee.org/dec05/2395

A PDF of the top 100 R&D companies is also available through IEEE Spectrum:

http://www.spectrum.ieee.org/images/dec05/images/rdf1.pdf

I looked at this article in the print version at home last night. I was immediately struck by the top 5 R&D spenders:

1. Ford
2. DCX
3. Toyota
4. Pfizer
5. GM

I should note that the top 100 ranking is based on total spending and, given the sales figures for these companies, I would hope the would be up there in spending for just about anything.

So yeah, the ranking seem impressive until you check out the percentage of R&D spending compared to sales. All of the automakers average around 3-4%. The average over the 100 companies was 8.8%. I wonder how much of that 3% is R&D into process improvements and HR initiatives?

There is also a consensus among automakers in another metric: R&D spending per employee. The big three average about $20k/employee; Toyota beats them all at $24k/employee. The average for the top 100 (spanning all industries worldwide) was $33k/employee. When you look at R&D from this perpective the automakers move to the bottom 40%.

What I find amusing is that Wagoner seems to be taking credit for all of the automotive R&D spending, even though they are 3rd among the big three and behind rival Toyota.

So, where's Honda in the mix? Number one among automakers in the ratio of R&D spending/sale @ 5.4% and spending $34k/employee on R&D. Have I mentioned how much I like working with Honda?

The other players: (In order of R&D spending)
VW:#12 overall, 4.3% sales to R&D ration, $14k/employee
Nissan: #22 overall, sales to R&D ratio of 4.6, $22k/employee.
PSA PEUGEOT CITROEN SA,: 3.3%, $11k/employee
Fiat: 3.9%, $14k/employee
Mazda: 3.4%, $24k/employee

Among major suppliers I noted: (In order of R&D spending)
SIEMENS AG,: 6.7%, $15k/employee
Bosch: 7.2%, $15k
Denso: 8.5%, $21k
Delphi: 7.3%, $11k/employee
Visteon: 4.8%, $13k/employee

Obviously, my spin is that the total dollars doesn't matter. So what would the list look like if I reorganized?

The top 10 :

1. Nortel
2. Schering-Plough
3. Eli Lily
4. Amgen
5. BAE Systems
   
6. Schering
7. AMD
8. Astrazeneca
9. ST Micro
10. Freescale Semiconductor

The Bottom 10:

1. GE
   
2. Deutsch Telecom
3. Nestle
   
4. NTT Docomo (Why spend money on R&D when you have a monopoly)
5. Dow Chemical
6. Unilever (Didn't they buy Ben & Jerry's)
7. Lockheed Martin (No suprise here)
8. LG Electronics
9. Nippon Telegraph and Telephone (See NTT Docomo)
10. BASF (Isn't their brand image all about R&D?)

To be fair to the bottom 9 (excluding GE) the margins on these products are likely so low the sales and R&D per numbers aren't really all that fair.

My gripe with GE is that the company is held up as a model business, what with the holy Jack Welch business model and all. Obviously R&D has nothing to do with making money, so Welch is not concerned with R&D from a business perspective. I heard a lot of comments to this effect during my days in the satellite industry, so I have to say the numbers don't surprise me all that much. Objectively though, GE does a lot of things that have nothing to do with R&D (like owning NBC, and loaning money) that probably effected their ranking.

I also did a quick check to see who had the largest (year over year) increase in R&D spending per employee: Samsung. Keep that in mind during your Christmas shopping this year.

Also of note, a good number of U.S. companies in both rankings.

Productivity up, wage growth....negative.

From the Washington Monthly. You would think that productivity growth = wages growth. Well, that is to say if you believe the party line that working harder results in more profits that will result in a bigger raise. Wait...what's that....you want me to drink what?

Kevin Drum provides some "snarky" comments:
http://www.washingtonmonthly.com/archives/individual/2005_12/007709.php

To be fair, wage growth is negative relative to inflation (including energy prices) and likely includes the effects of Katrin and Rita. Of course, from that perspecitve my wages have been on a negative growth path for 4 years. Excluding a job change and one great raise year at my first job my wage growth has been negative since I graduated from engineering school. Now, if I factor in that my wages only went up during my job change because of my Master's degree and then subtract the cost of obtaining that degree......Oh dear...seems my boss just told me raises next year will be delayed 6 months and the company is copping out of 401(k) contributions. Good thing they paid out a record dividend to shareholders this year.

Cool hack of the month

So far at least...

OSX on the PSP