GLG News by Jack Lifton

Implications: The Detroit Three followed the lead of Jacques Nasser at Ford in the early 1990s and began to eliminate internal supplier quality management and PPAP, production parts approval processes. After internal engineering supplier monitoring had been made into a supplier self approval regime came the outsourcing frenzy of the late 1990s. The result was that Chinese and Indian suppliers were self certifying and that has been a disaster.

Analysis: I doubt that a single worker in whatever Indian or Chinese factory that produced the defective heating wiring for windshield washer fluid bottles and lines, which has caused GM to recall and pay for probably 200 million dollars worth of retrofit wiring harness "with fuses," had any idea what he was building was for. The Indian engineer who designed the system probably didn't think of putting an inline fuse in the system, because, after all, if the wiring breaks, it will simply result in an open circuit that doesn't draw current. The idea that the wiring he was designing would be packed with an engine compartment and that the broken wire could fall onto a grounded mass of metal and thus draw enough current to turn red hot and ignite combustibles around it was not for the Indian engineer to contemplate. He never saw the completed car.

I have no doubt that this scenario was not only responsible for the GM recall of nearly 1,000,000 vehicles but that it has been and will be responsible for many, many more such recalls totaling billions of dollars.

Accountants, not engineers, are making safety related decisions today at GM.

Can you imagine the disasters waiting to happen to the Volt and to its luckless owners?

Implications: On what basis do OEM American carmakers deserve federal loan guarantees? Is it because their legacy costs weren't their own fault? Is it because they made lower quality vehicles than their foreign competitors? Is it because they sent American jobs overseas so that the unemployed workers they created could no longer afford to buy their overpriced cars? Is it because they use the money they earn overseas to fund further expansion overseas and thus move closer to no longer being American companies at all? Is it because they continue to employ and pay high salaries to legacy managers who have proven themselves completely inept and have cumulatively lost more than 100 billion dollars in just the last five year? It is for all of the above and many more reasons that the OEM American car companies must be allowed to go it on their own.

Analysis: If the financial markets think that GM, Ford, and Chrysler are on 'the right track" to profitability then those markets will lend those companies the money they need to retool their factories to produce the new cars that they have designed within their restructured organizations. The collateral will not need to be the good faith and credit of the taxpayers of the United States; it will need to be the belief by the financial institutions that they can make a profit by investing in the GM, Ford, and Chrysler of today.

Why not let the markets decide?

May i suggest that in order to build this trust in their future that all of the car companies restructure their current management by dismissing them and seeking to recruit new leaders not only in America but from those nations and companies that are right now producing vehicles profitably within the USA without any subsidies or loan guarantees from the US treasury.

Toyota
Honda
Nissan
Hyundai, and
Daimler

would be good places to start recruiting.

We all know that the above companies are already bidding for all or some of the assets of GM, Ford, and Chrysler that those companies themselves can no longer manage or make a profit from. Why is that if the American carmakers deserve loan guarantees?

FAILURE IS FAILURE, MR. LUTZ, AND I DO NOT WANT TO HAVE POLITICIANS IN OFFICE WHO GIVE MY MONEY TO FAILURES EVEN THOSE WHO CALL FAILURE SUCCESS.

Implications: End users of minor metals for critical purposes, i.e., for purposes that are not economically or technologically possible without a particular minor metal, can hedge the required supply of metal by financing the producer's output, through offtake agreements, for example, and by being the buyer of last resort as well as the holder of a small strategic excess inventory to use as a barrier against a speculative corner. Contrary to that type of reasoning the unskilled and inexperienced trader in this story simply tried to extend his company's inventory out as far as he could as a way to manage supply interruption. He miscalculated badly and only achieved an enormous cost increase when he was actually trying to stabilize a supply.

Analysis: The rhodium market is very small. It is, perhaps, no more than 25 metric tons a year of new production. All of that production is as a byproduct of platinum mining, almost all of which is done in southern Africa.

The Detroit 'Three' as the shrinking, two public and one private, OEM automotive assemblers based in and around the former Motor City are now known utilize among themselves between two and four tons od rhodium a year for their combined global 'build.' This doesn't mean that they cooperate in obtaining or distributing rhodium; quite the opposite is true. It does mean, however, that the Detroit three use as much as 20% of the world's supply of new rhodium annually to construct somewhat less than 20% of the globe's annual production of motor vehicles using internal combustion engines in countries where the fitting of catalytic converters to manage the exhaust emissions is mandated by law.

One of the Detroit appears to have stumbled badly this year by attempting to manage the risk of the interruption of its critical rhodium supply by building a large inventory one that was too large by two or even three times by historical standards. As the inventory was being built it fulfilled its own destiny. The accumulation shifted the market into an apparent shortfall position, so the price climbed. As the price climbed the Detroit car company buyer panicked and believed he was seeing a genuine shortage. Therefore he paid more and bought more thus continuing to drive the price skyward.

Finally the car company's treasury reacted to having a billion dollars tied up in an inventory that had never before even approached such a dollar cost figure. It decided to sell off the inventory overhang, but, of course, there was no skill set in the company to manage such a sale by feeding the excess in small lots all over the world so large amounts were offered and the shortfall became a surplus as fast as it had become a shortfall. The price kept dropping and now the car company worried that it would be stuck with overvalued inventory so it accelerated the sale.

Has a lesson been learned/ Not at all. The car company has simply moved its unskilled primates to other branches of its corporate tree but the members of the group are the same unskilled and inexperienced team. The boss primate of this group is famous for saying that employees are interchangeable commodities. Anyway it is shareholder value that has been affected not the top team's paychecks.

Next time the primate-in-chief told them at the club "we'll do it right the next time" he noticed that the club had fewer members and remarked that he felt bad about the workers losing their jobs due to market conditions as he ordered the veal chop and a nice bottle of wine to be charged to the shareholders.

Implications: In just this year Cerberus' accountants may have inadvertently exposed the seamy side of cost cutting in the American OEM automtoive industry: 1. Overcharging by non-competitive politically correct suppliers, 2. Underbidding by suppliers desparate to keep their own factories open, and now 3. Short-weighting of exchange traded commodities. Doesn't this expose the corrupt core of OEM automotive cost accounting in general?

Analysis:

What is it that feels good for the moment but exposes those who are seen to do it, from a distance, to ridicule for asocial self-indulgence? One simple answer to this question is masturbating in public. Another answer is the public announcements of cost-cutting programs based on mandatory price cuts from suppliers by OEM automotive assemblers. This simplistic approach to cost reduction is known as "The Lopez System" in American OEM automotive. It is the paradigm for all shortsighted consequence ignoring purchasing programs now in place in American OEM automotive, and it is the main cause of the precipitous decline of the ability of American owned and operated car makers to compete globally or domestically.

Cereberus' accounting are now unraveling some of the more common ways that OEM automotive suppliers have devised to keep from going bankrupt sooner rather than later.

One way has been, until recently, to create a minority 'pass-through front' which allowed the car maker and a mentoring supplier to both take credit for having minority 'content' in their products. This allowed both companies to meet the arbitrary targets for such minority content set by the SBA's Office of Minority Business Enterprize and to thus avoid fines and maintain the ability to bid on and get government contracts, tax subsidies, and the like. Almost all such programs resulted in out-of-control cost over-runs due to the added need for double overhead and quality control. The original idea was to give a lift up to disadvantaged minorities. n practice a few minority group 'good old boys' fronted for business as usual and the targeted class for uplift, African-American males, was impacted, if at all, negatively. Only cooperating minorities got 'assistance.' Actual entrepreneurial minorities usually found out that there was no money left over to invest in their ideas and no other support unless they played the 'game.'

Chrysler had extended 70 million dollars to Plastech Engineering, called the largest minority vendor to OEM automotive, with no hope of ever getting back the 'prepayment' funds when it decided, as Cerberus, to pull the plug. Plastech, a private venture, with a 'billion dollar' order book and 34 plants had NEVER made a profit yet its Vietnamese-American woman owner drew a multimillion dollar salary and had a company paid cook and driver.

Note well that JCI, if the charges are true, could not make a profit selling batteries honestly at the prices Chrysler wished to pay. How does this bode for the lithium batteries that JCI is supposedly going to mass produce for GM, for example?

Another game played by many suppliers to get around mandatory price reductions was to agree and then raise the prices due to unexpected rises in labor and commodity raw material costs after the contract was awarded. The reset back to the original prices, or even higher ones, was rarely, if ever, recorded against the trumpeted cost savings.

Finally, short weighting has become standard operating procedure in the OEM automotive supply business. Standard drums of paint, adhesives, and sealants, for example, are filled to within 2 or 3 inches of the top but labeled as 'full' and/or the weights of production chemicals are reduced by adding cheaper fillers with lighter weights but the original weights are invoiced.

It is even better with metals. For example, General Motors uses approximately 0.2 grams of rhodium in each catalytic converter. Last July 15, 2008 this tiny amount of rhodium had a base cost of $60 dollars. If the supplier were to utilize only 0.19 grams per converter the difference, only $3 a car would add up to $27,000.000 a year for all of GM's production. The same opportunity presents itself for platinum and palladium for catalytic converters although the rewards per .01 gram are not quite so high they still amount to millions of dollars of difference in cost per .01 gram when distributed across GM's annual production.

For batteries it seems that JCI was allowed to 'index' its price of lead each month to reflect the London Metal Exchange's price that month for lead. Chrysler seems to think however that no one bothered to see how much lead was actually used in comparison with what was invoiced. One pound less of lead per 25 pound battery when amortized across Chrysler's production equals 5 million dollars a year. Add in replacement batteries for the existing fleet (typically every three years) and 15 million dollars is a rather small figure, but it may be provable as against even the recent past when no records were kept.

Some car companies, such as GM, were buying commodity metals for their suppliers and releasing them to the supplier to meet contractual demands. This has been standard practice at GM for example for platinum group metals since a situation arose more than 20 years ago where GM found that a supplier was short weighting them. For companies like Ford or Chrysler such inventory building and holding has not been possible due to a lack of expertise in hedging and/or a lack of capital or both.

If the OEM automotive supplier buys its own metals, as is common, then the opportunity to short weight presents itself daily. Unfortunately many suppliers seem to have taken advantage of this opportunity in order to meet arbitrary price reductions imposed by the OEM American car makers. The result has been bankruptcy, poor quality, and financial chaos.

Implications: If we believe the news out of Russia then there must be palladium aplenty residing in the vaults of, or under the control of, Norilsk, the world's largest palladium producer.

Analysis: Oleg Deripaska, the principal owner of RUSAL, the world's largest (and Russian based) aluminum producer has set his sights on gaining control of Norilsk, the (Russian and) world's largest nickel and palladium producer; he, Deripaska, already has 25% of Norilsk's shares. But Deripaska is being blocked from taking control even of the Board of Directors of Norilsk by another Russian 'oligarch,' Victor Potanin, who managed to 'pack' Norilsk's Board and elect (and then dismiss shortly thereafter) his own CEO for Norilsk.

The western so-called 'precious metals' commodity reporting press has managed to ignore Deripaska's most recent comments on Norilsk, but they are worth looking at if you have an interest in the future of palladium or of nickel and cobalt.

Oleg Deripaska has stated that some Norilsk operations are so environmentally challenged that they are in danger of being "shut down." If this is true then the world's largest producer of palladium, and one of the world's top three producers of nickel and cobalt is in danger of sharply reducing its production of palladium, nickel, and cobalt. This "possibility" if it were said of a South African platinum, nickel, or cobalt producer, or a Chinese producer of tungsten would have caused the prices of any or all of those metals to skyrocket just as it has in the recent past when South Africa entered its electric power shortage crisis and China imposed allocation reductions on exports and raised the export taxes on many minor metals including tungsten.

So, what happened?

Even after Derpiaska'a statement of the dire danger of a "shut down" the prices for palladium, nickel, and cobalt dropped! The price of palladium, in particular has dropped by more than 40%.

Even accepting the fact that the world commodity metal market is dropping sharply at the present time as the sole explanation for the zero impact on palladium, nickel, and cobalt prices that occurred when Deripaska made his prediction leaves me skeptical..

One possible explanation is, of course,  that, at least for palladium, there is already a vast oversupply under the control of Norilsk. Analysts and pundits since 2002 have been attributing low palladium prices to the release of accumulated old inventory from Norilsk  Each year since 2002 we have been assured was to see the last of the old inventory so that the next year would see a jump. Yet in all that time the price of palladium did nothing more than follow the dollar's decline against the Euro. The price seemed to be going up slowly, but in fact it was only moving in lock step with the Euro's rise against the dollar.

It must be noted that if one had had the misfortune to buy palladium  in Euros in 2002 you would now be holding palladium worth only 60% (in Euros) what it was worth in 2002 almost exactly the same situation as dollars that you might have purchased in 2002 with Euros. Converting that palladium today into dollars would give you palladium at less than $160 per ounce! You still would have made a substantial profit by doing the same thing (buying in Euros in 2002 and selling for dollars in 2008) with nickel and cobalt and many other metals, howver.

It is difficule then to argue against the conclusion that there must therefore be simply less demand now for palladium than there was in 2002 or that there is an oversupply. In fact the world today, in 2008, is producing as many as 25% more cars using catalytic converters than it was in 2002-The slip in US domestic demand is simply drowned by the increase in global demand. Therefore the answer to the palladium price collapse seems to be simply that it is in such oversupply that even the cessation of the production of new palladium by Norilsk would be unimportant as the market has indicated by its total lack of interest in any possible cessation of Norisk production of palladium.

Norilsk shares have dropped by 40% since the battle between Deripaska and Potanin got heated, but this is of great help to Deripaska who is trying to acquire shares, so he must not be disappointed by the results of the boardroom battle and the threat of production interruptions.

Some investors are ignorant of the geoeconomics of palladium, platinum, and rhodium. They think that the production of palladium is somehow linked to that of platinum and rhodium. It is not connected in any way geologically; the metals platinum and rhodium are mined together because rhodium is only found as a byproduct of platinum, but palladium production is not related to platinum and rhodium production. Most of the world's platinum and rhodium come from southern Africa; most of the  world's palaldium comes from Russia. 

Palladium is dropping I believe, because it is simply in oversupply in a dropping market, and the myth of an impending shortage or exhasution of inventory reserves can no longer be sustained.

Implications: General Motors may not actually have a plan to compete with Toyota in the hybrid market. General Motors engineering and purchasing was disastrously shortsighted in the late 1990s and early 2000s, and its product planning group remains so even now. All of GM's product planning and sourcing errors were made under the rule of Rick Wagoner. GM's board of directors either doesn't understand carmaking or fears for its own reputation and job, or that it has no one to turn to,  if it now jettisons Wagoner and his team. GM is thus doomed to fail and the money being wasted chasing the short term lithium rainbow is just accelerating GM's demise.

Analysis: It seems odd that GM has invested between one and two billion of its dwindling store of dollars to develop a car that has hardly any market.

In fact this only makes sense when you realize that GM cannot admit that it first rejected and then was unable to develop for mass production the nickel metal hydride battery that is the core component of the wildly successful Toyota Prius hybrid.

The very profitable oil company, Chevron, has, without anyone even noticing simply decided to write off its 350 million dollar investment in developing a mass produced nickel metal hydride battery with Energy Conversion Devices, Inc., the company that originally invented the nickel metal hydride battery. Fittingly the now moribund Cobasys was forced to recall its entire 2007 model year production run of NiMH batteries produced for GM, which had to recall all of its 2007 hybrids on account of a failure by Cobasys to choose the correct plastic for the body of the battery. The plastic cracked and the electrolyte leaked from the batteries causing them to fail catastrophically.

This Chevron pullout and Cobasys failure advertises GM's inability to manage a program to produce batteries that another company, a licensee originally of the battery technology, Toyota is now not only able to produce at the rate of 1,000 a day, seven days a week, but is also ramping up the production of which to 3,000  a day to try and meet the growing demand for its NiMH utilizing Prius hybrid, which gets between 45 and 50 miles to the gallon.

We are supposed to believe that GM is working on the next generation of hybrids, which will utilize a not now existing lithium battery to power a hybrid which will use an onboard gasoline engine only as a generator and back up battery charger. We are supposed to believe that this car will have a range on a fully charged battery of 40 miles and that it will be able to be recharged from a household outlet and that this somehow makes it superior to the Toyota NiMH Prius with its 500 miles range and 825 lb cargo capacity. The Volt, by the way, will sell for nearly twice as much as the Prius.

At the same time we are also supposed to believe that the so far unchosen lithium battery technology will have a lifetime of 150,000 miles and ten years even though no such testing has even yet begun. In the mean time the NiMH batteries delivered by Toyota have a lifetime originally guaranteed for 8 years and 80,000 miles, but in fact have now routinely exceeded that lifetime and that range.

Honda like Toyota is now introducing NiMH using hybrid cars which it advertises will sell for less than the Toyota Prius and have the same or better performance, range, and lifetime.

Honda and Toyota have both opted to continue research on and limited production of lithium batteries but both state that such batteries are not ready for mass production.

Neither Honda nor Toyota feels that the lithium based plug-in hybrid with a 40 mile range on a full charge, upon which GM is betting its future, is more than a niche product.

GM mismanaged its oversight of Cobasys and allowed Chevron to waste 350 million dollars to develop nothing. Now we are told that GM may buy out both Chevron and Energy Conversion from Cobasys and use the company to quality control the lithium batteries GM is receiving in ones and twos from its so-called suppliers, research laboratories with pilot production like A123 or development labs of large makers of small lithium batteries for laptops and entertainment devices like SAFT.  It sounds like the kind of joke Jay Leno would tell.

Energy Conversion Devices' revenues from its patents for NiMH batteries come from the process patent it holds for any use of NiMH batteries for vehicles, not from the technology, in which it long ago lost its position. Energy Conversion Devices, in fact, is now a solar panel producer only and no longer works on NiMH batteries.

GM's NiMH battery producer, Cobasys, like GM, was an engineering failure due to mismanagement. Toyota and now Honda have both made the NiMH battery the core component for a successful hybrid system and are expanding their production of batteries and hybrids. the only constraint either of them have is the limited amounts of rare earths available.

General Motors only constraint on competing with Toyota and Honda is that it does not have the ability to produce NiMH batteries or the ability to purchase the critical raw materials for others to make them for it. Therefore GM has chosen to use its considerable lack of judgement to go down a blind alley towards a halo car, the Chevrolet Volt, which even if it were to be delivered on time and perform as advertised would be constrained by the fact that no one could predict how long it would work. Ford has even figured this out and is staying away from playing follow the leader.

The NiMH hybrid may never, due to raw material limitations, exceed 10% of the US market or 3% of the global market but every one manufactured will be sold at a profit by a Japanese (or Chinese) car company.

If and when a lithium battery is developed that meets the safety, reliability, and longevity requirements that it must have then that battery will be used to make and sell Japanese, Korean, and Chinese cars, because only the car companies in those countries have the capability to survive long enough for such cars to come into mass production.

Implications: Is it ridiculous to assume that a marked change in the value of the US dollar in relation to the resource backed currencies of all or even some of the BRAC countries, Brazil, Russia, Australia, and Canada, will not affect the immediate dollar price of the natural resources produced in those countries..

Analysis: Investors in metals should take note of the fact that the cooling of the US economy's demand for durable goods, housing, and soon, I think,  infrastructure is not a collapse of the US economy and that, in fact, since the US economy is now just around 25% of the global economy even a locally 'massive' 10% decline in the US economy would only be a decline of 2.5% of the global economy.

Just to put the decline in the American economy in perspective look at the decline in the demand for automotive grade steel which will occur if the US OEM automotive market demand for all of 2008 goes from the 17 million units projected in January 2008 to the worst case scenario now being bruited about, a 2008 US market of 'only' 12 million units for 2008. Basing the usage of steel per car at approximately one metric ton (A figure published for an average American mid-size car by the National Research Council) this means that the loss of demand due to the US OEM automotive market turndown for the global steel industry will be 5 million tons. This is 0.4% of the projected global production of steel for 2008.

Note well that the global iron ore industry has just doubled the price of iron ore for delivery by contract for the next year. This price increase will cause iron ore revenues to again grow dramatically next year no matter even if the global demand for iron and steel should decline by 10 or 20 times the decline caused by the reduction of American OEM automotive demand. In addition the reduced volume of high quality US generated automotive scrap steel, caused by Americans keeping their cars for a longer period of time, has already moved scrap to its highest price, in dollars, ever.

Platinum, palladium, and rhodium critically required for the manufacture of vehicular catalytic converters will see demand reduced by 150,000 troy ounces, 450,000 tr oz, and 30,000 tr oz, respectively. This represents 2%, 6%, and 3%, respectively of their global production (as newly mined metals) for 2008. But the new Chinese mandate for catalytic converters will simply cause this material to be redirected to the growing Chinese and Russian markets for 2008. If the American car economy comes back this will set off a new price war for platinum group metals until and if internal combustion engines are replaced by hybrid or electric powered vehicles.

The decline in prices for the major metals, copper , aluminum, and zinc has been more than can be accounted for by the reductions in volume demand caused by the American durable goods and, in the case of copper and aluminum, homebuilding industries recession.

The decline in the prices of the platinum group metals has been 25% over just the last couple of months and this is simply decoupled from any reasonable effect that reduced American OEM automotive demand could have created.

Speculation in all of the metals, major and minor-where possible-has certainly affected their price fluctuations, but I think that everyone is overlooking the effect on the pricing of metals worldwide by the rapid conversion of that pricing out of the US dollar.

The dollar effect on metals will I think soon become obvious when new trading markets in Asia decide to price the metals in currencies other than the dollar. I'll bet that there will be an avalanche of metal price corrections across the board sometime soon caused by the delinking of prices to the US dollar.

Implications: Gold has no utilitarian value whatsoever. Oil, however, is intrinsically the single most valuable commodity in the world and will remain so until the production of electric energy and the fueling of ordinary passenger and freight carrying vehicles in a nation no longer uses more oil than that nation using the oil can produce for itself.   It is simply not possible today for a nation to be economically self sufficient without either producing or burning oil for energy. The possession of gold or even of any utilitarian commodity without oil is today without real value.

Analysis: The twenty-first century global economy runs on energy. Nations which do not have the natural resources to produce sufficient energy domestically to meet their demand are in danger of becoming energy bankrupt and can avoid that status only by producing enough goods and services that other nations desire, or need, to enable them, the energy debtor nations, to obtain oil from energy creditor nations by trading their goods and services for oil.

The United States, although it has an abundance of oil, coal, and gas along with uranium, thorium, wind, and sunshine nonetheless exports between 5% and 10% of its GDP each year to nations that have no industrial base, no technology base, and no hope of developing such rudiments of self-sufficiency and any of which may cut the US off from its oil or sell it to a higher bidder at any moment.

This is because the greedy short sighted financiers and politicians of the so-called American establishment believe that the free market operates at all times and in all places to ensure that 1) all commodities are available if only one will pay the going price and that 2) increased demand ensures increased supply.

American activist environmentalists insure by enjoining production of energy natural resources in America that the lowest technology , least interested in human rights, and least friendly nations in the world continue to use up human lives and pollute at will so that they, the American self-obsessed elites can fly their private jets, operate their yachts and houseboats, and light their mansions on the broken backs of Chinese miners and Nigerian and Filipino and Palestinian, yes Palestinian, low paid laborers.

Actually now that the price of oil is rapidly going down again at least many of the low paid workers in the non-North American oil industry will be able to starve to death rather than being worked to death in a fog of noxious gases, liquids, and particulate. 

The American middle class and working poor are fed up with elitist pretensions to telling everyone how to live and is rapidly losing interest in luddite environmentalism and global warming fantasies of inevitability of disaster. 

Until the US is self sufficient in energy it is in danger of energy bankruptcy.

The world judges that risk by the value it gives to the US dollar not the price in dollars that some will pay for gold.

Simply the hope that America may move towards energy self sufficiency is driving the dollar upwards.






 

Implications: Mercedes is leading the green charge in European luxury cars. It is bringing its Bluetec diesel engines to the market to improve fuel efficiency and lower emissions for its premium cars. Mercedes also keeps talking about a plug-in hybrid using a 'lithium' battery that is supposed to be coming soon. So, why is Mercedes thinking of canceling an SUV hybrid targeted for the US market because it won't be getting the nickel metal hydride vehicles it made a prepayment for from now moribund Cobasys?

Analysis: Mercedes, like every other profitable car maker, judges technology by results, not by PR for it.

Mercedes knows that in the US market a first step must not be a stumble.

Mercedes therefore designed a hybrid power train for its M - Class SUVs, made in Alabama, around the safe, reliable, long lived nickel metal hydride battery thus taking advantage of Toyota's phenomenal record of problem free hybrid operation by the now one million Priuses built since 1999 all using a nickel metal hydride battery in the hybrid power train and a traditional lead-acid starting-lighting-ignition battery for those purposes.

The problem seems to be that Mercedes either didn't want to use Toyota's hybrid power train or could not get a license to do so, so that it had to go to the market for  nickel metal hydride battery.

Clearly without thinking it through Mercedes decided to trust Cobasys to do the job of building it a nickel metal hydride battery. Mercedes clearly did not have competent or sophisticated battery production engineers to approve Cobasys as a supplier, or it would have discovered, even with a cursory inspection that Cobasys was not up to the job.

The strength and longevity of the nickel metal hydride based hybrid power train is proved by the fact that Mercedes having found out it had been tricked has decided to put off or cancel the M-Class hybrid rather than take a chance of failure with some unproven lithium technology.

The strength of Japan's and Toyota's lock on the nickel metal hydride battery manufacturing space is proven by the fact that even Mercedes could not find a supplier for nickel metal hydride batteries not connected to or beholden to Toyota 9or, perhaps, even Honda0.

This proves that the lithium fantasy has poisoned western battery research. instead of the success of Toyota causing research into the development of even better nickel metal hydride batteries by hopeful suppliers to western car makers the nickel metal hydride r&d has dried up outside of Japan thus leaving the market for the only safe, reliable, long lived technology in the sole control of Japanese car makers.

General Motors living more and more each day on past glory is mostly responsible for this ridiculous state of affairs. Mercedes was sucked in by GM's reliance on a failed supplier, Cobasys, and was blinded by the inconvenient truth that Cobasys and GM had no idea how to do their jobs.

I guess people will now continue to buy Lexus SUV hybrids utilizing nickel metal hydride batteries just as they should do. perhaps technology has simply surpassed the ability of Mercedes, as it has surpassed the ability of GM, to comprehend it.

Implications: Liberal politicians and overpaid executives seem to have exactly the same solution to all problems whether they be environmental, cultural, or scientific: Throw somebody elses's money at them. Isn't it obvious that the presently touted solutions to old problems may not be the correct ones? Isn't it obvious that simply downsizing vehicles, building public transportation, and encouraging multiple passenger driving,  should be the very first way to go to reduce fuel consumption? Isn't it also obvious that the indulgence of the American consumer in his/her fantasy of large fast cars as a measure of self-esteem along with telling gullible people that they always need the newest version of a car are the actual impediments to rationalizing transportation? After doing all of those things perhaps we will still have time to advance our technology through innovation. Americans need industrial and political leaders not judas goats as managers and elected officials.

Analysis: No one knows whether or not a safe, reliable, long lived battery can be built and mass produced economically that will power a plug-in hybrid for 20, 40, or even 100 miles 'on a charge.' Yet Senator Obama having been indoctrinated by the men who have lost more money in just 3 years making cars than any other similarly situated men in human history now wants the US Government to invest another 150 billion dollars of the taxpayer's money on a technology that no one has been able to make work in the hope that it will lessen American dependence on imported oil. Oh, and don't forget Obama will add a tax credit for those who buy the cars so as to subsidize each car even after the taxpayer has subsidized its development.

Actually Senator Obama is merely an opportunistic politician. He hopes that saying he 'supports' this ridiculous bailout, which he would have no hope whatsoever of getting through a Congress of either party, will fool enough Michigan voters to swing the state to his column in 3 months time. Other than that I'm sure he doesn't care at all about plug-in hybrids.

The interesting thing about this assumption of the public's stupidity is that it is a last ditch effort by supposed free market capitalists to give life to their failures to operate viable car manufacturing in an American environment where Japanese, Korean, and German companies can build and sell cars and trucks profitably on a daily basis while American owned and operated companies are now functionally bankrupt from trying to do the same. The difference is that the 'transplanted' car companies do not operate in super high cost places like Michigan and do not depend on an American owned and operated supply chain.

Senator Obama's knee-jerk compliance in the Michigan bailout fantasy/conspiracy is proof enough for me that he is an ordinary opportunistic politician with a philosophy of taxing and spending his way out of being held accountable.

America's best hope is that Senator Obama and Messrs Wagoner and Lutz are all soon jobless and that we get replacements for them who can lead us out of the mess America has gotten into by abandoning its heavy industry, its natural resource production, and its common sense.

Implications: As James Carville might say to GM's Bob Lutz, "It's the battery, stupid, we don't have enough reliability and longevity data to put it on the market. That'll take at least five years after we finally choose a specific technology based in great part on initial reliability and longevity testing which is not yet completed!" Toyota and Honda have chosen the nickel-metal-hydride  battery equipped hybrid for mass production while continuing to evaluate lithium technologies for future plug-in hybrids.

Analysis:

The most interesting and important comment in this Reuter's article is:

"If you build your plug-in hybrid and the battery only lasts five years, how much is your vehicle worth? Nothing," Gioia said. "The battery replacement costs will exceed the residual value of the vehicle. We don't think that's an acceptable pathway forward."

General Motors is on a path, all by itself, to stave off its demise by creating a 'halo' car, which it prays will cause lenders to continue to feed GM's cash burning machine until it, GM, can come up with a way to make and sell cars at a profit. This something it has been unable to do for more than five years!

GM's focus on the Volt is not to create a revolutionary new car, but rather to create a reason for its lenders to keep it alive.

Toyota which makes mostly internal combustion powered cars, 97% of its current production, is gearing up its infrastructure so as to be able to build 10% of its total production as nickel metal hybrid battery utilizing hybrids by 2011, and it hopes to increase this percentage of hybrids to more than 25% by 2014.

Honda is also gearing itself up so as to be able to produce more than 10% of its total build as nickel metal hydride battery utilizing hybrids by 2011-12, and is actually aiming to surpass Toyota's total hybrid percentage of build by 2014.

Both Toyota and Honda make a substantial profit on their car making operations. In fact together they have made more profits in the last 5 years than the total of losses by just General motors. This means astonishingly that Honda and Toyota combined have made more than 50 billion dollars in total profits since 2003 and each have nearly that much unencumbered capital on hand.

I have no doubt that GM's executives will not pay attention to Ford's executive in charge of hybrid and electric car development, but before anyone listens to anything further that GM says or promises about the future everyone must keep in mind that the now largest and most profitable car maker in the world, Toyota, along with another consistently profitable and very large car maker, Honda, are betting on nickel metal hydride battery powered hybrids growing in demand and becoming the dominant electric car intermediate technology into the foreseeable future.

Toyota has announced that it is already looking beyond lithium technologies to a next generation of battery that will solve the problems that, in Toyota's and Honda's opinion, prevent the lithium battery from being safe, reliable, long-lived, and economical.

Nissan, it is true, is looking at lithium ion battery technology, but it doesn't intend to develop just short range plug-in hybrids, like GM. Nissan plans a total system consisting of short range all electric cars and a comprehensive charging grid so that cars can always be moved so they are within range of a charging station. This will be an ideal system for a small country like Israel, or for a taxi system or for a rental or lease type fleet system where the customer may use whatever vehicle is ready at the charging station. This is another intermediate solution that can last for a long time like Toyota's and Honda's.

The European car makers are going to go with small efficient diesels to increase fuel efficiency and decrease emissions and move slowly on electric and hybrid cars until they see how the technologies sort out.

Ford and Chrysler are in the same boat as GM, but neither is willing to commit to a Volt type of project especially one that is supposed to come on stream in just two years.

In the end I think that the Volt will be a short circuit, and GM will be pinning its hopes on a government bailout. The problem is that GM has no visionary Lee Iacocca in sight. It has only the myopic stale 'leaders' who have brought it to not just ruin but irrelevancy to the future of the OEM automotive industry.

Implications: Reuter's has now reported the official statement of a ranking official of China's Ministry of Economics, http://gateway.andohs.net/player/?sid=826&nid=2920 , to the effect that China's treasury must follow Chinese 'private' business and use its immense reserves of US dollars to obtain ownership of natural resources and of their sources of production overseas. China admits that it stands to lose more by simply holding American currency and dollar denominated negotiable instruments than any other nation in the world if the US dollar declines. But never before has the global economy been faced with a buyer of China's demand and wealth, as a competitor for natural resources. The Chinese nation and its treasury are primarily ranged against foreign private companies. Has the struggle I have in the past referred to as "The Gold War' begun?

Analysis: The Chinese national government is a communist regime, which operates a 'command' economy currently using a mix of capitalism and socialism.

The goal of the Chinese command economy is not to enable private capitalists to make a profit on investments; it is rather to improve the lives of the Chinese people. Therefore when the Chinese national government openly tells the world that it wants to use its immense reserves of foreign exchange, mostly US dollars, to obtain not only supplies, but sources of natural resources it is signaling a monumental change in operation of the world's natural resources markets.

Once the Chinese state or a subordinate company has taken control of a physical inventory of a metal, or a mine or a company that produces it, the state will no longer prioritize the selling of the ore, the metal, or the services of its producer or fabricator for a profit, rather it will sell the metal or the services to end users outside of China only when that act is of greater benefit to China than continuing to hold physical possession of the metal or control over the fabricator.

Thus as China now converts its surplus of US dollars into natural resources those resources will have effectively been withdrawn from the global 'free' marketplace.

Only domestic Chinese demand is of importance to the Chinese government, so that the world is about to enter an engineered supply crisis the like of which it has never before seen and for which there is no solution within the free market practice of the western democracies.

We may well be entering into an era of the economic equivalent of an all out war; a war, the end result of which, will be a transfer of the economic control of the world to Asia.

Russia, having foreseen this, is now sequestering its natural resources for its own use and survival; Africa is being drained of natural resources by Chinese resource imperialism; Canadian resources are being eyed by Asian resource imperialists; and finally, the production of domestic  American natural resources has been effectively shut down by starry eyed environmental activists in a variety of unilateral abrogation of economic self-sufficiency.

China operates by developing and following 'five-year plans' to improve the Chinese domestic economy. America lurches from one economic crisis to another and has no long term domestic plan. 

How much longer can America lurch from one crisis to another without adopting and following a plan for economic self-sufficiency?

 

Implications: Wind turbines can be used to produce electricity but in order to do so they must use permanent magnets and batteries. Building even the 'modest' 17 gigawatts  of wind power generated electricity that Texas alone projects would add so much demand for rare earth metals as to be impossible to carry out  in the face of present growth in Chinese domestic demand for rare earth metals.

Analysis: China today produces between 95%  and 100% of the world's supply of rare earth metals.

It is estimated that by sometime in 2011 Chinese domestic demand for rare earth metals will exceed Chinese domestic production. China has been sharply reducing the export quota for rare earth metals and increasing the export tax on what it does allow to be exported for the last 4 years. This year's quota, for example, will be below just the projected Japanese demand alone.

If the demand for large permanent magnets for wind powered electricity producing turbines were to ramp up even to meet the latest projection just for the State of Texas then the need for the rare earth metal, neodymium, just for this use could not be met based on the current priorities established by the Chinese government.

Therefore unless new sources of rare earth metals are brought into production outside of China, such as the ones under development in Australia, Canada, and the USA, the wind power agenda is in trouble.

Wind powered electricity generated turbines can be built with older permanent magnet technology, but such machines are dramatically less efficient than those built with neodymium based magnets and their return on investment may be too long to be considered.

The future of wind power may well depend on the environmental movement being made to realize just how important it is to get North American rare earth mines into production as soon as possible.

Implications: In order to maximize the range of a hybrid or all electric car it is important to minimize the drain on the battery from any load but that of the drive train.

Analysis: Late in the design of the Chevrolet Volt, it is said around Detroit, it was remembered that ordinary drivers often run the air conditioning, lights, and personal entertainment equipment while driving, or stopped at a traffic light, or stopped for any other reason. This created a mild panic, because all of these devices could create enough drain on the mythical 40 mile range on a charge lithium ion battery to reduce its range dramatically.

Toyota decided to approach the problem another way, and upgrade the existing nickel metal hydride based Prius hybrid with a market-savvy 'green' technology. Toyota will add a photovoltaic solar cell option to its 2010 Prius, which will be able to run some of the electrical accessories during the day, and even when the car isn't running the solar panel will charge the battery so long as there is sunlight on it!

No matter how much the solar panel option costs it will not bring the cost of the nickel metal hydride battery based Prius to anywhere near the price of that Chevrolet will have to charge for the Volt, and it will at the same time increase the total range of the nickel metal hydride based Prius without the need for a single drop of gasoline or diesel fuel to be burned.

Amusingly enough these are the same Japanese engineers who the young Bob Lutz ignored, along with his peers, because the received wisdom in 1975 was that Japanese cars would never be a factor in the US domestic market.

It is still true, by the way,  that, as the Japanese planned, American cars would never be a factor in the Japanese domestic market.

I think that the first sign of sanity at GM if it is allowed to go CVhapter11 will be the retirement of Bob Lutz and Rick Wagoner and either the cancelation of the Volt or its immediate conversion to nickel metal hydride battery operation as a straight hybrid. Of course since GM hasn't got, nor has it any plans to get, a nickel metal hydride battery manufacturer capable of making a battery that works and making it in mass production.

Implications: This article seems mostly nonsense to me. It is poorly researched and seems to conflate different solar technologies and their problems with one another in a purposefully confusing way.

Analysis: There are some companies which are trying to utilize mirrors to collect and focus sunlight to boil water to create steam to turn turbines to generate electricity.

This could have been done, and was done at various times over the last 100 years, or more. The problem in the past has been that such devices work only during the day and must be placed in regions that get as much direct sunlight as possible. Then the system must be connected to a storage system, such as a battery field, and to a power grid, so that when they are not generating electricity those using this system for power during the day can still get power at night. In practice this has meant constructing such systems in desert or arid regions, where a water supply for the boilers is a problem, and high costs would be incurred by connecting to a grid over long distances. Battery storage of power collected during the day also adds large initial costs and larger maintenance fees.

Now that California, for example, is so heavily populated, batteries are mass produced by the tens of millions, and the electric grid is widespread many entrepreneurs want to create such "solar" power stations, and being rebuffed only by knee-jerk environmentalists who somehow think their power stations will be more dangerous to desert animals and flora than would be the emissions of coal, oil , or gas fired power plants, which will otherwise be built.

In any case it must be noted that NO NEW TECHNOLOGY AT ALL is  needed to construct such power stations; the only inhibition is that they produce electricity in remote areas cheaper or safer than any other method. This, i believe, is now possible due to the pollution and rising costs of fossil fuels.

As for Chinese producers of electronic grade silicon or metallurgical grade silicon suddenly becoming able to produce large amounts of polycrystalline solar grade silicon  inexpensively when long experienced western companies are just now beginning to do so in beta testing this is risible. No one knows if there will be enough solar grade silicon being made in the next two years to satisfy the theoretical demand that could occur if the supply is there.

As for thin film photovoltaic cells the issue is simply one of supply. There is clearly not enough supply capacity to increase the production of new gallium, indium, selenium, or tellurium fast enough to supply more than a small percentage of the presumed market demand for solar energy conversion devices in the next two ro three years.

If mass produced polycrystalline silicon does not reach a high enough volume then new solar energy conversion capacity will be strictly limited to what is actually available.

There will be no sudden Chinese supply of new material for any of the critical uses in solar energy conversion in the near term.

Short sellers are the ones telling stories such as this article purports to tell. Pay them no attention; they are not worried about anything but a margin call.

Implications: Minor metal byproducts of major 'base' metals, which were discarded as waste or for which the mine did not get paid by the refiner are rapidly growing in importance and may represent enough added value to allow for the re-opening of marginal mines.

Analysis: The real story embedded in the reopening of the Mid-Tenness-Mining complex by the Canadian operator, SRA, is that not only will the MTM operations be the richest and largest producer of zinc in the USA, but will also be the largest producer of the zinc byproduct, germanium, and for the first time, not only produce gallium but be the largest producer of gallium in North America.


Previously when the MTM zinc operations were shut down due to their being uneconomical they were producing germanium as a byproduct but it was not of enough value to matter.

Today the value of that germanium will be, at full zinc production, around 14 million dollars a year at current prices, but it will be joined by nearly 40 million dollars worth of gallium for the very first time. In the past the gallium was not recovered and wound up as landfill or roadbed material.

In the last decade the Canadian company, Recapture Metals, has come into existence and has already  become the world's largest recycler of gallium from industrial process waste as well as concentrates such as those which the processes at SRA's Tennessee operations will produce.

The amounts of germanium and gallium which will be recovered as byproducts of the Tennessee zinc mining operations are 35 tons of each. This will increase the world production of both metals by more than 20%, and will be for each metal the most significant new addition to the world's supply from one location in a decade.

A Chinese company has also agreed to take ge/ga rich residues for processing, and there is no doubt that when the initial agreements with Recapture Metals and the Chinese company run out there will be a fierce competition for the contracts. it will not be surprising if the governments and defense departments of both Canada and the US take an interest in this situation.

A new era is dawning in mining; the age of counting added value for byproducts that were only recently not considered of value and were not considered when assessing the bankability of a mine.

The twenty-first century is rapidly becoming the age of minor metals.

Implications: Is GM planning to introduce and sell the Chevrolet Volt in November, 2010, at a loss? Probably. Even 'Maximum' Bob Lutz admits that the car might sell at a loss 'for many years.' The irreducible costs are not in the raw materials for a lithium ion battery. Lithium is actually rather cheap. They are instead in the manufacturing costs for the battery and in the cost of re-engineering the car's electrical accessories so that they don't drain the battery to where the vehicles' performance is compromised.

Analysis: The Chevrolet Volt seems to be designed to be nothing more than a 'positional good.' This is an item that I have and you don't, which therefore makes me superior to you in the childish contest for 'who has the most toys' that has come to symbolize America's popular culture's measure of success.

The problem is that the Volt will solve no problem, and in fact is a step backwards.

All of today's mass produced hybrids use a combination of a nickel metal hydride battery and an internal combustion engine. The most efficient of these, the Toyota Prius can carry 825 pounds of cargo-4 adult human beings-at up to 95 miles per hour for 500 miles on 10.1 US gallons of gasoline.

The Chevrolet Volt it is said by GM will be able to carry an unknown weight of cargo for 40 miles on a full charge and after that will fire up an onboard internal combustion engine to charge the battery and run a directly coupled generator which will provide power to electric motor(s) actually driving the wheels. The Volt it is claimed will be able to be plugged in to an 'ordinary' outlet [in the US this will mean a 120 VAC outlet] and after a charging time period to be announced will run another 40 miles before needing a recharge.

The Volt will have lower emissions, it is claimed, than the Prius, but other than that its range and performance is no better and may well be worse than the Prius. It is not at all clear that if the Volt is run at its top speed, whatever that may be, it will have a full 40 mile range. It is also unknown how the volt will react to icy road conditions (low traction0 or steep inclines (higher load on the power train).

Better numbers than the Volt's as a purely electric car were claimed for the EV1, the lead acid battery powered car of the 1990s built by GM to meet California's zero emissions standard, since rescinded.

Maximum Bob makes me incredulous when he disses the EV1 as old technology which could be built today with lead-acid batteries from Panasonic, he says, as it was then. I find this insincere statement to be suspicious on two accounts: 1. Panasonic devotes its auto battery research to its long time partner, Toyota, and 2. If Panasonic was GM's supplier of lead acid batteries for the EV1 then the Matsushita Corporation [the parent of Panasonic] must have been laughing at GM while at the exact same time it was making the original nickel metal hydride batteries for the first Toyota Prius based on a license from Energy Conversion devices, Inc, the developer of that battery, which has its offices and laboratories just a few miles from GM's Technical Center.

No one knows today whether or not the lithium technology based battery will ever be able to be made in a safe, reliable, long lived version capable of powering a Volt for 40 miles on a charge or a Tesla for 300 miles. The batteries are today hand assembled as groups of smaller cells in series to up the voltage and then in parallel to up the current output. Each battery, not each type of battery, must then be tested to see how long it can function without a failure. The problem is that those that pass such testing are the only actual ones that can be used with any hope of maintaining their properties. No one has yet mass produced such a battery, so everything today about their long term performance, safety, and reliability is a guess.

Toyota and Honda have a system that works, the nickel metal hydride battery mated now with a Wankel 3 cylinder gasoline powered engine. The 2009 Prius is advertised to have a 71 miles to the gallon capability.

Why do we need the Chevrolet Volt? We don't. It is GM that desperately needs not just the Volt but a successful leap into the high tech green sweepstakes. unfortunately for GM they plan on having the Volt carry a 16KWH lithium battery. At the current cost projected for such a battery it will cost $16,000.00. Add to that the need to re-engineer a low production electrical system as well as the electrical accessories for the Volt such as the lights, the radio, CD, DVD, air conditioning, power windows, and power seats and you get a $40,000 + car today.

No one needs a high cost, short range, electric car. The ideal electric car would be a long range good performance one like an EV1 with an onboard generator powered by a lightweight gasoline engine to charge American made lead acid batteries and run a direct drive generator when the batteries were low.

But wouldn't such a car be an example of the 'proven' technology that GM claims to be its goal?

if you ask me 70,000 Volts ( the number Bob says the company will produce in total between 2010 and 2011) could be enough to kill GM.

Implications: For the last ten years as the center of the OEM automotive industry's growth has shifted to mainland Asia we have heard nothing but failure-excusing buzz words from the 'leaders' of the OEM American automotive industry. Legacy costs, health care, and, just now, as they finally admit it, raw material costs, are mantras endlessly repeated without a moment's hesitation by the highest paid managers in American OEM automotive history as the companies they mismanage continue on in the longest profitless period in American OEM automotive history. Isn't it obvious that Wall Street has simply abandoned the American OEM automotive industry to its own devices and fate?

Analysis: The romantics and more-and-more fantasists in the increasingly nonprofessional Detroit automotive business press endlessly repeat what the bespoke suited, chauffeur driven, company plane carried top managers of the broken US owned and operated OEM automotive industry tell them at press conferences at which lunch is served and cars and trucks are handed out for 'test drives.'

Like clueless politicians industry 'leaders' repeat over and over again about the future direction of their companies, "We have a turnaround plan," or "We will be profitable in the  [fill in blank] quarter of [fill in blank]," or , Ford's all time favorite, "We're right on track with our turnaround plan."

The sad truth that has already impacted Michigan and will now affect the US midwest in general is that the segment of the US OEM automotive industry that is still owned and operated by Americans has become irrelevant to the future of the American economy.

The US domestic economy benefits directly from the profitable operations of foreign owned and operated OEM automotive companies. Such manufacturers as Toyota, Honda, Nissan, Hyundai, Daimler, and BMW now operate assembly plants in the USA. These companies have also brought their suppliers to the USA where they also have built manufacturing plants. The foreign owned and operated OEM automotive industry in the US was originally known as 'the transplants," but today the transplanted industries have overwhelmed and moved the domestic manufacturers out of the fertile fields of the US market.

Incredibly the overfed jackasses who manage the OEM American owned and operated industry bray about legacy, healthcare, and labor costs, even as the transplants not only eat their market share but actually export cars and trucks from the USA to other markets including their home countries based on their experience here of lower costs than in their home countries!

So, what is the glaringly obvious problem?

It is that the OEM American automotive industry's long term strategic planning is and always has been nonexistent.

The world's profitable OEM automotive companies have planned for currency fluctuations, raw material cost and availability issues, labor rate growth, and technological change in the long term. The US managers-they are not to be described as equivalent to those, for example, of Toyota and Honda, have planned only to please Wall Street and to fertilize golden parachutes and grotesquely fat retirements and severance packages. IN OTHER WORDS THEY HAVE TAKEN CARE OF THEMSELVES INSTEAD OF THEIR COMPANIES AND SHAREHOLDERS.

It is now time to pay the piper, but the payees will be those whose homes and families have been dependent for sustenance on jobs in the OEM American automotive industry.

Wall Street's day of reckoning is approaching. The first time that a low rated GM, Ford, or Cerberus-Chrysler cannot sell a bond or a preferred share or use 'assets' to collateralize a 'loan' the game is over.

That day is rapidly approaching, and I don't think it matters anymore outside of the American midwest what the self serving incompetent managers of the American OEM automotive industry do or say.

It is almost comical to watch the astronomically paid 'outside' turnaround 'specialists' and 'restructuring' planners scramble over the bones of the auto industry looking for some scraps of meat to satisfy their own hunger from an already dead beast.

Implications: Survival of their nation's industrial base and industrial independence has sent Japanese companies on a hunt for critical natural resources. When will American's wake up to the damage to out domestic economy that ignoring this issue has already caused and the impending disaster if we do nothing about it?

Analysis:          We can wait no longer to publicly address the impending minor metals crisis in the North American market.   The term “minor metals” is an anachronism for those metals, for which prior to the Second World War, there were no significant industrial uses. The rapid advance of technology since 1939 has transformed our civilization irreversibly and made so thoroughly obsolete the original meaning of the term “minor metals” that I am confident that our time will one day soon be referred to as “The Age of Minor Metals.” 

  The significance of the current North American minor metals market is that it is on a path to global insignificance, and that, the cause of this is almost entirely political, not technological.

Notwithstanding the facts that, since the end of the Second World War, in particular, the technologies for exploring,  extracting, and refining energy minerals and metal ores have improved exponentially both in production efficiency, allowing the economical recovery of lower and lower grade natural resources, and in ever lessening environmental impact, the knee-jerk core of the American activist political community has declared all such activities evil per se and will not accept or even hear anything of the positive effect on drilling and mining of the very same scientific progress, which they claim to worship when it manifests itself as stem-cell research, lithium-ion battery systems development, carbon sequestration, or global warming all of which have now become, literally, the received doctrine of the church of environmentalism, revealed, even though not one of these technologies or theories  has shown, or has been shown to have, any practical result.  

The anti-mining bias of political environmental activism has now forced the North American minor metals market into a crisis of supply. The once largely, and practically, self sufficient American natural resources production industry has been decimated in the case of metals and reduced to less than half of its former production in the case of gas and oil.  

The US National Academies, the scientific and engineering research arm of the US Congress, after it held several meetings of a group convened to study “Critical Metals for US Industry” in 2007, published a chart of critical metals.  It is evidence of how close North America is to a minor metals supply crisis, because it measures the impact of either a restriction or a cutoff of supply of the identified critical metals on the ability of US OEM industry to continue to function without them! This graph was published in October, 2007. In January, 2008, the People’s Republic of China announced a reduction of up to half of its export of rare earth metals, of which the PRC now supplies 100% of the global demand.   

         North American demand for minor metals, for use in domestic manufacturing, is slowly, but surely, declining, as the domestic supplies dwindle and vanish due to the lack of interest by mining companies in speculating on whether or not they will get operating permits in the face of activist environmental opposition in the US or whether they will get financing in the face of political/environmental opposition as well as the growing credit crisis. End users of minor metals in North America have been steadily moving their actual manufacturing off shore, mainly to Asia, for more than a decade to take advantage not only of low labor costs but, increasingly importantly, of access to minor metals.  

Chinese labor costs; the value of the Chinese renimbi versus the dollar; and shipping rates have all been rising, and so the politicians and the economists at  the very same American companies that sang the song of outsourcing are now singing of insourcing. Soon they say the low labor cost centers in American such as Michigan’s Saginaw Valley, the birthplace of both GM and the UAW, will see manufacturing operations return to take advantage of the low labor rates, the cheap dollar, and the savings on shipping costs.  

This is, of course, executive salary and, believe it or not, bonus saving, stuff and nonsense. The failure of American industry and financial institutions to create and implement long term strategies to minimize the risk of both price and availability of minor metals means, in the simplest terms, that strategic manufacturing critically dependent on an ever growing list of minor metals will stay wherever there are supplies of such metals that are available.  

This situation did not just now come about. For example, note that in 1994 the US was self sufficient in rare earth metals, and it produced 34% of the global demand for those minor metals. Today the US produces no rare earth metals, but it uses either in domestic manufacturing or in outsourced manufacturing in China 16% of the world’s production of rare earth metals, 20,000 tons, all of which are supplied at the moment by Chinese domestic producers. So we have the situation today where, when the US was totally self reliant for a critical mineral commodity, rare earth metals, in 1994, it is today 100% reliant on imports for supplies of that critical commodity and it is 100% reliant on just one exporter, the PRC, for those imports. 

North America is in danger of a minor metal supply crisis anytime that the domestic demands for those minor metals, in the countries of their production, rise to a level matching the supply of the minor metal.  

Now look at the fundamentals of the rare earth metals from 2000 through 2012.  If the projections are correct then Chinese domestic demand for rare earth metals will exceed its, and the global, supply in early 2012, just four years from now.   Unless North American businessmen wake up right now and make long term provisions in the form of full finance for minor metals production in North America then those North American industries that critically depend on rare earth metals will shut down for good beginning in 2012, and make today’s recession look like a minor correction.  

Perhaps we should also mention that there are critical minor metals,  the restriction or elimination of the supply of which will shut down the North American OEM automotive, aerospace, and electronic industries.  

The philosopher, Ludwig Wittgenstein, famously said “Whereof we cannot speak thereof we must remain silent.” Our political elites have made this dictum cover the domestic production of minor metals. As the philosopher/comedienne, Joan Rivers, might counter, “Can we talk?” To which I will finally add: “Before it is too late!”

Implications: The market capitalization of the Detroit Two (Chrysler having been privatized by Cerberus is no longer a public company with a transparent market 'cap.') is a grand total of less than 20 billion dollars with GM accounting for an astonishingly tiny 8 billion of that.   Toyota, which is in fact the world's largest viable car company due to the fact that its profit alone is more each year than GM's market capitalization has a market cap of more than $160 billion.   There is no reason, other than nostalgia, for GM today to be in the Dow Jones Industrial Average at all. It has the smallest market cap, in fact, of any of the 30 members of the average, and the market cap of the two largest, General Electric and Microsoft are each more than 25 times the market cap of GM. Exxon Mobil, ano