Signs of Detroit's Revival

February 14, 2010

In Detroit, Is There Life After the Big 3?

By PETE ENGARDIO

DETROIT

CRUISE the blighted streets that shoot off in either direction from 8 Mile Road, and the scars of the automotive crisis abound. “For sale” signs adorn the front of long-shuttered metal, paint and tool-and-die shops. And at factories still in business, the small number of cars in the parking lots testify that the shops are working below capacity.

But pull into the bustling headquarters of W Industries, a compound of imposing black structures at 8 Mile and Hoover Street, and you’ll encounter a more hopeful vision of Detroit’s future. Once an exclusive supplier to the auto industry, this machine tool and parts company is rolling in new business.

In one section of the cavernous shop floor, machinists use powerful lasers to slice thick steel plates. They’re making parts for Humvees and Stryker combat vehicles destined for Afghanistan and Iraq.

Elsewhere, they are assembling a 60,000-pound apparatus for testing the Orion space module by simulating the violent vibrations of liftoff. Other workers are finishing a steel mold that will be used to make 70-foot-long roof sections of Airbus A350 passenger jets.

Dozens of Michigan manufacturers like W Industries are discovering there is indeed life beyond the auto industry. Over the last two years, multinationals and start-ups alike have been coming to the state to build, buy or design a hodgepodge of products, whether aircraft parts, solar cells, or batteries for electric cars.

In September, for instance, NTR, a solar energy company from Ireland, awarded contracts to two Detroit-area auto suppliers, including the race-car engine developer McLaren Performance Technologies, to make components for thousands of SunCatcher solar dishes.

“It should be no surprise we went to Detroit,” says Jim Barry, NTR’s chief executive. “The standard of manufacturing in the automotive industry is extraordinarily high, and that is the only place you can find such a concentration of skills.”

Of course, nobody expects Michigan to regain anytime soon all of the estimated 216,000 auto-related jobs lost in the past decade. Most of the new projects create 50 to 100 jobs at a time, while auto plant closures have shed tens of thousands.

“You could bring a whole new industry in here, and it may replace one auto plant,” says David E. Cole, chairman of the Center for Automotive Research in Ann Arbor.

THE economic impact of the new industries is also hard to gauge: Michigan has few statistics on revenue from industries like clean technology and aerospace. Much of the new work, moreover, is limited to machining and developing prototypes. Mass production will most likely head elsewhere to save costs or to be closer to end customers. In short, the full payoff of the investments outside the auto industry is unlikely to be felt for several more years.

“What we really are talking about is R&D, pilot projects and early-stage production,” says Peter Adriaens, a University of Michigan entrepreneurship professor tracking the trend. “There is virtually nothing we can do to keep large-scale production here.”

Still, Mr. Cole and Mr. Adriaens say, the opportunities for auto suppliers are huge and could leave the state with a healthier, more diverse industrial base.

For example, virtually all of the $50 million in engineering projects at the Detroit campus of Ricardo Inc., a British engineering services firm, are for products like remotely piloted military aircraft, construction equipment and lithium-ion batteries. And Global Wind Systems, a developer of wind farms that is based in the Detroit suburb of Novi, says it is working with 18 local suppliers to design next-generation turbines to be assembled nearby in 2012.

General Electric, meanwhile, is investing $100 million in a 1,000-worker research and manufacturing facility for wind turbines outside Detroit, and Aernnova, a Spanish company that is a supplier to Boeing, Airbus and Bombardier, is planning an engineering center in Ann Arbor that will eventually employ 600. New plants to make lithium-ion batteries are in the pipeline from A123, Johnson Controls and LG Chemical.

“There is a lot of business out there that is really suited to Detroit’s automotive skills,” says Edward Walker, the chief executive of W Industries, a privately held company.

Among all the projects, the biggest is in Wixom, Mich., just northwest of Detroit. There, a mothballed Ford plant that had turned out millions of Thunderbirds, Town Cars and GTs is getting a $1.5 billion facelift. Two investors — Xtreme Power of Austin, Tex., and Clairvoyant Energy of Santa Barbara, Calif. — plan to hire 4,000 workers by late 2011 to make solar panels and battery systems for utilities.

“As the alternative-energy space builds out, we expect these plants will create a lot of opportunities for Michigan suppliers,” says Greg Main, the chief executive of the Michigan Economic Development Corporation, the state’s investment promotion agency. Mr. Main estimates that at least 100 auto suppliers already have secured contracts in other industries and that at least 250 have bid for work.

Federal and state tax credits, loan guarantees and grants certainly help stimulate investment. But the main allure of the Detroit area is its ability to quickly turn designs into workable products that can be economically mass-produced. The region remains the country’s premier precision manufacturing base, with 2,500 auto suppliers and tens of thousands of highly skilled, underemployed mechanical engineers, machinists and factory managers.

“We have the best manufacturing resources on the planet here in Michigan,” says Chris Long, the founder and chief executive of Global Wind Systems. “We just need to get aligned.”

IN 1981, W Industries was founded by Robert Walker, Edward’s father, to make wooden crates used to ship car windshields and windows. It eventually expanded into a wide range of machine tools and metal parts for car frames and bodies.

The younger Mr. Walker, a 42-year-old with a fondness for wearing black, started working on the shop floor as a teenager and took the helm in 1993. To give the company a distinctive look, he adopted a bold red “W” logo and had all the buildings redone in red and black.

The only way W Industries could grow, Mr. Walker soon concluded, was to diversify. He started with military contracts. By law, most of the work must be done on American soil. And by manufacturing within Detroit’s city limits, W Industries benefits from federal policies requiring that a certain portion of military contracts be given to companies in depressed areas.

Another lure is abundant and cheap industrial space. Mr. Walker says he spent around $20 a square foot to buy and upgrade factories from bankrupt auto suppliers, about one-fifth of the cost of new buildings.

Since landing its first military contract in 2004, the company has secured jobs to make hundreds of heavy steel parts for the frames, bodies and gun mounts of vehicles like the Stryker and the mine-resistant Cougar, both made by General Dynamics. Demand for such vehicles surged as the military sought to replace Humvees, which proved vulnerable to roadside bombs.

Such work “requires a different mind-set and an entirely different way of operating your business,” Mr. Walker says.

Rather than cranking out high volumes of parts for years, jobs come in small batches and are highly customized. Each month, for example, W Industries builds a dozen 25,000-pound frames for rough-terrain military vehicles that the Kalmar Corporation, based in San Antonio, builds for the Army.

To win such business, W Industries has spent $50 million on modern machinery since 2006. The mold for the Airbus sections, which it is building for Spirit AeroSystems of Kansas, is being made with one of the world’s largest computer-controlled machine tools. It moves along a 200-foot-long rail shaving steel to create a super-polished surface. Spirit selected W Industries largely because it offered “an attractive combination of fabrication and expertise,” says Ken Evans, a Spirit spokesman.

W Industries also got the Orion simulator project in part because it was one of the few companies in the United States with the right equipment. The Orion space program aims to send human explorers to the moon by 2020 and then to Mars and beyond. But NASA hasn’t built a space capsule since the Apollo program ended in 1975.

Five years ago, W Industries had $15 million in annual sales. This year, it expects at least $150 million, two-thirds of it from military and aerospace contractors. It has bought three old factories in the area and is looking for more, and it plans to double its work force to 500 by 2011.

Dowding Industries, a family-owned company in Eaton Rapids, is also wagering its future on diversification. It was founded in 1965 as a tool-and-die shop for Oldsmobile and later expanded into metal auto parts. The company branched out into tractor and rail car parts in the 1990s, as the Big Three pinched costs to compete with overseas rivals and “started getting real brutal” on suppliers, says Jeff Metts, Dowding’s president.

He said that after Dowding had invested in new machine tools and perfected a part, the work was often shifted to China six months later. “There seemed to be a real effort to remove our profit,” Mr. Metts recalls.

In 2006, he attended a wind-power trade show in Los Angeles. “We were really shocked at how big this industry was becoming,” he says. That year, Dowding won a $5 million contract from Clipper Turbine Works of Cedar Rapids, Iowa. Other wind customers followed.

After the recent recession, in which it laid off 130 of its 280 workers, Dowding made a bigger bet on wind, forming a venture with MAG Industrial Automation Systems in Sterling Heights to develop tools for turbine components.

MAG also makes machines used to fabricate carbon-composite airframes for planes like the Boeing 787 Dreamliner. In October, the venture will introduce a system that Mr. Metts says can make better-performing wind turbine hubs in one-fifth the time of current methods.

The next goal is a machine for carbon-composite blades that, he says, will be 30 percent lighter than fiberglass blades and last 20 years or longer. Mr. Metts says Dowding has commitments from several turbine makers, and he sees opportunities to use similar machines and technologies for bridges, expressways and ships — for which production methods and materials haven’t changed much in decades.

“This will be as big as the shift from metal to plastics,” Mr. Metts says.

The need to turn prototypes into real products is what lured NTR to the Detroit area. The company, based in Dublin, is installing the first 60 of its SunCatcher dishes, which cost $50,000 to $60,000 each, in Phoenix. If all of its solar-plant deals with California and Texas utilities are completed, it expects to sell 65,000 of them over the next two years.

In 2008, NTR’s manufacturing arm, Stirling Energy Systems, hired Tower Automotive in Novi to develop modules with mirrors that will reflect the sun’s energy. It also enlisted McLaren in Livonia to help design and build the motorized units that will convert concentrated sunlight into electricity. Founded in 1969 by Bruce McLaren, the New Zealand-born auto racer, and bought in 2003 by Linamar of Canada, the firm is best known for developing turbocharged engines for race cars.

Five years ago, all of McLaren’s business was with carmakers. Now, nearly a third is in developing motorized devices for the solar and wind industries. McLaren’s engineering team redesigned the SunCatcher engine and each of its 100 parts to make them more efficient, less expensive and easier to mass-produce.

“We put everything on a wall,” recalls Phil Guys, McLaren’s president. “We got 500 suggestions from engineers.”

McLaren has shipped its first batch of power-conversion units to Stirling and is developing new prototypes.

A BIG question is whether the new work will sustain Detroit’s manufacturing ecosystem if auto assembly keeps migrating elsewhere. As suppliers close, more managers and engineers could move away.

To illustrate how difficult that talent would be to replace, Bud Kimmel, vice president for business development at W Industries, points out Jason Sobieck. A 30-year-old machining whiz sporting a green tattoo, gray T-shirt and jeans, Mr. Sobieck manages the Spirit and Orion projects.

“Jason is like an artist,” Mr. Kimmel says. “We built our whole program around him.”

Mr. Sobieck began work at 17 at a small Detroit welding shop. He then worked for tooling companies, where he learned to program automated systems and manage projects. “These skills really aren’t taught in school,” Mr. Sobieck says, dragging on a cigarette. “This is a trade you learn on the shop floor.”

That’s one reason that W Industries wants to snap up as many good machinists and engineers as it can afford.

“If we don’t re-engage the automotive workers soon in major programs,” Mr. Kimmel says, “this set of skills will be lost.”

This article has been revised to reflect the following correction:

Correction: February 21, 2010
An article last Sunday about the transformation of former auto-related operations in the Detroit area misspelled the name of one of the companies that is investing in a mothballed Ford plant in Wixom, Mich. It is Xtreme Power, not Extreme Power.

Automobiles and Electric motors in the US!

Electric Motors, Made to Order

By LINDSAY BROOKE

THE electric motors that drive today’s hybrids and electric vehicles are not so different from those pioneered by Nikola Tesla and George Westinghouse a century ago.

Like their predecessors, modern electric machines, to use the engineers’ preferred term, are composed of two elements: a fixed housing that contains copper wire wound around an iron core, called the stator, and a rotor that spins within the stator’s open center.

The interaction of electric current and magnetic fields between the stator and rotor create rotational torque to spin the motor’s shaft — and turn the wheels.

Tailoring electric motors for duty in vehicles has necessitated the development of new materials, sophisticated electronic controls and some clever design variations, said Heath Hofmann, an associate professor of electrical engineering and computer science at the University of Michigan in Ann Arbor.

“The auto companies are focusing on machines capable of operating over a much wider speed range than typical fixed-speed industrial motors,” he said. Two primary designs for electric machines, A.C. induction and permanent-magnet, prevail in today’s hybrids and E.V.’s. They differ mainly in the construction and operation of their rotors.

The magnetic field of the rotor in an induction motor is generated by an electric current flowing through its copper windings.

In the rotor of a permanent magnet design — the type of motor the Chevrolet Volt will use — the field is generated entirely by strong magnets, without the need for current. More powerful motors can be built by making the magnets of rare-earth metals like neodymium, which increases the rotor’s magnetic flux (its total amount of magnetic field) and enables it to make more power.

Each motor type has its benefits and drawbacks. Permanent-magnet motors generate less rotor heat than inductive types, which aids efficiency. But as the motor’s size grows, magnetic losses increase proportionately, reducing efficiency.

Because permanent magnets tend to be brittle, Professor Hofmann said, General Motors, Toyota and others embed the magnets in the rotor, and the magnets are fairly expensive. There are strategic concerns: China has a near-monopoly on known rare-earth metal sources.

Induction motors do not suffer proportionate losses as size increases, and their design makes them capable of generating high power by operating at high speeds; the motor of the Tesla Roadster spins up to 14,000 r.p.m. They are generally less expensive to produce than permanent magnet types.

Specialist motor companies began improving automotive e-motors long before hybrid cars became popular. Remy, for example, invented a new stator-winding design that uses rectangular wire, rather than round wire, with windings that are arranged in multiple layers. The company says its design reduces heat.

For automakers, choosing a design boils down to a horses-for-courses decision. Induction motors appear to be the choice for battery E.V.’s where high performance is a main requirement, Professor Hofmann said. For economy-focused hybrids, permanent magnets may be better.

“I think it will be application-specific,” he said.

Energy: Article that highlights trends in the energy sector...

US's natural gas reserves are growing rapidly due to technology change. The trend leads further credence to the wisdom of the Pickens plan...
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February 17, 2010

Energy Company Mergers Are Expected to Rise

By JAD MOUAWAD

Energy companies are on the prowl again.

After a two-year slowdown in mergers and acquisitions in the industry, companies are once again looking for ways to use their checkbooks to expand their reserves, buy new technology or snap up promising oil and gas fields.

Unlike the round of mergers that created today’s behemoths in the late 1990s, the current round is not expected to form new giant companies like Exxon Mobil or ConocoPhillips. This time, companies are focused on buying fast-growing small companies, or on acquisitions that expand their reserves in an era when it is hard for them to find new places to drill.

The targets include companies that own new fields in nations like Ghana and Sierra Leone, independent gas producers in the United States, and companies that control fields in the deep waters of the Gulf of Mexico.

“In this industry, where you’re in the business of increasing your reserves, there are two ways to do so — to drill or to acquire,” said Christopher W. Sheehan, director for mergers and acquisitions research at IHS Herold. “There is an intense competition for access to resources through mergers.”

This latest wave of consolidation comes amid fresh enthusiasm for natural gas production, especially in the United States, where new technology has significantly expanded the nation’s reserves. The huge potential of new gas fields has driven most mergers in the North American energy sector in recent months, with more to come this year, according to bankers and analysts.

Buying interest is particularly strong among the international oil majors, which sold off many of their onshore assets in the United States over the last decade and are now eager to come back. Anthony B. Hayward, the chief executive of BP, said last month at the World Economic Forum in Davos, Switzerland, that the gas being extracted from beds of shale was “a complete game-changer. It probably transforms the U.S. energy outlook for the next 100 years.”

The biggest deal in that sector was announced in December, when Exxon Mobil said it would buy XTO Energy for $31 billion. Shortly after, Total of France said it would pay $800 million for a minority share in Chesapeake Energy’s Barnett shale gas portfolio. Chesapeake has raised about $11 billion from joint ventures for its shale gas assets in the last two years; BP and Royal Dutch Shell have struck similar agreements in recent months.

In a humorous note to investors, Bernstein Research analysts quipped recently: “Frankly, you can virtually plan your gym sessions around these deals, they are becoming so regular. Thinking about it, isn’t it about time for another Statoil deal?”

Statoil, the Norwegian national oil company, recently struck a deal with ConocoPhillips to trade some of its assets in the Gulf of Mexico for acreage that Conoco holds in the Chukchi Sea of Alaska; in November, Statoil agreed to pay $3.4 billion for a 32.5 percent stake in Chesapeake’s assets in the Marcellus shale formation in the Appalachian region.

“The growth opportunities from shale gas are something we haven’t seen in the United States for decades,” said Roger D. Read, managing director and senior energy analyst at Natixis Bleichroeder in Houston. “The United States, which had been a static market, now has the chance to grow its production.”

Bankers and energy consultants expect deals to pick up this year after a two-year lull. There were 244 deals in the global oil and gas industry last year, down from 285 in 2008, and 336 at the peak in 2007, according to data from IHS Herold, a consulting and advisory firm.

While the number of transactions was down, the size of the Exxon-XTO transaction helped raise the total value of last year’s mergers to $144 billion, up from $104 billion in 2008. (Merger values peaked at $200 billion in 1998, a year when many of today’s giant companies were created.)

Analysts point to a wide range of companies that are potentially on the market, including EOG Resources, Southwestern Energy, PetroHawk Energy, the Encana Corporation, Chesapeake Energy, Devon Energy and Anadarko Petroleum.

“There will be a shakeout there. It will be eat, or be eaten,” said James Bogues, who leads Accenture’s North America energy mergers and acquisition unit. “Given Exxon’s reputation as a very deliberate, cautious company, the fact they made such a bold move with XTO will no doubt inspire others that a price has been set for shale gas assets and technology.”

Outside of the United States, the pace of mergers has also picked up. Suncor Energy of Canada bought Petro-Canada in a deal valued at $18 billion at the time to form a national giant and stave off possible bids from foreign buyers, particularly Chinese companies. In West Africa, Exxon has offered $4 billion for a stake in an offshore field in Ghana, though that deal could fall through given the government’s threat to block the transaction; international firms, including Eni of Italy, are battling over some prospective fields in Uganda.

Chinese companies have also been particularly active. In August, Sinopec, one of China’s biggest oil companies, closed a $9 billion acquisition, buying Addax Petroleum, a Geneva-based oil explorer that is most active in Nigeria, Gabon and the Kurdistan region of Iraq.

Sinopec, formally known as the China Petroleum and Chemical Corporation, said the deal “represents the largest successful acquisition of overseas oil and gas assets by a Chinese company.”

The interest of national oil companies, like Sinopec, could prove a powerful and lasting driver for mergers.

“The mandate of national oil companies is to go and find reserves around the world,” said Jon McCarter, the oil and gas transactions leader for the Americas at Ernst & Young. “They have been very active and very aggressive.”

Transister size, the big differentiator in Semiconductors (45nm, 32nm, 28nm, and 22nm)

Last February, Intel made some changes and adaptations to its processor roadmap in what was generally perceived as a sensible move in light of the current economy: It's expediting its move from the 45 nm to the 32 nm generation of CPUs with increased investments in facilities, but then extending the market lifespan of the 32 nm generation to compensate, and to help reap back the costs incurred. That extension will include the introduction of a "mainstream" 32 nm architecture code-named Westmere, as part of its continued strategy -- successful so far -- to introduce certain elements of its newer designs to a broader market of buyers first.

That strategy was confirmed Monday during Intel's quarterly conference call -- where it also revealed sharply lower profits on much lower revenue: "We have pulled in Westmere, our first 32 nanometer product family, and will now be shipping those products later this year," reported CEO Paul Otellini (our thanks to Seeking Alpha for the transcript). "We have shipped thousands of Westmere samples to over 30 EOM customers already. We also look forward to the launch of our new consumer ultra-low voltage products, which will enable many new...light notebooks at very compelling price points."

The IBM-led Technology Alliance needs any opening it can get, and whether this is the one or not, it's going to try for it. For the group that now includes Global Foundries, the spinoff producer of CPUs for AMD, Intel's move is an alteration of its self-named "tick-tock" timing. The Alliance will try to take advantage of that phase shift, if you will, by accelerating the pace at which it moves its members to a new 28 nm low-power generation, according to an IBM announcement this morning.

"Through this collaboration, IBM and its alliance partners are helping to accelerate development of next-generation technology to achieve high-performance, energy-efficient chips at the 28 nm process level, maintaining our focus on technology leadership for our clients and partners," stated IBM R&D chief Gary Patton in this morning's prepared statement. The key to this move will be more rapid implementation of high-k-plus-metal-gate (HK+MG) technology, a breakthrough formula obtained in a race-to-the-finish with Intel that resulted, in January 2007, in Intel beating IBM to the announcement by less than two hours. From the beginning, both IBM and Intel promised that their respective formulas would enable foundries to shrink die sizes without overhauling their production processes...but Intel's needed the overhaul anyway with the Nehalem generation (the first to use HK+MG across the board), so it's never had the opportunity to put that theory into play.

IBM, with partners such as ST Microelectronics, Global Foundries, Samsung, and Chartered Semiconductor, will now actually give this theory a try. Today, the Alliance is saying it will introduce partners to a process that lets them go ahead with their 32 nm production plans, while safely transitioning the back end of their 32 nm roadmaps to become 28 nm products.

The Alliance already shipped its first evaluation kits to potential implementers last December, following that up with a public evaluation kit last month. This morning's signing on of Global Foundries means that the producer of AMD's CPUs has already made the evaluation, and could soon announce it's ready to go.

The goal for the Alliance for now is to enable "early risk production" versions of 28 nm processors to be made next year. That's a term that's one step removed from "early adoption tests" -- it means something that could be introduced to high-class customers, maybe not yet the mainstream. Last November, AMD introduced its own revised roadmap, which featured the intention to produce a 32 nm "Liano" architecture CPU in 2011. If this plan goes through as the IBM Alliance suggests it will, that architecture could conceivably become the 28 nm generation without shaking up AMD's roadmap a second time.

And that would mean AMD has a 28 nm CPU for the mainstream while Intel is still burning out its 32 nm generation. It's not a certainty by any means -- success depends on any number of factors turning out in IBM's and AMD's favor. But we know what the tunnel looks like now, because someone, somewhere, just turned a light on.

UAE and Economic Diversification

Interesting website on Industry in the UAE. Interestingly, most of the industry mentioned are producing things that can't be effectively exported because of weight (cement) or require a large amount of cheap energy to produce (aluminum and fertilizers). All leaves the question: does this diversification really help remove the contries dependency on oil & gas? I suppose only if they're able to develop efficient alternate energy (which they're working on - see Masdar City).

Importance of consolidation in the car industry

The car industry

Small isn't beautiful

Carmakers have escaped calamity. Now they face a big, long-term problem: people are moving to smaller vehicles

Sep 17th 2009 | FRANKFURT | From The Economist print edition

AFP

BIG motor shows are good barometers of the car industry’s mood. Twelve months ago in Paris, in the wake of the collapse of Lehman Brothers, the mood was dread—the knowledge that something terrible was about to happen. At the beginning of this year, at the show in devastated Detroit, and a few months later in Geneva as Chrysler and General Motors prepared for bankruptcy, it was all about the struggle to survive. This week in Frankfurt the industry gave a sigh of relief, confident that the worst was over but painfully aware there would be no return to business as usual any time soon, if ever.

The sense of relief is understandable. After the collapse in sales and savage production cutbacks that took place in nearly every big market nine months ago—with the huge exception of China—volumes have started to rise as inventories are cautiously rebuilt. Balance-sheets appear to have been stabilised if not repaired. There is even a good chance that in the final quarter of this year some of the big carmakers will return to (very modest) profit, while others will do so next year. Credit, the lifeblood of the industry, is flowing again, albeit somewhat anaemically. Particularly in Europe, government-sponsored scrappage schemes have brought buyers back into the market. And manufacturers are now enjoying reduced costs, partly from lower raw-material prices and partly because they have laid off workers.

What has not happened is any substantial reduction in capacity, particularly in Europe where factories are capable of churning out 4m more cars than the market can take even in a good year like 2007 (see chart). Not long ago it was widely assumed that the downturn would be sharp enough to take out more than one big carmaker. For better or worse, governments have done their utmost to stop that happening. Like the bailed-out banks, GM was probably always too big to be allowed to fail. But few expected sickly Chrysler to survive in anything like its present form. The removal of Opel/Vauxhall, one of the weakest big producers in Europe, would have done the industry a power of good.

Yet, thanks to President Obama’s auto task-force and a shotgun marriage with Fiat, Chrysler motors wearily on. German government largesse paved the way for Magna, an auto-parts firm, and Russia’s Sberbank to buy a majority stake in Opel/Vauxhall from GM on the condition that no plants will be closed in Germany. GM even found buyers for tiny Saab in Koenigsegg, a boutique Swedish sports-car firm, and China’s Beijing Automotive. Volvo, which is bigger and healthier than its Swedish rival, may be sold to Geely, China’s biggest privately owned carmaker. Far from consolidating, the European industry has instead gone in the opposite direction.

Although cuts at GM and Chrysler have removed some (though not enough) excess capacity in America, not a single car factory in Europe has closed so far. That is one reason why the carmakers assembled in Frankfurt believe that the normal strong, cyclical rebound may not happen this time. There are plenty of others.

One worry is the effect of withdrawing scrappage incentives. These have propped up demand this year, especially in Germany where they drove volumes to record levels. Optimists say that at least 70% of the scrappage purchases were incremental sales made to people who would not normally have bought a new car. But car-company bosses fear that volumes in Europe could slide next year unless “normal” new car buyers—well-off people and companies—return to the market. Even if scrappage schemes are continued or tapered, there may not be many buyers left who meet the qualifications.

Although the scrappage schemes have kept factories going, most of the action has been geared towards cheap, small vehicles which are less profitable for carmakers. They have thus weakened the “mix”—the balance of small and large vehicles sold—and reduced margins. The balance may swing back slightly next year, but the mix is threatened on a number of fronts in the longer term, raising doubts as to whether margins will return to their previous levels over the next few years.

To understand the importance of the mix, says Max Warburton of Bernstein Research, compare the cost of producing a small car such as the popular Fiat 500 with that of making a hulking sport-utility vehicle such as the Audi Q7. Mr Warburton calculates that the fixed costs are nearly identical, whereas the variable costs of making the Q7 (labour, raw materials and so on) are only about €10,000 ($14,700) higher for the Audi. Yet the Fiat sells for as little as €10,000, compared with a sticker price of at least €40,000 for the Audi. So a permanent shift toward smaller cars would devastate industry profits.

One big reason to expect such a shift is that the very cheap lease finance that manufacturers have relied on to stoke demand for their more costly cars, especially in America, Germany and Britain, is probably a thing of the past. Credit is unlikely to be so easily available again. Also, one of the ways leasing made more expensive cars seem affordable was by attributing to them high second-hand values after the lease was over. But higher volumes have dimmed the aura of exclusivity on which high residual values depend. BMW in particular has been badly hit by losses on returned cars and has cut the number of lease contracts it writes by a third.

A second threat to the mix, especially for the German premium makers, is demographic change. Arndt Ellinghorst of Credit Suisse says that by 2020 40% of new car buyers in developed markets will be over 60, compared with less than 30% today. Although the affluent old like premium brands, particularly Mercedes, they tend to want smaller, cheaper cars. Being mostly retired, they are generally buying a car with their own, rather than with a company’s, money. Empty-nesters do not need much carrying capacity. Over-65s also drive 45% fewer miles than the average, which means their cars last longer. Together with the growing durability of modern cars, Mr Ellinghorst reckons that underlying sales in developed markets could fall by as much as 30%. For growth in the sales of big, powerful prestige cars, manufacturers will have to rely on emerging markets.

A third threat to the mix is the ratcheting up of emissions legislation in almost every important car market as governments struggle to meet ambitious carbon-reduction targets. That seems certain to reverse the trend in recent years toward ever heavier and more bloated vehicles. It is also forcing manufacturers to invest abnormal amounts to develop clean technologies in the hope that their bigger vehicles can be made socially acceptable and escape penal taxation.

The executives gathered in Frankfurt this week were aware that threats to the mix, and therefore profits, are long-term and structural rather than short-term and cyclical. They also acknowledge that the industry will have to wean itself from the habit of using profits from bigger cars to subsidise smaller ones, and find a way to start building downsized vehicles that make money. Nick Reilly, who heads GM’s international operations, says that part of the answer is to adopt low-cost manufacturing techniques and not to load cheap cars with unnecessary technology. By contrast, Lewis Booth, Ford’s chief financial officer, reckons that the solution is to make small cars that are as good to drive as bigger ones and charge accordingly. Half of the Fiestas sold by Ford in Europe come with the top-of-the-range Titanium specification and are decently profitable, he says.

The problem confronts everyone (with the possible exception of Fiat, which has problems of its own), but it is most acute for the German premium makers, which dominated the Frankfurt show with their huge displays. Mercedes and BMW have enjoyed the best margins in the business, but they have lost lots of money on their small cars. BMW struggled to make a profit until recently even on its very successful Mini. Their rival Audi, being part of the massive Volkswagen Group, already has access to the technology and platforms it needs to make profitable small cars. To compete, Mercedes and BMW may have to do the unthinkable and join forces—either that, or risk their brands by forming partnerships with high-volume producers.

At the same time, the industry must tackle the problem of overcapacity in mature markets. Paradoxically, that may be easier once economies have emerged from recession and unemployment is no longer quite so high on the political agenda. More than anything, overcapacity undermines pricing power. The industry may feel it has come through a near-death experience in better shape than it could have hoped at the beginning of the year. But a return to health will take a lot longer.

The Osprey

Wednesday, Sep. 26, 2007

V-22 Osprey: A Flying Shame

By Mark Thompson

It's hard to imagine an American weapons program so fraught with problems that Dick Cheney would try repeatedly to cancel it — hard, that is, until you get to know the Osprey. As Defense Secretary under George H.W. Bush, Cheney tried four times to kill the Marine Corps's ungainly tilt-rotor aircraft. Four times he failed. Cheney found the arguments for the combat troop carrier unpersuasive and its problems irredeemable. "Given the risk we face from a military standpoint, given the areas where we think the priorities ought to be, the V-22 is not at the top of the list," he told a Senate committee in 1989. "It came out at the bottom of the list, and for that reason, I decided to terminate it." But the Osprey proved impossible to kill, thanks to lawmakers who rescued it from Cheney's ax time and again because of the home-district money that came with it — and to the irresistible notion that American engineers had found a way to improve on another great aviation breakthrough, the helicopter.

Now the aircraft that flies like an airplane but takes off and lands like a chopper is about to make its combat debut in Iraq. It has been a long, strange trip: the V-22 has been 25 years in development, more than twice as long as the Apollo program that put men on the moon. V-22 crashes have claimed the lives of 30 men — 10 times the lunar program's toll — all before the plane has seen combat. The Pentagon has put $20 billion into the Osprey and expects to spend an additional $35 billion before the program is finished. In exchange, the Marines, Navy and Air Force will get 458 aircraft, averaging $119 million per copy.

The saga of the V-22 — the battles over its future on Capitol Hill, a performance record that is spotty at best, a long, determined quest by the Marines to get what they wanted — demonstrates how Washington works (or, rather, doesn't). It exposes the compromises that are made when narrow interests collide with common sense. It is a tale that shows how the system fails at its most significant task, by placing in jeopardy those we count on to protect us. For even at a stratospheric price, the V-22 is going into combat shorthanded. As a result of decisions the Marine Corps made over the past decade, the aircraft lacks a heavy-duty, forward-mounted machine gun to lay down suppressing fire against forces that will surely try to shoot it down. And if the plane's two engines are disabled by enemy fire or mechanical trouble while it's hovering, the V-22 lacks a helicopter's ability to coast roughly to the ground — something that often saved lives in Vietnam. In 2002 the Marines abandoned the requirement that the planes be capable of autorotating (as the maneuver is called), with unpowered but spinning helicopter blades slowly letting the aircraft land safely. That decision, a top Pentagon aviation consultant wrote in a confidential 2003 report obtained by TIME, is "unconscionable" for a wartime aircraft. "When everything goes wrong, as it often does in a combat environment," he said, "autorotation is all a helicopter pilot has to save his and his passengers' lives."

The Plane That Wouldn't Die

In many ways, the V-22 is a classic example of how large weapons systems have been built in the U.S. since Dwight Eisenhower warned in 1961 of the "unwarranted influence" of "the military-industrial complex." The Osprey has taken years to design, build, test and bring to the field. All that time meant plenty of money for its prime contractors, Bell Helicopter and the Boeing Co. As the plane took shape and costs increased, some of its missions were shelved or sidelined. And yet, with the U.S. spending almost $500 billion a year on defense — not counting the nearly $200 billion annually for operations in Iraq and Afghanistan — there's plenty of money for marginal or unnecessary programs. Pentagon reform and efficiency are far less of a cause among lawmakers today than during the years of Ronald Reagan's comparatively modest defense-spending boom. "Almost every program the U.S. military is now buying takes longer to develop, costs more than predicted and usually doesn't meet the original specifications and requirements," says Gordon Adams, who oversaw military spending for the Office of Management and Budget during Bill Clinton's Administration.

The Marine Corps likes to boast that it spends only a nickel out of every Pentagon dollar and makes do with cheaper weapons than the other services. The story of the V-22 belies that image: It's a tale of how a military service with little experience overseeing aircraft programs has wound up with a plane that may be as notable for its shortcomings as for its technological advances.

First, some history. Because Marines deploy aboard ships, the service's chiefs have always hungered for vertical lift — aircraft that could take off and land from small decks and fly far inland to drop off combat-ready troops. As the Marines' Vietnam-era CH-46 choppers became obsolete, commanders started to dream of an aircraft that would give them more options when considering an amphibious assault. The dreams intensified following the failed Desert One mission in 1980 to rescue U.S. hostages in Iran. In the course of the operation, three helicopters broke down, leading to an order to abort the entire endeavor, and a fourth chopper collided with a C-130 aircraft at a desert base, killing eight U.S. troops. That sent Pentagon bureaucrats hunting for a transport that could be used by all four military services and prevent another fiasco. Reagan, who took office the year after Desert One, began to pour money into the Pentagon, particularly for research and design into new weapons and combat systems. The Osprey was born.

Originally, the program was designed to churn out the first of more than 1,000 tilt-rotors in less than 10 years for $40 million each. But this was no conventional plane. The Osprey may cruise like an airplane, but it takes off and lands vertically like a helicopter. The technical challenge of rotating an airplane's wings and engines in midair led to delays, which in turn led to an ever higher price tag. As expenses rose, the Pentagon cut the number of planes it wanted to buy, which in turn increased the unit price. Citing rising costs, the Army abandoned the project in 1983.

That left the relatively tiny Marine Corps footing most of the bill for the project — the V-22 accounts for nearly 70% of its procurement budget — and overseeing a program larger and more technically challenging than any the service was accustomed to managing. Sensing weakness at the Pentagon, congressional supporters, largely from the V-22's key manufacturing states of Texas (Bell Helicopter) and Pennsylvania (Boeing), created the Tilt-Rotor Technology Coalition to keep the craft alive, despite Cheney's opposition. They were aided by nearly 2,000 V-22 suppliers, in more than 40 states, who pressured their lawmakers to stick with the program. And so, despite Cheney's doubts, the Osprey survived.

By 1993, as the Osprey program approached its 12th birthday and Bill Clinton became President, the Marines had spent $13 billion on the planes. None were ready for war. In 1991 one of the first V-22s crashed when taking off for its maiden flight — because of improper wiring. A second crash killed seven in 1992. The Clinton Pentagon stuck with the program through the 1990s, but in 2000 two more V-22s crashed, killing 23 Marines. With that, the Marines grounded the Osprey for 18 months.

Probes into the deadly 2000 crashes revealed that in a rush to deploy the aircraft, the Marines had dangerously cut corners in their testing program. The number of different flight configurations — varying speed, weight and other factors — flown by test pilots to ensure safe landings was reduced by half to meet deadlines. Then only two-thirds of those curtailed flight tests were conducted. That trend continues: while a 2004 plan called for 131 hours of nighttime flight tests, the Marines managed to run only 33 on the Osprey. Why the shortcuts? Problems with a gearbox kept many V-22s and pilots grounded. That meant many pilots lacked the hours required to qualify for night flying. Similarly, sea trials were curtailed because the ship designated to assist with Osprey tests could spare only 10 of the 21 days needed.

There's also been controversy over a sandstorm test for the craft. The V-22's tendency to generate a dust storm when it lands in desert-like terrain wasn't examined because "an unusually wet spring resulted in a large amount of vegetation that prevented severe brownouts during landing attempts," the Pentagon's top tester noted. But the program continued, albeit with a caution about the aircraft's ability to fly in dusty conditions.

The Engine-Failure Problem

After the 2000 grounding, Osprey pilots were told to fly less aggressively, which critics say is the only reason no V-22 has crashed since. "They keep talking about all the things it can do, but little by little its operations are being more and more restricted," says Philip Coyle, who monitored the V-22's development as the Pentagon's top weapons tester from 1994 to 2001. The V-22 can fly safely "if used like a truck, carrying people from one safe area to another safe area," he says. "But I don't see them using it in combat situations where they will have to do a lot of maneuvering."

The Marines contend that the V-22 is an assault aircraft and that no pilot who finds himself dodging bullets is going to fly it gently. "The airplane is incredibly maneuverable," says Lieut. Colonel Anthony (Buddy) Bianca, a veteran V-22 pilot. But the dirty little secret about an aircraft that combines the best features of an airplane and a helicopter is that it combines their worst features too. The V-22 can't glide as well as an airplane, and it can't hover as well as a helicopter. If a V-22 loses power while flying like an airplane, it should be able to glide to a rough but survivable belly-flop landing. Its huge, 19-ft.-long (5.7 m) rotors are designed to rip into shreds rather than break apart and tear into the fuselage. But all bets are off if a V-22 is flying like a helicopter, heading in or out of a landing zone, and its engines are disabled by enemy fire or mechanical malfunction.

As originally designed, the V-22 was supposed to survive a loss of engine power when flying like a helicopter by autorotating toward the ground, just as maple seeds do in the fall. Autorotation, which turns a normally soft touchdown into an very hard emergency landing, is at least survivable. It became clear, however, that the design of the Osprey, adjusted many times over, simply could not accommodate the maneuver. The Pentagon slowly conceded the point. "The lack of proven autorotative capability is cause for concern in tilt-rotor aircraft," a 1999 report warned. Two years later, a second study cautioned that the V-22's "probability of a successful autorotational landing ... is very low." Unable to rewrite the laws of physics, the Pentagon determined that the ability to perform the safety procedure was no longer a necessary requirement and crossed it off the V-22's must-have list. "An autorotation to a safe landing is no longer a formal requirement," a 2002 Pentagon report said. "The deletion of safe autorotation landing as a ... requirement recognizes the hybrid nature of the tilt-rotor."

Indeed it does, but that doesn't make the aircraft any safer. The plane's backers said that the chance of a dual-engine failure was so rare that it shouldn't be of concern. Yet the flight manual lists a variety of things that can cause both engines to fail, including "contaminated fuel ... software malfunctions or battle damage." The lone attempted V-22 autorotation "failed miserably," according to an internal 2003 report, obtained by TIME, written by the Institute for Defense Analyses, an in-house Pentagon think tank. "The test data indicate that the aircraft would have impacted the ground at a ... fatal rate of descent."

That prospect doesn't concern some V-22 pilots, who believe they'll have the altitude and time to convert the aircraft into its airplane mode and hunt for a landing strip if they lose power. "We can turn it into a plane and glide it down, just like a C-130," Captain Justin (Moon) McKinney, a V-22 pilot, said from his North Carolina base as he got ready to head to Iraq. "I have absolutely no safety concerns with this aircraft, flying it here or in Iraq."

Helicopter expert Rex Rivolo, who called the decision to deploy the V-22 without proven autorotation capability "unconscionable" in that confidential 2003 Pentagon study, declined to be interviewed. But in his report, Rivolo noted that up to 90% of the helicopters lost in the Vietnam War were in their final approach to landing when they were hit by enemy ground fire. About half of those were able to autorotate safely to the ground, "thereby saving the crews," Rivolo wrote. "Such events in V-22 would all be fatal."

Faced with killing the program — or possibly killing those aboard the V-22 — the Marines have opted to save the plane and have largely shifted responsibility for surviving such a catastrophe from the designers to the pilots. While the engineers spent years vainly trying to solve the problem, pilots aboard a stricken V-22 will have just seconds to react. But tellingly, pilots have never practiced the maneuver outside the simulator — the flight manual forbids it — and even in simulators the results have been less than reassuring. "In simulations," the flight manual warns, "the outcome of the landings varied widely due to the extreme sensitivity to pilot technique and timing." The director of the Pentagon's testing office, in a 2005 report, put it more bluntly. If power is lost when a V-22 is flying like a helicopter below 1,600 ft. (490 m), he said, emergency landings "are not likely to be survivable."

The Pea-Shooter Problem

While the aerodynamics of autorotation may be challenging for outsiders to grasp, a second decision — sending the V-22 into combat armed with only a tiny gun, pointing backward — is something anyone can understand. The Pentagon boasts on its V-22 website that the aircraft "will be the weapon of choice for the full spectrum of combat." That's plainly false — and by a long shot. Retired General James Jones, who recently led a study into the capabilities of the Iraqi security forces, is a V-22 supporter. But when he ran the Marines from 1999 to 2003, he insisted the plane be outfitted with a hefty, forward-aimed .50-cal. machine gun. "It's obviously technically feasible. We've got nose-mounted guns on [helicopter gunship] Cobras and other flying platforms, and I thought all along this one should have it too," he says.

The Marines saluted, awarding a $45 million contract in 2000 for the development of a swiveling triple-barreled .50-cal. machine gun under the V-22's nose, automatically aimed through a sight in the co-pilot's helmet. "All production aircraft will be outfitted with this defensive weapons system," the Marine colonel in charge of the program pledged in 2000. The weapon "provides the V-22 with a strong defensive firepower capability to greatly increase the aircraft's survivability in hostile actions," the Bell-Boeing team said. But the added weight (1,000 lbs., or 450 kg) and cost ($1.5 million per V-22) ultimately pushed the gun into the indefinite future.

So 10 V-22s are going to war this month, each with just a lone, small 7.62-mm machine gun mounted on its rear ramp. The gun's rounds are about the same size as a .30-06 hunting rifle's, and it is capable of firing only where the V-22 has been — not where it's going — and only when the ramp used by Marines to get on and off the aircraft is lowered. That doesn't satisfy Jones. "I just fundamentally believe than an assault aircraft that goes into hot landing zones should have a nose-mounted gun," Jones told TIME. "I go back to my roots a little bit," the Vietnam veteran says. "I just like those kinds of airplanes to have the biggest and best gun we can get, and that to me was a requirement." He doesn't think much of the V-22's current weapon: "A rear-mounted gun is better than no gun at all, but I don't know how much better."

The Marines say combat jets or helicopter gunships will shadow V-22s flying into dangerous areas. And backers say the V-22's speed will help it elude threats. It could, for example, zip into harm's way at more than 200 m.p.h. (320 km/h), convert to helicopter mode and then land within seconds. It could pause on the ground to deliver or pick up Marines and then hustle from the landing zone. Various missile-warning systems and fire-extinguishing gear bolster its survivability. If it is hit, redundant hydraulic and flight-control systems will help keep it airborne. Finally, Marines say, if the V-22 does crash, its crumpling fuselage and collapsing seats will help cushion those on board.

It's good that such protection is there. It's needed. For the V-22 continues to suffer problems unusual in an aircraft that first flew in 1989. In March 2006, for example, a just-repaired V-22 with three people aboard unexpectedly took off on its own — apparently the result of a computer glitch. After a 3?sec. flight to an altitude of 6 ft. (about 2 m), according to the V-22's flight computer, or 25 ft. (about 8 m), according to eyewitnesses, it dropped to the ground with enough force to snap off its right wing and cause more than $1 million in damage.

There's more. Critics have had long-standing concerns about the poor field of view for pilots, the cramped and hot quarters for passengers and the V-22's unusually high need for maintenance. A flawed computer chip that could have led to crashes forced a V-22 grounding in February; bad switches that could have doomed the aircraft surfaced in June. In March the Government Accountability Office warned that V-22s are rolling off the production line in Amarillo, Texas, and being accepted by the Marines "with numerous deviations and waivers," including "several potentially serious defects." An internal Marine memo warned in June that serious and persistent reliability issues could "significantly" reduce the aircraft's anticipated role in Iraq. V-22s built before 2005, the report said, are fully ready to fly only 35% of the time, while newer models, like those in Iraq, are 62% ready. But "sustained high-tempo operations in [Iraq]," the memo warns, could drive down the readiness rates for the newer V-22s.

Into Iraq

Soon enough, the marines will know if those warnings are on target. "My fervent desire is to get the V-22 into the fight as soon as we can," General James Conway, commandant of the Marines, said in March. "I think it's going to prove itself rapidly." But then he said something that stunned V-22 boosters: "I'll tell you, there is going to be a crash. That's what airplanes do over time." Conway is not alone. Ward Carroll, the top government spokesman for the V-22 program from 2002 to 2005, believes that six Ospreys, about 5% of the fleet, will crash during its first three years of operational flight. Carroll says new pilots flying at night and in bad weather will make mistakes with tragic consequences. So he's reserving judgment on the aircraft and suspects that many of those who will be climbing into the V-22 are too. "I'm still not convinced," he says — echoing comments made privately by some Marines — "that the Marine ground pounders are in love with this airplane."

A former F-14 aviator, Carroll likens the V-22 to another Marine favorite, the AV-8 Harrier jump jet. "The Harrier," he notes, "is actually a good analogy for the V-22." Like the AV-8, the V-22 is a radical aircraft crammed with compromises that may change combat forever. And like the AV-8, it may also kill a lot of Marines while doing little of note on the battlefield. Since 1971, more than a third of Harriers have crashed, killing 45 Marines in 143 accidents. But there's a critical difference between the two warplanes. Each Harrier carries a single pilot, nestled into an ejection seat with a parachute. But after all the debate about tilt-rotor technology — after all the vested interests have argued their case and all its boosters and critics have had their say — this much we know: within days, a V-22 will begin carrying up to 26 Marines into combat in Iraq, with no ejection seats — and no parachutes.

Potash and Aluminum

Not hugely important, but I've seen the word Potash floating around for a while, and I've been kind of wondering what it is. A recent Economist article further sparked my interest... The industry seems to have some interesting dynamics in so far as you need to be close to cheap energy (such as natural gas) to be cost effective. Also, obviously, you need to be close to Potassium. If I were still in business school, the industry would make for a good corporate strategy project... Along the same lines, so would be semi conductor business (but for very different reasons). Aluminum smelting, however, sounds pretty similar to the fertilizer business (and it should thus be no wonder that the Gulf countries (i.e. the UAE) are investing in it heavily).

From the Wikipedia article of Potash:

Potassium is the seventh most abundant element in the Earth's crust, and is the third major plant and crop nutrient after nitrogen and phosphate. About 93% of world potash consumption is used in fertilizers,^[1] with small amounts used in manufacturing soaps, glass, ceramics, chemical dyes, drugs, synthetic rubber, de-icing agents, water softeners and explosives. Other main potash fertilizer products include potassium sulphate (K₂SO₄) and potassium nitrate (KNO₃).

Potash has been used since antiquity in the manufacture of glass, soap, and soil fertilizer. Potash is important for agriculture because it improves water retention, yield, nutrient value, taste, colour, texture and disease resistance of food crops. It has wide application to fruit and vegetables, rice, wheat and other grains, sugar, corn, soybeans, palm oil and cotton, all of which benefit from the nutrient’s quality enhancing properties.^[6]

Mergers in the fertiliser industry

A growth business

Feeding the world has become a mouth-watering opportunity

Feb 18th 2010 | From The Economist print edition

CorbisPotash makes the world grow round

FOR thousands of years farmers would try to ensure a decent harvest with exhortations to various deities. The weather may still be in the lap of the gods but the fecundity of the soil can now be improved by more down-to-earth means. The run-up in the price of fertiliser, which reached a peak along with most agricultural commodities in 2008, gave a taste of the money to be made by feeding the world. A recent flurry of takeovers suggests that fertiliser companies see the subsequent drop in prices as a buying opportunity before the next ascent begins.

The biggest deal so far this year was unveiled on February 15th. Yara, a Norwegian fertiliser-maker, agreed to pay $4.1 billion for Terra, an American company. The deal will extend Yara’s lead as the world’s biggest maker of nitrogen-based fertiliser. Vale, a huge Brazilian mining company, has put up $4.8 billion for two recent purchases. These will boost its phosphate- and potash-based fertiliser businesses, which serve Brazil’s vast and growing agricultural sector.

BHP Billiton, the world’s biggest mining company, has also added bulk to its potash operations. In January it paid $320m for Athabasca Potash, a Canadian business situated near a mine it owns in Saskatchewan. In a decade the combined sites could churn out 8m tonnes of potash annually, twice the output of the world’s largest mine and equivalent to a just under a sixth of global consumption. Such is the allure of potash that rumours last year suggested that Vale or BHP might bid for a big global fertiliser company such as America’s Mosaic or PCS of Canada.

The explanation for all this is undoubtedly the open maw and changing dietary habits of the world’s fast-expanding population. It is expected to grow by around a third by 2050 to over 9 billion people, who will all need to be fed. Moreover, as people grow more prosperous they eat more meat, which will require even more crops to provide feed for livestock.

China’s demand for fertiliser is expected to be particularly buoyant as a result of its huge population and the poor quality of its arable land. China is largely self-sufficient in nitrogen fertilisers. But the country is already a big importer of phosphates and especially potash. It consumes around a quarter of the 50m tonnes of potash produced in the world each year. By some estimates China alone might use 26m tonnes a year within a decade and a half.

There are other factors at work besides the world’s population pressures. The prices of fertilisers are recovering more slowly than those of other commodities, making fertiliser companies relatively cheap. That is especially true if the buyer is a mining firm, earning near-record prices once more for its ore. Big mining companies are also interested in phosphates and potash because they are generally extracted from the sort of huge mines that are their bread and butter.

The Yara deal is partly a response to lower prices for natural gas in America. Energy accounts for about three-quarters of the cost of producing nitrogen fertilisers, so cheaper gas and proximity to America’s many farmers make Terra an attractive buy. The gods, it seems, are smiling on the fertiliser-makers.

Wired: Smart Infrastructure

Lag In Intelligent Transportation Could Hurt Economy

• By Keith Barry
• February 18, 2010 |
• 9:30 am |
• Categories: Infrastructure

The United States lags years behind countries like Japan, Singapore and South Korea in implementing sophisticated intelligent transportation systems that make moving goods and people more efficient, and it could hurt the economy, according to a new report.

The Information Technology and Innovation Foundation that examined what world leaders in transportation are doing and found the United States is far behind in developing vehicle to vehicle and vehicle to infrastructure communication and telemetry systems. The report found Japan leads the world in adopting such technology, often called Intelligent Transportation Systems or ITS.

The technology can range from synchronizing traffic lights for optimal traffic flow to providing real-time information on traffic conditions and accidents to minimize traffic congestion. In Singapore, for example, all traffic lights are programmed for optimal traffic flow but just 40 percent of traffic lights in the United States are. Japan’s Smartway project goes further, offering drivers real-time traffic information, accident repots and navigation that avoids congested roadways.

“It can tell you that you’re about to come up on a blind curve, that traffic is backed up ahead of you, and that you need to brake immediately,” report author Stephen Ezell said, describing just one of the features Smartway offers.

Unlike similar premium services in the U.S. that are mainly a luxury for drivers of high-end vehicles, Smartway will be widely available both in new cars and as an aftermarket device. In addition to keeping drivers from wasting time stuck in traffic, Ezell said, ITS is actually a major gain for nationwide productivity.

Not only will systems like Smartway reduce the amount of fuel that drivers burn while in traffic jams and bring down motor vehicle fatality rates, ITS is also a boon for those Asian manufacturers who rely on just-in-time inventory strategies.

“If you talk to FedEx or UPS, they’d make it very clear that the level of congestion they face [in the U.S.] is an impediment to the JIT business models U.S. manufacturers would like to deploy,” Ezell said.

Factoring in all cost savings, Ezell said, “ITS systems on average have a benefit to cost ratio of nine to one – far above putting in additional highway capacity, which has a ratio of 2.7 to one.”

Individual measures can be even more beneficial, with the GAO estimating that a system like Japan’s Smartway could offer savings of 25:1.

“If we were all able to have real time traffic information, to deploy such a system would cost $1.2 billion, but it would deliver a $30.2 billion economic return over a ten year period in terms of mobility, safety and environmental savings,” Ezell said.

So what’s the holdup? There are two.

The foundation says we aren’t spending enough. The U.S. spends $100 million is spent annually. This is a fraction of the $2.8 billion China spent last year alone. What’s more, most of the money has been spent solely on research, not implementation.

Unlike Japan, Sinagpore and South Korea — relatively small, densely-populated countries with fully-developed road networks — the U.S. has a large road network that is for the most part congested only in and around major cities. Most importantly, roadways in the U.S. are under both federal and state control, whereas the leaders in ITS have “developed national policies that recognize the importance of information technology in general and ITS in particular.”

To match programs in Asia, Ezell says that the federal government has to treat ITS “like a 21st century digital equivalent of the Interstate Highway System,” with strong federal leadership and a lot of political will. He estimates it might take $2.5 billion per year to implement ITS, but “it’s much easier for politicians to attend a groundbreaking for a new highway than to explain they put in a back-office computer system.”

All these factors make research, development and implementation take a lot longer. The U.S. Department of Transportation is currently taking five years to research an ITS proposal called IntelliDrive. By comparison, Japan’s Smartway took six years from conceptualization to implementation.

“They did in six years what it’s taking us five years to see if we can or can’t do,” Ezell said.

Photo of rush hour in Kobe, Japan: Flickr / sachman75

Read More http://www.wired.com/autopia/2010/02/us-lags-asia-in-its/#ixzz0g6HwCIaK

Wired: Bulet Trains in the US

I find three things interesting about this article:

1) The analysis of where the necessary markets exist for high speed trains in the United States,
2) The brief commentary on technology transfer to the Chinese,
3) And, finally, the very high-level description of how bullet trains work.

Unfortunately, the blog cuts off pictures and messes up some of the formatting. The original article is available free at Wired.

Superfast Bullet Trains Are Finally Coming to the U.S.

• By James Glave and Rachel Swaby
• January 25, 2010 |
• 12:00 pm |
• Wired Feb 2010

Illustration: Paul Rogers

Believe it: Bullet trains are coming. After decades of false starts, planners are finally beginning to make headway on what could become the largest, most complicated infrastructure project ever attempted in the US. The Obama administration got on board with an $8 billion infusion, and more cash is likely en route from Congress. It’s enough for Florida and Texas to dust off some previously abandoned plans and for urban clusters in the Northeast and Midwest to pursue some long-overdue upgrades. The nation’s test bed will almost certainly be California, which already has voter-approved funding and planning under way. But getting up to speed requires more than just seed money. For trains to beat planes and automobiles, the hardware needs to really fly. Officials are pushing to deploy state-of-the-art rail rockets. Next stop: the future.

Fast Trains: A Brief History
When the first modern rail line connected Liverpool with Manchester in 1830, locals worried that flying sparks would set fire to buildings and that cows near the tracks would stop giving milk. That train couldn’t hit even 40 mph. Those British villagers would be downright terrified now. Here’s a quick trip through high-speed history.

1830

36 mph

Liverpool & Manchester Railway, England
A former member of Parliament was injured at the first modern rail line’s christening, and the Northumbrian train reached its top speed rushing him to a doctor. (He died soon after.)

1839

57 mph

Grand Junction Railway, England
Nine years after the Northumbrian’s emergency run, the high-speed record was broken in Staffordshire by an engine so powerful it was dubbed Lucifer.

1889

89.5 mph

Paris-Dijon line, France
France grabbed the speed title from England after a record run on the Paris-Dijon line. The engine that took the prize was designed by Thomas Crampton … of England.

1897

90 mph

Midland Railway, England
It took almost a decade for England to regain its dominance with a record-breaking run aboard an 8-foot-long, eight-wheeled locomotive from Melton Mowbray to Nottingham.

1903

126 mph

Military railway, Germany
Germany pulled ahead with this 12-wheel all-electric train between Marienfeld and Berlin, which would remain the country’s fastest for more than 70 years.

1932

92 mph

Great Western Railway, England
The Cheltenham Spa Express became the Cheltenham Flyer after going 77 miles in just under 57 minutes — the first regular passenger service to achieve such speed.

1964

130 mph

Shinkansen, Japan
This new line between Tokyo and Osaka provided the first regular service operating at speeds above 100 mph. The Shinkansen’s aerodynamic design earned it the nickname “bullet train.”

1981

161.6 mph

TGV, France
When this high-speed rail opened, it became the fastest regularly running line in the world, shuttling passengers 264 miles between Paris and Lyon in just 2 hours, 40 minutes.

2004

267 mph

Shanghai Maglev, China
The fastest passenger train in the world, this line zips from Pudong International Airport to Shanghai via an electromagnetic reaction created between the cars and the tracks.

2007

357 mph

TGV, France
A souped-up, 25,000-hp TGV with oversize wheels holds the current record for non-maglev trains. Journalists on the title run reported dizziness at 300 mph and difficulty standing at around 335 mph.

Florida (roll over for detail)

Texas (roll over for detail)

Midwest (roll over for detail)

California (roll over for detail)

Northeast (roll over for detail)

The Fast
Tracks

5 areas of the country have the population and geography to support high-speed rail now. But each route poses unique challenges.

California

First Phase

San Francisco
to Los Angeless

Ultimate Goal

Sacramento
to San Dieago

Estimated Completion Date

2025

Top Speed

220 mph

Final Tab

$45B

Conditions here are almost perfect. Not only does California possess a surplus of big-think, tech-whiz envirogeeks, it also boasts two major cities — San Francisco and Los Angeles — an ideal distance apart for bullet trains. In 2008, voters approved almost $10 billion to get started, and some of the environmental studies are already complete. But the biggest point in California’s favor? Ego. Governor Arnold Schwarzenegger wants the system to be his legacy.

Midwest

First Phase

Chicago to Madison, Detroit, and St. Louis.

Ultimate Goal

Hub-and-spoke network: 20 major cities using 3,000 miles of existing railway.

Estimated Completion Date

2025

Top Speed

110 mph

Final Tab

N/A

Nine Midwest states have teamed up to develop a regionwide network with Chicago as the hub. They will need to build atop a legacy freight system without a dedicated right-of-way — which means top speeds will be limited to 110 mph. Still, that should be fast enough to win over business travelers who currently brave three-hour-plus car trips between the region’s cities.

Texas

Ultimate Goal

“T-Bone” connecting Dallas/ Ft. Worth, San Antonio, and Houston

Estimated Completion Date

2020

Top Speed

220 mph

Final Tab

$12-22B

They think big down in Texas — as in a dedicated twin-track, 440-mile elevated corridor that will allow longhorns to wander underneath. The topography is forgiving, but the land-use patterns — miles of suburbs with scant public transit — are less than ideal. Lawyers for Southwest Airlines helped shoot down a proposal back in the 1990s, but with broad popular support this time, a Lone Star Shinkansen might happen.

Northeast

Ultimate Goal

Speed-boosting upgrades to existing lines to get Washington-to-Boston travel time down to five hours, 45 minutes.

Estimated Completion Date

2023

Top Speed

150 mph

Final Tab

$12B

On paper, the steel ribbon between Boston and DC is high-speed heaven: four large cities in close proximity, excellent transit connections, and overwhelmed airports. (The region already has the popular Amtrak Acela Express.) But on the ground, it’s stakeholder hell: eight commuter railroads with five owners, seven freight lines, and nine states — each with its own priorities and vision. And nobody seems to be coordinating the effort.

Florida

First Phase

Tampa
to Orlando

Ultimate Goal

Orlando
to Miami

Estimated Completion Date

2017

Top Speed

180 mph

Final Tab

$11.5+B

Florida has a checkered history with high-speed rail; its own voters nixed a bullet train in 2004. But now that there’s federal money on offer, the state has dusted off its plans and stands a good chance of becoming one of the first to start construction. The advantage: a 90-mile-long median along Interstate 4 that is government-owned and ready for trains. Plus, millions of Mouseketeers to ride the rails each year.

Fast or Superfast?
How rules and money limit speed.

Not all of the projects currently proposed are what many people think of as bullet trains. Turns out that while those 150-plus-mph rockets are insanely fast on the tracks, they’re slow to get off the ground. The first obstacle is regulatory: Federal rules demand environmental assessments, which require years of study and fieldwork by consultants, biologists, engineers, and planners. The second snag is cost: Superfast (or “express high-speed rail”) systems need new, exclusive lines, which are extremely expensive. That explains “emerging high-speed rail” projects, incremental improvements — new stations, bridges, and rolling stock — to existing infrastructure. These, like the Amtrak Acela Express in the Northeast, won’t have a dedicated right-of-way but will share tracks with freight and passenger trains and top out at around 110 mph.

The Bullet Decade
Can we have fast trains in 10 years? Yes we can.

The US hopes to have high-speed lines operational within the next decade. Sound impossible? It’s not. Other nations have shown the way. In 1990, Spain’s rail network was in even worse shape than America’s: Trains were slow and equipment dilapidated. Then the government made a commitment to modernize. Spain now has one of the most extensive high-speed systems in the world. Likewise, Taiwan built its entire infrastructure in just the past 10 years — despite a population density greater than that of the northeastern US. All it takes is planning: According to the island nation’s head of infrastructure construction, by threading the 60-foot-wide corridor carefully through the landscape, the builders had to knock down only about 1,000 homes over 214 miles. Finally, China plans to pour a staggering $300 billion into dedicated high-speed-rail corridors by 2020. Almost all of the first 60 trains will be manufactured in China under a technology-transfer agreement with bullet builder Siemens. In essence, Beijing intends to slash its costs by cloning the Siemens Velaro train, which could provide a model for a cheaper high-speed rollout in the US.

* Proposed by infrastructure-planning think tank America 2050

Illustration: Paul Rogers

The California
Challenge

The Golden State’s bullet train project will likely be a test bed for the nation. Here are some key hurdles.

Ridership

To be cost-efficient, any high-speed rail system needs an ample supply of riders. San Francisco hopes to deliver them through a new million-square-foot terminal. Dubbed the Transbay Transit Center, it will connect the new rail line with nine regional transportation systems, including the Caltrain commuter rail, Bay Area Rapid Transit, and Greyhound — once the thing finally is completed in a decade or so.

Nimbyism

The route across Pacheco Pass and up the San Francisco Peninsula — the California High-Speed Rail Authority’s preferred passage to San Francisco — is in peril. Menlo Park and Atherton have sued to stop construction from bisecting their posh towns. In August, a judge found in their favor. As an alternative, the train could run through the East Bay, but planners say the hurdles — 46 acres of wetlands, a San Francisco Bay crossing, and a little thing called the San Andreas Fault — are too great.

Instant Exurbs

High-speed rail will transform isolated and depressed Central Valley cities like Merced into commuter towns overnight, instantly cutting the hours-long odyssey to Sacramento to just 43 minutes. The resulting population boom (planners are already expecting an increase of more than 80 percent over the next 20 years) will mean higher employment rates and tax revenue but also a massive jump in urban infrastructure needs for local governments.

Farmland

Laying down track in Fresno County is like playing Operation. The goal is to carve out a 100-foot-wide corridor with minimal injury to the state’s most valuable agricultural land. Depending on the route from Fresno to Tulare, up to 300 acres of California’s best farmland will be disrupted. And parcels enrolled in the Williamson Act’s conservation program should be avoided altogether. Planners are scratching their heads over the issue now.

Mountains

Taking a bullet train over 4,000-foot-high mountains would feel more like a thrill ride than an office commute. So to navigate the Tehachapi range, rail planners initially sought to burrow through it. They soon realized that would require 23 miles of tunnels and negotiations with at least five major state parks, national forests, and recreation areas. The alternative: Lay an extra 35 miles of track to cross farther east, in Antelope Valley. The detour adds 10 minutes to the trip but would link Palmdale (population 139,000) to the greater LA metro area.

Car Culture

No city epitomizes the insane appeal of driving like Los Angeles, whose citizens cling to their steering wheels even as they face the worst congestion in the nation. Will high-speed rail persuade them to give up their autos? Maybe. Ridership on the local rail system has increased to 306,000 on weekdays, up from 265,000 in 2007. A faster, cheaper trip — the high-speed ride between Ontario and LA will save the average commuter at least 85 hours and as much as $6,400 a year in gas, parking, and lost productivity — might pry even the most dedicated motorist out of the driver’s seat.

Earthquakes

Since 1984, seismic activity has doubled in the area around San Diego (which suffered a magnitude 5.3 quake in 1986). But active faults are not necessarily deal breakers. Just look at Japan’s Shinkansen, which withstands some thousand tremors a year without any casualties. The trick is in the construction: Motion detectors are linked to a central control system that automatically shuts down trains during a significant rumble. Deep-reaching foundations resist an earthquake’s unsettling effects. And crossing fault lines at 90 degrees limits exposure to calamity.

Rail or Fail
The alternatives would cost more.

Getting California’s train up and running will be expensive. But doing nothing would cost two to three times more. Why? Currently, gridlocked lanes waste $20 billion in fuel and productivity annually. And it’s only going to get worse. The Golden State is growing — quickly. By 2030, another 12 million people could be calling it home. Without an infrastructure overhaul, drivers can expect a 10 percent congestion increase every year. To accommodate the billion trips between cities that residents and visitors will make annually, the state would need to build 3,000 more miles of freeway lanes, five more commercial airport runways, and 90 more airline departure gates. The price: at least $100 billion. Oh, and all that construction wouldn’t alleviate traffic; it would simply keep pace with it.

Speed Trials
San Francisco to L.A. in 2 hours, 40 minutes. Or else.

California’s bullet train system will need a steady flow of riders — lots of riders — to pay off. But studies show that when transportation times between major hubs exceed three hours, many travelers opt for planes. To address this dilemma, California’s high-speed-rail planners specify that trains must travel between San Francisco and Los Angeles in no more than two hours, 40 minutes, a feat that requires sustained intervals at 220 mph. The problem: Standard bullet trains don’t go that fast — yet. The state is gambling that technology will improve before it completes the planning process and starts laying track. Luckily, the tech doesn’t need to improve much: France’s new TGV already hits 200 mph, and Spain’s Alta Velocidad Española carries passengers at around 217 mph. Of course, the deadline also puts planners in a bind: Every route change that adds miles means the train needs to go that much faster. So be it. The target is necessary to ensure a fast ride and plentiful ridership.

Illustration: Paul Rogers

Built for Speed

Forget diesel locomotives and human error. Modern bullet trains are high-voltage rockets with regenerative brakes, powered wheel sets, and centralized control systems.

Traffic Monitor

It’s easy to blow past a trackside signal, which is why dedicated high-speed corridors don’t use them. Instead, operators rely on a system known as automatic train control, in which traffic and speed information is monitored centrally and displayed on a screen in the driver’s cab. Trains are assigned a maximum speed, beyond which the brakes kick in automatically.

Aerodynamics

Designers must carefully taper the first car, not only for aerodynamic performance but also to eliminate the sonic boom that can occur when a train enters a tunnel at very high speed.

Auto-Shutdown

Sensors can be placed along the route to monitor for high winds, mud slides, flooding, earthquakes, or misaligned tracks — and can trigger alarms or tell the system to stop the train immediately.

Power Connection

A hinged arm called a pantograph connects the train to the power line. The trick is to keep the pantograph in contact at more than 200 mph. In addition to a pneumatic system that pushes upward, a small wing creates lift at high speed; the faster the train moves, the more force is applied. The arm can also be lowered to let the train coast between different electrical systems.

A.C. Inverter Car

A high-speed line’s inverter car looks like any other passenger car, but under the floor lurks the humming high-voltage heart of the train. In the case of Siemens’ Velaro, for example, the traction inverter turns 3,000-volt alternating current from the pantograph into direct current. The driver controls speed by changing the frequency of this current, throttling it up or down between 0 and 60 hertz.

Drivetrain

High-speed trains don’t have locomotives — they have powered axles paired into wheel sets called bogies. Rather than placing all the drive wheels at the front, state-of-the-art systems have bogies up and down the length of the train. This reduces axle load, maintenance costs, and possibly the risk of a catastrophic “accordion” effect in the event of an accident.

Regenerative Brakes

Regenerative brakes inside the bogies feed power back to the grid. They employ the same principle as a hybrid car, but instead of storing the energy in an onboard battery, the system shares the juice with other trains on the network.

Fail-Safe Systems

What happens if a train operator passes out at 150 mph? Hopefully nothing, thanks to a time-tested safety device: a dead man’s switch. On some lines, drivers must press a button with their foot every 30 seconds. Should they neglect this duty, an audible alarm sounds, and if it’s ignored, the train will initiate an emergency stop.

Diagrams: Brown Bird Design