Results oriented

It's difficult to accept bland tributes paid to good intentions with so little attention to results.

In the scale of the debt being accrued by the U.S. government (about $16 trillion as I write), $2.7 million is not really very much money. And if that amount — contributed by the U.S. Dept. of Energy to General Motors and its partners, magnesium diecaster Meridian Lightweight Technologies and The Ohio State University — leads to “an integrated super-vacuum diecasting process” to produce thin-wall magnesium structures for automotive door interior panels, then it will have been a good investment. The hope is it that the magnesium parts produced in this way will be effective substitutes for steel inner door panels, which will reduce the component weight by 60% and cut energy consumed in the production process by 50% — which will improve fuel economy and cut carbon emissions.

But, am I wrong to wonder why those goals aren’t credible enough for the researchers to fund on their own? Cannot a wealthy university justify such future-oriented work for its faculty and students? Cannot a diecaster expect to gain market share with such a distinctive process capability? Won’t an automaker appeal to car buyers with the promise of better fuel economy? And inasmuch as the automaker here is GM — essentially owned by the U.S. government already — cannot this worthy project be financed in a more direct way? That, at least, might return some equity to the shareholder.

We cannot know the answers to these questions because asking them doesn’t seem to be any part of the product development process. In fact, the comparatively small amount that U.S. taxpayers are conferring on GM, Meridian, and OSU is just a portion of a $54-milion outlay by DOE to several manufacturers and universities, all justified by the practically unimpeachable logic that they’re developing “clean energy technology.”

“When it comes to clean energy,” U.S. Energy Secretary Steven Chu said, “[it] should be invented in America, made in America, and sold around the world.”

If a similar statement had been uttered by a government official from China or Russia, or Japan in the 1980s, U.S. manufacturers would be offended and alarmed. (And probably they would increase their requests for more subsidies, pointing to the threat of foreign domination in some critical technology — which is more or less what happened in a recent, infamous case involving cylindrical solar panels.)

The point is not that these investments have no promise, but that any prospects for good results are being muted by an emotional appeal. DOE is able to portray itself in a positive way to the public, at the public’s expense, but any technical achievement is being slighted. As a consequence there will be little if any accounting for the results of the research. All of us may one day ride in cars with super-vacuum diecast magnesium interior door panels, but we should not expect to see an accounting for the $2.7 million invested in it.

The nexus of free enterprise and government is a busy intersection of strategies and policies, as well as a lot of ambition. It is not a new development, nor a new outrage, and I am not indifferent to the various good things that have resulted from such efforts — though, as in private enterprise, the most remarkable outcomes are always those with the humblest beginnings. Financing new industrial technologies is probably the least objectionable aspect of it all; incentives, abatements, and subsidies to attract new business are much harder to account for than seed money for products or technologies.

What is increasingly difficult to accept though are the bland tributes paid to the intentions of these subsidies, with so little attention to results. The public officials involved in these efforts move from one election or appointment to the next with little concern for the record, but a manufacturers’ reputation is a much more important asset. The negative effect on the credibility of companies that accept these investments may be impossible to overcome.

The global financial collapse of 2008 has had this positive effect: it has trained the non-manufacturing public (including politicians, investors, and even average citizens) to appreciate manufacturing’s “potentiality.” In a crisis defined by a lack of capital, manufacturing is now recognized for its ability to create wealth, to spur economic growth. It’s good to have this recognized at last.

I recommend that manufacturers emphasize a different trait when they make these arrangements with public officials, the one that values execution over appearance, substance over style, and results over impressions. “Potential” may earn incentives, but performance wins rewards.

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