Your Efficient Markets at Work
April 19, 2012 7:08 AM Subscribe
How a fire in a small German town threatens to cause a worldwide car shortage. "When a fire in the small town of Marl in the west of Germany closed down an obscure chemical plant on 31 March, it barely made headlines." Now according to a recent IHS Automotive report, "shortages of the obscure component are 'likely to be serious.'"
Damn. This is also pretty much the secret to the German economy right now: they have near-monopolies on all sorts of obscure but essential industrial products that you can't currently get anywhere else. I think my other favorite is that they make all the heating pads for car seats.
posted by besonders at 7:17 AM on April 19, 2012 [2 favorites]
posted by besonders at 7:17 AM on April 19, 2012 [2 favorites]
From my soon-to-be-deleted post:
The braking and the fuel systems in cars depend on a resin called PA-12, made out of the chemical CDT (cyclododecatriene), and Evonik Industries' plant in Germany was responsible for possibly a third of the world's supply. There are potential alternatives to CDT, but they may take time to reach the market, especially with a closed factory.
Last year's tsunami, earthquake and nuclear disaster, which devastated Japanese industry also highlighted how manufacturers worldwide rely on component suppliers.
posted by Petrot at 7:19 AM on April 19, 2012 [2 favorites]
The braking and the fuel systems in cars depend on a resin called PA-12, made out of the chemical CDT (cyclododecatriene), and Evonik Industries' plant in Germany was responsible for possibly a third of the world's supply. There are potential alternatives to CDT, but they may take time to reach the market, especially with a closed factory.
Last year's tsunami, earthquake and nuclear disaster, which devastated Japanese industry also highlighted how manufacturers worldwide rely on component suppliers.
posted by Petrot at 7:19 AM on April 19, 2012 [2 favorites]
It turns out that the braking and the fuel systems of cars depend on a resin called PA-12.
And PA-12 is made out of an inelegantly named chemical: cyclododecatriene, or CDT.
Evonik Industries' plant in Germany was responsible for a good chunk of the world's supply - one estimate put it between a quarter and a half.
The supply of PA-12 was already tight because it is also used in solar panels.
Obviously, the fire was arson, and part of a plot by the fossil-energy cartels to stunt the growth of the solar power industry. Wake up sheeples!!!!111
posted by Thorzdad at 7:20 AM on April 19, 2012
And PA-12 is made out of an inelegantly named chemical: cyclododecatriene, or CDT.
Evonik Industries' plant in Germany was responsible for a good chunk of the world's supply - one estimate put it between a quarter and a half.
The supply of PA-12 was already tight because it is also used in solar panels.
Obviously, the fire was arson, and part of a plot by the fossil-energy cartels to stunt the growth of the solar power industry. Wake up sheeples!!!!111
posted by Thorzdad at 7:20 AM on April 19, 2012
I vote for Petrot's framing, saulgoodman, with all due respect to your hard work. The comparison to the shortages caused by tsunami make it an interesting look at the increasing efficiencies of the market acting as bottlenecks (ironically) in the global supply chain.
posted by infini at 7:21 AM on April 19, 2012
posted by infini at 7:21 AM on April 19, 2012
Heh. Hadn't even thought of that angle, but it seems so obvious now that you put it in terms of such clear reasoning, Thorzdad!
posted by saulgoodman at 7:21 AM on April 19, 2012 [1 favorite]
posted by saulgoodman at 7:21 AM on April 19, 2012 [1 favorite]
Fine with me either way, infini.
posted by saulgoodman at 7:22 AM on April 19, 2012 [2 favorites]
posted by saulgoodman at 7:22 AM on April 19, 2012 [2 favorites]
Linking to Petrot's post, just for the articles linked within it , as adding relevance to this discussion.
No problem, saulgoodman, thank you for your generosity of spirit.
posted by infini at 7:24 AM on April 19, 2012 [1 favorite]
No problem, saulgoodman, thank you for your generosity of spirit.
posted by infini at 7:24 AM on April 19, 2012 [1 favorite]
Highly efficient systems aren't resilient. Resilient systems are redundant and wasteful. Pick one, economy.
posted by wikipedia brown boy detective at 7:25 AM on April 19, 2012 [27 favorites]
posted by wikipedia brown boy detective at 7:25 AM on April 19, 2012 [27 favorites]
The supply of PA-12 was already tight because it is also used in solar panels.
The renewable energy market, particularly solar, has been getting increasingly competitive of late. I have seen numerous reports from German industries focusing on market opportunities in the developing world for their solar PV technologies.
Hmm thorzdad, your theory gets interestinger and interestinger...
posted by infini at 7:28 AM on April 19, 2012
The renewable energy market, particularly solar, has been getting increasingly competitive of late. I have seen numerous reports from German industries focusing on market opportunities in the developing world for their solar PV technologies.
Hmm thorzdad, your theory gets interestinger and interestinger...
posted by infini at 7:28 AM on April 19, 2012
I'm wondering what the effects of this shortage will actually look like, because of the robust market in used cars, which obviously wouldn't be directly impacted by a three-month materials shortage.
Also, how exactly is PA-12 used in brake systems? If it becomes impossible to find, does that mean brake failure disables a car indefinitely?
posted by Holy Zarquon's Singing Fish at 7:28 AM on April 19, 2012
Also, how exactly is PA-12 used in brake systems? If it becomes impossible to find, does that mean brake failure disables a car indefinitely?
posted by Holy Zarquon's Singing Fish at 7:28 AM on April 19, 2012
I just filled out an application for an entry level job in a plant that makes brake parts. I really know how to pick 'em.
posted by LiteOpera at 7:43 AM on April 19, 2012 [1 favorite]
posted by LiteOpera at 7:43 AM on April 19, 2012 [1 favorite]
"Shortage" is being used in a very specific or loose sense here, I imagine. Over a billion cars (so, one car for every seven people) isn't enough?
posted by eustacescrubb at 7:58 AM on April 19, 2012
posted by eustacescrubb at 7:58 AM on April 19, 2012
That's the problem with "just in time" production systems: they're awfully brittle. The thing is, I don't know how companies can go about building in resiliency into their production without risking their competitiveness. After all, why have excess inventories when you'll only actually need them, say, 5% of the time? If incorporating resiliency were a broadly shared belief, it wouldn't be an impediment; but getting to that point seems exceedingly difficult.
posted by Cash4Lead at 7:58 AM on April 19, 2012 [3 favorites]
posted by Cash4Lead at 7:58 AM on April 19, 2012 [3 favorites]
Also, how exactly is PA-12 used in brake systems? If it becomes impossible to find, does that mean brake failure disables a car indefinitely?
If I had to guess, since it's identified as a resin, it's possibly used to treat lines against the corrosive effects of brake fluid and fuel. Totally a guess, mind you.
posted by Thorzdad at 8:03 AM on April 19, 2012
If I had to guess, since it's identified as a resin, it's possibly used to treat lines against the corrosive effects of brake fluid and fuel. Totally a guess, mind you.
posted by Thorzdad at 8:03 AM on April 19, 2012
the potential impact could be serious, including a slow-down in production
"I do not think that word means what you think it means."
posted by ead at 8:08 AM on April 19, 2012
"I do not think that word means what you think it means."
posted by ead at 8:08 AM on April 19, 2012
That's the problem with "just in time" production systems
To be fair, most contract manufacturing is a combo of JIT and FIFO (first in first out), so that there's quite a few on the shelves of the manufacturing plants, quite a few on the shelves of the distribution centers, and quite a few on the various shelves of installation facilities. So it'll be a while before the "shortage" actually translates into "we can't fix your brakes today".
In theory at least, there's enough existing supply to support SSDD (same s*&^ different day) to allow for a rebuild and ramp up in production to make the delay as minimal as possible.
Wasn't there a car company, Kia or Suzuki possibly, that told dealers to absolutely stop selling their vehicles for like a two week span? IIRC (stop it already) they realized that they didn't have enough break components for the routine maintenance.
posted by Blue_Villain at 8:16 AM on April 19, 2012 [1 favorite]
To be fair, most contract manufacturing is a combo of JIT and FIFO (first in first out), so that there's quite a few on the shelves of the manufacturing plants, quite a few on the shelves of the distribution centers, and quite a few on the various shelves of installation facilities. So it'll be a while before the "shortage" actually translates into "we can't fix your brakes today".
In theory at least, there's enough existing supply to support SSDD (same s*&^ different day) to allow for a rebuild and ramp up in production to make the delay as minimal as possible.
Wasn't there a car company, Kia or Suzuki possibly, that told dealers to absolutely stop selling their vehicles for like a two week span? IIRC (stop it already) they realized that they didn't have enough break components for the routine maintenance.
posted by Blue_Villain at 8:16 AM on April 19, 2012 [1 favorite]
Kia would be my bet; their components are in a constant state of not-there as it is.
posted by Holy Zarquon's Singing Fish at 8:23 AM on April 19, 2012
posted by Holy Zarquon's Singing Fish at 8:23 AM on April 19, 2012
Highly efficient systems aren't resilient. Resilient systems are redundant and wasteful. Pick one, economy.--wikipedia brown boy detective
There's another option: fast and flexible.
The company I work for relied on material provided by one company in Japan, and their factory was very close to the evacuation zone of the Fukushima reactor. There were some other products only made in Japan at now damaged factories. The company started desperately scrambling for alternatives.
But the Japanese companies turned out to be remarkably fast and flexible. The material company had another factory farther away that they quickly converted to make the critical material. The chip company got their damaged factory up and running in record time.
Crisis averted.
posted by eye of newt at 8:28 AM on April 19, 2012
There's another option: fast and flexible.
The company I work for relied on material provided by one company in Japan, and their factory was very close to the evacuation zone of the Fukushima reactor. There were some other products only made in Japan at now damaged factories. The company started desperately scrambling for alternatives.
But the Japanese companies turned out to be remarkably fast and flexible. The material company had another factory farther away that they quickly converted to make the critical material. The chip company got their damaged factory up and running in record time.
Crisis averted.
posted by eye of newt at 8:28 AM on April 19, 2012
"I do not think that word means what you think it means."
A slow-down in production means a lot of workers not working and a lot of workers not getting paid and a lot of people cutting down their spending and a lot of economies suddenly seeing their GDP drop, so, yeah, it's kind of serious.
posted by mightygodking at 8:35 AM on April 19, 2012 [3 favorites]
A slow-down in production means a lot of workers not working and a lot of workers not getting paid and a lot of people cutting down their spending and a lot of economies suddenly seeing their GDP drop, so, yeah, it's kind of serious.
posted by mightygodking at 8:35 AM on April 19, 2012 [3 favorites]
"I just filled out an application for an entry level job in a plant that makes brake parts."
Callahan Auto?
posted by mr_crash_davis at 8:40 AM on April 19, 2012
Callahan Auto?
posted by mr_crash_davis at 8:40 AM on April 19, 2012
"Shortage" is being used in a very specific or loose sense here, I imagine. Over a billion cars (so, one car for every seven people) isn't enough?
Evidently not if people are still buying them. Of course, it'd be nice if there were higher fuel taxes in the US and Asian markets so that there was more incentive for public transit, but that's a separate issue from the potential problem of 4% of the US Economy taking a hit because of one hiccup in the supply chain.
There's nothing inelegant about the name cyclododecatriene, quite the opposite really.
posted by BrotherCaine at 8:47 AM on April 19, 2012
Evidently not if people are still buying them. Of course, it'd be nice if there were higher fuel taxes in the US and Asian markets so that there was more incentive for public transit, but that's a separate issue from the potential problem of 4% of the US Economy taking a hit because of one hiccup in the supply chain.
There's nothing inelegant about the name cyclododecatriene, quite the opposite really.
posted by BrotherCaine at 8:47 AM on April 19, 2012
Highly efficient systems aren't resilient. Resilient systems are redundant and wasteful. Pick one, economy.--wikipedia brown boy detective
There's another option: fast and flexible.
The debate here is the macro-economic version of "Fast, nice and cheap, pick two."
Creating a fast and flexible system is more expensive than a system which does one thing and does it very well. The problem is that even if you are fast and flexible, you have to have the wisdom to buck the "increase efficiency" by using these new shorter lead times to reduce your miniscule stockpiles even further.
Also, fast and flexible assumes a localized issue. If we ever have a massive outbreak of a nasty (but not particularly deadly flu) pray that engineers (the "I drive the train" type) always wash their hands and everyone around them covers their mouth when they cough. A huge fraction of the electricity comes from coal fired power stations and at any given moment we're like 48 hours from the secondary effects of a zombie apocalypse game (only without guns, ammo and health packs laying around everywhere).
posted by Kid Charlemagne at 9:40 AM on April 19, 2012 [1 favorite]
There's another option: fast and flexible.
The debate here is the macro-economic version of "Fast, nice and cheap, pick two."
Creating a fast and flexible system is more expensive than a system which does one thing and does it very well. The problem is that even if you are fast and flexible, you have to have the wisdom to buck the "increase efficiency" by using these new shorter lead times to reduce your miniscule stockpiles even further.
Also, fast and flexible assumes a localized issue. If we ever have a massive outbreak of a nasty (but not particularly deadly flu) pray that engineers (the "I drive the train" type) always wash their hands and everyone around them covers their mouth when they cough. A huge fraction of the electricity comes from coal fired power stations and at any given moment we're like 48 hours from the secondary effects of a zombie apocalypse game (only without guns, ammo and health packs laying around everywhere).
posted by Kid Charlemagne at 9:40 AM on April 19, 2012 [1 favorite]
Holy Zarquon's Singing Fish: Also, how exactly is PA-12 used in brake systems? If it becomes impossible to find, does that mean brake failure disables a car indefinitely?
The compound made at the factory in Marl, PA-12 is used in the manufacture of Nylon12. The link shows it can be used for fuel lines and hydraulic lines. I would imagine this is the problem. How many suppliers there are of the approved, required tubing and the inventory on hand will be the limiting factors.
posted by pdxpogo at 9:53 AM on April 19, 2012 [1 favorite]
The compound made at the factory in Marl, PA-12 is used in the manufacture of Nylon12. The link shows it can be used for fuel lines and hydraulic lines. I would imagine this is the problem. How many suppliers there are of the approved, required tubing and the inventory on hand will be the limiting factors.
posted by pdxpogo at 9:53 AM on April 19, 2012 [1 favorite]
Car shortage? Go look at the northbound 405 during peak hour and tell me that our problem is a shortage of cars.
posted by Joe Chip at 1:42 PM on April 19, 2012
posted by Joe Chip at 1:42 PM on April 19, 2012
Holy Zarquon's Singing Fish writes "Also, how exactly is PA-12 used in brake systems? If it becomes impossible to find, does that mean brake failure disables a car indefinitely?"
It's a precursor to the material used to make the flexible part of the brake line that goes from the body to the suspension. If you need a brake hose your car is pretty well sidelined until you can get a replacement. And because brakes are a safety item a manufacturer can't make material substitutions willy-nilly.
Holy Zarquon's Singing Fish writes "I'm wondering what the effects of this shortage will actually look like, because of the robust market in used cars, which obviously wouldn't be directly impacted by a three-month materials shortage. "
The used market could be heavily impacted as the hoses that need this compound are a maintenance item. As could the existing fleet. Also public transportation and commercial trucking which in some ways are worse off because they are required by law in many places to perform preventive maintenance. I can get away with deferring a weakened fuel line for a couple weeks (if I even notice it in the first place); a bus company is going to notice the problem before failure and is going to be required to either replace the line or take the unit out of service.
posted by Mitheral at 6:47 PM on April 19, 2012
It's a precursor to the material used to make the flexible part of the brake line that goes from the body to the suspension. If you need a brake hose your car is pretty well sidelined until you can get a replacement. And because brakes are a safety item a manufacturer can't make material substitutions willy-nilly.
Holy Zarquon's Singing Fish writes "I'm wondering what the effects of this shortage will actually look like, because of the robust market in used cars, which obviously wouldn't be directly impacted by a three-month materials shortage. "
The used market could be heavily impacted as the hoses that need this compound are a maintenance item. As could the existing fleet. Also public transportation and commercial trucking which in some ways are worse off because they are required by law in many places to perform preventive maintenance. I can get away with deferring a weakened fuel line for a couple weeks (if I even notice it in the first place); a bus company is going to notice the problem before failure and is going to be required to either replace the line or take the unit out of service.
posted by Mitheral at 6:47 PM on April 19, 2012
a lot of economies suddenly seeing their GDP drop, so, yeah, it's kind of serious
Guess we have ... radically different notions of what constitutes "serious". If there was a button I could push that would shut off the entire car industry, permanently, I'd push it without a second thought.
posted by ead at 8:45 PM on April 19, 2012
Guess we have ... radically different notions of what constitutes "serious". If there was a button I could push that would shut off the entire car industry, permanently, I'd push it without a second thought.
posted by ead at 8:45 PM on April 19, 2012
Some context for those interested. The affected plant is situated on one of the largest chemical sites in Germany. Origins of Chemiepark Marl date back to 1938, when infamous IG Farben started building chemical plants next to a coal mine, mainly to produce synthetic rubber from coal, thus ensuring the Third Reichs independence from foreign powers.
There are guided tours available on-site by an ex-mining engineer who'll dreadfully weep about the decline of German mining industry and proudly name the diverse range of chemical products produced on-site and the finished goods they contribute to. Highlight is the vista from the roof of the office building in the middle of the site over the vast industrial landscape. If I remember correctly, a number of plants on this site are also pivotal in the disposible diaper supply-chain.
Finally, Chemiepark Marl is a part of the Ruhr region's complex industrial/cultural heritage, which is very accessible and highly recommended exploring (if you're into beer, bratwurst and the history of vertical integrated steelmaking, or 'Montanindustrie' at large). I like to go to rusting blast furnaces with my family for fun, and you can too.
posted by mbn at 3:40 AM on April 20, 2012
There are guided tours available on-site by an ex-mining engineer who'll dreadfully weep about the decline of German mining industry and proudly name the diverse range of chemical products produced on-site and the finished goods they contribute to. Highlight is the vista from the roof of the office building in the middle of the site over the vast industrial landscape. If I remember correctly, a number of plants on this site are also pivotal in the disposible diaper supply-chain.
Finally, Chemiepark Marl is a part of the Ruhr region's complex industrial/cultural heritage, which is very accessible and highly recommended exploring (if you're into beer, bratwurst and the history of vertical integrated steelmaking, or 'Montanindustrie' at large). I like to go to rusting blast furnaces with my family for fun, and you can too.
posted by mbn at 3:40 AM on April 20, 2012
Assuming these guys do make a third of the global supply, can we not signal to the makers of the other 2/3rds (say, by using a price signal) that their production is needed and they should do anything they can to temporarily increase production.
posted by bystander at 4:21 AM on April 20, 2012
posted by bystander at 4:21 AM on April 20, 2012
Guess we have ... radically different notions of what constitutes "serious". If there was a button I could push that would shut off the entire car industry, permanently, I'd push it without a second thought.
Just because it would have effects you like (i.e. fewer and eventually no cars being driven) doesn't make the side effect of people losing their jobs in mass quantities not serious.
posted by Holy Zarquon's Singing Fish at 4:33 AM on April 20, 2012
Just because it would have effects you like (i.e. fewer and eventually no cars being driven) doesn't make the side effect of people losing their jobs in mass quantities not serious.
posted by Holy Zarquon's Singing Fish at 4:33 AM on April 20, 2012
Just because it would have effects you like (i.e. fewer and eventually no cars being driven) doesn't make the side effect of people losing their jobs in mass quantities not serious.
I guess it's a tone thing. I hear in the article a hand-wringing over bloodless abstractions like GDP and production, from a business thinktank of the sort capitalists look to for justification of their gleeful "creative destruction" (be it jobs, physical environment, or anything else) whenever it suits the profit motive.
In other words: would it be serious if they laid off the same people due to improved efficiencies? Would the same business press be reporting?
posted by ead at 5:54 PM on April 20, 2012
I guess it's a tone thing. I hear in the article a hand-wringing over bloodless abstractions like GDP and production, from a business thinktank of the sort capitalists look to for justification of their gleeful "creative destruction" (be it jobs, physical environment, or anything else) whenever it suits the profit motive.
In other words: would it be serious if they laid off the same people due to improved efficiencies? Would the same business press be reporting?
posted by ead at 5:54 PM on April 20, 2012
GDP is an abstraction, but that doesn't necessarily mean it is bloodless.
posted by BrotherCaine at 6:36 PM on April 20, 2012
posted by BrotherCaine at 6:36 PM on April 20, 2012
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Mal: It's nothing 'til you don't got one. Then it appears to be everything.
posted by kmz at 7:11 AM on April 19, 2012 [8 favorites]