US auto industry bolsters healthy economy- contributes in many ways

Growing now-- key to US economy

The Commerce Department said Wednesday that orders for autos and auto parts jumped 11.5% in July, the most in eight years. That followed an earlier government report on industrial production that showed the auto industry was the strongest segment of the manufacturing economy last month. This kind of expansion is important to the economy. Including factories, suppliers and dealers, the U.S. auto industry employs about 1.7 million workers and supports an additional 6.3 million private-sector jobs, according to the Center for Automotive Research in Ann Arbor, Mich. The center said those positions represent more than $500 billion in annual compensation and more than $70 billion in personal tax revenue. "Autos are certainly picking up. As we get into next year, this all depends on the state of the consumer," said Gary Schlossberg, senior economist Wells Capital Management. Auto sales peaked at about 17 million in 2000 and held near that level until 2007 before crashing to just 10.4 million two years later. They were heading back into the 13-million range — helped by a wave of new models, low interest rates and improving consumer confidence — only to be upended by the Japanese earthquake in March. Shutdowns at Japanese-owned factories in Japan and the United States created inventory shortages that led to sharply higher car prices, lower demand and hundreds of thousands of lost sales for dealers. But with those disruptions now in the rearview mirror, the industry is looking for sales to improve over the rest of the year. The health of the U.S. economy is so dependent on autos that economists such as UCLA's David Shulman are watching car sales to assess whether the nation's recovery will accelerate or stall. "If you see a 13-million-unit sales rate in the fourth quarter, that would help a lot," said Shulman, senior economist at the UCLA Anderson Forecast. "It would be very hard to see how the U.S. would go into recession with cars selling at that rate."

Growth: research, manufacturing, supplies, jobs

More than three years after bad management, a swooning global economy, and foreign competition gutted the U.S. auto industry, car makers are revving up for a comeback at what's likely to be one of the snazziest auto industry shows in years. The North American International Auto Show opened in Detroit this weekend for a nine-day run, and many eyes are on the annual pow-wow for clues about what's in store for 2012. The initial signs look good. The past two months have seen decent sales numbers, a trend that's likely to continue as the jobs outlook strengthens and Americans feel more financially secure, experts say. December was a good month for Nissan and especially the "Big Three"—Chevrolet, Chrysler and GM—all of which posted sales increases for the month and year. [Read: New Economic Data Points to Hope in 2012.] "The economy is such that people are feeling a little more comfortable about their job outlook and where they're going," says Bruce Belzowski, research scientist at University of Michigan's Transportation Research Institute. Economists forecast U.S. auto sales will jump to about 13.5 million in 2012, up from 12.8 million last year. While 13 or 14 million units sold certainly isn't bad, Belzowski says it's not the 15 or 16 million units auto makers used to enjoy several years ago. Still, the auto industry's recovery is playing a significant role in bolstering the broader economic recovery in the United States, primarily because automotive manufacturing touches so many other areas of the economy, from manufacturing gas caps to keeping the diner next to the plant open, says Aaron Bragman, senior analyst at IHS Global Insight. The resurgence in demand also bodes well for the job market. Auto makers have already re-hired nearly everyone they laid off during the recession, Bragman says, and if demand remains elevated, companies are likely to hire more to keep up with production needs.

Key to economy: jobs, exports, manufacturing

AAPC No date (American Automotive Policy Council, http://www.americanautocouncil.org/industry-facts) CS

The American automotive industry provides a unique and significant contribution to the U.S. economy. From job creation to domestic production to exportation and research and development, the American Auto Industry is a leader in multiple arenas, not only here at home, but across the globe. The Center for Automotive Research’s most recent report estimates that original equipment manufacturers, suppliers and dealers collectively support nearly 8 million jobs, pay $500 billion in annual compensation and generate $70 billion in personal tax revenue. The auto industry hires domestically. In a recent Gallup Poll, Americans were asked what the best way would be to create more jobs in the U.S. “Keeping jobs here” scored highest, by a substantial margin. Ford, GM and Chrysler are just three of 16 major global automakers competing in the U.S., but they employ two-thirds of America’s autoworkers: This is because four out of 10 Chrysler, Ford and GM employees are based in the U.S. At Toyota, Honda, Nissan, Hyundai/Kia, BMW, Daimler and VW (the seven largest foreign automakers), only five in 100 employees are based here. Over the past six years, automakers and suppliers have exported nearly $600 billion worth of vehicles and parts. The auto industry beat the next best performing sector (aerospace) by $74 billion. Last year alone, automakers and suppliers out-exported the aerospace industry by $20B. Last year alone, Chrysler, Ford and GM, together, exported more than 800,000 vehicles produced in the U.S. The cars bought each year in the U.S. each contain between 8,000 to 12,000 parts, using more than 3,000 pounds of iron, steel, rubber, glass and semiconductors. Automakers and suppliers purchase 70 percent of rubber and approximately 20 percent of the iron, zinc, aluminum and stainless steel produced in the U.S. While most automakers use some U.S. parts, Chrysler, Ford and GM’s vehicles contain nearly twice as much domestic content, on average, as the average foreign automaker vehicle. One and half times more of the Chrysler, Ford and GM vehicles bought in the U.S. are assembled here. (81 out of 100 vehicles Chrysler, Ford and GM sell in the U.S. are manufactured here. Only 55 out of 100 cars sold by foreign automakers are made here.) More U.S. production means more U.S. plants. For example, Chrysler, the smallest of the domestic automakers, operates as many assembly plants as BMW, Mercedes, Hyundai, Kia, VW and Mazda combined. More U.S. production means more U.S. jobs. Four in 10 employees at Chrysler, Ford and GM are based in the U.S., while only five in 100 employees at their largest competitors are based here. Eight of the world’s top 25 corporate investors in R&D are automakers, and the industry ranks third overall, ahead of software, aerospace and electronics manufacturers. In the U.S., nearly one in 10 engineers and scientists employed in the private sector work for automakers or auto suppliers. Ford and GM outspent global leaders like GE, Oracle, Google, HP, Apple and Boeing. And 80 cents of every dollar Chrysler, Ford and GM invest in R&D is spent in the United States. Those billions in R&D, and hundreds of billions in new plants and equipment, have translated into unprecedented improvements in passenger safety, air quality, fuel efficiency and new products and features. America’s drivers and passengers enjoyed the safest roads on record last year. Vehicle fatalities were the lowest on record, 25 percent lower than they were five years ago, even though Americans collectively drove nearly 3 trillion miles last year. Auto emissions are 99 percent cleaner than they were in the 1970s. 150+ new hybrid, all-electric and hydrogen fuel cell vehicles are currently on the road. Chrysler, Ford and GM alone are putting millions of flex fuel vehicles on the road each year. 2016 model year vehicles will offer 30 percent better fuel efficiency than last year’s fleet. Fleet fuel efficiency averages will reach 35.5 MPG. Despite the fact that cars and trucks account for only 20 percent of U.S. greenhouse gas emissions, automakers are the only sector committed to reducing greenhouse gas emissions of new products by 30 percent in just five years.

Manufacturing key to econ

Hill et al 10 (Kim, Debra Menk, Adam Cooper, "Contribution of the Automotive Industry to the Economies of all Fifty State and the United States," Center for Automotive Research, April 2010, http://www.cargroup.org/?module=Publications&event=View&pubID=16) CS

The United States automotive industry is a critical component of economic growth with extensive interconnections across the industrial and cultural fabric of the U.S. This report outlines many known elements and highlights tremendously important associations beyond the market space of manufacturing. It touches on the following elements as they relate to the automotive industry: national and regional employment; research, development and innovation; state and local government revenues; foreign direct investment; education; health care; U.S. trade; and quality of life. The paper is organized into two sections: Section I provides qualitative context and current market metrics for the automotive industry, both of which are needed to truly appreciate the contributions of the industry to the broader economy and gauge where the sector may be heading; Section II features an in-depth quantitative analysis of employment and personal income associated with the automotive sector. Section II is subdivided into four primary sections to capture the distinct contributions of suppliers, assemblers, and dealers to the national economy with a final summary section that describes the state-level employment associated with the automotive industry. The auto industry is one of the most important industries in the United States. It historically has contributed 3 – 3.5 percent to the overall Gross Domestic Product (GDP). The industry directly employs over 1.7 million people engaged in designing, engineering, manufacturing, and supplying parts and components to assemble, sell and service new motor vehicles. In addition, the industry is a huge consumer of goods and services from many other sectors, including raw materials, construction, machinery, legal, computers and semi-conductors, financial, advertising, and healthcare. The auto industry spends $16 to $18 billion every year on research and product development – 99 percent of which is funded by the industry itself. Due to the industry’s consumption of products from many other manufacturing sectors, it is a major driver of the 11.5% manufacturing contribution to GDP. Without the auto sector, it is difficult to imagine manufacturing surviving in this country. Recently, the auto industry has fallen on tough times. However, the U.S. market is still one of the largest motor vehicle markets in the world; consequently, many automakers sell and manufacture in the U.S. In fact, many automakers make the lion’s share of their profits in North America. There has been a period of restructuring by the three U.S.-based companies in order to right-size their operations and be able to respond to this fierce competition in the U.S. market. In the latest restructuring, a bursting of the housing bubble and a collapse of the financial sector © Center for Automotive Research 2010 2 led to the current period of extremely tight credit, making it nearly impossible for companies and consumers to make investments. During this period, many supplier companies, dealerships and a couple of manufacturers found themselves fighting for survival and turning to the lender of last resort–the federal government. This led to an amazing time of public introspection concerning the value to the country of a U.S.-based auto industry. In this paper, the authors touch on many of the factors that support the auto industry’s importance and standing in the national economy, along with an estimate of the industry’s employment and economic contribution to the national economy and to each of the 50 states and the District of Columbia. As previously mentioned, over 1.7 million people are employed by the auto industry. In addition, the industry is a huge consumer of goods and services from many other sectors and contributes to a net employment impact in the U.S. economy of nearly 8 million jobs. Approximately 4.5 percent of all U.S. jobs are supported by the strong presence of the auto industry in the U.S. economy. People in these jobs collectively earn over $500 billion annually in compensation and generate more than $70 billion in tax revenues.

Key to manufacturing

Hill et al 10 (Kim--director of the Sustainability & Economic Development Strategies Group (SEDS) at the Center for Automotive Research, Debra Menk--senior project manager in the Sustainability & Economic Development Strategies Group, Adam Cooper, "Contribution of the Automotive Industry to the Economies of all Fifty State and the United States," Center for Automotive Research, April 2010, http://www.cargroup.org/?module=Publications&event=View&pubID=16) CS

The automotive industry is a very important industry in the U.S. economy; no other single industry links as closely to the U.S. manufacturing sector or directly generates as much retail business and overall employment. Manufacturing has been the backbone of the American economy, and the automotive industry is its heart. A look at the entire production and supply chain provides a rich narrative of how a strong automotive industry historically supports the growth and stability of many other industries, such as basic materials suppliers of steel, plastic, rubber and glass, which are used for making bodies, interiors and trim, tires, gaskets and windows. Figure 1.4 provides a comparison of the value added per employee (measured in thousands of dollars per year) across several manufacturing industries. The value added per employee can be thought of as the difference between the cost of materials and the sale price of the good. Effective deployment of land, labor, and capital create value; in 2006, each employee in the motor vehicle assembly industry created $321,000 of value in the final products shipped; fourth highest amongst manufacturing industries. An economy is reinforced by the size and job creating capability of its manufacturing base. Within the broad manufacturing landscape of the U.S., few industries are as large or provide so many indirect and ancillary opportunities for job creation as the motor vehicle industry. Figure 1.5 highlights the sheer size of the motor vehicle assembly and parts manufacturing industry which is the second largest employer within the subset of manufacturing. Some industries inherently create more jobs than other industries. A high jobs creation multiplier tends to be associated with industries that require large amounts of inputs from other industries, source inputs from industries that have a high regional purchase coefficient, or pay above average wages. Figure 1.6 details the employment multiplier for a select set of industries. The motor vehicle assembly industry, with its multiplier of 10, is an industry that meets all of the above criteria.

Key to econ recovery-- jobs and spending

Huffington Post 11 ("Auto Industry Hiring May Drive U.S. Economic Recovery: Survey," 8/1/11, http://www.huffingtonpost.com/2011/08/01/auto-industry-hiring-may-lead-recovery_n_914686.html)

The auto industry could lead an economic recovery in the United States, according to a recent survey by audit, tax and advisory firm KPMG. Auto executives plan to do more hiring and more capital spending than executives in any other sector in the next year, according to the survey. Sixty-two percent of auto executives said they expect to hire people in the coming year, compared with an average of only 52 percent of executives across all sectors. Similarly, 71 percent of autos executives said they expect to increase their capital spending in the coming year compared with an average of 59 percent of all executives. Two years after the end of the U.S. recession, unemployment remains above 9 percent, U.S. consumer confidence hit a near two and a half-year low earlier this month and the U.S. government reached a last-minute deal late Sunday to avoid a U.S. debt crisis. All this has raised questions about the speed and strength of a U.S. recovery. The U.S. auto industry was hit hard during the financial crisis, which saw both General Motors Co (GM.N) and Chrysler seek bankruptcy protection and government bailouts. It was hit again in March when an earthquake, tsunami and nuclear crisis in Japan disrupted the supply chain. While the sector is improving -- U.S. July auto sales are expected to hit an annual rate of around 12 million vehicles, an improvement over May and June -- that figure still lags the 17 million-plus number sold in 2000. A full recovery could take years, but the next 12 months could see an improvement, according to the survey.

Helping econ recovery-- jobs

Waldron 12 (Travis, "Auto Industry Adds Thousands Of Jobs To Meet Growing Demand, Proving Auto Rescue’s Success Yet Again," 5/23/12, http://thinkprogress.org/economy/2012/05/23/489024/auto-industry-add-jobs/?mobile=nc)

The automobile industry has been a consistent bright spot in the American economy over the last several months, as automakers have added jobs to meet growing demand. And news from the industry is only getting better, as new estimates expect automakers to sell 14.3 million cars in the United States in 2012 — 1.5 million more than they sold last year. Factories for both foreign and domestic automakers are now working “at maximum capacity” and the industry is adding shifts and jobs to keep up with that rising demand, the USA Today reports: Some plants are adding third work shifts. Others are piling on worker overtime and six-day weeks. And Ford Motor and Chrysler Group are cutting out or reducing the annual two-week July shutdown at several plants this summer to add thousands of vehicles to their output. “We have many plants working at maximum capacity now,” says Ford spokeswoman Marcey Evans. “We’re building as many (cars) as we can.” Chrysler and General Motors, the major beneficiaries of the auto rescue, have both reported their best profits in more than a decade, and both were already planning to add jobs this year. With factories now struggling to meet demand, both foreign and domestic auto companies are planning to add even more jobs — and, as the Center for American Progress’ Adam Hersh and Jane Farrell noted in April, the industry has added more than 139,000 jobs in the last three years. The strength of the auto industry is yet another sign that letting it fail would have been a major mistake. Not only would it have cost more than a million jobs at a time when the economy was struggling, it would have prevented the current growth that is helping both the industry and the American economy recover.

Multiplier across every state

Hill et al 10 (Kim--director of the Sustainability & Economic Development Strategies Group (SEDS) at the Center for Automotive Research, Debra Menk--senior project manager in the Sustainability & Economic Development Strategies Group, Adam Cooper, "Contribution of the Automotive Industry to the Economies of all Fifty State and the United States," Center for Automotive Research, April 2010, http://www.cargroup.org/?module=Publications&event=View&pubID=16)

The motor vehicle industry’s breadth and depth of operations extends into every state economy in the nation. The industry impacts an unusually large number of individual communities because the supplier network is spread across many states. Beyond that, motor vehicle dealerships have a presence in nearly every community in the country. The tables in this section examine the estimated employment and income contributions of the industry to individual state economies. Even for those states with relatively few direct jobs in the industry, the number of jobs supported by the industry is significant. In many states, large numbers of jobs are generated due to the state’s proximity to manufacturing or technical facilities located in a neighboring state. All states see major additional impact from substantial numbers of spin-off jobs resulting from the spending of direct and indirect employees of the industry. The automotive industry is a mature industry, with assembly and parts manufacturing plants well established throughout most of the states east of the Mississippi, as seen in Figure 2.1, which shows the top states for OEM employment, as a percentage of state population. Many states in the Midwest are well known for supporting a strong base of manufacturing. The entire Midwest is connected by a strong and efficient network of road and rail systems. This transportation integration provides intra-state and inter-state options for sourcing intermediate goods and supplies to manufacturing operations. It is this broad, efficient network of suppliers (located across many states) which leads to the dispersion of total employment contributions from manufacturing operations to all areas of the nation. Figure 2.2 below shows the impact of employment in the industry for motor vehicle assemblers, parts, systems and components manufacturers, motor vehicle dealerships, and the suppliers to these operations. This map does not include expenditure-induced employment. It is a portrayal of the direct impacts of employment and suppliers to the industry. As can be seen, the industry provides significant numbers of jobs to every state in the nation. Each individual state’s economic impact is one effect of the total contribution of the industry to the nation. That is, jobs in one state are not only attributable to investment in that state, but are supported by the auto industry’s investments and activities in nearby states as well. Therefore, an employment multiplier is not calculated for any individual state. Employment multipliers apply to the national economy and are not applicable to, nor can be derived from, any one state’s economy

K2 Steel Ext.

Key to steel

Hill et al 10 (Kim--director of the Sustainability & Economic Development Strategies Group (SEDS) at the Center for Automotive Research, Debra Menk--senior project manager in the Sustainability & Economic Development Strategies Group, Adam Cooper, "Contribution of the Automotive Industry to the Economies of all Fifty State and the United States," Center for Automotive Research, April 2010, http://www.cargroup.org/?module=Publications&event=View&pubID=16) CS

The automotive industry is a very important industry in the U.S. economy; no other single industry links as closely to the U.S. manufacturing sector or directly generates as much retail business and overall employment. Manufacturing has been the backbone of the American economy, and the automotive industry is its heart. A look at the entire production and supply chain provides a rich narrative of how a strong automotive industry historically supports the growth and stability of many other industries, such as basic materials suppliers of steel, plastic, rubber and glass, which are used for making bodies, interiors and trim, tires, gaskets and windows. Figure 1.4 provides a comparison of the value added per employee (measured in thousands of dollars per year) across several manufacturing industries. The value added per employee can be thought of as the difference between the cost of materials and the sale price of the good. Effective deployment of land, labor, and capital create value; in 2006, each employee in the motor vehicle assembly industry created $321,000 of value in the final products shipped; fourth highest amongst manufacturing industries. An economy is reinforced by the size and job creating capability of its manufacturing base. Within the broad manufacturing landscape of the U.S., few industries are as large or provide so many indirect and ancillary opportunities for job creation as the motor vehicle industry. Figure 1.5 highlights the sheer size of the motor vehicle assembly and parts manufacturing industry which is the second largest employer within the subset of manufacturing. Some industries inherently create more jobs than other industries. A high jobs creation multiplier tends to be associated with industries that require large amounts of inputs from other industries, source inputs from industries that have a high regional purchase coefficient, or pay above average wages. Figure 1.6 details the employment multiplier for a select set of industries. The motor vehicle assembly industry, with its multiplier of 10, is an industry that meets all of the above criteria.

Auto industry largest steel consumer

RNCOS 10 --leading industry research and consultancy firm ("Auto Sector to Drive the US Steel Industry," 12/17/10, http://www.rncos.com/Press_Releases/Auto-Sector-to-Drive-the-US-Steel-Industry.htm) CS

According to our research report “US Steel Industry Outlook”, the US economy is recovering fast from the post recessionary effects of volcanic slowdown started in 2008. With balancing demand and the government support, the steel industry has started showing promising growth potentials in terms of both production and demand. A segment wise demand analysis has revealed that the automobile sector will fuel steel demand, which is poised to grow at a CAGR of around 4% during 2010-2012. We have found that the automobile industry is one of the largest consumers of steel in the US. The sector accounts for approximately 20% of the entire steel consumption. In 2009, the automobile production plants capacity utilization rate was just over 50%. The rate is forecasted to reach over 75% by 2012, which will be a testimony of the automobile sector revival in the US. Our research reveals that steel forms the majority of the vehicles curb weight and is the first preference of manufacturer due to its inherent strength and safety. In 2009, steel (including flat steel and other categories) occupied over 58% of overall light vehicle curb weight of around 3800 Pounds. In coming years, steel is expected to sustain its dominance on metal content share in vehicle total curb weight due to its cost effectiveness and easy availability.

K2 Heg Ext.

Vital to innovation and hegemony

Clark 08 -- retired Army general and former supreme allied commander of NATO, is a senior fellow at the Burkle Center for International Relations at the University of California at Los Angeles (Wesley K. Clark, "What’s Good for G.M. Is Good for the Army," New York Times, 11/17/08, http://www.nytimes.com/2008/11/16/opinion/16clark.html?_r=4)

When President Dwight Eisenhower observed that America’s greatest strength wasn’t its military, but its economy, he must have had companies like General Motors and Ford in mind. Sitting atop a vast pyramid of tool makers, steel producers, fabricators and component manufacturers, these companies not only produced the tanks and trucks that helped win World War II, but also lent their technology to aircraft and ship manufacturing. The United States truly became the arsenal of democracy. During the 1950s, advances in aviation, missiles, satellites and electronics made Detroit seem a little old-fashioned in dealing with the threat of the Soviet Union. The Army’s requests for new trucks and other basic transportation usually came out a loser in budget battles against missile technology and new modifications for the latest supersonic jet fighter. Not only were airplanes far sexier but they also counted as part of our military “tooth,” while much of the land forces’ needs were “tail.” And in those days, “more teeth, less tail” had become a key concept in military spending. But in 1991, the Persian Gulf war demonstrated the awesome utility of American land power, and the Humvee (and its civilian version, the Hummer) became a star. Likewise, the ubiquitous homemade bombs of the current Iraq insurgency have led to the development of innovative armor-protected wheeled vehicles for American forces, as well as improvements in our fleets of Humvees, tanks, armored fighting vehicles, trucks and cargo carriers. In a little more than a year, the Army has procured and fielded in Iraq more than a thousand so-called mine-resistant ambush-protected vehicles. The lives of hundreds of soldiers and marines have been saved, and their tasks made more achievable, by the efforts of the American automotive industry. And unlike in World War II, America didn’t have to divert much civilian capacity to meet these military needs. Without a vigorous automotive sector, those needs could not have been quickly met. More challenges lie ahead for our military, and to meet them we need a strong industrial base. For years the military has sought better sources of electric power in its vehicles — necessary to allow troops to monitor their radios with diesel engines off, to support increasingly high-powered communications technology, and eventually to support electric propulsion and innovative armaments like directed-energy weapons. In sum, this greater use of electricity will increase combat power while reducing our footprint. Much research and development spending has gone into these programs over the years, but nothing on the manufacturing scale we really need. Now, though, as Detroit moves to plug-in hybrids and electric-drive technology, the scale problem can be remedied. Automakers are developing innovative electric motors, many with permanent magnet technology, that will have immediate military use. And only the auto industry, with its vast purchasing power, is able to establish a domestic advanced battery industry. Likewise, domestic fuel cell production — which will undoubtedly have many critical military applications — depends on a vibrant car industry. To be sure, the public should demand transformation and new standards in the auto industry before paying to keep it alive. And we should insist that Detroit’s goals include putting America in first place in hybrid and electric automotive technology, reducing the emissions of the country’s transportation fleet, and strengthening our competitiveness abroad. This should be no giveaway. Instead, it is a historic opportunity to get it right in Detroit for the good of the country. But Americans must bear in mind that any federal assistance plan would not be just an economic measure. This is, fundamentally, about national security.

K2 Navy Ext.

Key to military fuel cells and dominance

ONR 09 –Executive branch agency within the Department of Defense, the Office of Naval Research (ONR) provides technical advice to the Chief of Naval Operations and the Secretary of the Navy. (Office of Naval Research, “ONR Partners with Car Industry to Test Energy-Efficient Vehicles”, March 18, 2009, http://www.navy.mil/submit/display.asp?story_id=43502)

ARLINGTON (NNS) -- The Office of Naval Research (ONR) teamed up with an automobile industry leader to explore energy-efficient, environmentally-friendly viable transportation alternatives; a cutting-edge General Motors (GM) Chevrolet Equinox fuel cell vehicle (FCV) is the result of the partnership. As the global automobile industry considers alternative energy sources to replace the traditional internal combustion engine, Jessie Pacheco, a mail clerk at Camp Pendleton, makes his rounds in the FCVs. The Office of Naval Research (ONR) has sponsored the GM FCVs at Camp Pendleton since 2006; two more scheduled to arrive later this year. "These vehicles are the future," said Pacheco. "It's great to see people drive by me, giving me the thumb's up, and asking 'Where can I get one?'" "Fuel cell vehicle research is clearly a case where the Navy and Marine Corps needs are propelling advanced technology that also has potential benefit to the public," said Rear Adm. Nevin Carr, chief of naval research. Within the Navy-Marine Corps Team, ONR has researched power and energy technology for decades. Often the improvements to power generation and fuel efficiency for ships, aircraft, vehicles and installations have direct civil application for public benefit. "There is not a drop of oil in it," explained Shad Balch, a GM representative at Camp Pendleton. "The electric motor provides maximum instant torque right from the get go." The efficiency of a hydrogen-powered fuel cell may prove to be twice that of an internal combustion engine, if not greater, added Balch. From an operational perspective, the fuel cell vehicle is quiet yet powerful, emits only water vapor, uses fewer moving parts compared to a combustion engine and offers an alternative to the logistics chain associated with current military vehicles. The addition of fuel cell vehicles to Camp Pendleton provides a glimpse into the future of advanced transportation technology that reduces reliance on petroleum and affords environmental stewardship benefits such as reduced air pollution and a smaller carbon footprint for Navy and Marine Corps bases. "Partnering with the military gives us critical feedback from a truly unique application. This will help us as we engineer our next generation of fuel cell vehicles," Balch noted. Technology underwrites the solutions to both national and naval energy needs. As an ONR program officer in the 1990s, Richard Carlin, Ph.D., recognized the potential of alternative fuel research to help meet the energy challenges of the future. Today, as ONR's director of power and energy research, Carlin is pleased to see the positive reaction to the fuel cell vehicle research program. "This is an example of where the value of investment in science and technology can really pay off," said Carlin. "Besides the potential energy savings and increased power potential of fuel cell technology, the research and testing we are doing will address challenges like hydrogen production and delivery, durability and reliability, on board hydrogen storage and overall cost." For example, through its testing ONR has made advances in the storage necessary for achieving greater range in fuel cell automobiles. Dave Shifler, the program officer managing the alternative fuels initiatives at ONR, emphasizes that partnerships are essential when bringing a new technology forward. "With the right partnerships, you can accomplish almost anything," stressed Shifler. "We have teamed with the Army from the beginning on this research, sharing technical support, contracting support and usage of the GM fuel cell vehicle." ONR fuel cell research has not been limited to vehicles and spans the operational spectrum: from ground vehicles to unmanned aerial vehicles (UAVs), to man-portable power for Marines and afloat. Hydrogen powered fuel cell technology is one of many programs at ONR in the power and energy research field that is helping the Navy meet the energy needs of both the warfighter and the public. ONR's partnerships in fuel cell vehicle research include: Headquarters Marine Corps; the Marine Corps Garrison Mobile Equipment office; Southwest Region Force Transportation; Naval Facilities Engineering Services Center, Port Hueneme; Department of Energy (Energy Efficiency and Renewable Energy), South Coast Air Quality Management District; California Air Resources Board; California Fuel Cell Partnership; Defense Energy Support Center, General Motors; Naval Surface Warfare Center Carderock Division; U.S. Fuel Cell Council; U.S. Army TARDEC/NAC, and Deputy Assistant Secretary of the Navy for Environment. ONR provides the science and technology (S&T) necessary to maintain the Navy and Marine Corps' technological warfighting dominance. Through its affiliates, ONR is a leader in S&T with engagement in 50 states, 70 countries, 1035 institutions of higher learning, and 914 industry partners. ONR employs approximately 1400 people, comprised of uniformed, civilian and contract personnel.

K2 Fuel Cells

Only the auto industry solves fuel cell production

Clark 08 -- retired Army general and former supreme allied commander of NATO, is a senior fellow at the Burkle Center for International Relations at the University of California at Los Angeles (Wesley K. Clark, "What’s Good for G.M. Is Good for the Army," New York Times, 11/17/08, http://www.nytimes.com/2008/11/16/opinion/16clark.html?_r=4)

For years the military has sought better sources of electric power in its vehicles — necessary to allow troops to monitor their radios with diesel engines off, to support increasingly high-powered communications technology, and eventually to support electric propulsion and innovative armaments like directed-energy weapons. In sum, this greater use of electricity will increase combat power while reducing our footprint. Much research and development spending has gone into these programs over the years, but nothing on the manufacturing scale we really need. Now, though, as Detroit moves to plug-in hybrids and electric-drive technology, the scale problem can be remedied. Automakers are developing innovative electric motors, many with permanent magnet technology, that will have immediate military use. And only the auto industry, with its vast purchasing power, is able to establish a domestic advanced battery industry. Likewise, domestic fuel cell production — which will undoubtedly have many critical military applications — depends on a vibrant car industry. To be sure, the public should demand transformation and new standards in the auto industry before paying to keep it alive. And we should insist that Detroit’s goals include putting America in first place in hybrid and electric automotive technology, reducing the emissions of the country’s transportation fleet, and strengthening our competitiveness abroad. This should be no giveaway. Instead, it is a historic opportunity to get it right in Detroit for the good of the country. But Americans must bear in mind that any federal assistance plan would not be just an economic measure. This is, fundamentally, about national security.

This race for fuel cell batteries will determine geopolitical power for the future

Levine 10

Steve LeVine is a contributing editor at Foreign Policy and an adjunct professor at Georgetown University's Security Studies Program. Foreign Policy November 2010 http://www.foreignpolicy.com/articles/2010/10/11/the_great_battery_race?hidecomments=yes

The Chinese government saw in the technology that Wan had mastered a potential future pillar of its economy. Starting virtually from scratch, Beijing announced last year it would become the world's largest producer of the vehicles within the next few years. "China is committed to developing clean and electric vehicles," Wan told me when I met him in Chicago this summer. "Batteries and clean vehicles are a national strategic priority." Indeed, the battery, among the most humble and unsexy of inventions, might just be the most important technological battleground of the next two decades. The discovery of the next key breakthroughs in the field could mean not just a fortune for a handful of companies, but the remaking of whole economies -- and the rebalancing of geopolitical power that typically accompanies such shifts. A Chinese triumph could speed the country's global advance; an American one could give U.S. dominance a new lease on life.¶ Two developments have brought us to this pass. Developed countries and rising powers alike are looking to curb their oil-guzzling habits, for any number of reasons: climate change, unsavory petrostate politics, the looming fear there simply isn't enough petroleum on the planet to satisfy everyone. The result is a new global interest in alternatives to petroleum and the internal combustion engine -- most prominently advanced battery technology, the necessary precondition for the development of an affordable, powerful electric car.¶ But the world doesn't just need a better car -- it also needs a better means of building and sustaining economies. Over the last 20 years, Asia's growth has been mostly driven by manufacturing exports, while the United States' was fueled first by Silicon Valley's tech boom and later by elaborate (and ultimately ruinous) financial instruments. But those platforms have reached or are nearing their limits, and in the scramble to avoid another recession, the world's great economies are looking for the next big thing, an engine of economic growth for the future.¶ These two aspirations -- for a less oil-dependent world and for a more prosperous one -- are rapidly converging in a global race for a better battery. By 2030, experts say, advanced batteries will swell into a $100 billion-a-year business. They will also enable an electric-car industry on the order of half a trillion dollars, on a par with the global pharmaceutical industry and capable of spawning companies on the scale of ExxonMobil, General Electric, and Toyota. "It is a matter of national wealth and national economic advantage in a way that few new things in society can be," Peter Harrop, who heads the Britain-based technology consulting firm IDTechEx, told me. "But it is a high-stakes game. It is going to be beneficial [only] to certain companies in certain countries."¶ Two of the likeliest beneficiaries are Japan and South Korea, the top producers of today's cutting-edge batteries and the favorites to develop tomorrow's. But the more interesting -- and potentially world-changing -- rivalry is between the United States and China, both of which are scrambling to get into the game. Each country has a great deal to win by establishing itself as an early leader in advanced batteries, in competition or in partnership with East Asia's technological heavyweights. The contest has taken on ultraserious geopolitical heft for the United States, at its lowest economic ebb in recent memory, and for China, eager to cement its position as a globally influential superpower. Both countries' governments have adopted an unapologetically hands-on approach, attempting to drive innovation from the top down and viewing the project through the lens of national strength. The analogies tend more toward the Manhattan Project than Microsoft.¶ On a July visit to the Smith Electric Vehicles plant in Kansas City, Missouri, U.S. President Barack Obama vowed that within five years, the United States would be making 40 percent of the world's advanced batteries. (It made just 2 percent in 2009.) "That's how we ensure that America doesn't just limp along," he declared, "but instead that we're prospering -- that this nation leads the industries of the future." Obama's point man for this ambitious project defines his goals in equally sweeping terms. "The ability of a country to manufacture batteries and vehicles will help to create wealth, will help to provide resilience against oil-supply disruptions, and help to create jobs," David Sandalow, U.S. assistant energy secretary for policy and international affairs, told me. "And those, in turn, will create national power."¶ But while U.S. officials have been sweeping in their rhetoric, China has been breathtaking in the scale and specificity with which it is ordering up an electric-car industry. Beijing in recent years has issued government directives that, if realized, will result in the production of some 30 electric-vehicle models by 2012; expanding lithium-ion battery manufacturing into a $25 billion-a-year industry by that same year; and the construction of about 100 charging stations this year alone across the country.¶ It's not just the United States and China. Google the phrase "electric car" and the name of any reasonably sized country, and you will turn up yet another aspirant. More than a dozen would-be contenders from South America to Scandinavia are talking about the technology in positively existential terms, even those with little plausible hope of coming up winners. German Chancellor Angela Merkel hopes that "in the 21st century we are again the nation that is able to build the most intelligent and environmentally friendly cars." French Ecology Minister Jean-Louis Borloo has announced a government-industry plan to win "the battle of the electric car." Those who develop and manufacture the next-generation technology for electric cars, these leaders believe, will be the haves. And those who don't will be at the mercy of those who do.

The shift in geostrategic power will unleash a wave of global conflict scenarios

Khalilzad 11 — Zalmay Khalilzad, Counselor at the Center for Strategic and International Studies, served as the United States ambassador to Afghanistan, Iraq, and the United Nations during the presidency of George W. Bush, served as the director of policy planning at the Defense Department during the Presidency of George H.W. Bush, holds a Ph.D. from the University of Chicago, 2011 (“The Economy and National Security,” National Review, February 8^th, Available Online at http://www.nationalreview.com/articles/print/259024, Accessed 02-08-2011)

Today, economic and fiscal trends pose the most severe long-term threat to the United States’ position as global leader. While the United States suffers from fiscal imbalances and low economic growth, the economies of rival powers are developing rapidly. The continuation of these two trends could lead to a shift from American primacy toward a multi-polar global system, leading in turn to increased geopolitical rivalry and even war among the great powers.¶ The current recession is the result of a deep financial crisis, not a mere fluctuation in the business cycle. Recovery is likely to be protracted. The crisis was preceded by the buildup over two decades of enormous amounts of debt throughout the U.S. economy — ultimately totaling almost 350 percent of GDP — and the development of credit-fueled asset bubbles, particularly in the housing sector. When the bubbles burst, huge amounts of wealth were destroyed, and unemployment rose to over 10 percent. The decline of tax revenues and massive countercyclical spending put the U.S. government on an unsustainable fiscal path. Publicly held national debt rose from 38 to over 60 percent of GDP in three years.¶ Without faster economic growth and actions to reduce deficits, publicly held national debt is projected to reach dangerous proportions. If interest rates were to rise significantly, annual interest payments — which already are larger than the defense budget — would crowd out other spending or require substantial tax increases that would undercut economic growth. Even worse, if unanticipated events trigger what economists call a “sudden stop” in credit markets for U.S. debt, the United States would be unable to roll over its outstanding obligations, precipitating a sovereign-debt crisis that would almost certainly compel a radical retrenchment of the United States internationally.¶ Such scenarios would reshape the international order. It was the economic devastation of Britain and France during World War II, as well as the rise of other powers, that led both countries to relinquish their empires. In the late 1960s, British leaders concluded that they lacked the economic capacity to maintain a presence “east of Suez.” Soviet economic weakness, which crystallized under Gorbachev, contributed to their decisions to withdraw from Afghanistan, abandon Communist regimes in Eastern Europe, and allow the Soviet Union to fragment. If the U.S. debt problem goes critical, the United States would be compelled to retrench, reducing its military spending and shedding international commitments.¶ We face this domestic challenge while other major powers are experiencing rapid economic growth. Even though countries such as China, India, and Brazil have profound political, social, demographic, and economic problems, their economies are growing faster than ours, and this could alter the global distribution of power. These trends could in the long term produce a multi-polar world. If U.S. policymakers fail to act and other powers continue to grow, it is not a question of whether but when a new international order will emerge. The closing of the gap between the United States and its rivals could intensify geopolitical competition among major powers, increase incentives for local powers to play major powers against one another, and undercut our will to preclude or respond to international crises because of the higher risk of escalation.¶ The stakes are high. In modern history, the longest period of peace among the great powers has been the era of U.S. leadership. By contrast, multi-polar systems have been unstable, with their competitive dynamics resulting in frequent crises and major wars among the great powers. Failures of multi-polar international systems produced both world wars.¶ American retrenchment could have devastating consequences. Without an American security blanket, regional powers could rearm in an attempt to balance against emerging threats. Under this scenario, there would be a heightened possibility of arms races, miscalculation, or other crises spiraling into all-out conflict. Alternatively, in seeking to accommodate the stronger powers, weaker powers may shift their geopolitical posture away from the United States. Either way, hostile states would be emboldened to make aggressive moves in their regions.¶ As rival powers rise, Asia in particular is likely to emerge as a zone of great-power competition. Beijing’s economic rise has enabled a dramatic military buildup focused on acquisitions of naval, cruise, and ballistic missiles, long-range stealth aircraft, and anti-satellite capabilities. China’s strategic modernization is aimed, ultimately, at denying the United States access to the seas around China. Even as cooperative economic ties in the region have grown, China’s expansive territorial claims — and provocative statements and actions following crises in Korea and incidents at sea — have roiled its relations with South Korea, Japan, India, and Southeast Asian states. Still, the United States is the most significant barrier facing Chinese hegemony and aggression.¶ Given the risks, the United States must focus on restoring its economic and fiscal condition while checking and managing the rise of potential adversarial regional powers such as China. While we face significant challenges, the U.S. economy still accounts for over 20 percent of the world’s GDP. American institutions — particularly those providing enforceable rule of law — set it apart from all the rising powers. Social cohesion underwrites political stability. U.S. demographic trends are healthier than those of any other developed country. A culture of innovation, excellent institutions of higher education, and a vital sector of small and medium-sized enterprises propel the U.S. economy in ways difficult to quantify. Historically, Americans have responded pragmatically, and sometimes through trial and error, to work our way through the kind of crisis that we face today.¶ The policy question is how to enhance economic growth and employment while cutting discretionary spending in the near term and curbing the growth of entitlement spending in the out years. Republican members of Congress have outlined a plan. Several think tanks and commissions, including President Obama’s debt commission, have done so as well. Some consensus exists on measures to pare back the recent increases in domestic spending, restrain future growth in defense spending, and reform the tax code (by reducing tax expenditures while lowering individual and corporate rates). These are promising options. ¶ The key remaining question is whether the president and leaders of both parties on Capitol Hill have the will to act and the skill to fashion bipartisan solutions. Whether we take the needed actions is a choice, however difficult it might be. It is clearly within our capacity to put our economy on a better trajectory. In garnering political support for cutbacks, the president and members of Congress should point not only to the domestic consequences of inaction — but also to the geopolitical implications.¶ As the United States gets its economic and fiscal house in order, it should take steps to prevent a flare-up in Asia. The United States can do so by signaling that its domestic challenges will not impede its intentions to check Chinese expansionism. This can be done in cost-efficient ways.¶ While China’s economic rise enables its military modernization and international assertiveness, it also frightens rival powers. The Obama administration has wisely moved to strengthen relations with allies and potential partners in the region but more can be done.¶ Some Chinese policies encourage other parties to join with the United States, and the U.S. should not let these opportunities pass. China’s military assertiveness should enable security cooperation with countries on China’s periphery — particularly Japan, India, and Vietnam — in ways that complicate Beijing’s strategic calculus. China’s mercantilist policies and currency manipulation — which harm developing states both in East Asia and elsewhere — should be used to fashion a coalition in favor of a more balanced trade system. Since Beijing’s over-the-top reaction to the awarding of the Nobel Peace Prize to a Chinese democracy activist alienated European leaders, highlighting human-rights questions would not only draw supporters from nearby countries but also embolden reformers within China. ¶ Since the end of the Cold War, a stable economic and financial condition at home has enabled America to have an expansive role in the world. Today we can no longer take this for granted. Unless we get our economic house in order, there is a risk that domestic stagnation in combination with the rise of rival powers will undermine our ability to deal with growing international problems. Regional hegemons in Asia could seize the moment, leading the world toward a new, dangerous era of multi-polarity.

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