Skip to main content

The Smith View

With the predominance of knowledge industries, financial instruments, and labor-intensive services in our economy and news this political season, one might forget about the asset-intensive businesses that drive the heartland. We do not. Our membership is drawn from across the industrial spectrum and the fate of our largest members - utilities, manufacturers, suppliers and vendors, engineering and construction companies among them - depends on the interplay of capital markets; tax, trade and economic policy; and government regulation more than is the case for companies less laden with fixed assets. Thus it is heartening to hear the perspective of someone who understands the challenges of these heavily capitalized companies in today's turbulent times, a perspective that seldom reaches the front pages of The Washington Post or the New York Times or the teleprompters of CNN.
This morning, the Wall Street Journal weekend edition published an interview with Fred Smith, CEO of FedEx and a member of the Energy Security Leadership Council. In the interview, Mr. Smith explains the need for changes in corporate tax policy to support rather than punish investment in corporate assets, describes how those investments link to better opportunities for workers and improvements in wages, and discusses the responsibility of corporate boards of directors to oversee managers and give them long-term incentives tied to the fortunes of shareholders.
Mr. Smith also speaks about the importance of energy. With FedEx the second largest consumer of energy in the world (only the U.S. military consumes more), Mr. Smith is keenly interested in energy policy. He believes the U.S. must dramatically expand its domestic energy supply. Asked how we should do this, he said:
"Two things: The first is we should maximize oil production in the United States in every respect. Everything, offshore, Alaska, shale,nonconventional, coal to liquid, gas to liquid, and nuclear. Let the market work. Second, and this is where I am an apostate on the free market, and also where I disagree in the main with, with Boone Pickens. The United States has only one real way to reduce our dependence on foreign petroleum, in terms of reducing demand while we're increasing our domestic supply, and that is to electrify the short haul transportation system, to go to battery powered cars. The technology that brought us laptops and cell phones has reached a point where these lithium ion batteries can now produce cars like the Chevy Volt and the new plug-in Toyota Prius."
Interesting - a guy whose business flies airplanes, drives trucks, and employs 290,000 people mentions nuclear. That sounds like the perspective of someone who understands the interrelatedness of our energy needs and the importance of pursuing all options, a perspective we applaud and commend to your reading.


Charles Barton said…
The long term viability of Mr. Smith's business is in question because of peak oil and AGW. Although I disagree with T. Boone Pickens on almost everything, "Drill, Drill, Drill" is not a long term solution. Smith is correct about the electrification of surface transportation, but offers no solution for his own industries long term troubles.
Jim Slider said…
I'm reminded of the line, "In the long term, we're all dead." The overnight shipping business did not exist on a world-wide scale until Smith invented it. It is hard to imagine that once invented, the business cannot or would not adapt to changing circumstances. Evidence of that is mentioned further along in the WSJ interview, where Smith spoke of experiments with alternative vehicles and admitted the economic results are not what they need to be. By historical measures, we are barely into the acknowledgment stage on climate change and experimentation and the search for solutions. I would give Smith the benefit of the doubt at this juncture and trust that he or his successors at FedEx will, in due course, offer solutions for their long term challenges. If they don't, someone else will. It's the American way.
Charles Barton said…
Jim Projecting out 40 years from where we are right now, to where existing trends in the fuel industry seem to be taking us, it is hard to imagine there being an air transport industry. I know that there is an enormous investment in air transport technology right now, but the twin issues of peak oil and AGW aren't going away. At the moment there is no technology in the offing that would replace fossil fuels in powering flight. This must be a major concern to both manufacturers and air transport providers. High speed electric trains can replace flight in the United States, but nothing will work for long distance. we have to face this reality, and begin weighing alternatives.
Anonymous said…
Nuclear hydrogen, combined with carbon from any source (biomass, coal, tar sands, CO2 capture) can make synfuel which will fly future airplanes beautifully. What we need to do is to work to overcome the barriers to coupling modular high temperature reactors to chemical facilities, both in terms of siting (establishing reasonable approaches to security and emergency response) and in terms of technology (getting at least 2 or 3 high temperature reactor designs certified and on the market).
Rod Adams said…
"Interesting - a guy whose business flies airplanes, drives trucks, and employs 290,000 people mentions nuclear. "

Of course he mentions nuclear, anyone who understands basic economic theory understands that increases in supplies of a commodity benefits buyers of that commodity. Smith's company is a huge energy purchaser; he SHOULD be in favor of technologies that introduce a huge new supply into the market.

The real challenge for people who want to shift the conversation about energy is to figure out how to reorder Mr. Smith's list so that nuclear is at the top rather that at the bottom.
Anonymous said…
speaking of flying planes... check out this article calling for the use of nuclear powered airplanes:

Popular posts from this blog

A Billion Miles Under Nuclear Energy (Updated)

And the winner is…Cassini-Huygens, in triple overtime.

The spaceship conceived in 1982 and launched fifteen years later, will crash into Saturn on September 15, after a mission of 19 years and 355 days, powered by the audacity and technical prowess of scientists and engineers from 17 different countries, and 72 pounds of plutonium.

The mission was so successful that it was extended three times; it was intended to last only until 2008.

Since April, the ship has been continuing to orbit Saturn, swinging through the 1,500-mile gap between the planet and its rings, an area not previously explored. This is a good maneuver for a spaceship nearing the end of its mission, since colliding with a rock could end things early.

Cassini will dive a little deeper and plunge toward Saturn’s surface, where it will transmit data until it burns up in the planet’s atmosphere. The radio signal will arrive here early Friday morning, Eastern time. A NASA video explains.

In the years since Cassini has launc…

Missing the Point about Pennsylvania’s Nuclear Plants

A group that includes oil and gas companies in Pennsylvania released a study on Monday that argues that twenty years ago, planners underestimated the value of nuclear plants in the electricity market. According to the group, that means the state should now let the plants close.


The question confronting the state now isn’t what the companies that owned the reactors at the time of de-regulation got or didn’t get. It’s not a question of whether they were profitable in the '80s, '90s and '00s. It’s about now. Business works by looking at the present and making projections about the future.

Is losing the nuclear plants what’s best for the state going forward?

Pennsylvania needs clean air. It needs jobs. And it needs protection against over-reliance on a single fuel source.

What the reactors need is recognition of all the value they provide. The electricity market is depressed, and if electricity is treated as a simple commodity, with no regard for its benefit to clean air o…

Why Nuclear Plant Closures Are a Crisis for Small Town USA

Nuclear plants occupy an unusual spot in the towns where they operate: integral but so much in the background that they may seem almost invisible. But when they close, it can be like the earth shifting underfoot., the Gannett newspaper that covers the Lower Hudson Valley in New York, took a look around at the experience of towns where reactors have closed, because the Indian Point reactors in Buchanan are scheduled to be shut down under an agreement with Gov. Mario Cuomo.

From sea to shining sea, it was dismal. It wasn’t just the plant employees who were hurt. The losses of hundreds of jobs, tens of millions of dollars in payrolls and millions in property taxes depressed whole towns and surrounding areas. For example:

Vernon, Vermont, home to Vermont Yankee for more than 40 years, had to cut its municipal budget in half. The town closed its police department and let the county take over; the youth sports teams lost their volunteer coaches, and Vernon Elementary School lost th…