Never Has Arrived; The Last Mile

Train drivers working for Australian miner Rio Tinto make as much as A$240K (US$224K) per year to haul ore. According to BLS data, that is as much as surgeons in the US, and more than the $151K average of New York State lawyers.

Does that pay schedule make any sense? I do not think so, nor does Rio Tinto.

When costs are ridiculous, companies seek ways to lower them. Thus, the following Bloomberg headline should not be surprising: Rio Replacing Train Drivers Paid Like U.S. Surgeons

The 400-plus workers in the remote Pilbara region who earn about A$240,000 ($224,000) a year probably are the highest-paid train drivers in the world, according to U.K.-based transport historian Christian Wolmar. Australia’s decade-long mining boom has sucked up skilled workers, raising wages for engineers to drivers at Rio, the second-largest exporter of the mineral, and its closest competitors, Vale SA (VALE) and BHP Billiton Ltd.

Rio, which last year approved spending of $7.2 billion to expand the iron ore operations, is aiming to have the world’s first, fully automated, long-distance and heavy-haul rail system operating in 2015. Its automated rail will have 1,500 kilometers (930 miles) of track, 10,000 wagons and individual train sets 2.3 kilometers long, according to Credit Suisse Group AG. The company is spending $518 million on the program that was announced last year.

“You need to have quite a significant amount of scale” in fleet and volumes to benefit from automation technology, said Evy Hambro, manager of BlackRock Inc. (BLK)’s $7.7 billion World Mining Fund.

Laser Detectors

Rio’s rail, port and truck movements are all watched over from a control center in the Western Australia state capital of Perth, 1,500 kilometers to the southeast, that has about 250 controllers working three shifts a day. The rail automation is part of the company’s push to use technology to improve productivity and safety and wring out extra capacity from existing assets, Simon Prebble, general manager for Rio’s automated trains project, said in an interview yesterday.

The trains have on-board systems that check speed, signals and operate the brake, Prebble said. Rio has installed a new radio-based network to communicate with the trains as well as close-circuit television at every public level crossing, he said. “We also have an obstruction detection system which uses laser scanners to continually look for any obstructions.”

Never Has Arrived

Why stop with train drivers? So, what about trucks?

For those who said truck drivers would never be replaced by robots, it appears "never has arrived" because Rio is also going to automate trucking.

From Bloomberg ....

Rio also plans to automate about 40 percent of its Pilbara truck fleet by 2016. The goal is to reduce costs to $15.60 a ton by 2020, from $23.10 a ton in the first half of this year, Paul Young, a Sydney-based analyst with Deutsche Bank said in a report after touring operations last month, citing Rio data. Automation is set to help shave $1.90 a ton off costs and boost output by 20 million tons, or 5 percent, he said.

Technology Progress

Technology progress starts at high end specialties then permeates everywhere. Think of all the features in cars first found in Mercedes or BMW, now found everywhere.

And so it goes with automation. Truck driving will be automated for mines, and in a few years or sooner, it will spread.

Message to 5.7 Million Truck Drivers "No Drivers Needed"

On August 15, 2013, I wrote Message to 5.7 Million Truck Drivers "No Drivers Needed" Your Job is About to Vanish; Time Marches On, Fed Resistance is Futile

I made the claim "Over the next two decades, machines will drive themselves and 5.7 million truck driving jobs will vanish."

Many readers said that I was wrong, citing insurance reasons,  city traffic, tight ports, etc. Truck drivers in particular said it would not happen, some citing "last mile" problems.

Check out a few comments from ATA: Self-Driving Trucks Are “Close To Inevitable”

Poli: C’mon guys even if they make it work, comes up some crazy guy with few thousand dollars buy one Russian 150 miles radius GPS/communication jammer and you’ll see how many deaths in one minute!!

Hotrod: Are you kidding me? With all the glitches and failure of computers you would have more accidents than ever.

Andrew: And in the beginning, self piloted trucks will all slam into a low clearance bridge in Chicago because the programmers forgot to take into account truck routes in various cities.

Angelo: This is a fantasy and nothing more until we arrive at the “George Jetson” generation. The infrastructure doesn’t exist as it took 200 years to build the existing model which is certainly not designed for it, nor can it be retrofitted for such an endeavor.

Kay: I doubt it will happen in our lifetime. There are too many critical components to driving a truck on the road. Decisions have to be made by humans, not machines. If they can ever create a robot with a mind as complex and brilliant as humans and with the dexterity of arms and legs then they might be able to have automated-driving trucks. We aren’t there yet and we won’t be for another 30-50 years, IMO.

Alchemist: Who will have money to buy the products these automated trucks are hauling? I’d like to know how they expect to sell anything to the vast nation of jobless, impoverished obsolete humans?

One rational person offered this pertinent comment:

Jon: Of course trucking companies are excited about this. So should everyone else. Passenger cars will get the same treatment, just a little slower. Yes us truck drivers will be out of a career. Welcome to the world of technological advancement. It happens to all professions eventually. Get used to the idea.

The Last Mile

Truck drivers talk about how they can never be replaced because of city traffic, tight spaces, etc., etc. It's the "last mile" problem. One possible solution is automated trucking stations just outside major urban areas, where human drivers take over the "last mile".

Recall the "last mile" problem with high speed internet? It's been solved in numerous ways: DSL, Fiber, Cable, Satellite, Wi-Fi.

And so it will be with robot-operated trucking.

Automated trucking will not be here tomorrow, in the US, but it's coming far sooner than anyone thinks.

Fed's Battle Against Technology

The Fed is fighting the deflationary trend of technology. It's a battle it cannot win. Real wages have not and will not keep up as asset bubbles in stocks and equities get bigger and bigger (and income inequality soars).

The problem is not low wages. The problem is high prices, fueled by the Fed and fractional reserve lending. The middle class has be ravaged by Fed policies.

Finally, please note that higher minimum wage laws do nothing but encourage use of more robots.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com