Monday, April 20, 2009

When is $100 million a lot of money?

The U.S. Federal budget for next year is over $3.5 trillion.

Obama campaigned on cutting the many wasteful programs within the gov't.

It appears his estimate of 'waste', now that he is in power, is that there is possibly $100 million not being used effectively, and he is 'challenging' his cabinet to find these poorly spent funds.

My calculator tells me that $100 million out of $3.5 trillion is .00003% .

Which means he now feels that $3.5 trillion is a very lean budget and that the gov't is performing at virtually 100% efficiency.

The budget passed had over 10,000 earmarks amounting to several tens of Billions of dollars and this was deemed insignificant in the context of the overall budget also.

When AIG executives gave themselves hundreds of millions in bonuses this was also deemed insignificant within the context of over $150 billion in bailout money.

If workers were given raises amounting to several hundred million dollars this would be seen as inflationary and causing American industries to be less competitive against workers elsewhere in the world. That is, several hundred million dollars suddenly becomes a very large amount, having a disproportionate effect on the whole world economy, not just the U.S.

If hundreds of thousands of workers get $10 more per week this upsets the economic apple-cart but if 100 execs get $1 million a year this makes economic sense to retain 'talent' , even in failed corporations.

Ridding a $3.5 trillion budget of $100 million is equivalent to buying one less coffee per year for the average worker.

Is $100 million a lot of money ?

Absolutely, at least to most people outside of the Washington beltway, large corporations and Ivy League Universities.

To this group it all depends..... on who is receiving it.

Obama to gather Cabinet, seeking $100 million in cuts

  • Story Highlights
  • Two top administration officials say president wants $100 million in expenses cut
  • Agencies would have to report how they saved on expenses after 90 days
  • House and Senate returns from recess this week to work on $3.67 trillion budget
  • Obama to also offer examples of how agencies are already planning to save
By Suzanne Malveaux
CNN

WASHINGTON (CNN) -- President Obama returned to Washington on Sunday night with his eye back on his domestic agenda and a plan to save government money.

On Monday, Obama will gather his full Cabinet together for the first time as president and challenge it to cut a total of $100 million in the next 90 days, two senior administration officials said.

The officials spoke anonymously because the announcement had yet to come from the president, who returned Sunday from the Summit of the Americas in Trinidad and Tobago.

The agencies would have to report how they saved on expenses after 90 days, the officials said.

A senior administration official described the edict as part of Obama's "commitment to go line by line through the budget to cut spending" and "reform the government."

As House and Senate lawmakers return from recess this week, they are expected to start reconciling their versions of the fiscal 2010 budget resolution. The president's budget request is $3.67 trillion.

In context of the federal budget, $100 million in savings is a small amount, but the White House wants to demonstrate fiscal responsibility.

On Monday, Obama will offer examples of how various agencies have started cost-cutting measures, including:

• The Department of Homeland Security's plan to save an estimated $52 million over five years by purchasing office supplies in bulk.

• The Department of Agriculture's effort to consolidate 1,500 employees from seven locations into a single facility in 2011. It's estimated to save $62 million over a 15-year lease.

• The Veterans Affairs Department's move to cancel or delay 26 conferences, saving nearly $17.8 million. Veterans Affairs also will use video-conferencing to cut costs.

Thursday, April 16, 2009

A corporate lemming ?

This is similar to actions that Circuit City took which wound up greatly acceleraing it's downfall ...

Circuit City fired and replaced their experienced salespeople who were earning more, with new, less experienced people at minimum wage . Which turned out to be exactly the wrong thing to do at the time. Probably the wrong thing to do at ANY time.

Best Buy actually reported decent results , considering the world economy, the past quarter.

Now it's gonna fire 1000 assistant store managers? This is a typical corporate reaction, layoffs ... who knows what the effect will be, but probably not much for the future growth and health of the company. Just standard operating procedure.

But decreasing the salary of 'Senior Sales Associates' by 25-50% (YIKES!!) .... this is similar but MUCH worse than the Circuit City action ... they have decided not to fire their experienced people but instead keep them around at newbie wages ....

In today's economy it may be that those affected will have to grin and bear it as there are not many job alternatives out there. But, for the medium and long-term effects on Best Buy once the economy comes back, this has got to be a gigantic negative .

I would think that they will suffer the 'Circuit City effect' within the next year if this report is true.


April 16, 2009
Best Buy Cuts Wages, Jobs in Its Stores
By THE ASSOCIATED PRESS
Filed at 7:31 a.m. ET
RICHFIELD, Minn. (AP) -- Thousands of Best Buy store employees will see pay cuts and others will lose their jobs as the consumer electronics chain reorganizes.

Best Buy Co. Inc. would not disclose the number of people affected. A spokesman said the move will put more sales people in front of customers. Many store managers and senior-level sales people will go to jobs where they'll interact more directly with shoppers.

New York investment firm Sanford Bernstein said in a research note Wednesday that as many as 1,000 assistant store managers would lose their jobs. Up to another 8,000 senior sales associates would be demoted to jobs paying 25 percent to 50 percent less.

The numbers are estimates by Sanford Bernstein. Best Buy won't confirm or deny them.

Tuesday, April 14, 2009

Disney hi-tech

Disney employs a middle-aged woman to figure out what young teenage boys like?

...... and her background? :

The people on Ms. Peña’s team have anthropology and psychology backgrounds, but she majored in journalism and never saw herself working with children. Indeed, her training in consumer research came from working for a hotel operator of riverboat casinos.

And her methodology ? paying the kids family to rummage through his private things and talk to him ... the headline says '... Uses Science ...' .... that's a broad definition of science!

Who does she know to get a job like this for which she has absolutely no relevant experience or training?

And imagine if they employed a middle-aged man to figure out what 12-yr old girls like ... cries of sexism would echo in the press !!

It's also interesting that Disney, a company catering to children for 80 years suddenly doesn't know what children like?
Have kids changed that much in 80 years?
Their toys have, but have they ?


April 14, 2009

Disney Expert Uses Science to Draw Boy Viewers

ENCINO, Calif. — Kelly Peña, or “the kid whisperer,” as some Hollywood producers call her, was digging through a 12-year-old boy’s dresser drawer here on a recent afternoon. Her undercover mission: to unearth what makes him tick and use the findings to help the Walt Disney Company reassert itself as a cultural force among boys.

Ms. Peña, a Disney researcher with a background in the casino industry, zeroed in on a ratty rock ’n’ roll T-shirt. Black Sabbath?

“Wearing it makes me feel like I’m going to an R-rated movie,” said Dean, a shy redhead whose parents asked that he be identified only by first name.

Jackpot.

Ms. Peña and her team of anthropologists have spent 18 months peering inside the heads of incommunicative boys in search of just that kind of psychological nugget. Disney is relying on her insights to create new entertainment for boys 6 to 14, a group that Disney used to own way back in the days of “Davy Crockett” but that has wandered in the age of more girl-friendly Disney fare like “Hannah Montana.”

Children can already see the results of Ms. Peña’s scrutiny on Disney XD, a new cable channel and Web site (disney.go.com/disneyxd). It’s no accident, for instance, that the central character on “Aaron Stone” is a mediocre basketball player. Ms. Peña, 45, told producers that boys identify with protagonists who try hard to grow. “Winning isn’t nearly as important to boys as Hollywood thinks,” she said.

Actors have been instructed to tote their skateboards around with the bottoms facing outward. (Boys in real life carry them that way to display the personalization, Ms. Peña found.) The games portion of the Disney XD Web site now features prominent trophy cases. (It’s less about the level reached in the game and more about sharing small achievements, research showed.)

Fearful of coming off as too manipulative, youth-centric media companies rarely discuss this kind of field research. Disney is so proud of its new “headquarters for boys,” however, that it has made an exception, offering a rare window onto the emotional hooks that are carefully embedded in children’s entertainment. The effort is as outsize as the potential payoff: boys 6 to 14 account for $50 billion in spending worldwide, according to market researchers.

Thus far, Disney’s initiative is limited to the XD channel. But Disney hopes that XD will produce a hit show that can follow the “High School Musical” model from cable to merchandise to live theater to feature film, and perhaps even to Disney World attraction.

With the exception of “Cars,” Disney — home to the “Princesses” merchandising line; the Jonas Brothers; and “Pixie Hollow,” a virtual world built around fairies — has been notably weak on hit entertainment franchises for boys. (“Pirates of the Caribbean” and “Toy Story” are in a type of hibernation, awaiting new big-screen installments.) Disney Channel’s audience is 40 percent male, but girls drive most of the related merchandising sales.

Rivals like Nickelodeon and Cartoon Network have made inroads with boys by serving up rough-edged animated series like “The Fairly Oddparents” and “Star Wars: The Clone Wars.” Nickelodeon, in particular, scoffs at Disney’s recent push.

“We wrote the book on all of this,” said Colleen Fahey Rush, executive vice president for research of MTV Networks, which includes Nickelodeon.

Even so, media companies over all have struggled to figure out the boys’ entertainment market. News Corporation infamously bet big on boys in the late 1990s with its Fox Kids Network and a digital offering, Boyz Channel. Both failed and drew criticism for segregating the sexes (there was also a Girlz Channel) and reinforcing stereotypes.

The guys are trickier to pin down for a host of reasons. They hop more quickly than their female counterparts from sporting activities to television to video games during leisure time. They can also be harder to understand: the cliché that girls are more willing to chitchat about their feelings is often true.

The people on Ms. Peña’s team have anthropology and psychology backgrounds, but she majored in journalism and never saw herself working with children. Indeed, her training in consumer research came from working for a hotel operator of riverboat casinos.

“Children seemed to open up to me,” said Ms. Peña, who does not have any of her own.

Sometimes the research is conducted in groups; sometimes it involves Ms. Peña’s going shopping with a teenage boy and his mother (and perhaps a videographer). The subjects, who are randomly selected by a market research company, are never told that Disney is the one studying them. The children are paid $75.

Walking through Dean’s house in this leafy Los Angeles suburb on the back side of the Hollywood Hills, Ms. Peña looked for unspoken clues about his likes and dislikes.

“What’s on the back of shelves that he hasn’t quite gotten rid of — that will be telling,” she said beforehand. “What’s on his walls? How does he interact with his siblings?”

One big takeaway from the two-hour visit: although Dean was trying to sound grown-up and nonchalant in his answers, he still had a lot of little kid in him. He had dinosaur sheets and stuffed animals at the bottom of his bed.

“I think he’s trying to push a lot of boundaries for the first time,” Ms. Peña said later.

This kind of intensive research has paid dividends for Disney before. Anne Sweeney, president of the Disney ABC Television Group, noted it in her approach to rebuilding Disney Channel a decade ago.

“You have to start with the kids themselves,” she said. “Ratings show what boys are watching today, but they don’t tell you what is missing in the marketplace.”

While Disney XD is aimed at boys and their fathers, it is also intended to include girls. “The days of the Honeycomb Hideout, where girls can’t come in, have long passed,” said Rich Ross, president of Disney Channels Worldwide.

In Ms. Peña’s research boys across markets and cultures described the television aimed at them as “purposeless fun” but expressed a strong desire for a new channel that was “fun with a purpose,” Mr. Ross said. Hollywood has been thinking of them too narrowly — offering all action or all animation — instead of a more nuanced combination, he added. So far results have been mixed.

Disney XD, which took over the struggling Toon Disney channel, has improved its predecessor’s prime-time audience by 27 percent among children 6 to 14, according to Nielsen Media Research. But the bulk of this increase has come from girls. Viewership among boys 6 to 14 is up about 10 percent.

“We’ve seen cultural resonance, and it doesn’t come overnight,” Mr. Ross said.

Which is one reason Ms. Peña is still out interviewing. At Dean’s house her team was quizzing him about what he meant when he used the word “crash.” Ben, a 12-year-old friend who had come over to hang out, responded, “After a long day of doing nothing, we do nothing.”

Growing self-conscious, Ben added, “Am I talking too much?”

Not even close.

Wednesday, April 1, 2009

Race to the bottom accelerates

The most important part of the article is the very last paragraph:

The steps taken by Honda will have the effect of reducing hourly wage costs at its U.S. factories just as GM and Chrysler face pressure to bring their own compensation levels in line with the pay of workers at U.S. plants run by Honda, Toyota and Nissan.

This is an example of the lowering of wages in the West and the U.S. in particular, a trend that has been happening for a while and will now accelerate in this deep recession. Even after the recession 'ends' wages will continue to fall.

Economists are very worried about deflation. Falling wages drives deflation.

The flip side is that the excessive creation of dollars will also cause inflation.

What happens when wages decrease and the dollar in turn buys less? Loss of buying power deepens the recession and if this cycle is not stopped a severe and prolonged depression results.


Honda to cut North American output, pay

Japanese automaker to shut down six factories for nearly two weeks to cut production by 3.4%.

TOKYO (Reuters) -- Honda Motor Co., Japan's No. 2 automaker, said it would cut production in North America by temporarily shutting factories from next month and will reduce pay for workers as sales in the United States plunge to multi-decade lows.

Honda (HMC) will shut down six factories for 13 days, starting in May, to cut production by 62,000 vehicles. Honda does not provide a production forecast, but the reduction would be equivalent to 3.4% of what it built in the region in the year to March.

The decision by Honda comes amid a sharp downturn in auto sales that is threatening the survival of General Motors Corp. (GM, Fortune 500) and Chrysler.

Data due out later are likely to show U.S. auto sales at the weakest monthly rates in more than 27 years.

"U.S. sales look set to fall about 40% in March, and there's no signs of a recovery beyond April either," said Okasan Securities analyst Yasuaki Iwamoto.

"When sales are this bad, it's natural that production is going to be weak," he said, while adding that there was no change to his view that the worst was over for production cuts after Japanese automakers made deep reductions in January-March.

Japan, Korea sales slide

Sales in Asia are also suffering.

In Japan, industry-wide auto sales fell 25% in March from a year earlier to 546,098 vehicles.

Sales at South Korea's five automakers in March fell 19% to 402,563 vehicles, with exports down 20%.

Shares in Honda gained 6.7% in Tokyo on Wednesday along with jumps in other auto stocks.

Market participants cited reasons ranging from the dollar's gradual rise this week to hopes for some resolution for GM and Chrysler, which the New York Times reported might involve some form of controlled bankruptcy.

Honda said it would cut pay for salaried and factory workers and also offered buyouts and early retirement incentives to most of its 32,400 workers in the United States and Canada.

It is the most sweeping program to reduce payroll costs offered by Honda, a spokesman said.

Honda has trailed Japanese rivals Toyota Motor Corp. (TM) and Nissan Motor Co. in reacting to a buildup of unsold cars in the United States, and executives have said it would likely take until the summer to bring inventory back to appropriate levels.

The slow pace is also partly due to Honda's policy of limiting sales incentives, which erode cars' resale value as well as profits. According to research firm Autodata, Honda's average spending on incentives per vehicle in February was the lowest among mass-market brands, at just over $1,300 versus nearly $1,600 for Toyota and $2,900 at Nissan.

Nissan Chief Operating Officer Toshiyuki Shiga said earlier in Tokyo he expected global production at Japan's No. 3 automaker to be 10% higher in the first half of the new business year that started on Wednesday compared with the previous six months.

Honda has assembly plants in Indiana, Ohio and Alabama in the United States, as well as in Canada and Mexico. It also operates two engine plants and two transmission plants in North America.

Pay hit

Like Toyota, Honda previously paid its non-union hourly workers even when it shut down factories to reduce inventory. But Honda said this time hourly workers would not be paid for six of the 13 days, to be scattered between May 1 and July 31.

Salaried workers will also see compensation reduced this financial year, said spokesman Ed Miller.

Miller said Honda told employees it expected bonus payments for both hourly and salaried employees to be reduced or eliminated this year.

The steps taken by Honda will have the effect of reducing hourly wage costs at its U.S. factories just as GM and Chrysler face pressure to bring their own compensation levels in line with the pay of workers at U.S. plants run by Honda, Toyota and Nissan. To top of page

Friday, February 20, 2009

Chutzpah majors

What other business requires it's customers to prove their merit before even being allowed for consideration to purchase their product, except the elite schools ? (maybe high-end co-ops also)

"If you're just hiding out from the dismal job market, you won't get in," says Rosemaria Martinelli, associate dean and head of admissions at the University of Chicago's B-school. "If you can't articulate why you want the degree, you're wasting our time, and your own time and money." Oh.

It's not enough just to competitively apply? You also have to provide proof of worthiness?

Imagine a car dealer asking for worthiness in addition to cash in order to buy the Chevy.

They can only get away with this because they have more applicants than they can accomodate, demand exceeds supply.

So they can ask all applicants to do anything superfluous to the immediate transaction, ridiculous or not .... why not require hula dancing or brownie baking competitions as part of their admission process ?

Skip the recession, get an MBA?

Many people think this is the perfect time to go back to school and hide out from the lousy job market. But don't say that on your application.

By Anne Fisher, contributor
February 19, 2009: 1:01 PM ET

(Fortune) -- Dear Annie: I lost my job at Lehman Brothers (LEHMQ) last September and have not succeeded in finding another finance position (for obvious reasons). But finance is all I know. While I was working at the firm, I completed almost one year of course work toward an MBA. I'm thinking of trying to transfer my credits to a full-time program and finishing the degree, which just seems like a more productive use of my time than job hunting right now. Do you agree? Also, will admissions people hold it against me that I worked at a failed firm, even though I had nothing to do with the problems? -Out in the Cold

Dear Out: Ah, it happens every time the economy hits the skids: Huge numbers of MBA wannabes line up to go back to the classroom. A record 264,641 people took the Graduate Management Admissions Test in 2008, and 77% of full-time graduate business programs say applications jumped late last year, the Graduate Management Admissions Council (www.gmac.com) reports.

Clearly, you face lots of competition. The good news is, B-schools are unlikely to hold your previous employer's mistakes against you. "There is no stigma attached," says Dawna Clarke, director of admissions at the Dartmouth's Tuck School.

"We're seeing really good applications from former investment bankers," she adds. Wall Street firms traditionally have set such stringent hiring standards, and train their people so thoroughly that, Clarke says, "we feel these applicants are in effect pre-screened for us."

Even so, beware: Your application must reflect a well-thought-out career strategy, including cogent reasons why you want an MBA, and why you have chosen the particular school you're trying to get into.

"If you're just hiding out from the dismal job market, you won't get in," says Rosemaria Martinelli, associate dean and head of admissions at the University of Chicago's B-school. "If you can't articulate why you want the degree, you're wasting our time, and your own time and money." Oh.

Keep that in mind, especially when interviewing. At New York University's Stern School, "each applicant meets with our admissions committee for 30 minutes," says executive director of MBA admissions Isser Gallogly. The school, which accepts 400 students a year, saw applications shoot up 20% in 2008.

"We're very selective," Gallogly says. "We look for people who can clearly convey their career goals and explain why Stern is the right 'fit' for them."

The written application also asks how you know you belong at Stern: "So, between that and the interview, you'd better have a good answer," Gallogly says. Writing "Because I'm tired of my fruitless job hunt" is not likely to wow anybody.

So, before you start filling out applications, think through what you want to do next, and specific ways an MBA will help you get there. And remember, MBA programs are not all alike.

"Don't rely on anybody's published ranking," says Gallogly. "You have to do enough research to make your own personal list of the best programs for you."

If possible, visit each school that interests you, take a tour, sit in on some classes, and chat with a few current students. The more you know, the more persuasive your application will be.

Then keep in mind these tips from Stacy Blackman (www.stacyblackman.com) , a Los Angeles consultant who specializes in helping people get admitted to B-school.

1. Emphasize ethics. Applicants with a Wall Street background should assure admissions committees that they personally have kept to the straight and narrow, Blackman says -- in other words, that they're "committed to more than short-term personal gain, and acting in the long-term best interests of the firm and its clients."

Be ready to give an example or two of ethical decisions you've made, perhaps when under pressure to do otherwise. You can even prompt your references to mention such moments when they write their recommendations: "Give anyone you're using as a reference a short list of bullet points, to remind them of your achievements," she says.

2. Don't overlook after-work activities. "A lot of people call me and say, 'I've been laid off, just like everybody else,' says Blackman. "But you aren't just like everybody else. Your application should mention outside activities, whether it's coaching your child's soccer team, serving on the board of a nonprofit, or hiking solo through Tibet. What you learned from those experiences will help you stand out."

3. Focus on the future. "Losing a job is such a terrible experience that people tend to dwell on it, and to think that it defines who they are," says Blackman. Instead of looking back, "focus your attention on how you're going to bounce back and what your plan is for getting past this rough spot," she suggests. "I've seen people turn this into a story that is much more impressive than if they had just stayed there in the same job."

4. Don't neglect the basics. "It sounds obvious, but be meticulous about details like making sure your application meets the school's deadline," Blackman says. "No matter how great your application is, if it's a day or two late, that reflects badly on your project-management skills - and you are, after all, applying to management school."

Friday, January 23, 2009

layoff or opportunity to offshore?

Microsoft made over $4billion in profit in 1 quarter and therefore needs to layoff 5,000 workers?

Just last year Bill Gates and other execs were imploring Congress to allow foreign workers into the country because American college students weren't pursuing engineering and computer science degrees.

No mention of how many jobs they have open, going unfilled, in the USA.

No mention of their hiring numbers in the USA and in their overseas offices.

No mention of why they can't hire 1 or 2 thousand top students out of the 50,000 computer science major who do graduate every year.

But you have to read through this long, slow account of their results to get to a critical statement that goes unquestioned:

Microsoft said Thursday that it would replace some of the fired workers with new hires, many of them to handle search, as it tries to grow new businesses.

Some? how many?

Where are the fired workers located? Where are their 'replacements' located?

And how many of those inadequate 50,000 engineers and computer science grads will Microsoft hire in the US now?

Do we have too many grads now while just months ago we had too few?

Are they unemployable here while hiring continues overseas?

Is it a reasonable long to medium term career to pursue for large numbers of people given the hiring and layoff patterns of the past 10 years?

Or is it a mark of intelligence to not pursue such careers?

http://www.nytimes.com/2009/01/23/technology/companies/23soft.html

Tuesday, January 20, 2009

The no-manufacturing economy

.... aka The 'Service' economy, only works in the perfect world where everyone gets along well.

The current hard recession will severely test globalization.

Will countries try to protect their worker's jobs? Will they protect industries that are starting to fail? Will they start to impose tariffs and 'local content' provisions in laws and contracts?

Yes, yes and yes. They cannot politically do otherwise.

Even if just a few countries embark on protectionist paths, other countries will need to respond to these new rules or they will lose market-share, large parts of industries, and many jobs.

What is true for the pharmaceutical industry, below, i.e. offshoring manufacturing as well as most other attendant work including design, development and managing of manufactured products exposes countries to economic and political weakness and turmoil.

This process is affectinghas been ongoing and expose almost all other industries as well.

Computer technology .... aircraft manufacturing ... car and truck manufacturing ....clothing ... etc. What is made in the USA (or the West) anymore? Even in food production where the economic mantra has been the same , repeated ad nauseum, 'allow the lowest-cost producer to take over the industry. This will be good for the global economy'.

In a perfect world where all societies are in-sync politically, philosophically and religiously, this might work, but not in the fragmented world we currently live in.

While the effects of economic warfare may be critical in pharmaceuticals, what would the effect be if used with food?

We are already seeing this type of scenario played out with Russia which has Europe in a serious stanglehold because of it's control of a significant part of their energy needs.

Globalization has actually created , in our current severe economic downturn, greater instability with the promise of social upheavals and war.


January 20, 2009

Drug Making’s Move Abroad Stirs Concerns

WASHINGTON — In 2004, when Bristol-Myers Squibb said it would close its factory in East Syracuse, N.Y. — the last plant in the United States to manufacture the key ingredients for crucial antibiotics like penicillin — few people worried about the consequences for national security.

“The focus at the time was primarily on job losses in Syracuse,” said Rebecca Goldsmith, a company spokeswoman.

But now experts and lawmakers are growing more and more concerned that the nation is far too reliant on medicine from abroad, and they are calling for a law that would require that certain drugs be made or stockpiled in the United States.

“The lack of regulation around outsourcing is a blind spot that leaves room for supply disruptions, counterfeit medicines, even bioterrorism,” said Senator Sherrod Brown, Democrat of Ohio, who has held hearings on the issue.

Decades ago, most pills consumed in the United States were made here. But like other manufacturing operations, drug plants have been moving to Asia because labor, construction, regulatory and environmental costs are lower there.

The critical ingredients for most antibiotics are now made almost exclusively in China and India. The same is true for dozens of other crucial medicines, including the popular allergy medicine prednisone; metformin, for diabetes; and amlodipine, for high blood pressure.

Of the 1,154 pharmaceutical plants mentioned in generic drug applications to the Food and Drug Administration in 2007, only 13 percent were in the United States. Forty-three percent were in China, and 39 percent were in India.

Some of these medicines are lifesaving, and health care in the United States depends on them. Half of all Americans take a prescription medicine every day.

Penicillin, a crucial building block for two classes of antibiotics, tells the story of the shifting pharmaceutical marketplace. Industrial-scale production of penicillin was developed by an American military research group in World War II, and nearly every major drug manufacturer once made it in plants scattered throughout the country.

But beginning in the 1980s, the Chinese government invested huge sums in penicillin fermenters, “disrupting prices around the globe and forcing most Western producers from the market,” said Enrico Polastro, a Belgian drug industry consultant who is an expert in antibiotics.

Part of the reason these plants went overseas is that the F.D.A. inspects domestic plants far more often than foreign ones, making production more expensive in the United States.

“U.S. companies are more regulated and are under more scrutiny than foreign producers, particularly those from emerging countries. And that’s just totally backwards,” said Joe Acker, president of the Synthetic Organic Chemical Manufacturers Association. “We need a level playing field.”

The Bush administration spent more than $50 billion after the 2001 anthrax attacks to protect the country from bioterrorism attacks and flu pandemics; some of that money went to increase domestic manufacturing capacity for flu vaccines.

Even so, officials have said that during a pandemic the United States would not be able to rely on vaccines manufactured largely in Europe because of possible border closures and supply shortages. And the situation is similar with antibiotics like penicillin; researchers have found that during the 1918 flu pandemic, most victims died of bacterial infections, not viral ones.

The Centers for Disease Control and Prevention has a stockpile of medicines with enough antibiotics to treat 40 million people. If more are needed, however, the nation lacks the plants to produce them. A penicillin fermenter would take two years to build from scratch, Mr. Polastro said.

Dr. Yusuf K. Hamied, chairman of Cipla, one of the world’s most important suppliers of pharmaceutical ingredients, says his company and others have grown increasingly dependent on Chinese suppliers. “If tomorrow China stopped supplying pharmaceutical ingredients, the worldwide pharmaceutical industry would collapse,” he said.

Since drug makers often view their supply chains as trade secrets, the true source of a drug’s ingredients can be difficult or impossible to discover. The F.D.A. has a public listing of drug suppliers, called drug master files. But the listing is neither up to date nor entirely reliable, because drug makers are not required to disclose supplier information.

One federal database lists nearly 3,000 overseas drug plants that export to the United States; the other lists 6,800 plants. Nobody knows which is right.

Drug labels often claim that the pills are manufactured in the United States, but the listed plants are often the sites where foreign-made drug powders are pounded into pills and packaged.

“Pharmaceutical companies do not like to reveal where their sources are,” for fear that competitors will steal their suppliers, Mr. Polastro said.

China’s position as the pre-eminent supplier of medicines is a result of government policy, said Guy Villax, the chief executive of Hovione, a maker of crucial drug ingredients with plants in Portugal and China.

The regional government in Shanghai has promised to pay local drug makers about $15,000 for any drug approval they garner from the F.D.A. and about $5,000 for any approval from European regulators, according to a document Mr. Villax provided.

“This shows that there has been a government plan in China to become a pharmaceutical industry leader,” Mr. Villax said.

The world’s growing dependence on Chinese drug manufacturers became apparent in the heparin scare. A year ago, Baxter International and APP Pharmaceuticals split the domestic market for heparin, an anticlotting drug needed for surgery and dialysis.

When federal drug regulators discovered that Baxter’s product had been contaminated by Chinese suppliers, the F.D.A. banned Baxter’s product and turned almost exclusively to the one from APP. But APP also got its product from China.

So for now, like it or not, China has the upper hand. As Mr. Polastro put it, “If China ever got very upset with President Obama, it could be a big problem.”