Manufacturing costs: American auto makers close the gap
By Brian Milligan -- Purchasing, 8/12/1999 2:00:00 AM
Better management, streamlined manufacturing processes, and consistent work habits are what American auto makers now need if they want to close the manufacturing cost gap with Japanese transplants further than they have.
This is what industry experts and company representatives are saying as they examine the influential Harbour Report North America 1999. The report shows that Japanese transplant auto makers still are ahead of their U.S. counterparts when it comes to productivity, but the gap is closing.
The report has American auto makers reflecting on their gains, but also taking a sobering look at where their rivals are keeping a few paces ahead. "Yes, the Japanese are more productive on the average than the North American plants," says Lonnie Ross, spokesperson for Ford Motor Co. in Detroit. "But we are catching up."
The report measures assembly, stamping, and powertrain performance, plant by plant, for auto makers in North America. It also looks at each auto maker's cost and profitability results for the year.
Report highlights
The annual study of automotive manufacturing, released in June by the Michigan-based Harbour and Associates Inc., notes, for example, that:
- Nissan Motor Co. led all automakers in overall assembly productivity, with Honda Motor Co., Toyota, and Ford close behind.
- Toyota Motor Corp. and Ford Motor Co. had the most productive car assembly plants in North America in 1998.
- Nissan's Smyrna, Tenn., plant, which was the top car assembly plant for the past five years, ranked fourth this year among individual plants. Toyota's Cambridge, Ontario, operation surpassed Nissan in assembly hours per vehicle to become the most productive plant overall.
Specifically, the report placed Nissan, Honda, and Toyota well ahead of their Detroit rivals when it came to average assembly productivity, or the number of hours it took to produce a vehicle. Nissan came in first in this category, taking an average of 19.20 hours to produce a vehicle. Honda was second with 21.41 hours, and Toyota came in third at 21.63.
By comparison, it took Ford 23.87 hours to produce a vehicle, General Motors 31.58 hours, and DaimlerChrysler 32.33 hours.
But even as the Japanese auto makers continue to score high, the American plants are catching up in many areas.
"The gap is narrowing," says Ron Harbour, president of Harbour and Associates. "In the last 10 years or so all the companies have done their own analysis of what they are good at and what they are not so good at. They've worked hard to improve designs for easier assembly, and it has impacted their hours significantly. They've come down a lot."
That the Japanese are still ahead of their American counterparts in so many areas comes as no surprise to Harbour, who says the Japanese have management advantages, among them the basic ability to find a way of doing a job and making it the norm.
"Anywhere in the world, they have the same equipment and process. So if they learn how to do something in one plant, they learn how to do it in another," he says. "They develop a good process and stick with it. All the others reinvent the wheel in every plant."
A minor glitch
Harbour says part of the Japanese success here also stems from newer, automated factories that are laid out and designed to efficiently produce vehicles with a minimum of employees.
Honda of America, for example, performs stamping and plastic injection molding operations in its Marysville auto plant. At the factory, workers stamp the blanks and all the exterior and major interior body panels, injection mold the instrument panels, and bumper fascias and assemble the panels in the plant. Workers also assemble the entire door--both inner and other panels and complete door trim--in the plant. This is something that is rarely done in American auto plants.
"We were the first U.S. auto maker to do stamping inside the plant, something we still do today," says Roger Lambert, senior manager of company communications at Honda of America. "Honda of America manufacturing performs many more operations under one roof and in our plants compared to other auto makers."
Part of the Japanese success story, Harbour says, is in simple layout of the assembly line. Whereas an American line may have six to seven places to get parts from, the Japanese contain the parts to one area or rack that follows the car through the production line. The parts are easily accessible by fewer people.
Union activity
Harbour says the Japanese may also have a slight edge because they do not have union labor. While the labor rates are about the same between the two cultures, the Japanese do not use unions. Restrictive work rules in American plants do, in some cases, cut down on productivity.
But the representatives from the American auto makers are quick to defend the United Auto Workers.
General Motors spokesman Alan Adler says the company is content with its union work force. "We are very happy with our workers," he says.
DaimlerChrysler spokesman David Barnas agrees. He says the union has helped DaimlerChrysler remain competitive in many areas. "The union has been instrumental in helping us be a much more productive manufacturer of automobiles," he says.
Barnas, like many company representatives, says the key to narrowing the gap further lies in better management.
Car design
There are some areas where the Japanese envy North American automakers. Among these are design.
"Chrysler did good styling for the past five years," Harbour says. "The Japanese are saying, 'We wish we had people who style cars the way they do.' They (Chrysler) just come out with vehicles that turn heads."
But perhaps the most intriguing news came in the area of productivity. Here, the report notes the still wide gap among manufacturers in measuring total hours per vehicle performance. Both DaimlerChrysler and General Motors require more than 50% more labor hours than Nissan, long considered the efficiency benchmark, and more than 30% than Ford.
The report says that although DaimlerChrysler, Ford, and General Motors all run considerable amounts of overtime, DaimlerChrysler and GM are having to expend more premium, higher cost overtime hours to meet their production schedules. Harbour says this includes unscheduled overtime to produce daily units the manufacturers should have been able to produce during normal straight time hours.
The report says other factors that drive overtime and a gap in labor productivity include extensive maintenance time, repair or rework of vehicles because of quality or factory workmanship issues, and line stocking due to material shortages.
Adler says his company is looking carefully at the overtime cost and impact of vehicle reworking.
Adler also says General Motors is working hard to recruit younger factory workers for its work force. The average age of the worker in General Motors factories is about 49. "In a factory environment, that is very old," he says. Adler adds that the company is trying, through attrition, to hire a younger factory work force that will be able to build cars in a shorter period of time.
Good news
Despite the gap, the good news for American auto makers is impossible to miss. The report notes that Ford plants in Atlanta and Chicago finished second and third in the car assembly category.
Harbour ranks plant productivity by calculating the average number of labor hours it takes to build each vehicle.Toyota's Ontario plant, which makes the Toyota Corolla Sedan, ranked first at 17.66 hours, for example. But Ford's plant in Atlanta ranked second at 17.72 hours while its plant in Chicago completed a car at 18.09 hours. Nissan's plant ranked fourth at 18.97 hours.
Ford's Louisville operation also jumped ahead of Nissan Smyrna, becoming the most productive truck assembly plant in North America.
Ford's Louisville plant ranked first at truck assembly, taking 19.29 hours to produce a vehicle. Nissan Smyrna came in second for truck assembly, taking 19.77 hours to produce one, while NUMMI, the joint General Motors/Toyota venture in California, came in third at 19.81 hours.
Ford's Ross says a lot of the company's success here is due to an effort to create a consistent production system that works identically from plant to plant. "We are looking at ways to reduce waste in inventory, and everything we do is standard process to increase productivity," she says. "We are starting to share our best practices now, and it will help us throughout the organization."
About ADR North America
02/08/2010Buyers adopt hard line
08/10/2005About ADR North America
07/28/2009Honda chooses Averitt for North America
10/07/1998Freeport not boosting U.S. copper output
03/19/2010
Now Playing: 