The domestic U.S. automakers have nearly eliminated the productivity gap vs. the Japanese OEMs’ North American manufacturing operations, according to the 2008 Harbour Report, the industry’s annual benchmark on automotive productivity.
“We’ve seen more improvement in the last five years than in the last fifteen,” said Ron Harbour, a partner in the U.S. automotive practice of consultants Oliver Wyman, which acquired Harbour Consulting in 2007. “Productivity improvements and employee buyouts are bringing the Detroit 3 to near parity with their Asian rivals.”
Only 3.5 h of total manufacturing labor, equivalent to approximately $260 per vehicle, separates the most productive plants from the least productive among the so-called “Big Six” North American OEMs: General Motors, Ford, Chrysler, Toyota, Honda, and Nissan. In 2003, the productivity delta was 10.5 h, or $790 per vehicle.
The 2008 report, which is based on comprehensive plant visits conducted in the U.S., Canada, and Mexico in 2007, showed Chrysler posting the biggest year-to-year improvement. The company reduced its total manufacturing labor hours per vehicle (HPV) by 7.7% to 30.4 HPV, the same as recorded by Toyota.
Chrysler also ranked tops in transmission manufacturing, while Toyota led in engine making and stamping operations. “They’re running neck and neck,” Harbour said.
He noted that Chrysler’s gain in vehicle assembly was partly the result of greater outsourcing of assembled parts. Its most productive plant, the Toledo, OH, Supplier Park that builds the Jeep Wrangler, has suppliers operating major departments: Germany's Kuka Group manages the Toledo body shop, Magna Steyr operates the plant’s paint shop, and Hyundai Mobis handles chassis assembly.
Harbour said it counted the supplier workers in its Toledo plant analysis. By comparison, Toyota makes a greater percentage of its own parts.
GM improved its total manufacturing productivity to 32.3 HPV, its 12th straight year of improvement. Ford reduced its labor HPV to 33.9, a 3.5% improvement, despite building 6% fewer vehicles than in 2006.
Toyota slipped modestly, needing 2.5% more hours to produce a vehicle than it did in 2006. Nissan suffered the 2008 report’s biggest deficit. Losing light-truck production at its Canton, MS, complex drove Nissan’s North American labor HPV up 10.1% to 32.3 h.
Harbour explained that greater attention to design for manufacturability (DFM), common and flexible vehicle and powertrain architectures, and flexible manufacturing are ongoing keys to greater productivity. But the tens of thousands of early retirements and buyouts of GM, Ford, and Chrysler hourly and salaried workers was the major factor in helping the “Detroit 3” edge ever closer to Toyota, which has retained virtually its entire North American workforce despite reduced output in certain plants.
"Toyota remains the industry benchmark through its renewed commitment to lean production,” said Harbour. “Chrysler made substantial progress with the support of suppliers. GM deserves credit for the growing maturity of its Global Manufacturing System, and Ford is demonstrating that focusing on quality leads to better productivity."
Some of the most productive North American auto plants, as rated in the Harbour Report, are closing or losing large numbers of jobs, including Ford Norfolk (VA)—the industry’s most productive full-size pickup plant. Harbour stressed that OEMs need plants with greater platform and manufacturing flexibility, so they do not have to close their most productive factories or spend millions retooling them to build different vehicles.
In powertrain manufacturing, Toyota averaged a mere 3.13 labor hours per engine across its North American plants. Chrysler was second with an average 3.35 h. GM, close behind in third place, averaged approximately 3.4 h.
Among individual engine plants, Chrysler’s recently built Global Engine Manufacturing Alliance (GEMA) plant in Dundee, MI, last year assembled four-cylinder engines at a super-productive 1.84 h per unit. Currently, GEMA builds only engines for Chrysler, although the facility was conceived to operate for Chrysler with partners Mitsubishi Motor Corp. and Hyundai Motor Co.
Chrysler, which in last year’s Harbour Report led its domestic rivals in transmission manufacturing efficiency, again led the pack this year. It averaged 3.36 h per transmission, compared with Ford’s 3.62 h and GM’s 3.68 h. Among individual transmission plants, GM’s rear-wheel-drive transmission plant in Toledo was the North American industry’s most productive, requiring just 2.37 h per gearbox.