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DETROIT
, June 5, 2008 – Driven by more consistent,
leaner processes and buyouts of tens of thousands workers, the Detroit Three automakers
in 2007 nearly erased the productivity deficit against their Japanese-based competitors,
despite declining production and shrinking market share.
The difference among the Big Six from the most to least productive in terms of total
manufacturing labor (Assembly, Stamping, Engine and Transmission) has dropped to
3.50 hours per vehicle (or about $260 per vehicle), down from 10.51 hours (or $790
per vehicle) in 2003.
Chrysler showed the biggest improvement, cutting its total manufacturing labor hours
per vehicle by 7.7% to 30.37, the same number recorded by
Toyota
, according to Oliver Wyman’s
The Harbour Report™ North America 2008, the annual study released today.
Oliver Wyman acquired the report in January 2008.
It is worth noting that
Toyota
fabricates and assembles a greater percentage of its vehicle parts with its own
employees, while the Detroit Three purchase many modules and subassemblies from
suppliers, thus saving labor.
Toyota
also has retained nearly all its employees even in plants that experienced lower
production. In contrast, GM, Ford and Chrysler have used buyouts and layoffs to
reduce labor costs.
General Motors brought its total manufacturing productivity performance to 32.29
hours per vehicle, its 15th consecutive year of improvement. Ford reduced
its labor hours per vehicle by 3.7% to 33.88, despite producing 6% fewer vehicles
than it did in 2006.
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The Harbour Report™ North America 2008 – page 2
“Improving productivity in the face of lower production is a huge accomplishment,
especially with the pressures created
by rising gas prices,” said
Ron Harbour
, partner in Oliver Wyman’s North American
automotive practice. “Toyota
remains the industry benchmark through its renewed commitment to lean production.
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 will lead to better productivity.”
Despite the convergence of productivity numbers,
Toyota
proved most impressive during Harbour’s visits to their plants. Its productivity
improvements, in some cases, were offset by a broader mix of vehicles, including the Tundra pickup and Sequoia SUV, more V8 engines and higher volume of the Camry
hybrid. In addition,
Toyota
showed the most improvement in energy conservation, opening more floor space, reducing
manufacturing time and line length, and increasing capital efficiency.
Unfortunately, the profitability gap between Detroit-based and Japan-based automakers
remains wide. Chrysler, Ford and GM are suffering even more with falling sales of
profitable fullsize pickup trucks and SUVs as consumers demand much better fuel
economy. Honda and Nissan led the six largest North American automakers, each earning
a pretax profit of $1,641 per vehicle on their North American sales, followed by
Toyota
at $922 per vehicle. Chrysler lost $412 per vehicle for the first nine months of
2007, while GM and Ford lost $729 and $1,467, respectively, per vehicle for the
full year. This reflects that the Detroit Three still pay more for health care,
pensions and sales incentives. They also support more dealers relative to their
respective market shares, than either
Toyota
, Honda or Nissan.
“There is no doubt, based on our visits
to more than 20 plants over the last year that continuous improvement in manufacturing
processes are taking hold in just about every company,” said Michelle Hill, vice
president of Oliver Wyman and director
of The
Harbour Report™ North America. “Everyone is focused on reducing waste
and building quality into their processes more than ever.”
Harbour noted that despite the focus on low labor costs in
Mexico
, the plants in that region are very lean and competitive with high quality even
with less automation.
The innovative agreements the United Auto Workers reached with the three domestic
companies likely will enhance their competitive position in the future.
First, the union agreed to
a lower-tier wage – about $14.20 an hour – for
new hires. GM can hire these new workers to perform “non-core” work such as delivering
parts to the assembly line, custodial services, and most work that doesn’t involve
putting a part on the body of a car or truck. Ford and Chrysler can hire the lower-wage
people for any hourly position as long as they don’t exceed
20% of their
U.S.
hourly workforce.
The lower-tier wage may lead Chrysler, Ford and GM to consider bringing the production
of certain components and modules back into their assembly plants that have been
out-sourced to suppliers who have paid their workers considerably less. How soon
and how far any of the three bring work back in-house will depend on the number
of high-seniority workers accept buyouts in the coming months.
In its first year in
The Harbour Report™ North America, Hyundai Motor Manufacturing Alabama
posted a very strong 20.62 assembly labor hours per vehicle at its
Montgomery
,
Ala.
, plant that produces the Hyundai Sonata sedan and
Santa Fe
crossover. The plant’s productivity on the
Santa Fe
(22.58 labor hours per vehicle) was best for plants building midsize crossover vehicles.
In overall productivity, four of the six companies with assembly, stamping and powertrain
operations in
North America
– GM, Honda, Chrysler and Ford – showed improvement
in 2007.
Neither Honda nor Nissan participated in this year’s report. The report does include
assembly, engine and total manufacturing estimates for both companies based on publicly
available data.
Among vehicle assembly plants, Chrysler’s new
Toledo
plant, which assembles the Jeep Wrangler, set the
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The Harbour Report™ North America 2008 – page 3
individual plant benchmark
for labor productivity with a measure of 13.57 hours
per vehicle, followed - by GM’s
Oshawa
#1 plant that produces the Chevrolet Impala.
Oshawa
#1 posted a 15.18 HPV performance.
Chrysler’s Toledo South plant features an innovative collaboration with three suppliers.
Kuka Group manages the body shop. Magna Steyr manages the paint shop, and Hyundai
Mobis handles chassis assembly for the Jeep Wrangler.
The Harbour Report™, the auto industry authority on manufacturing
efficiency first published in 1989, measures assembly, stamping and powertrain productivity
performances – plant by plant, and company by
company – for North American automotive
manufacturers. The labor hours per vehicle measure calculates the total salary and
hourly labor content required to produce one vehicle.
By comparison, automakers in North America, on balance, have become very competitive
globally, only slightly behind
Japan
, but ahead of most other regions. Although labor costs remain high, the weak dollar
and new labor agreements have made North
America
a more attractive region for manufacturing.
Despite their continuous improvement in plant-floor productivity, Chrysler, Ford
and General Motors still use significantly less of their assembly capacity than
Toyota
and Honda. For example, Chrysler and GM each assembled 88% of the potential number
of vehicles they could produce on two 16-hour shifts for 235 days a year. Ford’s
assembly capacity
utilization was 84%, up from 77% in 2006, but well below
Toyota
’s 100% and Honda’s 97%. The domestic manufacturers also have a wider range between
their least and most utilized plants. Toyota had no plant running at less than 92%
of capacity and none running at more than 107%. By contrast, GM’s North American
assembly plants ranged from 44% to 137%. Ford’s were between 47% and 129%, while
Chrysler’s spanned from 46% to 126%.
Other highlights from this year’s Assembly, Stamping and Powertrain chapters include:
Vehicle Assembly
CAMI Automotive, which produces the Chevrolet Equinox, Pontiac Torrent
and Suzuki XL-7 in
Ingersoll
,
Ontario
, achieved a 17.59 HPV and the New United Motors
Manufacturing Inc. (NUMMI) plant in
Fremont
,
Calif.
, posted an impressive 18.96 HPV to lead all companies in
North America
.
Chrysler had four of the 10 most productive assembly plants: Toledo South (13.57 HPV for Jeep Wrangler);
Belvidere
(17.09 HPV for Dodge Caliber, Jeep Compass and Jeep Patriot); Jefferson North (18.68
HPV for Jeep Grand Cherokee and Jeep Commander), and
Brampton
(18.78 HPV for Chrysler 300, Dodge Charger and Dodge Magnum).
GM’s
Oshawa
#1 and #2 plants finished second and third, respectively at 15.18 and 16.17 HPV).
GM makes the Chevrolet Impala in Oshawa #1 and the Buick LaCrosse and Allure (for
the Canadian market) in Oshawa #2. GM’s Lordstown, Ohio, plant (Chevrolet Cobalt, Pontiac G5) finished seventh at 18.12 HPV.
Toyota
averaged 22.35 labor hours
per vehicle across the five North American assembly plants included in this year’s
report, compared with 22.05 hours per vehicle in 2006.
GM led in 11 of the 20 vehicle
segments in which it competes: midsize non-premium conventional car (Buick LaCrosse
and Pontiac Grand Prix/Oshawa), midsize non-premium sports car
(Chevrolet Monte Carlo/Oshawa #1), midsize non-premium van (Chevrolet Uplander, Pontiac Montana SV6,
Saturn Relay and Buick Terraza/Doraville, Ga.), midsize premium conventional (Cadillac
STS/Lansing Grand
River); midsize premium sports car (Chevrolet Corvette, Cadillac XLR/Bowling Green, Ky.); midsize premium utility (Saab 9-7X/Moraine, Ohio); large
non-premium conventional (Chevrolet Impala/Oshawa #1) large non-premium utility
(Chevrolet
Tahoe, Suburban, GMC Yukon and Yukon XL/Arlington, Tex.); large non-premium
van (Chevrolet Express, GMC Savana/Wentzville), large premium conventional (Cadillac
DTS/Detroit-Hamtramck); large premium SUV (Cadillac Escalade/Arlington, Texas).
Ford led in five of 15 segments
in which it competes: compact premium conventional car (Lincoln
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The Harbour Report™ North America 2008 – page 4
MKZ/Hermosillo, Mex.), mid-size
non-premium pickup truck (Ford Ranger/Twin Cities), midsize premium CUV (Lincoln
MKX/Oakville); large non-premium pickup (Ford F-150/Norfolk), large premium pickup (Lincoln Mark LT/Dearborn), premium van (Chevrolet Express, GMC Savana/Wentzville),
large premium conventional (Cadillac DTS/Detroit-Hamtramck); large premium SUV (Cadillac
Escalade/Arlington,
Texas
).
Chrysler led in four of 12 segments in which it competes: compact non-premium conventional car (Dodge Caliber/Belvidere),
compact non-premium CUV (Jeep Compass, Jeep Patriot/Belvidere); compact non-premium
utility (Jeep Wrangler/Toledo South), and mid-size non-premium SUV (Jeep
Grand Cherokee/Jefferson North).
Harbour estimates show Honda
remains very competitive. However, Nissan’s performance suffered due to a drop in
truck and minivan production at its
Canton, Miss.
, plant.
Stamping
Harbour uses a stamping index that weighs several labor and equipment measures to create a composite score of stamping productivity. On that basis,
Toyota
’s
Georgetown, Ky.
, press shop ranked first, followed
by
Toyota
Cambridge
, Ont. and Chrysler
Belvidere
. Of the 10 best stamping plants,
Toyota
had three;
Chrysler and General Motors, two; and Ford, Hyundai and NUMMI, one each.
“In 2007 Toyota was the best stamper, on balance, in the industry,” said Harbour.
“It is not a matter of spending more than competitors. It reflects regular kaizen
improvement activities and the flexibility that comes with well coordinated engineering
and manufacturing.”
Powertrain
Four of the six largest companies improved engine productivity when comparing plants
that were included in last year’s report. Toyota still led the field at 3.13 HPE.
Chrysler finished second at 3.35 HPE while GM was a close third at 3.44 HPE.
Chrysler’s Global Engine Manufacturing
Alliance plant in Dundee, Mich., turned in the best performance by an engine plant at 1.84 hours per engine, beating
GM’s Spring
Hill, Tenn. plant (2.53 HPE).
Toyota’s Georgetown, Ky. Engine plant finished a respectable third with 2.60 hours
per engine, and its Buffalo, W.Va., plant was fourth at 2.66 HPE. GM had five engine plants in the top 10.
Chrysler maintained the lead it assumed last year over GM and Ford in transmission
productivity, improving to 3.36 HPT from 3.39, while Ford came in at 3.62 and GM came in at 3.68 HPT. For the third time in the last five years GM’s Toledo plant
led all plants producing rear-wheel drive transmissions (2.37 hours per transmission)
and was the No. 1 plant overall. Chrysler Kokomo had the best productivity measure
among producers of front-wheel-drive transmissions (A604 line) at 3.51 HPT.
Overall
More than just year-over-year performance,
Oliver Wyman’s
Harbour Report™
looks at several
years of results to determine which companies are developing systems and processes
related to quality, lean manufacturing, continuous improvement, worker involvement,
technology, level of product complexity, process design and layout.
“Lean manufacturing and continuous improvement efforts do not always produce
immediate improvements, nor are they immediately recognizable,” said
Ron Harbour
. “But as shown in
The Harbour Report™
2008 results, companies that are producing consistent, sustainable
improvements to their manufacturing operations are providing automakers with a cost
advantage over their rivals.”
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