5/1/1999 | 6 MINUTE READ

State of the Industry's Health

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Ron Harbour and his associates have their fingers on the pulses of the world's major automakers—and they've been assessing the health of these companies for more than a decade. Here's some of what he's diagnosed.


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If there's anyone who knows precisely—and we do mean precisely—how well the North American OEMs are doing in terms of their manufacturing (funny how the last word in the acronym refers to manufacturing and how many of the companies seem to be more focused on their marketing) it's the folks at Harbour and Associates (Troy, MI), the manufacturing and management consulting firm that's been analyzing auto productivity since Jim Harbour—who retired from Chrysler Corp., where he'd been the Director of Manufacturing Engineering—started the firm in May, 1980. Jim Harbour performed a study that compared how the then-Big Three stacked up against Japanese auto manufacturers. You may recall that in 1981 there was a report issued by the U.S. Secretary of Transportation that indicated the Japanese were able to produce a small car for $1,500 to $2,000 less than the Big Three could. It was Jim Harbour's research that came up with the number.

In subsequent years, Harbour and Associates have produced The Harbour Report, an annual analysis of the productivity of North American automakers: how well they're doing in assembly, stamping, and powertrain, right down to the specific plants. In some regards, The Harbour Report is to the manufacturing people within auto companies what the J.D. Power Award is to the marketeers. In 1997, a team of Harbour researchers made their way to Europe to create another Report; this one is currently a private document, available only to the participants, but which will likely become public, like the North American study.

The Best—& How Come

Ron Harbour (yes, Jim's son), joined the firm in 1983. He has recently been named the president of the firm, which has grown both in terms of size and industry stature. When we talked with Ron Harbour (and henceforth, when we refer to "Harbour," he's the one we mean), he and his colleagues had just wrapped up visiting more than 50 plants for the firm's 1999 study. Asked to name the company that's doing the best in North America, he answered, "Consistently, Toyota is, on balance, one of the best manufacturers that we see." He noted that "just a half step behind" is Honda.

If someone looks at the 1998 Report for North America they'll see that in terms of workers per vehicle, Nissan Smyrna has the best average, at 2.29. Honda is second, with 2.45 workers per vehicle, and Toyota is third, with 2.55. With regard to the top 10 car assembly plants based on actual hours per vehicle, Nissan Smyrna is in first place, at 16.55 hours per vehicle, with Toyota Cambridge (its Canadian plant) coming in second at 17.14 and Ford Atlanta (Taurus/Sable) third at 17.83. Honda East Liberty (Civic and Acura CL) places ninth, at 21.16 hours per vehicle. When it comes to stamping, Toyota Georgetown and Honda East Liberty and Marysville plants (they're combined in the study for stamping) lead, with each scoring the best in three of the eight categories. (Toyota is best at Hits/Worker, Pieces/Worker, and Average Number of Die Changes; Honda is best at Vehicles/Line, Pieces/Hour, and Average Die Change Time.)

So why did he mention Toyota and Honda? What about Nissan? Harbour's answer is that a broad view must be taken. "I have never come back from Smyrna without being impressed with what they're doing," he said, adding, "Their quality, cost, and productivity are all very good. But they can't get the product." He amplified that part of what accounts for success is the consequence of what the styling studios do, and what the product engineers and the product designers come up with. "Look at Chrysler," he remarked. "Although they've improved, people are not knocking their doors down to buy product because of their quality reputation. They're doing it because the product is so eye-catching, so fun to drive. Nobody has done as good a job in developing product, in my opinion."

Back of the Pack

Who isn't doing so well? Not surprisingly: "GM is still in last position from a productivity standpoint." Without belaboring the point, suffice it to observe that according to the Report GM had a loss of $104 per vehicle, as compared with Chrysler, which made $1,520 per vehicle (before taxes). Harbour pointed out, however, "The gap between the companies is much more narrow than its ever been before. GM has come a long way." During his recent tour of factories he came back extremely impressed with what GM Powertrain is doing. "We've seen some of the most impressive progress in lean manufacturing at GM." He cited, for example, the GM Romulus V8 plant as being one that is an outstanding example of lean implementation, with visual controls, standardized work, andon system, containerization, etc.

The Secret

So what is the secret to success? The answer is there really isn't one. As in the case of Nissan, the manufacturing can be outstanding and the product acceptance in the market mediocre so the result is less than stellar.

Another way of looking at it is from the standpoint of whether excellence is attained via technology solutions (i.e., new and better manufacturing equipment, software tools, etc.) or management approaches. "You can't attribute it to either one," Harbour said. "It is a combination of both." The real issue, he explains, is one of managing the assets better.

He explained that a company can introduce new equipment in a body shop on a regular basis. The best, the latest. But the companies that implement their machines and methods consistently are the ones that are likely to be in the best shape: "They determine what a good system is, then they leverage the hell out of it."

Historically, Harbour noted, the Big Three have taken something of a hodge-podge approach. There would be something new. They'd try it in one place. And in another place they'd try something else. But now, he said, "They see the virtue of common systems." So they, too, will implement consistently and when improvements occur, make the changes comprehensively. They'll leverage the learning.

Blurring of the Lines

For years—at least up until the last few—things were fairly well understood when it came to who did what. The OEMs would build transmissions and engines (and produce the major components of same), make the major stampings, and assemble vehicles. But a change has occurred of late. "There has been a graying of the line between the OEMs and the suppliers," Harbour said.

There is a greater movement toward suppliers doing more, including many of the things that have historically been the tasks of the OEMs. And who hasn't heard of or participated in the modularization of the vehicle? It seems inexorable. But Harbour observed, "There is a perception out there that the way for automakers to cut costs is to go to modules, to let suppliers build big modules. That's a fallacy."

He explained that while it could be true that modules can save the OEMs money, it may be that a module is being built by a supplier that isn't as good at producing quality product, which doesn't end up as a savings, or it might be that transportation costs from the supplier to the assembly plant might outweigh any labor cost savings. "If you're doing a complete analysis of every cost, plus or minus, including such things as the cost of quality and the competency of engineering, then you'll be able to determine whether it is useful to go outside with the module or to keep it," Harbour said.

The Big Question

Speaking of engineering, he pointed out that one of the major issues today (one that he's heard many times from Japanese automakers) is finding U.S. suppliers with strong engineering skills. In fact, he thinks that finding bright, fresh-out-of-college engineers that want to go to work in the auto industry is a major challenge for the OEMs. "Some of the most critical functions at the car companies right now are human resources and labor relations. We've come very far in reinventing the auto industry during the past few years.

"How do you change the reputation of this as being a has-been industry?"

Harbour doesn't have the answer. There probably isn't an answer. But he is certain that it is a question that all in the industry—OEMs and suppliers alike—must ask...and answer.