Study says 'Big 3' need big changes

THE ROAD TO REFORM

August 02, 1991|By Ted Shelsby

The domestic auto industry will have to make a "quantum change" in improving the way it does business if it wants to be more competitive with foreign automakers by the year 2000.

This was the conclusion of a yearlong study by Ernst & Young, a professional services company, and the University of Michigan. They interviewed more than 250 upper-echelon executives with "Big Three" automakers, U.S.-based foreign manufacturers and both foreign and domestic suppliers.

Lee A. Sage, director of Ernst & Young's automotive industry services division in Detroit, said that while the Big Three have improved in the past year, "getting a few percent better each year isn't enough. Revolutionary thinking and quantum change are needed."

Another member of the study group, David E. Cole, director of the University of Michigan's Office for the Study of Automotive Transportation at Ann Arbor, offered a favorable outlook for General Motors' Baltimore assembly plant, which lives with the threat of closing as GM ponders where it will build a remodeled van for the 1996-1997 model year.

During a teleconference interview from Detroit, Mr. Cole said that it was his understanding that the Broening Highway complex was "a pretty good plant." He said that it is difficult to say where GM and the Baltimore plant will fit in the domestic industry at the beginning of the 21st century, but his guess was that the plant "would probably be around for a long time."

Mr. Cole said that the local GM facility, the city's largest manufacturing employer with about 4,000 employees, will probably have fewer workers in the years ahead. For the industry a whole, he said, there will be fewer people building more cars as manufacturers seek to boost productivity. He added that the autoworkers of the future will need more skills than today, and as a result will probably be better paid.

The study released yesterday, "The Car Company of the Future: A Study of People and Change," noted that there is a clear consensus among executives surveyed of the key characteristics of a successful car company in the year 2000. The characteristics include improved consistency and reliability in the design, engineering and manufacturing processes, and greater responsiveness to customers and flexibility, reflected in such things as offering more frequent model changes.

The executives concluded that U.S. auto employees will need to be more flexible and better-educated and that automakers will have to have closer, more strategic relationships with their suppliers.

The study's major recommendations to improve the competitiveness of U.S. carmakers by 2000 included:

* Set clear priorities for their agenda of change.

* Accelerate the pace of change.

* Rethink and re-engineer business processes.

This is easier said than done, the study group concluded. The industry seems to be its own worse enemy when it comes to making changes. Mr. Sage noted that 57 percent of the `f executives surveyed cited pressures in favor of "business as usual" as the biggest barrier to change. Fifty-three percent said that short-term thinking is a major barrier. While only 23 percent saw organized labor as an obstacle, more than double that amount -- 47 percent -- pointed to middle-management resistance as a significant impediment to change.

Another finding of the study was that U.S. carmakers may continue to lose domestic market share in the years ahead as Eastern Europe, Mexico and the Soviet Union capture a bigger slice of the world market.

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