Big 3 catching up on productivity

Japanese carmakers still have an edge

June 02, 2006|By RICK POPELY | RICK POPELY,CHICAGO TRIBUNE

CHICAGO -- Japanese-based manufacturers remained the most efficient vehicle producers in North America last year, but the domestic Big Three are catching up.

Nissan reclaimed the top spot from Toyota after falling to second in 2004, and Honda ranked third in the Harbour Report, an annual productivity assessment by Harbour Consulting of Troy, Mich., that is closely watched by Wall Street and manufacturing experts.

Productivity and quality go hand-in-hand, said Michelle Hill, Harbour's North American director and one of the authors of the study.

"If you focus on quality, if it is driven into the process, you'll get more productivity," she said. "That means you're not fixing things after the vehicles are built."

Nissan required 28.46 labor hours per vehicle, including fabricating metal, building engines and transmissions and assembling the vehicle. That's a 3.3 percent improvement from 2004, when it opened a new assembly plant in Canton, Miss., and launched several new models.

Labor accounts for about 15 percent of a vehicle's cost on average, so Nissan's efficiency translates into a $300 to $450 per vehicle cost advantage over Ford, the least productive of the six major manufacturers in North America in 2005.

Productivity at No. 2 Toyota slipped 5.4 percent, to 29.4 hours per vehicle, and Honda's fell 1.5 percent, to 32.51.

General Motors led the domestic manufacturers for the fifth straight year, closing in on Honda. GM improved 3.3 percent, to 33.19 hours per vehicle, despite producing 425,000 fewer vehicles last year.

Harbour's Hill said one of the domestics could become the most efficient manufacturer within three years. GM and Ford are streamlining, she said, while Japanese manufacturers are adding capacity and straining their resources.

"Look at GM. They had an 8 percent reduction in production volume and still showed a 3.3 improvement [in productivity]," Hill said. "There's some discipline there. They see a need to improve to stay alive."

But Erich Merkle, an analyst with industry forecaster IRN Inc. of Grand Rapids, Mich., said this is only on part of the picture.

"And in GM's case, it's a small part," Merkle said. "The real issue is what demand is going to be for Big Three vehicles in the future. If they don't make vehicles people want to buy, they will have to keep retrenching and falling back," Merkle said.

"The Japanese are making vehicles that people want to buy, and they're building them efficiently. They're firing on all cylinders."

Gary L. Cowger, GM's manufacturing chief, said the automaker will continue to improve through a global manufacturing system that lets all plants share techniques that boost productivity - and quality.

In 1998, GM needed 16.6 more labor hours to build a vehicle than Toyota, the leader then, but has narrowed that to 3.8 hours. Cowger said GM has its sights on the top. "We never predict when, but that is the goal," he said. "I'm pretty optimistic there's more we can achieve here. We're moving in on the leaders."

GM had five of the 10 most efficient assembly plants in North America, though four of the five are scheduled to close by 2008 as part of a restructuring.

Ford improved for the fourth year in a row, by 3.2 percent to 35.79 hours per vehicle, and its Atlanta plant was the most efficient assembly operation in North America, requiring 15.37 hours per vehicle. The Atlanta plant will close this year as part of the struggling automaker's restructuring.

Chrysler restated its goal of requiring fewer than 30 hours per vehicle in 2007. Much of Chrysler's efficiencies have come from new, easier-to-build models.

Rick Popely writes for the Chicago Tribune.

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