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Making It: How the Automakers Measure Up

When it comes to how well companies are manufacturing their vehicles from the standpoint of the factory floor, the people at Harbour and Associates have the benchmark vantage point. Here are some observations about their most recent assessments.

Each year, the announcement is awaited by some people with excited anticipation, by others with a sense of dread. It's The Harbour Report, a study of the productive prowess of North American automakers with regard to assembly, stamping, and powertrain operations. TheReport is conducted by Harbour and Associates (Troy, MI).

How sensitive are the auto manufacturers to this study? Well, consider this: The overall results for the 1999 study (which is based on 1998 data) were announced by Ronald Harbour, company president, at a meeting of the Automotive Press Association (APA) in Detroit. No sooner had Harbour left the stage than a General Motors public relations official was passing out a press release with the headline "Harbour: GM Productivity Progress Significant."

It should be noted that the headline on the news release from Harbour and Associates proclaims "Toyota, Ford Plants Triumph in Harbour Report Study."

Clearly, GM is concerned that it gets the right spin so far as its productivity goes vis-a-vis the competition...and according to Harbour, while there have been improvements, they haven't gone too far: "Neither DaimlerChrysler nor General Motors was able to close the productivity gap with the leaders. In fact, the two companies require over 50% more labor hours than Nissan, the efficiency benchmark, and over 30% more than Ford." The problem that Harbour identified with regard to both DCX and GM is that they exhibit an inability to produce vehicles on straight time as well as Ford (and others), that they tend to resort to more unscheduled overtime to get the job done. This can cost billions. Speaking specifically of GM, Harbour noted that the company "still struggles with a lot of plants that aren't getting it done."

Lean Seen.

The GM release quotes Harbour: "GM had major gains in the rollout of lean production techniques across many of its plants. The results were highly visible, especially in material strategies, workplace organization, visual controls, and error proofing." During his presentation of the findings at the APA meeting, Harbour cited "lean" both in the context of the Ford Production System ("It's scary how good they could get," he noted—scary for Ford's competitors) and with regard to how well Mexican plants are doing in the implementation of lean (he pointed out, for example, that DCX's best full-size truck plant is in Satillo): "People who think the Mexican advantage is the labor rate should think again."

That said, the top assembly plant in North America (based on assembly hours per vehicle) is actually a Canadian plant: Toyota's facility in Cambridge, Ontario, where the Corolla is produced. According to Harbour figures, it requires 17.66 hours per vehicle. What is remarkable to note is that Ford Atlanta is the second most productive vehicle assembly plant, needing just 17.72 hours to put together a Taurus or a Sable—and those are classified as midsize cars, not subcompact, like the Corolla.

The other area where Toyota had a "triumph" was in engines, specifically at its Georgetown, KY, four- and six-cylinder engine facility, where it takes 2.97 hours to produce an engine.

Ford was triumphant on the list of top 10 truck assembly plants: Ford Louisville, which builds the Explorer, Mountaineer, and Ranger, is the most productive, requiring just 19.29 hours per vehicle.

Props to GM.

There are a variety of metrics in the Stamping category. And it must be said that GM actually did score first in one of them: pieces produced per hour of production: 653. However, when looking at the equipment productivity based on vehicles per line, Honda is way ahead, at 209 (second place is AutoAlliance, at 110); Honda and Nissan tie in average die changeover time, both at 10 minutes. (Toyota scored in hours per vehicle, hits per worker, pieces per worker, and average number of die changes per line/per day.)

One of the more meaningful measures in the Stamping category is how many labor hours it takes a company to produce the stampings for a vehicle. According to Harbour, when the Big Three are ranked, Ford requires the least number of hours: 2.98. DCX is close behind, at 3.01 hours. GM has a ways to go before it can catch up: 5.38 hours.

The Big Three rate the same way when transmission labor productivity is measured, with Ford at 4.38 hours per transmission, DCX at 4.52 hours (excluding Mexico), and GM at 5.26 hours (excluding Spring Hill). However, when it comes to engine labor productivity, there is a switch in the order: Ford is still the best, requiring 4.57 hours per engine, but GM is second, requiring just 4.76 hours. DCX requires 5.19 hours. And when looking at a five-year (`93-'98) trend, GM shows a 20% improvement in engine labor productivity, DCX a 5% improvement, and Ford a 6% decline.

Money & Manpower.

When it comes to the actual bottom line, DCX has the best one in the industry. According to Harbour calculations of worldwide profit per vehicle, DCX makes $1,470. Toyota is in second place, with a profit of $1,348. Of course vehicle mix (as in percentage of high-margin trucks versus low-volume cars) undoubtedly has a lot to do with it.

One calculation could be troublesome with regard to labor negotiations. It is of the "1998 Labor Productivity Cost Penalty." Essentially, it is based on labor hours per vehicle, the cost of those hours, and the annual volume. The benchmark for hours per vehicle is Toyota, at 30.38. A labor rate of $35 per hour is used for Toyota, Honda, and Nissan; $45 per hour is used for the Big Three. So it costs $1,063 in labor for Toyota to build a vehicle. At the other end of the spectrum, there's GM, which has 45.60 labor hours per vehicle, for a total labor cost per vehicle of $2,052. Harbour then calculates, based on the number of vehicles produced per year for each automaker, how many workers it would take for Toyota to make that many units. The result is a category called "Equivalent Excess Workers to the Benchmark." So to use the extreme again, Harbour reckons that GM has 40,471 people in that category. But undoubtedly GM—as well as every other company—is looking to increase market so as to be able to use its workers rather than to get rid of them.

If there is any one message: Productivity matters.