The much-ballyhooed 2006 Harbour Report—the industry bible on manufacturing efficiency—uncovered some interesting facts, not the least of which was the top two most efficient North American assembly plants are slated to be mothballed in the next few years. After years of nipping on the heels of the leaders, Ford’s Atlanta, GA, assembly plant took the top spot in the competition, with merely 15.37 man hours needed to assemble each Taurus and Sable that rolled off the line—starting in ’08, some of the workers will have a long time to contemplate that victory, as the plant is scheduled to be closed. Right behind the Atlanta plant is GM’s soon-to-be-shuttered Oshawa, Ontario, No. 2 plant, home of the Buick LaCrosse and Pontiac Grand Prix; vehicles are built there at a pace of 16.08 hours per vehicle. The other plants on the top ten list destined or already closed are GM’s Lansing, MI, M plant and its Spring Hill, TN, Saturn Ion plant. Ron Harbour, president of Harbour Consulting, points out most of the plants that topped the list headed for the scrap heap were either outside the traditional supplier footprint of the Big Three or were having their vehicle platforms phased out. Those factors won out at the end of the day, not productivity: “When you evaluate closing or retaining a plant, there are hundreds of criteria. Productivity is only one of them—certainly an important one, but it’s not the only one,” he said.
In terms of total assembly hours per vehicle for all vehicles produced by a company in its North American facilities, Nissan remains the leader at only 18.93 hours per vehicle, which is a 3.5% decline from the automaker’s year-ago performance. Blame it on the Canton, MS, plant and its continuing struggles. Toyota came in second at 21.33 hours per vehicle, a 9.6% drop-off from 2005, thanks to problems at its Alabama engine plant. Harbour also suggested Toyota may be experiencing growing pains: “As you grow and start to take on more resources…you are going to have difficulties keeping all the puppies in a box,” he said. Toyota has instituted programs to provide refresher courses to employees on the Toyota Production System, he said. Honda also saw its performance decline by 3.9% to 21.43 hours. On the positive side, GM posted a 2.9% gain in productivity, ending at 22.42 hours and for the first time, DaimlerChrysler surpassed Ford, coming in with 23.73 hours per vehicle, a 5.7% gain, while Ford pulled up the rear at 23.77 hours, a modest 2.9% jump. In terms of capacity utilization, Harbour said Toyota is running at an average of 106% utilization rate, while Nissan is at 95%, DaimlerChrysler at 94%, Honda at 91%, GM at 90% and Ford at 79%. Comparing best and worst utilization performers at each automaker shows another interesting fact: GM has one plant operating at only 23%, while Ford’s worst performer is running at 33%. Compare that with Toyota’s worst performer, which runs at 97%, or Nissan’s at 89%. Built-in flexibility is the differentiator here, as most of the transplants are equipped with tooling enabling the plants to build multiple products off multiple platforms, while the Big Three are just getting on the flexibility train. A stark example: Honda added production of the Accord to its East Liberty, OH, assembly plant over a weekend, thanks to the built-in flexibility at the plant, which builds the Civic and Element. After demand slowed, the Accord was taken out of the plant in a similarly quick fashion. “All they had to do was contact their suppliers and tell them, instead of shipping your parts here, send them there, it was that easy,” Harbour said. Traditional Big Three plants have taken weeks or months to add new products and equally as long to ramp up to full output, which leaves them at a competitive disadvantage.
What does productivity mean to the bottom line? According to the report, Nissan enjoys a cost advantage of as much as $450 per vehicle over its less-productive competitors. Another financial statistic is the pre-tax profit per vehicle for each of the manufacturers, which Harbour said resulted in GM losing $2,496 on every vehicle produced in North America last year, while Ford lost $590 and DaimlerChrysler managed to eek out a $223 profit on each vehicle. The rest were raking in the dough as Honda recorded an average profit of $1,215 per vehicle, Toyota threw $1,587 in its bank account for each car produced and Nissan built its balance sheet to the tune of $2,249 for each vehicle produced in the region.
What does it all boil down to? Manufacturing flexibility and product desirability in the market place are the two key factors that equate to money in the bank. It’s not about union work rules, since most of the top ten plants are represented by either the UAW or CAW. It’s not about currency exchange rates. It’s all about being able to respond to the market quickly with reduced manufacturing complexity.—KMK