The Assembly Top 50
In 1952, Charles Erwin Wilson, president of General Motors Corp., told a congressional committee: "What is good for the country is good for General Motors, and what's good for General Motors is good for the country."
More than 50 years later, Wilson's boast still rings true, at least according to ASSEMBLY magazine's latest research project: the Assembly Top 50. To determine the impact of product assembly on the U.S. economy, ASSEMBLY magazine ranked the top 50 publicly owned manufacturing companies by gross revenue. To qualify for our list, a company had to derive a significant portion of its gross revenue from products that it assembled or that it designed and had assembled by another company. More importantly, some of this assembly, whether in-house or outsourced, had to occur in the United States.
By those standards, GM is clearly No. 1. In 2003, the company posted a gross revenue of more than $185.5 billion, or a whopping 1.7 percent of the U.S. gross domestic product. That makes GM the top assembler not just in the United States, but the world. Only three other manufacturers in the world made more money than GM last year, and those are oil companies.
While Wilson's statement may seem like braggadocio today, our survey reinforces what the former Defense secretary was really trying to communicate to Congress: Since the first Model T rolled off the line, the assembly of machines that roll, float or fly has been critical to the U.S. economy.
In the Assembly Top 50, six of the top 10 assemblers are the major automotive OEMs. Moreover, 32 of the Assembly Top 50 assemble cars, trucks, tractors, planes, trains, ships, tanks, missiles and spacecraft-or major components of those machines. All totaled, these companies account for 78 percent of the $1.9 trillion in revenue amassed by the Top 50. And that's not including contract manufacturers, such as Sanmina-SCI Corp. (No. 39, San Jose, CA), that assemble the ever-growing number of electronic components inside today's vehicles.
Here's some of what's going on at the Assembly Top 50.
No. 1, General Motors Corp., DetroitA flexible vehicle-architecture strategy has enabled GM to optimize resources globally, take better advantage of economies of scale, and develop products tailor-made for each region. For example, the Epsilon architecture spawned the Opel Vectra, Saab 9-3, Chevy Malibu and Pontiac G6. The new Pontiac GTO, based on the Holden Monaro, was developed in less than 2 years.
"In today's increasingly global auto industry, the winners will be those companies that best combine the efficiencies of global scale with a superb focus on local markets," says Rick Wagoner, GM's chairman and CEO. "In both of those regards, I like GM's position."
GM's investments in China during the 1990s are paying off. In 2003, China became the world's third-largest automotive market, and GM's unit sales in that country increased 46 percent last year. The Chevrolet Spark is the first mini-car produced by GM's SAIC-GM-Wuling joint venture and the first Chevy manufactured in China.
Soaring health care costs remain a major challenge for GM and all U.S. companies. GM is the largest private purchaser of health care in the United States. During 2003, the company spent $4.8 billion on health care for its 1.1 million U.S. employees, retirees and their dependents. That's more than the company spent on steel. On an expense basis, every vehicle GM manufactures in the United States starts with a $1,400 bill for health care.
No. 2, DaimlerChrysler AG, Stuttgart, GermanyDuring the next 3 years, DaimlerChrysler plans to launch some 50 new products. Half of those will come from the Chrysler Group, including nine new models by the end of 2004.
In 2003, DaimlerChrysler invested approximately $7 billion in R&D, and $8.3 billion in property, plants and equipment. Major investments were made by the Mercedes Car Group to equip plants in Rastatt, Germany, and Tuscaloosa, AL, to assemble the new A-Class and M-Class vehicles and the new Smart Forfour. Investments for the Chrysler, Jeep and Dodge brands included funds to modify the plant in Newark, NJ, to assemble the new Dodge Durango.
In December 2003, China approved an application to establish a joint venture between DaimlerChrysler, the Taiwanese China Motor Corp., and the Chinese Fujian Motor Industry Group. The joint venture will construct a new plant in Fuzhou City to assemble the Mercedes-Benz Sprinter and Viano Vito vans. The plant, which will open at the end of 2005, will have an annual capacity of 40,000 units.
No. 3, Ford Motor Co., Dearborn, MIFord has dubbed 2004 the "Year of the Car," because most of the new products it introduced in North America this year were cars. That includes the 2005 Ford Focus, Five Hundred, Freestyle, GT and Mustang, as well as the Mercury Montego.
Among the domestic automakers, Ford is leading in hybrid and fuel cell technology. This year, the company began selling a fuel cell powered version of the Ford Focus to commercial fleets. The company also introduced the Ford Escape Hybrid, a mainstream sport-utility vehicle with a full hybrid-electric powertrain. The Escape Hybrid is expected to achieve more than 35 miles per gallon in city driving.
"Consumer-Driven Six Sigma," Ford's quality improvement and waste elimination methodology, has dramatically affected the company's operations. Since its inception, Ford has completed more than 9,500 projects that have saved the company $1.7 billion worldwide, including $731 million in 2003. In addition, the automaker attributes about half of its current-model quality improvement to Consumer-Driven Six Sigma. Warranty costs in 2003 were down 18 percent compared with 2002 spending.
Also in 2003, Ford began implementing a program called Team Value Management (TVM). The process brings together cross-functional teams to improve value and quality. Working collaboratively with its suppliers, Ford assessed the gaps between its actual costs and industry benchmarks. Ford credits TVM for achieving record reductions in total material costs for 2003.
Ford is continuing to implement its new flexible manufacturing system, which standardizes operations, allows multiple models to be built on the same assembly line, and enables faster product changeovers. Three more plants in the United States began using the new system this year. By the end of the decade, all of Ford's European assembly plants and 75 percent of its North American plants will have flexible systems in place.
Like GM, Ford is counting on common vehicle architectures to help increase flexibility, reduce costs, and shorten development times. The company plans to reduce the number of architectures it uses by 25 percent by the end of the decade.
No. 4, General Electric Co., Fairfield, CTIn 2003, only 37 percent of GE's gross revenue came from product sales. Of course, 37 percent of $134.2 billion is still a nice chunk of change, and overall GE ranks No. 4 on our list of the Top 50 assemblers.
Two-thirds of the company's businesses, including Medical Systems and Consumer Products, posted double-digit earnings growth in 2003. And, even though the past 3 years were the worst, economically, in the history of commercial aviation, GE's Aircraft Engines business still grew earnings by 4 percent.
Though GE is known for assembling jet engines, locomotives and giant turbines, the company is dedicating significant R&D resources to something very small: nanotechnology. GE's Global Research scientists filed 28 nanotechnology-related patents in 2003. For example, GE Transportation is pursuing ways to use high-temperature and high-strength nano-metal alloys and nano-ceramics to reduce weight in aircraft engines and allow them to run at higher temperatures, significantly boosting fuel efficiency and decreasing emissions. GE Power Systems has begun field testing erosion-resistant nano-coatings for hydroelectric turbines. The coatings could enable the turbine blades to last 20 times longer than conventional blades. The technology could be a boon in markets such as China, where rivers have extremely high silt content.
No. 5, Toyota Motor Co., Toyota City, JapanOne of the keys to Toyota's success is that it's never content to rest on its laurels. In 1996, for example, the company introduced a new process for assembling car bodies at a plant in Vietnam. The so-called Global Body Line (GBL) was developed so Toyota could implement a common vehicle-assembly "platform" at any of its worldwide assembly locations-regardless of volume or method of assembly.
Today, the GBL has been installed at nearly all the company's plants. Compared with the previous body assembly process, the GBL has produced:
- 30 percent reduction in the time a vehicle spends in the body shop.
- 70 percent reduction in time required to complete a major model change.
- 50 percent cut in the cost to add or switch models.
- 50 percent reduction in initial investment.
- 50 percent reduction in assembly line footprint.
- 50 percent reduction in carbon dioxide emissions due to lower energy usage.
- 50 percent cut in maintenance costs.
Now, the company is working hard on what it calls "Unit and Material Reform" (UMR) measures, which are aimed at reducing the cost of components. Through UMR, the company hopes to reduce the number of process steps needed to produce engines, transmissions, chassis and other components. Already, UMR initiatives have reduced the length of the Corolla ZZ engine assembly line by one-third and the length of the 3.0- and 4.0-liter V6 engine assembly line by one-sixth.
Toyota is also experimenting with new materials, such as plant-based bioplastics. For example, the door trim on the Soarer and the package tray trim on the Camry, Premio and Allion are made from kenaf, a fibrous plant related to cotton and okra. The Raum, unveiled in May 2003, contains parts made of a plastic produced by combining kenaf fibers and polylactic acid derived from sugar cane and sweet potatoes. Dubbed "Eco-Plastic," the material is used for the vehicle's spare tire cover and part of the floor mats.
No. 6, IBM Corp., Armonk, NYLike GE, IBM derives most of its income these days from things that don't need to be soldered or screwed together.
Even so, "Big Blue" garnered $28.2 billion in revenue from servers and other computing hardware, and the company ranks sixth overall on our list. Revenue from IBM's Systems Group increased 11 percent to $14 billion in 2003, and the company outpaced competitors with double-digit growth in UNIX-, blade- and Intel-based servers and storage systems.
IBM's total revenue for 2003 was $89.1 billion, an increase of 10 percent from 2002. Net income was $7.6 billion, compared with $5.3 billion in 2002.
IBM's R&D operations differentiate it from competitors. Each year, the company spends approximately $5 billion for R&D. In 2003, IBM earned 3,415 U.S. patents, breaking the record for patents received in a single year and eclipsing the nearest company by more than 1,400 patents. During the past 11 years, the U.S. Patent Office has issued IBM more than 25,000 patents-nearly triple the total of any U.S. competitor in the information technology business.
Last year, the company turned its expertise in R&D into a full-fledged division. In its first year, IBM's Engineering and Technology Services business designed products for Medtronic (No. 46, Minneapolis), Raytheon Co. (No. 25, Waltham, MA), the Mayo Clinic and the New York Stock Exchange. All totaled, the unit generated more than $160 million in revenue in 2003.
No. 7, Siemens AG, Munich, GermanyThe presence of Siemens on our list underscores the difficulty of producing a list of the top U.S. assembly companies. Though Siemens' headquarters may be located in Germany, its U.S. operations generated $16.6 billion in revenue in 2003, or approximately 21 percent of the company's worldwide business. In 2003, Siemens employed some 65,000 people at 675 locations in all 50 states and Puerto Rico. Among other products, Siemens operations in the United States assemble 3.3 million lamps, 200,000 automotive electronic components and 180,000 residential circuit breakers each business day.
Like all the companies in our top 10, Siemens invests heavily in R&D, including nearly $6 billion worldwide last year. Among the fruits of that research is a tiny piezoelectric actuator that the company's auto parts division now uses in high-speed fuel-injection valves for common-rail and pumped-jet diesel engines. The actuators will help diesel engines to run more quietly, smoothly, cleanly and efficiently. In the future, these actuators will also be used in vibration dampening components, motors for power windows, and fuel injectors for gasoline engines.
In April 2003, Siemens opened a new factory for optoelectronic components in Regensburg, Germany. The new facility will assemble semiconductor light sources, such as light-emitting diodes (LEDs). LEDs are being used more and more in automotive and general lighting applications, particularly in fields where miniaturization, long product life and color saturation are key factors. The plant will also be assembling the company's new organic LEDs, which have a bright future in flat panel displays. They are extremely thin, highly luminous and allow for wide-angle viewing.
No. 8, Hewlett-Packard Co., Palo Alto, CADespite the significant challenge of merging with Compaq, HP shipped record numbers of printers, servers, notebook computers and handheld computers in 2003. In fact, the company sold 43 million printers last year, or more than one printer per second. Unit sales of notebook computers increased by 61 percent, while unit sales of handheld computers increased by 117 percent.
Though the merger was controversial, it has yielded some $3.5 billion in cost savings-three times the company's original goal of $1 billion.
Given that HP sells millions of products annually, the company is conscious of the impact those products have on the environment. HP manages its environmental performance through its Environmental, Health and Safety Management System, which includes regular audits of the company's office and manufacturing sites. Through HP's Design for Environment program, engineers design products to improve energy efficiency and recyclability.
The company has also invested in programs to help customers recycle hardware and printer cartridges. And, HP mandates that its suppliers follow a code of conduct that addresses employment, environmental, health, labor and safety issues.
No. 9, Nissan Motor Co. Ltd., TokyoLast year, Nissan sold more than 3.057 million vehicles worldwide, a 10.4 percent increase from 2002 sales and the first time in 13 years that the company has sold more than 3 million units in a year. The company expects to sell 4.2 million vehicles annually by 2007 and will introduce 28 new models over the next 4 years.
In the United States, Nissan's plant in Smyrna, TN, where the Altima is assembled, set a new benchmark for productivity in 2003. According to the Harbour Report for North America, the plant set a productivity rate of 15.74 labor hours per vehicle-the best rate in the report's history.
Nissan also opened a new assembly plant in Canton, MS, last year. Costing $1.43 billion and spanning 3.5 million square feet, the plant launched five new vehicles, including the Titan full-size pickup truck and the Armada full-size SUV, in just 8 months.
In July 2003, Dongfeng Motor Co. Ltd., a joint venture between Nissan and Dongfeng Motor Corp. of China, successfully launched the Sunny sedan. It's the first Nissan-branded model produced by the company, which expects to introduce six new models by 2006. In addition, Dongfeng Motor Co. is investing $40 million in a new R&D center for passenger vehicles in Guangzhou City. Scheduled to open by the end of 2005, the center will focus on developing car models specifically for China.
No. 10, Honda Motor Co. Ltd., TokyoIn 2003, Honda set records for sales of motorcycles (8.08 million units), cars (2.89 million units), and generators, outboard motors and other small-engine products (4.58 million units). Sales of motorcycles increased by 32.6 percent, while car sales rose 8.3 percent. Net sales, operating income, income before taxes, and net income all reached record highs.
In 2003, Honda completed expansion of the second assembly line at its plant in Alliston, ON, Canada, and the company began building a second assembly line at its plant in Lincoln, AL. When this line is finished, Honda's annual production capacity in North America will reach 1.4 million vehicles, about half of which will be light trucks.