In its annual report on automotive manufacturing, Harbour Consulting Inc. (Troy, MI), found that the Big Three have just about closed the gap with their Japanese counterparts in terms of manufacturing efficiency in the United States. Granted, Toyota is still leading the pack overall, but nowhere near to the degree that it did in the past.
In fact, according to the report, in 2006 the difference between the most and least productive automakers in terms of total labor hours, including assembly, stamping and powertrain, was 5.17 hours per vehicle. This represents about $300 per vehicle and is down substantially from the 7.33-hour gap that existed in 2005 or the 17.17-hour gap that existed in 1998. Today, four of the 10 most efficient automotive assembly plants in the country actually belong to General Motors!
Of course, productivity is one thing. Profitability is another. Currently, Toyota and Honda are earning a pre-tax margin of some $1,200 per vehicle. Chrysler, on the other hand, is losing $1,072 per vehicle, while GM is losing $1,436. In 2006, Ford lost an average of $5,234 on each and every automobile it produced.
There are a number of reasons for this continuing disparity-labor costs, healthcare costs, product mix, pensions, jobs banks, restructuring costs, plant utilization-all of which the Big Three are addressing in one way or another. The question is whether management and labor will be successful in turning things around.
The good new is that change is in the air, along with a sense of urgency. The coming months will bring pivotal talks between domestic manufacturers and the United Auto Workers. The Big Three are all continuing to restructure their manufacturing capacity as well as their product lines. Chrysler will soon be under new ownership.
On the down side, it remains to be seen whether management and labor are up to the task of navigating these challenges.
Traditionally there have been two viewpoints with regard to history. One maintains that historical figures merely ride the crest of underlying events largely beyond their control, the other, that it is indeed individuals who “make” history. For better or worse, it appears at this moment that the U.S. automotive industry is very much at the mercy of the latter.
Will the individuals in charge of setting policy at the Big Three do so effectively? Will they truly work for the common good? Or will they allow themselves to be blinded by short-term gain? Will they squander their companies’ collective manufacturing know-how, or work together to effect lasting positive change?
For years now Americans have been saying U.S. automakers need to build better cars-well, thanks to the hard work and ingenuity of countless engineers, production managers and shop floor workers, they are doing just that. Now it’s up to the leaders on both the management and labor sides of the equation to follow suite. Instinctively, I have a feeling we are about to witness a true renaissance on the part of U.S. automakers. But, I’m keeping my fingers crossed, just in case. Let’s hope the powers that be don’t end up letting down those thousands of hardworking Americans who are already doing their part to turn around the domestic automotive industry.