Will the Big Three go the way of radiator caps and hood ornaments? Recent rumblings in Detroit suggest that General Motors and Chrysler are considering a “marriage.”
Look out! The Big Three may soon go the way of radiator caps and hood ornaments. All the rumblings coming from Detroit these days seem to indicate that top executives at General Motors Corp. (GM, Detroit) and Chrysler LLC (Auburn Hills, MI) are seriously considering a “marriage.”
That doesn’t surprise me, because both companies have some close ties. For instance, GM’s current cheerleader and self-appointed car czar, Bob Lutz, whose “official” title is vice chairman, previously served as president and CEO of Chrysler. And, going back almost 100 years, a guy by the name of Walter Chrysler sparked GM’s early success.
When Chrysler became plant manager of Buick’s huge complex in Flint, MI, in 1912, he streamlined the production process and implemented a series of innovations to reduce the time and cost of final assembly. To speed up production, Chrysler installed a track throughout the plant that was made from two-by-fours.
After the wheels and springs were attached to the frame, vehicles were pushed along the track and, as the car came to assemblers, they each attached a part before the car was wheeled to the next workstation. Chrysler claimed that Ford Motor Co. (Dearborn, MI) operated its final assembly line on a chain conveyor after Buick had begun its own nonmotorized system.
Because of the new assembly process, Buick output quickly increased from 45 to 200 cars a day. By 1915, Buick assemblers were turning out 150,000 cars per year. Within four years, Buick was generating $48 million in sales annually-more than half the money GM earned.
However, Chrysler abruptly left GM in 1919, because he was frustrated by a long-running feud with Billy Durant, the company’s flamboyant founder and president. A few years later, Chrysler started the company that GM is now courting. The Buick complex thrived for many years after Chrysler left, and it was GM’s most vertically integrated facility.
Today, Chrysler’s assembly lines rank as some of the most efficient in the North American auto industry. The company’s manufacturing productivity has improved by more than 31 percent over the last seven years, according to the 2007 Harbour Report conducted by the Oliver Wyman Group (New York). In last year’s study, Chrysler posted an 8 percent improvement in total manufacturing labor productivity to tie with Toyota Motor Engineering & Manufacturing North America Inc. (Erlanger, KY) as industry leaders.
As far as individual assembly lines go, GM could pick up a few gems if its merges with Chrysler, including the innovative Toledo Assembly Plant and its supplier park, where companies such as Kuka Group and Magna Steyr manage and operate major parts of the production process, such as the body shop and the paint shop. According to the 2007 Harbour Report, the complex is the best-performing assembly plant in North America, with assembly averaging 13.57 hours per vehicle.
Other top-notch Chrysler facilities include lean, flexible assembly plants in Belvidere, IL; Brampton, ON; Detroit; and Kokomo, IN. Another plant that earns high marks in the Harbour Report is the Global Engine Manufacturing Alliance (GEMA, Dundee, MI), which is a Chrysler, Hyundai and Mitsubishi partnership.
Despite those advantages, I think GM and Chrysler are a poor fit. First of all, there’s too much overlap in their existing product lineup. Could GM really make Dodge a stronger brand than it currently is? I doubt it. On the other hand, GM could probably help Dodge and other Chrysler brands get more exposure in hot markets, such as China, India and Russia.
If the days of the Big Three are coming to an end, I think it would be better if Chrysler could be absorbed into the Nissan-Renault alliance (Renault owns a 44 percent stake in Nissan). The French-Japanese company is led by Carlos Ghosn, who has been extremely successful turning around Nissan. Could he perform the same type of magic at Chrysler?
Maybe the French could succeed where the Germans (Daimler) failed. But, then again, I seem to recall the last time that Renault came knocking on Detroit’s door-it acquired American Motors Corp. in 1982. Ironically, Chrysler gobbled up the remains of AMC (mostly the Jeep brand) in 1987. Will history repeat itself?