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August 3, 2005
Detroit discovers flexible manufacturing
From yesterday's Wall Street Journal, "Amid Price War, Chrysler To Revamp Manufacturing":
DaimlerChrysler AG's Chrysler Group plans a major revamp of its manufacturing process that it hopes will shave billions of dollars off the cost of developing and producing cars over many years.
The move reflects how U.S. auto makers have begun to rethink basic assumptions about manufacturing cars and trucks as they seek a way out of the intense price war, and surge in overseas competition, that has sapped their North American profits since 2001.
Chrysler's new manufacturing process, which will be rolled out this fall at a plant in Belvidere, Ill., that is among the company's biggest money-losers, is intended to allow the flexibility to build three or more completely different models of cars in a single plant. Typically, U.S. auto makers produce one or two types of vehicles per plant. The idea behind the retooling is to improve the odds of a plant operating at close to maximum capacity - a big key to profitability in a capital-intensive industry like autos.
. . .
Increasing factory flexibility by retooling one plant to build three different cars isn't a new idea. Japanese car makers, led by Toyota Motor Corp. and Honda Motor Co., have nearly a decade of experience with the process, known as flexible manufacturing.
But with costs rising, Chrysler, GM and Ford face acute pressure to rethink the decades-old calculus of their North American vehicle-making businesses.
"This environment requires people to do things differently," said Frank Ewasyshyn, executive vice president of manufacturing at Chrysler, in an interview. "You have to find ways that you never thought of before to reduce your cost and pass it on to the customer."
. . .
Ron Harbour, president of Harbour Consulting, which puts out a closely watched scorecard of auto-manufacturing productivity, said Chrysler's new initiative "gives them the chance to catch up to Toyota and Honda," but notes that the Japanese are not standing still. "Five years ago, I thought [the Big Three] would have caught up by now, but the Japanese have continued to move forward and [the Big Three] haven't moved fast enough," he said.
. . .
Industry manufacturing experts point out that Detroit's auto makers have announced ambitious initiatives in the past to revolutionize vehicle development and manufacturing, only to see them fizzle. In the 1990s, for instance, GM set out to create a common set of underpinnings that could be used to make midsize cars by its auto brands in Europe, the U.S. and elsewhere. But its divisions ended up modifying the underpinnings so much that the cars that use them -- such as the Saab 93 and the Chevrolet Malibu -- shared relatively few parts and couldn't be made on the same production line.
Toyota has been working to improve its own flexible-manufacturing systems. At some plants in Japan, Toyota and Honda produce as many as six different models per assembly line.
I don't know whether to laugh or cry. These ideas of flexible manufacturing and a common underpinnings (not the same thing - although the reporter seems to think so) go back well before the 1990's (remember the "world car"?). Every few years, we seem to get a new wave of assertions by US auto makers (including the Americanized German company DaimlerChrysler) that they are on the verge of a manufacturing revolution. In the mean time, the Japanese companies continue along with their process of continual improvement. And they pay attention to other things besides costs -- like quality and design.
Judging from this story, the US auto industry seems stuck in the days of Henry Ford when the key to success was "plant operating at close to maximum capacity" (to quote from the story as the reason for the change). They had a good run with innovative new products -- minivans, SUVs. But now those creative juices seem to have dried up and they can't adjust to the new circumstances.
No wonder Detroit has to practically give their vehicles away in order to maintain sales.
Posted by Ken Jarboe at August 3, 2005 10:02 AM
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