Lauren Woods asked: The Toyota Motor Corp. led all North American automakers in manufacturing productivity last year, but Detroit’s Big Three continued to close the productivity gap with their Japanese rivals, said The Harbour Report, a study watched closely by the auto industry.
The annual report prepared by Troy, Mich.-based Harbour Consulting, compared labor productivity at six companies that have North American plants. The study covered the installation of auto equipment and integration of parts and accessories like the Jet Chips cold air intake. The General Motors Corp. had four of the top ten most productive vehicle assembly plants, including the most productive plant in the study - Oshawa No. 2 in Oshawa, Ont. It took Toyota 29.93 work hours to manufacture components and assemble each vehicle.
“Topping the Harbour Report is a great achievement at a time when productivity is a critical challenge facing Canada’s economy,” said Arturo Elias, the GM Canada president. “This really shows what can be accomplished with constant focus and it is a testament to our great employees at GM Canada.”
Harbour Consulting president Ron Harbour said that the difference between the most and least productive companies last year was 5.17 hours, more than two hours better than the 7.33-hour gap in 2005. Yet the gap still is equal to about $300 per vehicle in favour of Toyota, the study said.
The productivity gain came because Toyota’s performance declined while the Detroit Three continued to increase. Ford and GM became more productive by slashing thousands of workers through buyouts and early retirement offers, and all three continued to work with unions to negotiate away work rules that place them at a disadvantage to the Japanese companies, Harbour said.
The improvements came even though sales and production declined for all three Detroit automakers, he said. “I think it’s a major point that Ford, Chrysler and GM all made improvements despite the fact that they all had some significant drops in volume,” he said. “When you’re losing production volume that fast, it’s pretty hard to make productivity improvements.”
Ford, GM and Chrysler could narrow the gap even further in 2007, because they did not fully realize the full impact of productivity improvements in 2006, Harbour said. “One of them could even overtake Toyota if production volumes don’t drop too much. We should see a big improvement in the Big Three’s numbers overall in 2007.”
Joe Hinrichs, Ford’s vice president of North American manufacturing, said that although his company is behind competitors, it has seen five straight years of productivity improvements. “Our rate of improvement was better than some,” Hinrichs said. He added that Ford has worked with union leaders on forging agreements to make plants more efficient. That includes allowing workers to do multiple jobs and contracting out traditional union jobs to save money.
Harbour said that such agreements are a necessity as the Detroit Three try to return to profitability. According to the study, Ford lost US$5,234 per vehicle before taxes last year, followed by GM with a $1,436 loss and DaimlerChrysler, which lost $1,072 per vehicle. On the contrary, Toyota made $1,266 per vehicle, while Honda made $1,368 and Nissan made $1,575. While Harbour gives the United Auto Workers and Canadian Auto Workers credit for helping the Detroit Three reduce costs, he said more must be done in the upcoming U.S. national contract talks. He added, “They have really come to the party here and made some really big improvements. But there are still some things out there.”
The Detroit Three have to erase productivity differences at any cost because their viability depends on it, Harbour said.
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