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June 6, 2007

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2007 Harbour Report published: Toyota leads in total manufacturing productivity, but domestic narrow the gap

  • Toyota leads the six largest competitors in total manufacturing productivity (assembly, stamping, engine and transmission), using 29.93 labor hours per vehicle.

  • General Motors wins 3 of 4 Best Plant awards.

  • Honda leads the six largest companies in vehicle assembly productivity with 21.13 labor hours per vehicle.

  • The gap among the six major North American automakers continues to narrow.

  • The correlation between quality and productivity continues to strengthen.

  • Improved labor productivity allows money to be redirected to make future vehicles more appealing.

  • Flexibility through more competitive labor agreements is beginning to pay off, but more must be done.

  • GM and Ford buyouts partially offset volume losses, and will have a bigger impact in 2007.

  • Fewer plants are producing more vehicles and a wider variety of models supported by flexibility and productivity gains throughout the industry.

  • Best Plant Awards Vehicle Assembly -- GM Oshawa #2 Stamping -- Honda Marysville Engine -- GM Spring Hill Transmission -- GM Toledo

The manufacturing productivity gap among North American automotive manufacturers continued to narrow as quality advances and more flexible labor agreements drove major improvements, according to The Harbour Report™ North America 2007, the annual study released today by Harbour Consulting.

The larger gap in financial performances of the Detroit-based and Japan-based automakers reflect domestic companies’ higher incentive costs, legacy costs and their slower response to shifts in consumer choices more than any large competitive disadvantage on their factory floors.

“Improving productivity in the face of lower production is a huge accomplishment, but none of the domestic manufacturers can afford to let up,” said Ron Harbour, president of Harbour Consulting.

“General Motors essentially caught Toyota in vehicle assembly productivity. Considering that they will be building vehicles in 2007 with dramatically fewer hourly employees in the U.S., GM, Ford and Chrysler likely will reduce their hours per vehicle significantly.”

The UAW and CAW were more proactive in 2006 than ever before in creating a more competitive environment among the companies whose hourly workers they represent. Chrysler, General Motors and, especially Ford, negotiated more flexible local labor agreements prior to this summer’s pivotal national talks with the UAW. However, they must go further to overcome their persistent health care and pension cost disadvantage vs. Honda, Nissan and Toyota. Restrictive labor agreements that create cost disadvantages still exist and could jeopardize the survival of certain automakers.

The difference between the most and least productive in terms of total (Assembly, Stamping and Powertrain) labor hours was 5.17 hours per vehicle (or about $300 per vehicle), down from 7.33 hours per vehicle in 2005, and less than one-third the 17.17 HPV gap in 1998.

This year, Honda’s showed the biggest improvement (2.7%) across this combined assembly, stamping and powertrain measure.

In overall productivity, four of the six companies with assembly, stamping and powertrain operations in North America – GM, Honda, Chrysler and Ford – showed improvement in 2006.

Nissan Motor Co. did not participate in this year’s report. Toyota’s total manufacturing hours per vehicle, while leading the way among the participating companies at 29.93 HPV, was not as strong as its 2005 performance of 29.40. Honda was second at 31.63 HPV.

Among vehicle assembly plants, GM’s Oshawa #2 plant, which assembles the Pontiac Grand Prix, Buick LaCrosse and Buick Allure, set the individual plant benchmark for labor productivity with a measure of 15.68 hours per vehicle, followed closely by its adjoining Oshawa #1 plant that produces the Chevrolet Impala and Monte Carlo, Oshawa #1 posted a 16.34 HPV performance.

“GM Oshawa historically has had one of the best work forces of any assembly plant in the industry and the data proves that,” Harbour said. “The total site builds 20% of GM’s North American volume and does it well.”

The Harbour Report™, the auto industry authority on manufacturing efficiency first published in 1989, measures assembly, stamping and powertrain productivity performances – plant by plant, and company by company – for North American automotive manufacturers. The labor hours per vehicle measure calculates the total salary and hourly labor content required to produce one vehicle.

This year’s Harbour Report™ provides an even broader assessment of factories, adding Volkswagen’s Puebla, Mexico, plant; General Motors’ new Delta Township assembly plant near Lansing, Mich., and Toyota’s plant in Baja, Mexico.

DaimlerChrysler, Ford and General Motors still have a wider variation in capacity utilization among their assembly plants, while they continue to work on plant flexibility. By closing plants in the next two years, all three domestics should see improvement on capacity utilization. Others, such as Toyota, which had its assembly plants running between 95% and 108% of capacity, are leveraging their design, engineering and manufacturing organizations to increase flexibility and use common parts and processes.

The other differentiator is profitability. Toyota and Honda each earned a pre-tax margin of more than $1,200 on every vehicle they sold in North America. In contrast, Chrysler Group lost $1,072, while General Motors lost $1,436 and Ford lost $5,234 on each vehicle sold in 2006.

This reflects a variety of factors, including the large difference in health care and pension costs, lower average revenue, as well as higher costs of rebates and low-interest rate financing required to trim inventories.

Other highlights from this year’s Assembly, Stamping and Powertrain chapters include:

VEHICLE ASSEMBLY

Honda led all multi-plant companies in assembly performance with 21.13 hours per vehicle, but CAMI Automotive, which produces the Chevrolet Equinox, Pontiac Torrent and Suzuki XL-7 in Ingersoll, Ontario, achieved a 17.85 HPV and the New United Motors Manufacturing Inc. (NUMMI) plant in Fremont, Calif., posted an impressive 19.34 HPV.

General Motors had four of the 10 most productive assembly plants: Oshawa #2 (15.68 HPV for Pontiac Grand Prix, Buick LaCrosse and Allure); Oshawa #1 (16.34 HPV for Chevrolet Impala and Monte Carlo); Fairfax, Kan, (17.89 HPV for Chevrolet Malibu and Saturn Aura); and Lordstown, Ohio (19.17 HPV for Chevrolet Cobalt, Pontiac G5 and Pursuit).

Toyota’s Georgetown #2 plant, which produces the Camry and Solara, ranked 10th with 19.77 HPV, an impressive feat considering that it launched the new Camry and the Camry Hybrid during 2006. Overall, Toyota’s assembly performance declined 3.3% from 2005. Despite a 13% increase in North American sales Toyota’s North American production volume actually declined 4% at the five assembly plants participating in The Harbour Report™ North America.

GM also led in 12 of the 23 vehicle segment ratings: compact non-premium conventional car (Saturn ION/Spring Hill), large non-premium conventional car (Chevrolet Impala/Oshawa #1), large non-premium pickup (Chevrolet Silverado-GMC Sierra/Fort Wayne), large non-premium SUV (Chevrolet Tahoe, GMC Yukon/Arlington, Texas), large non-premium van (Chevrolet Express, GMC Savana/Wentzville), full-size luxury sedan (Cadillac DTS/Detroit-Hamtramck), large premium SUV (Cadillac Escalade/Arlington, Texas), mid-size non-premium sports car (Chevrolet Monte Carlo/Oshawa #1), mid-size premium conventional sedan (Cadillac STS/Lansing Grand River), mid-size premium crossover (Cadillac SRX/Lansing Grand River); premium sports car (Chevrolet Corvette, Cadillac XLR/Bowling Green, Ky.), mid-size premium SUV (Saab 9-7X/Moraine, Ohio).

Ford led in five segments: compact non-premium SUV (Ford Escape, Mercury Mariner/Kansas City #1), mid-size non-premium conventional car (Ford Taurus/Atlanta), large premium pickup (Lincoln Mark LT/Dearborn), mid-size non-premium crossover (Ford Freestyle/Chicago) and large premium sports car (Ford GT/Wixom).

Chrysler led in two segments: mid-size non-premium van (Dodge Caravan, Chrysler Town & Country/Windsor) and mid-size non-premium SUV (Jeep Grand Cherokee/Jefferson North).

STAMPING

Harbour uses a stamping index that weighs each of several labor and equipment measures in a process that creates a composite score of stamping productivity.

On that basis, Honda’s Marysville stamping shop ranked first, followed by Toyota Georgetown, Toyota Cambridge and Honda East Liberty. Of the 10 best stamping plants, Toyota had three; Honda, two; DaimlerChrysler, two; and Ford, General Motors and NUMMI, one each.

“In 2006 Honda was the best stamper, on balance, in the industry,” said Harbour. “It is not a matter of spending more than competitors. It reflects regular kaizen improvement activities and the flexibility that comes with well coordinated engineering and manufacturing.”

POWERTRAIN

Four of the six largest companies improved engine productivity when comparing plants that were included in last year’s report. Toyota still led the field at 2.85 HPE. Honda finished second at 3.34 HPE while GM was a close third at 3.44 HPE.

GM’s Spring Hill 4-cylinder engine lines turned in the best performance by an engine plant at 2.27 hours per engine, edging out Toyota’s Buffalo, W.Va., plant (2.29 HPE), which had captured the top spot for five straight years.

The Global Engine Manufacturing Alliance plant in Dundee, Mich., finished a respectable third in its first year participating with 2.68 hours per engine. GM had four engine plants in the top 10.

Chrysler maintained the lead it assumed last year over GM and Ford in transmission productivity, improving to 3.39 HPT from 3.55, while GM came in at 3.68 and Ford came in at 3.75 HPT. For the second time in the last four years GM’s Toledo plant led all plants producing rear-wheel drive transmissions (2.54 hours per transmission) and was the No. 1 plant overall. Chrysler Kokomo had the best productivity measure among producers of front-wheel-drive transmissions (A604 line) at 3.52 HPT.

OVERALL

More than just year-over-year performance, The Harbour Report™ looks at several years of results to determine which companies are developing systems and processes related to quality, lean manufacturing, continuous improvement, worker involvement, technology, level of product complexity, process design and layout.

“Since our company started 27 years ago, we look at how companies are managing their resources,” Harbour said. “Lean manufacturing and continuous improvement efforts do not always produce immediate improvements, nor are they immediately recognizable. But as shown in The Harbour Report™ 2007 results, companies that are producing consistent, sustainable improvements to their manufacturing operations are providing automakers with a cost advantage over their rivals.”

All Photos & Charts: Harbour

(June 1, 2007)


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