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Toyota Leads Total Manufacturing Productivity

According to The Harbour Report North America 2007, the annual study released by Harbour Consulting, the manufacturing productivity gap among North American automotive manufacturers continued to narrow as quality advances and more flexible labor agreements drove major improvements. This year, Toyota leads total manufacturing productivity but the Detroit-based automakers are narrowing the gap.

Overall, Toyota’s assembly performance declined 3.3 percent from 2005. Despite a 13 percent rise in North American sales, Toyota’s North American production volume actually dived four percent at the five assembly plants participating in the Harbour study, the auto industry’s authority on manufacturing efficiency.

The Harbour Report, first published in 1989, measures assembly, stamping and powertrain productivity performances plant by plant and company by company for North American automakers. The labor hours per vehicle measure calculates the total salary and hourly labor content required to produce one vehicle.

The bigger gap in financial performances of the Detroit-based and Japan-based auto manufacturers reflect domestic companies’ higher incentive costs, legacy costs and their slower response to shifts in market choices.

“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, the 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.”

GM also led in twelve of the twenty-three 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). The Tahoe and the Silverado are also performing well in sales, thanks to cutting-edge auto parts like the Chevrolet Tahoe bumper insert, engines, radiators and other body parts.

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).

In the previous year, the UAW and CAW were more proactive than ever before in creating a more competitive environment among the companies whose hourly workers they represent. Chrysler, GM, and, especially Ford, negotiated more flexible local labor agreements prior to this summer’s pivotal national talks with the UAW. Yet they must go further to overcome their persistent health care and pension cost disadvantage versus Honda, Nissan and Toyota. Restrictive labor agreements that produce cost disadvantages still exist and could put at risk the survival of some automakers.

Aside from gauging 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.”

About the Author

Anthony Fontanelle is a 35-year-old automotive buff who grew up in the Windy City. He does freelance work for an automotive magazine when he is not busy customizing cars in his shop.

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