U.S. automakers close productivity gap
The Wall Street Journal reported today that last year “Chrysler LLC and Toyota Motor Corp. were tied for the top spot in plant productivity in North America,” according to a closely watched scorecard on auto manufacturing. “On average both companies required the same number of labor hours – just over 30 – to assemble a vehicle and major components like the engine and transmission.”
The Detroit Free Press added that Chrysler “got its first piece of really good news in more than a year as some of its most important manufacturing facilities won raves in the respected Harbour Report of productivity.” With “buyers shift[ing] to more fuel-efficient vehicles, the plants that build Chrysler’s smallest and most fuel efficient engines and vehicles have become the most efficient in North America by a wide margin,” giving the automaker “an important competitive advantage.” The report indicated that “Chrysler has tied Toyota as the most efficient vehicle maker in North America.” In contrast, “Chrysler finished dead last in the survey just seven years ago.”
According to a related Wall Street Journal article, the Harbour Report indicated that, “[h]elped by leaner processes and employee buyouts, Detroit’s beleaguered automakers last year nearly erased the productivity deficit against their Japanese competitors.” The difference between “the Big Six from the most- to least-productive in terms of total manufacturing labor dropped to 3.5 hours a vehicle, or about $260 a vehicle, down from 10.51 hours, or $790 a vehicle, in 2003.” In addition to Chrysler’s improvements, the report suggested that “General Motors Corp. (GM) brought its total manufacturing productivity performance to 32.29 hours a vehicle, its 12th consecutive year of improvement,” while “Ford Motor Co. reduced its labor hours per vehicle by 3.5 percent to 33.88, despite producing 6 percent fewer vehicles than it did in 2006.”
Bloomberg further explains that, while Toyota and Chrysler “plants used the least labor to build a vehicle in North America last year…worker buyouts helped improve efficiency at” GM and Ford. “Automakers are shifting to ‘fewer, better, more competitive plants,’ Ron Harbour, partner in Oliver Wyman’s North American automotive practice, told reporters at an Automotive Press Association meeting in Detroit.” Harbour added, “Plant flexibility is going to be crucial.”
Meanwhile, the report says that while the U.S. automakers are more productive, they still are “losing money per vehicle,” due to higher costs, the Associated Press notes.