Driving Auto Changes

Posted on 26 Jan 2009 by The Manufacturer

Toyota remains Big Three's best teacher in the US, by Anand Sharma.

Fifty years down the road we won’t be talking about the legacy costs and outmoded business practices of the U.S. auto industry. We won’t be talking about the industry at all because it won’t exist. Or, we’ll be talking about how the nation’s economic engines of the 20th century forged a new legacy of world-class competitiveness out of today’s crisis.

In his final plea before the U.S. Senate before they turned down the automakers’ request for government aid, General Motors Corp. (GM) Chairman Rick Wagoner testified that his company is able to compete in global markets because, unlike in North America, it can apply the latest technology and business practices to how they make and sell cars. Specifically he cited newer distribution methods and lean manufacturing practices. It’s the same advantage, he noted, that the automotive transplants from Japan, Europe and Korea have been able to leverage in their dealer networks and the factories that they have built in the United States.

Wagoner admitted, in effect, that he and his management team, and their predecessors, and the leaders of the United Auto Workers Union, despite knowing exactly what they needed to do to hold onto GM’s perennially shrinking market share and profit margins, had failed utterly to restructure their North American operations in order to remain competitive.

The U.S. Treasury Department and the former Bush administration examined the automakers’ books and wrangled over the conditions of bridge loans to keep Chrysler and GM out of bankruptcy over the next few more months. But we must continue to focus on exactly how the U.S. automakers should restructure their operations to regain economic viability. The model, oddly enough, lies within GM itself.

This month marks the 24th anniversary of the first Chevrolet Nova to roll off the line at the New United Motor Manufacturing, Inc. (NUMMI) factory in Fremont, Calif. Working in partnership with Toyota Motor Corp. and the UAW, the joint venture has made superior quality small cars and light trucks with both GM and Toyota nameplates for North American markets and for export back to Japan. Over the years thousands of GM managers have cycled through the plant to gain first-hand experience with Toyota’s culture and its efficient and cost-effective methods for assembling vehicles.

After doing their time at NUMMI these GM managers have returned back to other areas of the company only to be surrounded and undercut by workers and managers steeped in traditional manufacturing methods and adversarial labor relationships. With the company’s survival on the line, perhaps those lessons will finally be learned.

Much has been written about how Toyota’s just-in-time production management system is designed to produce only what is being ordered or sold rather than building to preset inventory levels. This production and supply chain synchronization tactic reflects a relentless focus on the customer and the customer’s desires that permeates the entire organization. From its factories to its dealers, GM has never gotten this message. Granted, in a sharp economic downturn, even Toyota doesn’t always get it right. Witness the three-month shutdown of its new truck plant in San Antonio (without laying off any employees) and November’s 56% year-to-year sales decline of its full-size pickup.

The domestic automakers don’t have until the end of the next quarter to develop and finalize a restructuring plan. They’ve had decades to study and talk about what they need to do. It’s time for action. Fortunately for them, there is a core group of U.S. manufacturing companies that are competing both in North America and globally using the business strategies popularized by Toyota. Focusing on what customers really want, eliminating wasteful activities, harnessing the intellect of all employees to improve processes throughout the company, and forming true partnerships with suppliers, does not take years to have an impact.

Every business or corporation is perfectly designed for the results it gets. GM, Chrysler and Ford Motor Company have one final chance to get it right.

Anand Sharma is chief-executive and co-founder of the TBM Consulting Group, a Durham, N.C., manufacturing and management consulting firm. Sharma is also author of “The Antidote” and “The Perfect Engine.”