Productivity is Not Quality

Today brought us the news that the Detroit 3 automakers (Chrysler, Ford, GM) have almost eliminated the labor productivity gap with foreign automakers, including Toyota.

Helped by leaner processes and employee buyouts, Detroit's beleaguered auto makers last year nearly erased the productivity deficit against their Japanese competitors, according to an annual report on automotive manufacturing activity.

The difference among 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, according to Oliver Wyman's The Harbour Report.

There was no clear chart, but by piecing together the data the ranking from most productive down to least was as follows:

1. Toyota
2. Chrysler
3. Honda
4. GM
5. Nissan
6. Ford

This article claims this narrowing of the labor productivity gap is of some concern to Toyota.

Under the terms of the new UAH contract, the Big Three [Detroit 3] should be able to continue cutting labor costs further over the next few years, a prospect that has Toyota worried, a manufacturing executive at the company said.  One internal study at Toyota predicts Big Three [Detroit 3] labor costs, including health care, will be even with Toyota's by 2010, the executive said.

But labor productivity is just one piece of the equation that creates success.  And the Detroit 3 will no longer be able to blame labor.

A level-playing field in plant productivity means union labor is now no longer a major disadvantage for GM, Ford, and Chrysler, and shifts the focus of their troubles on management.  In the past, the Big Three [Detroit 3] have blamed many of their problems on the high wages and benefits the UAW commanded.  Now the bulk of their profitability issues stem from management decisions.

In other words, the chicken has come home to roost.  One glaring example of how productivity does not equal success can be found with Chrysler.  Take the following example:

A Chrysler plant in Toledo, Ohio, that makes Jeeps was the best assembly plant, requiring 13.57 hours to produce a vehicle.  It uses an unusual system in which three suppliers operate parts of the production lines, using workers on their payroll.  "When you put it all together that's the kind of result you get," said Frank Ewasyshyn, Chrysler's vice president of manufacturing.

"... that's the kind of result you get."  Hmmm... I wonder what result he's referring to.  Just yesterday there was a story on the latest quality ratings for auto brands.  The ranking from best to worst?

Yes, Porsche is on top again.  Where was Jeep, owner of the most productive auto factory?

In other results, all three brands owned by Chrysler LLC scored below the industry average, and its Jeep brand was last -- underscoring the challenge facing Cerberus Capital Management LP, the private-equity group that bought a controlling stake in the auto maker last year.  Chrysler's Jeep brand had 167 problems per 100 vehicles, six more than last year.

Hmmm... perhaps something all you factory managers should think about when you hand down productivity goals.  Don't forget the other components that create customer value... which creates your success.