Productivity Gains

North America's automotive productivity race gets a little more interesting as Chrysler Group and General Motors Corp. log major improvements in 2002 while Honda of America Mfg. Inc. and Toyota Motor Mfg. Corp. stumble a bit.

Measured by the 14th annual Harbour Report on production efficiency, the manufacturing and assembly operations of Nissan Motor Mfg. Corp., Honda and Toyota in North America continue to be far more efficient than Detroit's, giving them a $300 to $400 per-car cost advantage.

Despite the superior numbers of the Asian auto makers, Detroit's Big Three are continuing to whittle down the productivity gap between their operations and the major Japanese producers. That's no small feat considering the huge disparity in their operations. The Big Three have dozens of mostly older, unionized facilities with aging workers, while the Japanese have generally newer, non-union plants with younger workforces.

What's more, Ron Harbour, president of Troy, MI-based Harbour and Associates, which produces the closely watched report, adds that every one of the Chrysler plants measured, and all but one GM plant, showed a year-over-year improvement.

At the same time, Honda's efficiency fell almost 13% compared with 2001, while Toyota's efficiency grew an unimpressive 3%.

Meanwhile, Chrysler tallied an 8.3% improvement, the second-best gain for any manufacturer since the Harbour Report was first published in 1989. GM, which has improved its overall hours per vehicle (HPV) 22% over the past five years, posted a 7.4% gain from 2001 to 2002. Even Ford, which has struggled with productivity issues for the past several years, managed to stem its slide last year and post a 2.3% overall gain.

Harbour admits to being a bit surprised by Honda's and Toyota's lackluster performances. Both operations launched new products last year, but he says such launches rarely affect Honda's or Toyota's productivity numbers. However, he points out that the two were significantly impacted by a dock workers labor dispute last year in California that shut off key component shipments from Japan.

Honda alone lost about 25,000 units of production due to the dispute, and because it didn't lay off workers while its production lines were idle, its total HPV was negatively affected, a source says.

Toyota was less affected because it shipped more components by air to keep its production lines moving.

Nissan, whose operation in Smyrna, TN, has been a perennial star of the Harbour Report, established a new record for assembly productivity with a measure of 15.74 HPV. It was unaffected by the dock worker issue because its major port of entry for Japanese parts is in Mexico.

Harbour also points out that both Honda and Toyota implemented new flexible assembly systems at key plants last year, which also could have hurt their HPV numbers. Sources say Honda and Toyota are expected to rebound.

But buoyed by their recent improvements, Detroit auto makers sound more confident than ever about catching up with their Asian rivals.