1999 Harbour Report

It's tough to stay on top. Just ask the Detroit Red Wings. They were eliminated early in this spring's NHL playoffs after winning two Stanley Cups back to back. So it should not be a surprise that after five years of being rated as the most productive auto assembly plant in North America by the influential Harbour Report, Nissan Motor Mfg. Corp. (NMMC) in Smyrna, TN, is ceding its crown to another.

What is a bit surprising is that its car operations slipped four rungs in 1998, trailing Toyota Motor Corp's Cambridge, Ont., plant which builds subcompact Corollas, as well as both of Ford's perennially high-ranking Taurus/Sable plants in Atlanta and Chicago.

NMMC's compact pickup truck assembly operations in Smyrna also dropped to second place in truck assembly efficiency, behind Ford's Louisville plant, which builds a more complex product, the Explorer sport/utility vehicle (SUV).

But even though Toyota and Ford ranked at or near the top of Harbour's efficiency rankings of North American automotive assembly, stamping, engine and transmission plants, they could not top DaimlerChrysler AG in arguably the most important indicator of all: worldwide profit per vehicle.

Thanks to a heavy production mix of high-margin light trucks, DC, which is even less efficient than General Motors Corp. in some areas easily beat out its more productive rivals in this crucial measurement. DC's whopping $1,470/car profit in 1998 was well above Toyota's $1,348 profit and Ford's $854 profit, and it dwarfed GM's measly $317 worldwide profit per vehicle. Adding injury to insult, poor Nissan lost $66 per vehicle worldwide in 1998 after earning $301 in '97.

Aside from these results, there was good and bad news for most North American automakers participating in this closely watched annual study. That's because this year, Harbour manufacturing analysts finished changing over their methodology from comparing the number of workers it takes to build a vehicle or component to the number of worker hours it takes to do it, which they say is a much more accurate measuring tool. This measure, they say, accounts more precisely for the impact of factors such as absenteeism and unscheduled overtime.

Unfortunately for some manufacturers, this more accurate tool shows they aren't improving as much as they would like. In fact, it reveals a big productivity gap between front-runners Nissan, Ford, Toyota and Honda Motor Co. Ltd., and the rest of the North American pack, namely GM and DC, which were actually gaining ground by the previous measurement technique.

GM, of course, still trails the pack in most key labor productivity areas. If it were as efficient as Toyota's benchmark operations, it would not need the equivalent of 40,000 extra workers. Harbour Associates President Ron Harbour says, however, that 40,000 is a theoretical number based on overtime figures, and that GM probably only needs to cut actual staffing by about 20,000 workers.

The villain in this little drama, Harbour experts say, is unscheduled overtime. It's fine to run overtime to add production volume to average straight-time levels, but when you have to use overtime just to meet daily straight-time quotas, then your efficiency drops. For instance, if you are adding overtime because equipment is breaking down, or production is halted because of part supply problems, you obviously can't be as efficient as a plant that is building the same number of vehicles on straight time, even though the number of workers used may be the same.

Ford is doing particularly well by this measure because it is managing to keep product flowing smoothly out of its factory doors while demand is hitting record levels. However, Harbour analysts say Ford still isn't nearly as "lean" as Toyota, and that proffers both good and bad news. The bad news is Ford still relies on lots of in-process part inventories to prevent production stoppages and bottlenecks if one segment of the production chain goes down. The good news is that it still has lots of room to increase its high productivity even further.

Harbour analysts emphasize that NMMC's drop in the rankings is more the result of product and marketing problems at its parent than troubles with plant efficiency. NMMC's key products last year were the slow-selling Altima sedan and Frontier compact pickup. The plant has the capacity to build 430,000 vehicles annually, but built only about 300,000 in 1998 due to low demand. Despite the big drop in production, Nissan didn't lay off any workers, and that ultimately hurt its industry-leading productivity numbers.

Another victim of the marketplace is GM's CAMI Automobile Inc. joint-venture plant in Ingersoll, Ont. Although its hours/vehicle numbers look terrible, it's actually a very efficient plant. The problem, Harbour analysts say, is that it has a production capacity of 250,000 vehicles annually and it only built about 55,000 vehicles last year because of slow demand. It has laid off lots of workers, but not enough to look efficient.

Conversely, Ford's Kentucky truck plant benefited from the booming SUV market and the ability to keep plant uptime high.

Other highlights: n Toyota's Georgetown No.2 plant won high marks, even though it builds Camry sedans and more labor-intensive Sienna minivans on the same line.

n GM's Buick City plant required only 28.15 hours to build the Pontiac Bonneville and Buick LeSabre, a number Harbour calls "very good." Meanwhile, GM's Orion plant logged a poor 40.61 hours/vehicle to build Oldsmobile Aurora and Buick Park Avenue and Riviera. The irony? GM is shutting down Buick City, but sparing Orion.