Northern disclosure

There were the usual complaints: Corny jokes, self-serving lines and a paucity of people from the auto companies other than the "suits" who gave their speeches and jetted immediately out of town, leaving the predominantly supplier-company attendees to shrug and talk shop among themselves.

But this year's University of Michigan Management Briefing Seminars, staged each August since 1972 in this northern Michigan resort area along Grand Traverse Bay, also had plenty of food for thought and more news than, well, the Republican National Convention.

Manufacturing, chiefly the "lean" variety, captured the spotlight during the first two days of the week-long session and set some sort of record by producing a smattering of disclosures not widely known as more than two-dozen speakers took the podium.

Then the heavyweights -- 21 speakers gave talks over the final three days -- arrived to toy with the provocative general theme, "Knowledge: The Competitive Edge," conjured up by David E. Cole and his colleagues at the U of M's Office for the Study of Automotive Transportation (OSAT). Dr. Cole is a founding father of the Traverse City seminars, ranked by most folks who regularly attend such meetings as among the more fruitful of a proliferating horde of automotive confabs.

If there is a single thread that pulls all of the "knowledge" rhetoric together -- and there were some dandy speeches, with Chrysler Corp. President Bob Lutz's meriting a 10 -- it's this: The explosion in information technology created by increasingly sophisticated computer systems and software threatens to overwhelm those who fail to grasp its implications.Ken Baker, General Motors Corp. research and development chief, perhaps summed it up best. "Since today's knowledge may be tomorrow's day-old bread," he told his audience, "the true value of knowledge comes from applying it quickly. In fact, in the future, there will be only two kinds of business competitors -- the quick and the dead."

Suppliers were warned by speaker after speaker from the OEM side that they'll have to tie in with the Big Three's new global product development and manufacturing computer networks or face losing business. Neil Ressler, Ford Motor Co. advance technology vice president, says adapting to Ford's new computer-aided-engineering scheme, called Multi-Function Optimization, will "almost become the price of entry for major suppliers. Without it, suppliers will not be able to provide us with optimized designs." The goal: "Common computer systems, joint access to common data bases and shared technical capabilities," he says.

Mr. Lutz spent less time on the technicalities of dealing with the information revolution, concentrating on the human element. And in doing so he strafed numerous long-standing beliefs with what he calls "Lutz's Immutable Laws of the Auto Business." Indeed, while acknowledging that making cars requires the logic and predictability mandated by technology "the analogy that I like to use is that we actually have more in common with the movie business than we do, say, with the computer and electronics business." Why? Because making successful movies and cars both require "creative spark" and "inspiration," he says.

Oh yes, those four laws: "The customer is not always right," an argument that customers don't know what they want in future vehicles. "Teamwork is not always a good thing," because at some point someone has to make a gut decision. "The goal of business in general, and of the auto industry in particular, is not to make money -- or at least not just about money," but that the cash will come by providing truly great products." "Creativity itself -- or rather creativity all by itself -- is not always a good thing, either," because costs can get out of control, hurting customers in the pocketbook.

Beyond such lofty thoughts to ponder, the U of M Seminars generated plenty of news and worthy quotes. Here's a sampling:

And Now the News

Joe Spielman, vice president of GM's recently established Metal Fabricating Div., tells reporters after his talk that all eight of GM's '97 model launches are "on target," only to be reminded a few days later by the Wall Street Journal that at least one -- full-size vans at Wentzville, MO -- has hit major snags.

If indeed GM is on or ahead of target at the other seven plants, Mr. Spielman's outfit can take some credit for adopting common practices on the stamping side. "The days of trying to run manufacturing operations by the seat of our pants are long gone," he says. "When people come to work each day they must know how things are going to run." As one example, GM has reduced "literally 57 varieties" of press operations to just six, he says, and commonality is being introduced across the board in areas such as safety, processes and materials handling.

That's all part of GM's goal of slashing new-product cycles from about 42 months now to 24 months within five years, as outlined by Mr. Baker. The swift pace of information flow -- and establishing reliable networks for analyzing and using it -- will enable GM to adopt "24-hour engineering" on a worldwide basis within five to 10 years, he says, taking more months out of the cycle.

Ed Hagenlocker, president of Ford Automotive Operations, focused on empowerment as the key to the company's Ford 2000 globalization effort that, he says, will produce 50% more new products for $11 billion less over the next five years.

But Mr. Hagenlocker also produced a bombshell: Because they've failed to continue meeting Ford's tough Q-1 standards, the Q-1 flag has been lowered at 44 supplier "shipping sites," or facilities, he reveals, and more may be coming as the company continues a Q-1 "review" that began a few months ago. Ford has about 2,300 major suppliers and 10,000 shipping points, including its own facilities, which also are being scrutinized he says.

J.T. Battenberg III, president of GM's Delphi Automotive Systems, calls for rules to control information among suppliers who work for competitive companies, and assures that Delphi already is doing just that. During a Q&A, he also urged suppliers to play it straight with their customers. "If an OEM wants a certain generator and you know it's undersized, or 13-in. brakes when you know they should be 14-in., you either should turn down the business or convince them to change. If we don't, we can't control costs and warranty issues."

Foreign-based automakers, a staple at most recent U of M Seminars, also generated news:

* Daewoo Group Chairman Kim Woo Chong unveiled the South Korean automaker's plans to enter the U.S. market within the next 18 months, targeting 100,000 sales yearly by 2000. Like its rapid expansion in Europe, Daewoo will rely on "direct" sales rather than the traditional franchise structure, although how that will pan out given traditional franchise laws in most states remains to be seen. As part of its North American push, Daewoo plans to establish an advanced research center likely located in the Detroit area, he says.

* Takeshi Yamada, chairman of Honda of America Mfg. Inc., says that by 2000 Honda's North American investments in manufacturing and R&D facilities will hit $4 billion and include the capability of annually producing 840,000 vehicles -- including an all-new minivan -- 900,000 engines and 650,000 automatic transmissions.

Here are snapshots of other news from the U of M Traverse City Management Briefings:

Learning from Aerospace

Faced with mounting crises in their supply chains, U.S. aerospace companies have organized "commodity teams" to smooth out the blips. Mitchell Fleischer, scientific fellow at the Industrial Technology Institute, explains that, "Suppliers used to wait until their part of the program was under way. Now they get started when the contract begins." Aerospace firms are more structured in supply-chain management and more process-oriented than automakers, he contends, which may provide lessons for automakers. He says one aerospace supplier slashed delivery times from 15 to 3 weeks, helping its customer to come in on schedule. "There was greater trust, too," he adds.

More Successful Product Launches

James J. Tobin, vice president and general manager of body and assembly systems at Lamb Technicon, says there are four steps to a successful launch of a high-quality, cost-controlled product:

* Automaker and supplier need to organize dual project teams;

* Teams need to define all the "deliverables" for the project including the documentation or checkpoints needed to validate the progress of the project;

* Teams need to develop final specifications for the machining or assembly process and system simulation, along with target costs;

* Teams need to produce documentation for process development and evaluation, using program status reports, budget reviews and scheduled program reviews.

Ford Saves a Billion

Ford Motor Co.'s inventory-reduction campaign has generated a whopping $1 billion in savings since 1994, John Kaplan, controller-manufacturing for Ford Automotive Operations, reveals. He credits a variety of moves, including reducing the time that components remain in a plant, lower parts stock-piles, and faster shipping times.

`Fair Play' in Information Sharing

J.T. Battenberg III, president of Delphi Automotive Systems, calls for "a well-defined system of enforceable rights for the know-how required to design, manufacture and market competitively distinct goods and services." He adds that the industry needs new and better ways to help prosecutors secure indictments and obtain convictions in order to protect confidential information. "At the same time," he continues, "we must also recognize we belong to a community of practice that requires some sense of obligation -- and fair play -- about how we share and use knowledge. It is in our common interest to do so."

Critical Supplier Issues

Kenneth Way, chairman and CEO of Lear Corp., says the dramatic change in the supply base has led to numerous issues that require attention by automakers and suppliers alike. First, there's supplier responsibility for managing tooling and engineering costs; second is when OEMs give major raw material suppliers a cost increase, but Tier 1s are not allowed to recoup their costs; and finally, "the warranty issue. Having suppliers face warranty costs can be expensive," says Mr. Way.

A Balanced Approach to Development

Charlie Baker, division director of automobile design engineering at Honda R&D North America, notes: "We all get so wrapped up in the day-to-day problems we face that we like to think our challenges are totally unique. But the reality is we all face the same basic challenge -- developing cost-competitive, high-quality and highly marketable products in the most efficient and effective manner possible." He says, "A successful balance among these activities provides equilibrium between the purely rational and the emotional -- between the short and long term. It recognizes that R&D is fundamentally a technical activity and rewards technical competence and expertise, but also understands the reality that ... technology that is not targeted to customer needs and providing marketable products is useless."

Design Cycles Aren't in Sync

Allan M. Kirson, a senior member of Motorola's technical staff, says one problem facing automakers and electronics companies is that each industry is on a different design cycle. Another barrier is lack of interconnection standards, he says, because there's no industry-wide standard bus. Mr. Kirson says this forces device manufacturers to design and build multiple versions of their products. He argues for strategic standardization, but his pitch bounces off the old car-builder's bias that an electronic device can't interfere with the car's operation.

President J. David Power of California-based J.D. Power & Associates reveals a new daily sales reporting network at the U of M conference that he says can slash distribution costs $4 billion a year by reducing dealer inventories in half to 30 days supply.

Developed over five years and representing an investment by Power and his partners of some $6 million, the network already includes 1,000 of California's 3,600 dealers, with 200 more joining next month. He'll roll out the system nationally early in '97. Power will track some 50 data fields including new and used sales, leases, selling prices, trade-in information, VIN numbers, buyer demographics, and option and trim levels. A sample is shown in the adjoining table.

"It's unbelievable that most automobile manufacturers today have little information on the actual retail transaction," he says, adding that dealers commonly "play games with retail delivery cards" to capitalize on sales contests and rebate programs, "which leads to aberrations in monthly sales reports."