Robin Buckson / The Detroit News
GM's Oshawa I plant in Ontario was the most efficient North American plant last year, needing 15.85 hours to build each vehicle.
Asians outpace Big Three in factory efficiency
Detroit automakers make strides, but Toyota leads pack in labor productivity.
Detroit automakers have steadily improved factory productivity and efficiency in North America, but still trail Japan's Toyota Motor Corp. and other Asian rivals, according to a closely watched report released Thursday.
Toyota spends the fewest man hours to produce a vehicle -- 27.9 -- while Ford Motor Co. spends the most, at 36.9. The nine-hour difference, though, is down from a 16-hour gap between the two companies in 1998, according to the Harbour Report North America 2005.
Nissan Motor Co. was second behind Toyota at 29.4 hours, and Honda Motor Co. was third at 32 hours. General Motors Corp. was fourth, at 34.3 hours. DaimlerChrysler AG's Chrysler Group was fifth at 35.8 hours.
Toyota's 5.5 percent productivity increase was the biggest gain made by any automaker. Ford and Chrysler improved productivity by 4.2 percent last year, and GM gained 2.5 percent.
Chrysler's 19 percent improvement in the past three years is the best among all automakers.
Despite the gains, Ford, GM and Chrysler must move faster to modernize plants, reduce rebates and address other challenges to compete with Japanese automakers, the report showed.
"We do know that we've got to move a lot faster because the competition, especially this year with Toyota, is moving very, very quickly," said Guy Briggs, GM's group vice president for manufacturing and labor relations.
The Harbour study measures total labor hours required to build a vehicle, including engine, transmission, stamping and final assembly operations.
GM and Ford made strides despite production cuts last year that idled many workers and left some plants underutilized.
While the gap between the slowest manufacturer and the fastest is narrowing, Japanese automakers are widening their lead in profit per vehicle.
Nissan was the top performer, making $1,603 per vehicle in the first quarter of this year. GM was at the bottom, losing an average of $2,311 for every model it produced in North America.
The profit gap suggests that it will take more than lean and swift factories for Detroit automakers to catch Nissan, Toyota and Honda.
"Unlike past downturns in the early '80s and '90s, manufacturing is not the problem," said Ron Harbour, president of Troy-based Harbour Consulting, which produces the annual report.
"Manufacturing is as strong as it's ever been. Quality is as high as it's ever been. Product and pricing is a whole other story."
Toyota banked $1,488 per vehicle in the first quarter and Honda earned $1,250 per vehicle, according to the Harbour Report. Ford earned $620 per vehicle; Chrysler booked $186.
Detroit automakers' profits have been undercut by deep discounts and rising health care and benefit expenses.
At the same time, Japanese automakers have been more successful at charging higher prices for luxury models and popular light trucks that cost only slightly more to build than the midsize cars and other models they have traditionally relied on for sales and profits.
Last year, the Harbour Report said Toyota generated $26,514 in revenue per model, nearly $6,000 more than GM's $20,659.
Toyota's labor productivity also gives it a cost advantage of $350 to $500 per vehicle over domestic manufacturers, Harbour said.
The Japanese automaker's improved showing reflects a renewed commitment to lean manufacturing at all levels, Harbour said.
"It's a tribute to their process and their mentality," he said. "They have convinced themselves that they're paupers."
While many automakers have shifted some aspects of vehicle assembly to suppliers to improve productivity, Toyota keeps more of the work in-house where it can manage costs and quality more closely.
"The ironic twist to Toyota's performance as one of the most productive auto assemblers is that it is the most vertically integrated auto manufacturer, outsourcing the least of any," Harbour said.
Asian manufacturers also scored better in the report because nearly all of their plants are capable of building multiple models on the same assembly line, which allows them to quickly adjust to changes in product demand.
Last year, for instance, when Honda needed more manufacturing capacity for its hot-selling Acura TL sedan, it made room by moving production of the Accord sedan from Marysville, Ohio, to a plant in nearby East Liberty, Ohio. "All they had to do was move the material from one plant to the other," Harbour said. "They practiced over a weekend and started on Monday."
Detroit automakers are making progress in plant flexibility. Chrysler, for instance, ranked second only to Toyota last year in capacity utilization across its 13 North American plants, using 90 percent of its production capability. Toyota ran its six plants at 107 percent of capacity on average, which reflects overtime at some plants.
Chrysler's small-car plant in Belvidere, Ill., broke into the top 10 fastest vehicle-building plants, with an average time of 18.71 hours per vehicle.
Frank Ewasyshyn, Chrysler's executive vice president of manufacturing, said the automaker still has a way to reach its goal of matching the industry's productivity leaders by 2007.
And Toyota's big gain puts that goal even further away.
"My life didn't get any easier," he said in response to the Harbour Report results on Thursday.
GM's Oshawa I sedan plant in Ontario was the most efficient North American assembly plant last year -- requiring 15.85 labor hours per vehicle. It beat out Nissan's Smyrna, Tenn., plant, which fell from 15.33 hours in 2003 to 16.10 hours last year because of vehicle launches that slowed operations.
GM led in seven of the study's 13 vehicle segments -- three in cars and four in trucks. GM has shown the biggest gains over the past five years by shaving the overall time to build a model by 22 percent.
"Improvements in quality and productivity will really help us win back market share and increase our long-term profitability," said GM's Briggs.
Francine Romine, a Ford spokeswoman, said Ford's gains show the company is on track to close the gap with foreign automakers.
"This year's report represents the third consecutive year-over-year improvement. We are confident that by utilizing disciplined processes throughout our manufacturing and design process, we will continue to make improvements."