The outlook in Detroit; US auto industry scrambles to regain competitive edge
Just how competitive is the US auto industry today?
Now nearing the end of the worst sales downturn since the end of World War II , the answer is far from clear. One thing is clear, however. The US car industry is spending tens of billions of dollars to modernize its products, upgrade its image, and push the wolf away from the door.
''A lot of things have changed in our business,'' James McDonald, president of General Motors, told attendants at the seventh annual Automotive News Congress here in late August. ''But the fact that it's a highly competitive business has not changed at all.''
Some people aren't so sure just where Detroit stands in the competition, however.
The way things are going, ''the US industrial base will be so eroded that the only thing we'll be exporting will be free-enterprise ideology,'' laments James E. Harbour, a Michigan-based management consultant.
Whether or not it's as bad as he makes it out to be, the imports still have a wide highway to the hearts of the American motorist and are making a determined drive to fill it with cars.
Mitsubishi Motors, for example, is launching its own US dealership network Oct. 1, independent of Chrysler Corporation. Isuzu is also expanding its car distribution system in the US.
Business has never been better for Mercedes-Benz of North America or for Sweden's Volvo. Even Britain's Jaguar is hitting a fast stride. But it's the Japanese that have the biggest chunk of the import business by far. Beyond quality, the Japanese also have an image of giving good value for the money.
Douglas A. Fraser, who retires next May as president of the United Automobile Workers (UAW), reports that US productivity improvements over the last 20 years have been 3.4 percent a year. The Japanese, by contrast, ''are the world leaders in productivity improvements in industry,'' Mr. Harbour asserts.
''The Japanese Ministry of Labor puts the industry average at 8 to 9 percent a year,'' he adds. ''That leaves the Japanese with a 5 or 6 percent gain over the US industry.''
Mr. Harbour says it takes 33 total direct- and indirect-labor hours to assemble a subcompact or compact car in the US, but only 15 in Japan.
To help meet the challenge, the US auto industry is turning to Dr. W. Edwards Deming, a statistician and one-time college instructor, for help in upgrading the quality of its cars.
''Our principal goal must be to win the quality race,'' says Mr. McDonald of GM.
Dr. Deming is widely credited for the high-quality cars built in Japan today, yet he was snubbed by the US automobile industry more than 20 years ago. The Japanese, however, embraced the Deming approach to ''statistical quality control'' in order to build better cars and cut costs.
Now Ford Motor Company is training its managers as well as its suppliers in the system. GM officials are working with Dr. Deming, and Chrysler is changing its quality system as well. Quality isn't the only ingredient in the drive to sell cars, but it's high on the list.
When one Japanese carmaker increased its inspection stations and applied statistical methods for total process control, its defect rate fell from 4.5 percent to 0.4 percent.
The Japanese automobile industry uses a just-in-time system in acquiring parts for its production process. In other words, there is essentially no inventory, which not only saves space but also the huge sums of money that otherwise would be tied up in parts.
The US automobile industry is reported to turn over its inventory 10 times a year compared to Toyota's average of 240 times a year.
Of course, the Japanese industry is organized very differently from Detroit. Most of its parts suppliers are located close to the car assembly plants, unlike the US pattern. The US auto industry buys and ships components from all over the world.
''The US auto industry consistently sources component parts with multiple suppliers, regardless of their location, and based almost entirely on price,'' Mr. Harbour complains.
A new US auto-assembly plant designed to produce 1,200 cars a day is large enough to produce 2,000 cars a day if the latest developments in management technology were employed, he adds.
''Out-of-date work rules also contribute heavily to the US industry's noncompetitive stance in the world,'' Harbour continues. ''These redundant work rules now exceed $300 a car.''
To make its plants more productive, US carmakers are bringing the production workers into the limelight. Ford, Pontiac, and Buick, as well as others, have demonstrated the potential of hourly workers in the automobile industry.
The Japanese discovered it long ago. At Toyota, 1.1 million suggestions were received in 1981, or 31 per worker. Ninety-two percent of them were accepted, saving the company $131 million. ''This valuable worker resource, plus infinitely better management systems, has helped Toyota achieve an annual productivity increase of almost 11 percent,'' Harbour says.
Output per man has tripled from 24 cars to 76 cars in 12 years.
Jaguar Cars Ltd. had a spotty image not long ago. It was widely perceived to be building problematical cars - beautiful machines that were prone to break down. Through the hard-headed effort of John Egan, chairman, the company slashed the size of its work force, set up quality-circle programs to check and upgrade quality, and significantly increased output.
Now more than 60 quality circles, involving 10 percent of the workforce, are operating. ''We want to expand the quality circles to all workers,'' Mr. Egan says.
The point is that quality has been dramatically improved, which is making a big difference in the marketplace.
Harbour also criticizes the US industry's management system.
The Saginaw Steering Gear division of GM operates nine domestic plants with only skeleton management staffs. There are no industrial engineers, no finance people. ''It is competitive with the imports,'' the critic adds.
In contrast, the US industry as a whole has consistently maintained 10 or more organizational levels where its international competition has only five.
Harbour also calls for two shifts in the auto industry's machine plants instead of three.
''Without preventive maintenance, they only operate at 40 to 60 percent of total capacity,'' notes Harbour. ''The international competition operates these plants on two shifts. Each US manufacturer has converted selected engine lines from three shifts to two shifts - and in one plant had a 40 percent improvement in productivity.
''With this kind of result, you have to wonder what they're waiting for.''