The Harbour Report

THE HARBOUR REPORT
By Steve Purdy
TheAutoChannel.com
Detroit Bureau

Detroit – June 1, 2006 – “In-plant quality improvement is driving productivity gains at most North American auto plants,” and “the manufacturing productivity gap among North American automotive manufacturers is smaller than ever . . .” Those are the messages delivered by the tall, dapper, Ron Harbour, president of Harbour Consulting, during his annual report to the Detroit Automotive Press Association today. Harbour’s father, Jim Harbour, started this consulting business more than 25 years ago focused on evaluating all aspects of automotive manufacturing. The Harbour Report is considered the most comprehensive and authoritative guide to automotive manufacturing of its kind.

While productivity numbers over the past year have been relatively flat for Toyota, Honda and Nissan, US makers have shown vast improvement. The Harbour Report has coined a new word, “qualitivity” – and even trademarked it. It refers to the idea that improvements in quality contribute so much to productivity that it deserves its own word. And, think about the concept. Every bit of time and effort saved in not having to fix something that was badly done in the first place will contribute to lessening the time, effort, and of course cost, it takes to get the finished product out the door.

As we might expect the surface numbers do not tell the whole story. Yes, the productivity gains for GM, Ford and DaimlerChrysler are dramatic but overall labor costs are only very slowly narrowing. Bottom line productivity figures for Japanese makers have been somewhat stifled by expansion of existing facilities and building new ones, which takes time and resources. Metaphorically, Harbour says it’s like “trying to keep all the puppies in the box.” The US auto makers, on the other hand, have been closing plants and excising excess capacity, which means fewer resources put into the same number of vehicles. Productivity, in its broadest sense, is improving vastly across the board.

Talking about efficiency of production engineering, Harbor described one Japanese company that decided it needed to make better use of the capacity at one of its plants, particularly related to the need for more units of a popular model. So they moved part of the production of an existing model to another plant not far away and introduced the needed model in its place. That was all done in the space of a weekend.

US auto manufacturers are making a good go of it. Five out of the ten most productive assembly plants are GM. Three are Nissan. DaimlerChrysler gets honors for most improved with a 6% gain in productivity across the entire range of models. Despite continually declining volume GM posted a respectable 3% gain in overall productivity. Through 2005, the period covered by the report, the number of hours it takes to make each vehicle (HPV) differs very little from one manufacturer to another.

Of course, efficiency is not a guarantee of survival for auto plants. Ford’s most productive assembly plant, the Atlanta Taurus facility, will soon close. Harbour explains that productivity (Atlanta is best in the industry with an HPV of 15.37) is only one of dozens of criteria that must come into play when making plant closing decisions. Other important criteria are: the age of the plant; the plant’s flexibility; whether it can be expanded; the state of labor relations; distance from suppliers; and many more.

Let’s not forget the manufacturing processes and plants outside of assembly. Stamping, engine and transmission plants all make huge contributions to a company’s performance. Engine productivity, for example, ranges from Ford taking 4.77 hours per engine to Toyota’s 2.90. But remember. These are just the total numbers. The meat of the issue is in the details of each engine plant. And, the Harbour folks have all those numbers.

Some lessons to be learned, or goals to be addressed by US car makers, according to the astute Mr. Harbour, who has a wonderful ability to make numbers sing, are: - Development time for new models must come down - Capitol investment varies greatly between the US makers and Japanese rivals who are building new facilities - Flexibility of manufacturing facilities must continue to be increased - The range of plant utilization at the US makers continues to be a problem - Launch time for new models must become more effective in time and impact - Capacity utilization needs attention - Labor and benefit costs for US manufacturers (so called legacy costs) must be brought closer to those of the competition - Outsourcing and modularity are not always a good thing and need to be carefully evaluated - US manufacturers will have considerable leverage in upcoming negations with unions considering what’s going on in the world auto industry

The full Harbour Report, with the numbers and what they mean, is available for $595 through the company’s Web site at www.harbourinc.com or by calling 800-208-1353. Can you think of a more entertaining read for the beach this summer?