Harbour was the "most hated man in Detroit" for concluding Toyota had a 30% production cost advantage.
Does America want to be a manufacturing nation or not? If you ask James Harbour, a leading analyst and founder of The Harbour Report on auto productivity, the answer is clearly “no.” Decades of U.S. Congressional and Presidential economic policies have decimated not only auto manufacturing but other industries as well, he says. That’s because the cumulative effect of promoting imports of manufactured goods from countries that restrict access to their own markets crippled U.S. makers.
“How in the hell did Ford, Chrysler and General Motors go from the top of the heap to the bottom?” the plain-speaking Harbour asked members of the Automotive Press Association in Detroit today. He was promoting his just published book, Factory Man. In it he presents the views of an assembly line worker turned manufacturing executive for Chrysler and Ford, and then as government consultant and private entrepreneur, starting in the post-war boom years and continuing up to today. Harbour co-authored this conversational book with James Higgins, an award-winning automotive reporter, columnist and editor, who covered the industry at The Detroit News.
After 60 years getting his “hands dirty” on auto and pharmaceutical production lines, Harbour is in no mood for Washington posturing during discussions about car company restructurings. “The folks there think a machine is something to rig an election,” he says.
Not only are Detroit-based makers losing money, but all makers are in the economic collapse caused by the reckless practices of government regulators, Wall Street and bankers. Financial institutions do not create wealth, Harbour maintains, but rather are the consequence of it. “Historically, if industrial development is lost, we can expect financial institutions to follow trade to the countries more successful than we are,” he says.
“You can make things in a factory. That’s where Detroit comes in and that’s what America needs right now – a good jolt of the power of the factory,” says Harbour, ‘allowing America’s manufacturing industry to create wealth and put money in people’s pockets.”
The outcry against Detroit surrounding the ongoing bailout debate is unfair in Harbour’s view. He estimates that Detroit’s pure manufacturing costs are now within $100 of Toyota and Honda, the acknowledged leaders.
Consider that Toyota last year made $2300 per vehicle globally and Nissan $1500, according to their annual reports. Both are projecting losses of $500-$600 a vehicle when their current fiscal year ends on March 31, 2009.
The real problem that domestic makers still need to address is the $3000 in rebates used to sell cars and trucks, the result of their bad reputations. “Seems like everybody bought a 1976 (Plymouth) Volare’ and they are still mad,” he says. Even at reduced industry volumes that’s a staggering outflow of billions of dollars in marketing costs.
Ironically, Harbour’s transformation from just another Detroit executive in the 1950-70s to a recognized global expert started with an auto restructuring in 1979. That’s when the federal government forced a “virtual chapter 11” proceeding on Chrysler, where he was working as manufacturing executive. In return for a $1.5 Billion loan guarantee, Chrysler dramatically reshaped itself and introduced the comeback K-cars and minivans. The loan was paid back ahead of time and the government made money when it exercised the stock warrants it demanded as part of the deal.
Harbour was dismissed from Chrysler on April fool’s day 1980, but as a result of working with the government on that bailout, he immediately became a consultant for the Department of Transportation, which was scrutinizing the industry. This led to his touring of all of the Toyota factories in Japan. Toyota’s obsession with quality and productivity stunned Harbour, who concluded that as a result Toyota had a manufacturing cost advantage of $1,500-1,700 per car when compared with domestic makers. This conclusion was issued by DOT in an annual report to the President in January of 1981 on the state of the auto industry.
This led to the first Harbour Report later in 1981, a study of car makers’ manufacturing performance. Harbour became the “most hated man in Detroit.” Chrysler executives chose to ignore the report. Ford executives, because of their association with Mazda and its data agreed. And General Motors from Chairman Thomas Murphy on down maintained he “was full of it.” James McDonald, then GM’s president, issued a memo banning Harbour from GM property. If you want know how this ultimately sorted out and how Detroit transformed itself, read the book.
“It’s tragic, this situation, in a large part because of the mismanagement of the U.S. economy by Congress and the White House,” says Harbour. “Just think, in time, the North American auto market will recover and even resume growth. But, because of the low priority given to American factory people by their government, the main beneficiaries will be foreign-owned companies.”
To purchase a copy of Factory Man visit http://www.sme.org/factoryman or http://www.amazon.com.
While I completely agree that governmental decision makers have spent years crippling U.S. manufacturing (and thus middle class employment) with “free trade” policies, I also recognize that they did this at the behest of Wall Street and the management of the very corporations themselves that thought they were benefitting from cheaper and more compliant foreign labor. A lot of people got a lot of what they wanted (money) from selling out U.S. manufacturing for a long time.
I also find it interesting that GM and Chrysler, the two U.S. auto companies wanting bailouts, either ignored or were hostile to Harbour’s report in the early 1980s and Ford, with firsthand knowledge based on Mazda, agreed with it. Yet more proof of the long term incompetence and aloofness of their corporate management. It’s too bad. If they had paid attention in the early 1980s, they (and we) wouldn’t be in the shape we are today.
True, Ford hasn’t so far asked for Federal money, but it is asking for credit lines since it has borrowed against all of its assets, even the brand name Ford. It is asking the Swedish government for help with Volvo as it looks at selling the brand. And Ford is asking for money for its suppliers. However, while some Ford executives might have agreed with Harbour, they were slow to react. Even today, Ford is struggling with commonality — it has seven versions of the Focus Fiesta platform in production — and it still does not have the flexible manufacturing it needs to compete against Toyota and Honda. Repeated promises of common designs, parts and processes going back to the Ford 2000 reorganization of the mid-90s have not been fulfilled. And it still develops cars in one region that do not comply with regulations in others so when a market shifts it can quickly react; say in the U.S. as gasoline prices soared, the Fiesta sub-compact car and C-Max minivan and diesel-powered Ranger pickup truck could not be brought in. And they are still not here — years after Toyota and Honda and Nissan brought in sub-compacts. So Ford too faces an uncertain future as a much smaller company.
It’s refreshing to have this well-informed view finally being better disseminated. Lack of perspective such as Harbour’s has been my main gripe with other recent analyses, such as the book End of Detroit by New York Times writer Micki Maynard, for example. Their blindness to the world around them and ultimately self-defeating strategies do imply that Detroit executives bear a lot of responsibility. Nevertheless, they really were just part of a broader managerial and political attitude that has skewed U.S. policy in ways that chronically undermine the competitiveness of the U.S. labor force while enabling investors to make bundles of money with no accountability for delivering value to the nation.
Toyota learned from the U.S. how to make cars, but they went on to create a highly efficient, centralized manufacturing colossus, constantly reducing costs and increasing productivity. In 25 years, they have overtaken the 75-year world lead of General Motors, by offering a broad product range with excellent value-for-money and the best quality in the world. It happened because U.S. gave the Asians free access to the largest and most profitable prize in the auto world — the U.S. market.
Our Trade policies let them build assembly plants, import all needed parts, and import duty-free all the built-up vehicles they choose. The U.S. asked for nothing and got nothing in return. Never in industry has history had a host country made such a one-sided, outright gift to foreign nationals. This isn’t “Free Trade,” it was a “Free Gift.” (Fact: In 2007, the Asians sold 6,727,196 vehicles in U.S. and we sold about 8,000 in Asia… and this is called trading?)
The rationale: The U.S. believed that “once the Asians completely manufactured cars in U.S., they would stop the built-up imports; share their superior technology, and a “level playing field“would result, with both sides benefiting equally.”
We made a huge mistake: We have let them make the rules for 25 years.
First, they have no intention of manufacturing a “whole car” in U.S. That’s what they do only in Japan. They manufacture only enough parts here to make us think they are “manufacturers“like GM, importing all the rest. (Fact: After 22 years, and 6.7 million vehicles sold in U.S. in 2007, imported cars and parts accounted for 5 million vehicles, or about 75% of the manufacturing jobs to build them. These jobs remain in Asia.
For each job an Asian Transplant creates, three jobs are lost in U.S.
Second, they have no intention of phasing out built-up imports – their life blood and profitability – and their first line of marketing offense. For 20 years, Lexus, their highest profit line (8 models) — is imported-on-wheels, selling over 300,000 in 2007. With higher quality and costing less to manufacture in Japan, they import the bewildering variety they don‘t assemble here — Matrix, Prius, Scion, Sienna, Solara, Venza, and seven SUVs –none requiring one product investment dollar, or employing one factory worker in U.S. — a constantly growing profit bonanza for Toyota and Japan.
Third, they have a $2,000 to $3,000 per car profit advantage versus U.S. Big 3, which pay health care and pensions to 800,000 retirees. This elevation of U.S. auto workers into middle class status was heralded as an example for the world. But today, these same benefits are reviled as non-competitive excesses – emblematic of egregious management mistakes that have led Big 3 companies into imminent bankruptcy.
Well, which is it — Blessing or Disgrace? It can’t be both.
This is “Unfair Trade,” certainly not “Free Trade.” Our Government doesn’t realize they are asking the Big 3 to compete directly with emerging Asian economies, whose costs, wages, worker rights, benefits, safeguards, and “quality of life” – are woefully deficient. If we can’t match Japan, whose wage rates are close to ours, how can we compete with China’s labor at one dollar/ hour? We cannot survive if Asians make a $1,000 profit, and we suffer a $1000 to $2,000 loss per car.
Do we seriously plan to strip 800,000 retirees of hard-fought career benefits, making the Big 3 “earn the right” to stay in the business they founded in their own country? If we elect to continue this benighted “Free Trade” misadventure, whose Standard of Living shall we choose for the 21st century: The United States of America or The Emerging Asian Nations?
To all who would join this clarion call for Fair Trade I can supply letters, white papers, and a specific proposal for trading relationships that can ensure a profitable future for the U.S. automotive manufacturing industry, proven in the fires of WWII to be the world’s Arsenal of Democracy. — Ralph L. Peters, Rancho Santa Fe, CA
We have been getting responses from quality and process engineers in the automotive and other communities regarding how the use of custom gages can be used to eliminate scrap in the manufacturing process, thus leading to better made products at a lower cost. Is this part of the answer?
Perhaps you could share with us your views — as someone in the business — what’s going on right now?
True Story on Oversized Shaft Diameters and Concentricity Issues in Production Manufacturing:
A company used go and no-go ring gages to check diameters and found a high percentage of bad parts. Since no actual size data was collected, they were having difficulty in detecting the problem. They then began using a digital readout with combination probes and data collection in a simple fixture gage.
The results were that they were able to determine that the diameters of the shafts were out of round and that the diameters were not running true with each other. They were able to repair the grinding machine and eliminate the out of roundness and they also changed the process so that no more than one diameter was being ground at the same time, eliminating concentricity issues.
The gage system used was also designed to feed back size variations to the controller allowing for adjustments in the grind process.
Situations like this where production manufacturing takes on a new form of quality assurance and monitoring may be one of the keys for a re-formation in the automotive industry; and perhaps other sectors.
For engineers, we have data on how these types of gauges can streamline manufacturing costs and produce an end quality product, regardless if we create the gage or not.