Motown's Struggle To Shift On The FlyJames B. Treece
The tortured launch of the 1995 Chevrolet Lumina couldn't have been more poorly timed for GM: In the midst of the strongest auto market in years, the Oshawa (Ont.) factory that makes General Motors Corp.'s No.3 best-seller was shut for three months starting last November, while workers installed new welding robots and other machinery to build the revised model. The factory started up again on Feb. 14--slowly. Oshawa made just 10 cars a day and, to keep things simple, painted all of them white. By Apr. 1, it had built a total of 288 cars.
The plant won't reach its full line speed of 60 cars an hour until August, though its palette has expanded to 7 of the 10 colors it will produce. The pain can be measured in lost greenbacks. Chevy's sales this year are up a scant 4%, less than half the industry average. The main culprit is the Lumina, whose sales are down 61%. And that's not GM's only nightmare. Production of the new Oldsmobile Aurora and Buick Riviera is starting slowly, to maintain quality. And shortly, GM's Lordstown (Ohio) plant will shut for a monthlong change for the Cavalier, Chevy's No.1 model. Says Daniel Blaskovich, general manager of Tom Blaskovich Chevrolet-Oldsmobile Inc. in East Chicago, Ind.: "I'm afraid we'll lose four months of sales with it, too."
Over the past decade, Detroit has made huge strides in cutting costs and improving quality. But in one respect, the Big Three are still miles behind the Japanese: They take forever to change over for new models. Ford Motor Co.'s Kansas City (Mo.) factory is down for two months right now to switch to the new Ford Contour and Mercury Mystique. And Chrysler Corp. has yet to hit full output on its subcompact Neon--more than six months after production began. At Honda Motor Co.'s Marysville (Ohio) assembly plant, by contrast, the final 1993 Accord rolled off the line on Friday, Aug. 27. Production of the all-new 1994 model began the next Monday. And the factory reached full speed of 48 cars an hour within six weeks.
To be sure, some downtime is often inevitable. That's especially true as the Big Three retool passenger-car plants to meet surging demand for minivans, pickups, and sport-utility vehicles. Yet Detroit is slower than Japanese makers even when the models are comparable (chart). The result is as damaging as a strike: When sales are booming, as they are now, every month that a plant is shut costs between $65 million and $85 million in pretax profits, estimates Morgan Stanley & Co. analyst Scott F. Merlis. And delays take the oomph out of marketing blitzes--because dealers don't have cars when customers show up: Jim Muir Oldsmobile-GMC Truck Inc. in Sterling Heights, Mich., has received only four new Auroras, even though it has customer orders for 14.
Belatedly, the Big Three are trying to adapt. "We can't afford three-, four-, or five-month downtimes for model conversions if we're running at lean capacity," says G. Richard Wagoner Jr., the new president of GM's North American Operations. The industry's new goal: two weeks at most to launch a model. "It's one of the things we're working aggressively to change," adds GM President and CEO John F. Smith Jr.
FLEXIBLE ROBOTS. It isn't rocket science, after all. "The key is planning, pure and simple," says Alex Warren, senior vice-president at Toyota Motor Manufacturing USA Inc. in Georgetown, Ky. To start, Toyota and other Japanese auto companies make new-car designs as compatible as possible with existing equipment. To make that easier, they tend to use more flexible automation--such as welding robots that can be reprogrammed. And their factories have extra space beside the assembly line, so that new gear can be tested well before it's needed.
At Marysville, Honda began debugging the 1994 model Accord's machinery a year before the production changeover. More was added over Christmas of 1992, and then "about every weekend until July, something was being put in place," says plant manager Steve Yoder. Even as the old line ran, Honda made prototype new models by shunting them onto the new equipment, as if in a railroad switch yard.
GM's Oshawa plant didn't have that option. The body shop, where a car's frame is welded together, is at the heart of a model changeover. Although Osh-
awa was one of many GM factories refurbished in the 1980s, most of the money was spent on its stamping facilities--where sheet-metal parts are formed. The body shop was left with heavy, inflexible robots for welding and frame-positioning that had to be torn out for the Lumina's major redesign. The scheduled three-month closing was bad enough, but then unforeseen glitches slowed the production ramp-up. Chevy belatedly redid the instrument panel after consumers in focus groups disliked it. The Japanese avoid such last-minute tinkering: They would wait until next year to change it.
There are signs Detroit is catching on. Chrysler's Windsor (Ont.) minivan factory doesn't have extra room to install new welding gear, but an unused former engine plant is right next door. So Chrysler is setting up a body shop there for next summer's minivan launch. By 1997, vows Dennis K. Pawley, Chrysler's executive vice-president for manufacturing, "there won't be a plant in the system where I couldn't bring in another car or truck in two or three weeks."
Ford also is starting earlier. In planning for a 1996 model, managers realized it would take 14 weeks to replace the tooling--for an all-new, high-volume car. Adding a body shop nearby was impossible, so last year, over long weekends and holidays, Ford began removing one old piece of equipment at a time and replacing each with another one flexible enough to build both the old and new model. As a result, Ford thinks it can make the switch with just a three-week shutdown next summer--two weeks of which are scheduled during the companywide vacation in July.
Eventually, GM's 27 assembly plants should be better at changeovers, too. New body-shop machinery at Oshawa is reprogrammable. And by converting to lean-manufacturing methods, which slash inventory, Oshawa has freed factory space--as much as 45% in some areas. Once they adapt to faster turnarounds, American auto plants should be flexible enough to produce several different cars on the same production line. E. Michael Mutchler, GM vice-president and group executive for North American passenger car platforms, wants all his factories to hit their two-week changeover target by the year 2000.
In the old days, Detroit might well have yielded to a quicker fix--cranking up production regardless of the effect on quality. But the Big Three now know that won't work. "If the first 2,500 units are poor quality, you sacrifice thousands of sales later," says auto analyst Ronald A. Glantz of Dean Witter Reynolds Inc. Indeed, Detroit has made a fundamental shift, says David E. Cole, director of the Office for the Study of Automotive Transportation at the University of Michigan. "It's a new discipline on quality," he says. With a little luck, Detroit may master rapid changeovers by the time the next sales boom arrives.
LESSONS FOR THE BIG THREE
CAR DESIGN Insist that engineers adapt their designs to a plant's capabilities
ADVANCE PLANNING Leave open areas next to the assembly line to install and test new equipment even while the old model is still being built
FLEXIBLE EQUIPMENT Use "soft" automation, such as welding robots, that can be reprogrammed for new models