Detroit Is Cruising for Quality
You'd think Ford Motor Co. (F ) would learn a lesson about keeping an eye on quality from the $3.5-billion Explorer tire debacle. And, indeed, the auto maker went to extraordinary lengths to ensure that its revised 2002 Explorer launched without a hiccup. It even took the unprecedented step of holding up vehicles in the factory for engineers to pore over them for defects. But that wasn't enough. Last May, the new Explorer had to be recalled. It turned out that while redesigning the car, engineers forgot to adjust a rail used to guide the vehicle along an assembly line. The oversight meant that some Explorers limped off the line with nine-inch-long gashes in their tires.
Try as it might, the U.S. auto industry can't shake its karma for shaky quality--even though its cars and trucks are better than ever. Consumer Reports recently found that the average number of problems per 100 new vehicles built by General Motors (GM ), Ford, and Chrysler (TM ) dropped from 105 in 1980 to just 23 in 2000. But as the Explorer Redux episode highlights, U.S. cars still are not up to snuff. Despite the improvement, Consumer Reports pegs the quality of American vehicles at Japanese levels circa 1985. And the Big Three currently spend about $125 more per vehicle in warranty costs than their Japanese rivals.
Why the gap? It's not that American factory workers are sloppier than their Japanese counterparts. In fact, fewer than 15% of quality problems can be traced to shoddy workmanship or other factory errors, says Sandy Munro, president of Munro & Associates Inc., a Troy (Mich.)-based manufacturing consultant. The real problem, he says, is at the front end of the development process. "It has more to do with who designed it, how they designed it, and what processes and materials they used," Munro contends.
RAIDING TOYOTA. Now, in a drive to reduce costs and boost quality, U.S. carmakers are revamping their approach, trying to root out problems before assembly lines start rolling. They're borrowing strategies invented by the Japanese, or--in the case of Chrysler Corp.--raiding Toyota Motor Corp. (TM ) for quality expertise. And they're bringing suppliers into the design process earlier and treating them like partners, in hopes of spotting problems with components as early as possible.
Detroit is finding, as it did back in the 1970s, that there is no better way to begin than with a close look at Japan. There, top car builders take an evolutionary approach to design, stressing continuous improvement. From year to year, if parts are working well, they are kept, not replaced. And by using common components across a range of vehicles, Japanese designs cut down on variability--the old, familiar foe of quality.
In stark contrast, U.S. auto makers tend to start with a clean sheet of paper whenever they redesign a vehicle. And this can lead to trouble. When Chrysler introduced the redesigned 1999 Jeep Grand Cherokee, former CEO Robert J. Eaton bragged that there were so few shared bits between the new and old models, they'd all fit in a bag in his hand. He should have kept mum: Consumer Reports says the Grand Cherokee's "reliability has been among the worst we've seen."
Another nagging problem at U.S. car shops is an overly narrow focus on component design without enough regard for the larger task of integrating parts on the factory floor. The trouble, points out Jay Baron, director of manufacturing systems group at the Center for Automotive Research in Ann Arbor, Mich., is that good components that don't fit together demand costly last-minute design changes. "This is one area where the Japanese are way ahead of us," says Baron. Instead of striving for perfection in the design of each component, the Japanese fast-forward to the manufacturing phase to make sure the parts fit, and then back up to make necessary adjustments, he says. Now, all three Detroit auto makers are beginning to follow suit.
TRICKY PROBLEMS. Ford, by any calculation, needs the most work. Last year alone, recalls and other quality gaffes cost the company at least $1 billion, says CEO Jacques A. Nasser. Now, Ford is pinning its quality hopes on Six Sigma, a data-driven method pioneered by industrial giants such as AlliedSignal Inc. and Motorola Inc. (MOT )
It's an approach that depends on rigorous statistical analysis to unearth tough problems. And it's already helping crack some tricky ones at Ford. Ill-fitting doors on Ford's top-selling F-150 pickup truck, for example, were blamed for chronic wind noise and leaks. So, after studying the installation of hundreds of such doors, a Six Sigma team working at Ford's Norfolk (Va.) truck factory discovered that door-fit varied according to the order in which bolts attaching the door to the frame were driven in.
The problem implied its own solution. Experimenting with various sequences, the team reduced the defects rate by two-thirds--without changing a single part. The change immediately saved $35,000 on the plant floor by eliminating the refitting of bad doors. Larger savings in warranty haven't yet been tallied.
The truck team passed along its findings to other Ford truck plants and to teams developing future models. Ultimately, catching potential problems while the designs are still just sketches gives the biggest payoff. "In existing product, problems are easy to find, but hard to fix," says Louise Goeser, Ford's quality vice-president. "In future product, problems are harder to detect, but easier to fix."
Of the Big Three, GM has made the most progress on quality. This year, it climbed to No. 4 on J.D. Power & Associates' annual overall quality rankings, just a notch behind Nissan Motor Co. Now, GM is looking to close in on the leaders, Toyota and Honda (HMC ), by working more closely with its suppliers, says GM manufacturing chief Gary Cowger. On some vehicles, GM is even handing over complete design responsibility for its interiors to large suppliers, such as Lear Corp. (LEA ) and Johnson Controls Inc. (JCI ) The subcontractors, GM figures, can better monitor quality by designing and building fully integrated systems--complete seats or dashboards as opposed to just seat frames or speedometers.
At Chrysler, the struggling U.S. unit of Germany's DaimlerChrysler, improving quality is an even more urgent mission. The company's new CEO, former Mercedes chief engineer Dieter Zetsche, has made it a cornerstone of his $3.9-billion turnaround plan. He's overhauling Chrysler's vehicle development processes by pulling together teams from all areas of the company--design, engineering, marketing, manufacturing, and purchasing--in a bid to drive out waste. By involving everyone up front, his goal is to avoid the kinds of last-minute design changes that lead to errors later on. Even before Zetsche arrived, Chrysler quality was improving: Its Dodge Intrepid beat out the Toyota Camry and the Honda Accord--long-time leaders in the midsize sedan segment--in J.D. Power's 2001 new car quality survey.
Chrysler also is adding more discipline to the development process by borrowing Mercedes' system of "quality gates." This refers to a series of a dozen or so checkpoints throughout the three-year vehicle development process. The concept is simple, says Don Dees, the quality guru Chrysler hired last year from Toyota. "You don't go through the gate if you're not ready. Otherwise, you'll have warranty problems for the customer."
Chrysler also expects to boost quality by sharing more parts among its vehicles and borrowing more components from Mercedes. Until now, some Mercedes execs were slow to release certain technologies and components to their counterparts at Chrysler. But Zetsche, who joined Chrysler in November, has the influence to encourage sharing.
Some quality problems may still find their way into vehicles. But Chrysler is trying to identify them earlier--and fix them faster--at its new quality engineering center near its Auburn Hills (Mich.) headquarters. There, some 15,000 company-owned cars are serviced. The center also receives and scrutinizes every faulty part that is removed from a car at Chrysler's 4,600 dealers nationwide. That helps engineers quickly identify problems in the field and work with suppliers to find a solution. "As you fix things, you put that in your book of knowledge so you don't make the same mistake on the next vehicle," says Dees.
Sounds good. But Detroit has already shown that learning from its own mistakes is easier said than done. What's more, it remains to be seen whether the Big Three can turn the still harder trick of learning Japan's best practices too.
By Joann Muller, with Katie Kerwin, in Detroit