Dispelling the Manufacturing Myth American Factories Can Compete in the Global Marketplace (1992) / Chapter Skim
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4 AUTOMOBILES
4 AUTOMOBILES
Pages 61-76
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From page 61... ...
Such daunting and often con r~ · , · ~ ~ t~ct~ng Demands have stretched resources and skills to the limit, but the success in achieving all these objectives should not be underestimated. Given these pressures, it would be reasonable to assume that offshore manufacturing could offer attractive advantages, particularly as an effective way to lower production costs; therefore, an analysis of these costs as they affect global site location would be expected to provide useful insights both to managers in the industry and to policymakers.
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From page 62... ...
Ford used mass production to reduce production costs dramatically, thereby creating the mass market for automobiles and dominating global auto production in the early part of this century. Because of its clear advantages, mass production eventually spread to every large-scare producer worldwide but has been refined to meet the unique demands of different automobile markets.
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From page 63... ...
For instance, to maximize the output of expensive stamping dies, stamping is typically performed in central locations and parts are shipped to distributed assembly plants, common parts are used in as many models as possible, purchasing decisions are based on the lowest bidder, and investments are driven by the desire to eliminate labor. This traditional mass production system relies on dedicated equipment and equipment-paced assembly lines to keep production high, which is inherently inflexible.
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From page 64... ...
; work closely with suppliers to allow them to determine the most effective manufacturing processes for the parts they supply; and create engineering teams to work on product and process engineering simultaneously. The results are much higher product quality, virtually eliminating inspection and rework; lower production costs; and greater production flexibility, allowing more models to be produced with less production capacity and rapid mocle]
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From page 65... ...
In fact, the only major global shift in automobile production has been Japanese investment in North America, combined with domestic shifts in production by American producers that is, closures of outdated assembly plants; new investment to modernize existing plants; and greenfield ir~vestments, such as General Motors' Saturn plant in Spring Hill, r ~ ennessee. The Japanese have invested heavily in North American production, an investment that ranks as perhaps the largest scale shift of production capacity to a foreign location ever undertaken.
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From page 66... ...
66 DISPELLING THE MANUFACTURING MYTH Four computer-controlled robots weld the underbody, one of the first steps in automobile assembly. SOURCE: General Motors Corporation.
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From page 67... ...
A UTOMOBILES 67 r Beside the assembly line, doors move on hangers beside the bodies they will join. Front doors and the hood are then added as the "body in white" moves toward the paint shop.
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From page 68... ...
in fact, a local production base provides a better means to leverage the advantages of the lean production system to customize products for different markets; to speed product introductions; and to build knowledge of, access to, and implementation of locally developed technologies. MANUFACTURING COSTS Although offshore movement of automobile production has, almost exclusively, been movement by Japanese producers to North America and increasingly to Europe, a brief examination of manufacturing costs will emphasize the point that the critical driver is market access.
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From page 69... ...
Though the level varies by mode! size and low-volume luxury models tend to have more hand work, on average direct labor accounts for only 5 to 10 percent of automobile assembly costs, with a combined labor and load of 15 to 20 percent.8 As a source of cost savings, direct labor does not provide the same leverage as materials, although most materials are purchased parts, comportents, and subassemblies that have significant imbedded labor content.
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From page 70... ...
It is argued (1) that only by significantly reducing the labor content of motor vehicles can companies manage to retain production in the developed countries and (2)
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From page 71... ...
Workers in lean production facilities are expected to perform a wider variety of tasks in cooperation with fellow workers. Such jobs are in sharp contrast to traditional mass production jobs that are narrowly defined and highly repetitive; they require higher skill and greater initiative.
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From page 72... ...
automakers begin to use up the credits earned in past years to meet current standards, this separate averaging of imports creates opportunities to manage production to raise a firm's CAFE through foreign production. For CAFE purposes, a domestic car must have 75 percent local content; conversely, cars with less than 75 percent local content are considered imports and averaged separately.
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From page 73... ...
International site selection, for cost savings or any other reason, has not been a signficant phenomenon- with one exception: the Japanese have created massive production capacity in North America and are gradually increasing their capacity in Europe. This pattern of home market production and Japanese direct investment makes it clear that market access is the dominant motivator of site selection in the auto industry.
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From page 74... ...
14. An excellent discussion of the productivity and quality capabilities of the Mexican work force can be found in Harley Shaiken, "Automation and Global Production," Monograph Series, 26, Center for U.S.-Mexican Studies, University of California, San Diego, 1987.
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From page 75... ...
A UTOMOBILES 75 15. Both domestic and foreign automakers actively manage the domestic content of their vehicles, not only for CAFE requirements but also for customs and tax purposes.
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