A recent article by Joseph White, Senior Editor , The Wall Street Journal, titled “How Detroit’s Automakers Went from Kings of the Road to Roadkill” caught my eye. In his article Mr. White points out a number of issues that led GM into the “bankruptcy” condition it now finds itself and compounded further by government ownership. What amazed me is that over the last 30 years GM had two early warning events that illustrated their “distance” from the needs of the market and unwillingness to change caused their fall from auto leadership.
The first example was ignoring presentations from one of its own executives, Alex Mair, that detailed methods that their off-shore competitors were using to produce lighter, more fuel efficient and less costly cars. He compared a GM connecting rod with one from Japan. The GM connecting rod needed costly post forging operations to make it fit into the GM product resulting in inconsistent balancing of the weight of the piston and rod assembly. By contrast the Japanese rod came out of the forge properly balanced and ready to install without further labor operations resulting in a consistently balanced assembly. His point was that if you design in the installation and performance objectives into the process a lighter, consistently built, fuel efficient and lower cost product could be produced.
The other example is even more illustrative of the executive mind set at GM. Jim Harbour warned GM executive management early of the Japanese challenge to their domination. He showed them how the Japanese were able to use fewer hours (not just cheaper labor) to build and assemble their cars. In addition to using fewer labor hours they were able to produce a comparable volume of cars on a factory footprint half the size (labor force and physical plant) of a GM plant. GM’s President at the time responded by barring Jim Harbour from company property.
The remarkable lesson from this example, besides the NIH (Not Invented Here) mind set of GM executive management, is that the GM process was out of line with the needs of the customer. Japanese cars at the time were not just cheaper because the workers were paid less but due to a more effective process were able to ultimately move their production to the US, use American workers to produce a more cost effective and competitive car.
Is your process cost effective? Have you designed in inefficiencies and living with unnecessary non-value add operations that extend the time to produce, deliver and ultimately produces a product that has more cost (and lower profit margin) than it should?
Know your process – is it a strategic and competitive asset contributing to your bottom line!
