Posts about Manufacturing
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Looking at Auto Manaufacturing in the USA

Posted on February 6, 2012  Comments (0)

America’s Dirty War Against Manufacturing

Bob Lutz, the former head of GM, says it was neither uncompetitive wages nor unions that drove the Big Three into decline. It was a management with its eye focused on the bottom line and the short term.

That sentiment should be familiar to students of Deming (it is one of Deming’s 7 deadly diseases). It is sad that this bad management practices, short-term thinking, continues to do harm several decades later. Hopefully we can do better in the next few decades.

retiree health care and pensions — burdens that are borne by society, not manufacturing plants, in every other advanced country. That disparity, the result of policy decisions made in Washington rather than wages negotiated by the United Auto Workers, was the source of most of the labor-cost advantage enjoyed by foreign companies.

The excessive health care costs in the USA, another of Deming’s 7 deadly diseases, has continued to get worse every year since he classified it as one. The damage that the failed health care system in the USA does to the USA is enormous.

Related: Manufacturing Skills Gap or Management Skills Gap? – Manufacturing in the USA, and Why Organizations Often Don’t – Big Failed Three, Meet the Enlightened Eight

Manufacturing Skills Gap or Management Skills Gap?

Posted on November 7, 2011  Comments (3)

I stumble across articles discussing the problem of manufacturers having difficulty finding workers with the skills they need (in the USA largely, but elsewhere too) somewhat regularly. While it is true that companies have this problem, I think looking at the problem in that way might not be the most insightful view. Is the problem just that potential workers don’t having the right skills or the result of a long term management skills gap?

To me, the current manufacturing skills gap results directly from short term thinking and disrespect for workers practiced by those with management skills shortages over the last few decades. Those leading the manufacturing firms have shown they will flee the USA with the latest change in the wind, chasing short term bonuses and faulty spreadsheet thinking. Expecting people to spend lots of time and money to develop skills that would be valuable for the long term at manufacturing firms given this management skills shortage feels like putting the blame in the wrong place to me.

Why should workers tie their futures to short term thinking managers practicing disrespect for people? Especially when those managers seem to just find ways to blame everyone else for their problems. As once again they do in blaming potential workers for their hiring problem. The actions taken based on the collective management skill shortage in the manufacturing industry over the last few decades has contributed greatly to the current state.

If managers had all been managing like Toyota managers for the last 30 years I don’t think the manufacturing skill gap would be significant. The management skill gap is more important than the manufacturing skill gap in my opinion. To some extent the manufacturing skill gap could still exist, market are in a constant state of flux, so gaps appear. But if their wasn’t such a large management skill gap it would be a minor issue, I believe.

That still leaves companies today having to deal with the current marketplace to try and find skilled workers. But I think instead of seeing the problem as solely a supplier issue (our suppliers can’t provide us what we need) manufacturing firms would be better served to look at their past, and current, management skills gap and fix that problem. They have control over that problem. And fixing that will provide a much more solid long term management base to cope and prosper in the marketplace.

Another management issue may well be the hiring process itself. As I have written about many times, the recruitment process is highly inefficient and ineffective. When you see workers as long term partners the exact skills they have today are much less significant than their ability to meet the organizations needs over the long term. In general, information technology recruiting has the worst case of focusing on silly skills that are really not important to hiring the right people, but this also can affect manufacturing hiring.

Related: IT Talent Shortage, or Management Failure? – Dee Hock on Hiring – Manufacturing Jobs Increasing for First Time Since 1998 in the USA (Sept 2010) – Building a Great Workforce – manufacturing jobs have been declining globally (including China) for 2 decades – Improving the Recruitment Process

6 New Kiva Loan to Manafacturing Entrepreneurs

Posted on July 28, 2011  Comments (0)

I have been a big fan of Kiva for quite some time, and have written about it previously: Kiva – Giving Entrepreneurs an Opportunity to Succeed, Thanksgiving: Micro-financing Entrepreneurs. I made 6 new loans today to manufacturing entrepreneurs in the USA (and Mexico); Tajikistan; Nicaragua; Armenia; and 2 in El Salvador. The webcast above shows Armen Tsaghikyan in Armenia. It does seem like his process maybe could use a benefit from a bit of application of lean manufacturing ideas.

It is great to be able to help out people whether it is providing useful information (like I hope my web site and blog do) or a small loan of capital that allows some capital improvements. Many of the loans through Kiva amount to providing a loan to get additional supplies (often they have very limited capital). But my favorite loans are those that allow for purchases of new equipment that will make them more efficient.

It is easy to help out yourself; you can loan as a little as $25. The 10 members of the Curious Cat team have made 292 loans for a total of $12,000. Comment with the link to your Kiva page and I will add a link on Curious Cat Kivans.

Related: Kiva Fellows Blog: Nepalese Entrepreneur Success – More Kiva Entrepreneur Loans: Kenya, Honduras, Armenia… – 100th Entrepreneur Loan

Touring Factories on Vacation When I Was Young

Posted on July 13, 2011  Comments (0)

Growing up, occasionally, a family vacation would include a factory tour related to my Dad’s work. He was providing some management or engineering consulting and took the opportunity to check in on progress and visit the gemba. Here is a photo from one of those tours (in Nigeria, I think). My brother and Mom are visible in the photo.

The tours (which were not a very common occurrence) were quite enjoyable and interesting. Though I really didn’t like how noisy the factories were. Seeing all the machines and vast scale of the systems was quite a change of pace and added some excitement to the vacations (that often were already pretty exciting). I remember we also visited some factories in Kenya (in between seeing the game parks).

photo of factory tour with my family when I was a kid

Factory in Nigeria (I think) that my family toured


On this tour we found a bit of visual management showing which side of a crate should be on the top.
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Factorial Designed Experiment Aim

Posted on April 25, 2011  Comments (2)

Multivariate experiments are a very powerful management tool to learn and improve performance. Experiments in general, and designed factorial experiments in particular, are dramatically underused by managers. A question on LinkedIn asks?

When doing a DOE we select factors with levels to induce purposely changes in the response variable. Do we want the response variable to move within the specs of the customers? Or it doesn’t matter since we are learning about the process?

The aim needs to consider what you are trying to learn, costs and potential rewards. Weighing the various factors will determine if you want to aim to keep results within specification or can try options that are likely to return results that are outside of specs.

If the effort was looking for breakthrough improvement and costs of running experiments that might produce results outside of spec were low then specs wouldn’t matter much. If the costs of running experiments are very high (compared with expectations of results) then you may well want to try designed experiment values that you anticipate will still produce results within specs.

There are various ways costs come into play. Here I am mainly looking at the costs as (costs – revenue). For example the case where if the results are withing spec and can be used the costs (net costs, including revenue) of the experiment run are substantially lower.
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Manufacturing Jobs Increasing for First Time Since 1998 in the USA

Posted on September 29, 2010  Comments (1)

Surprise! Blue collar jobs are coming back

Manufacturing employment began its decline long before the recession, losing jobs every year since 1998. But since the start of this year, there’s been a 1.6% gain in manufacturing jobs — about twice the pace of growth in other private sector jobs.
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The unemployment rate for manufacturing workers has also shown much greater improvement than for workers overall, dropping to 9.5% in August from 13% in December. That compares to a far more modest improvement to 9.6% from 10% for the overall labor force.
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Gains so far have been concentrated in four industries — automotive, fabricated metals, primary metals and machinery

This is good news for the economy. I believe it is partially due to more companies rethinking off-shoring practices which are flawed and adopting lean manufacturing ideas. As I have written for years USA manufacturing output has continued to increase and still remains by far the largest manufacturer. China is making huge gains by growing their output dramatically (not by the USA’s output decreasing). Manufacturing employment in the USA (and everywhere else – including China) has been decreasing for 20 years. The main stories are not jobs moving but jobs being eliminated by productivity improvement and China growing manufacturing output not a decline in manufacturing output in the USA.

Related: Worldwide Manufacturing Employment Data – 1979 to 2007 – Manufacturing in the USA, and Why Organizations Often Don’t – Top Manufacturing Countries in 2005

Manufacturing in the USA, and Why Organizations Often Don’t

Posted on May 9, 2010  Comments (3)

Manufacturing in the USA continues to do well. But it could do better. There are reasons manufacturing that could be located in the USA is not. And addressing those can increase USA manufacturing. Some reasons are sensible, based on the existing economics and realities of comparative advantage. Some reasons are just flawed thinking, such as the “spreadsheet management” taught at many business schools that Deming and lean thinkers can understand the flawed thinking that leads to outsourcing.

Typical wall street thinking (also driven by “spreadsheet management think” rather than an actual understanding of value stream of a potential investment) also hampers raising investment capital for USA manufacturing. The broken USA health care system also is a big problem driving up costs of doing business in the USA enormously.

Fighting for ‘made in the USA’

Safer and longer-lasting than conventional lithium-ion car batteries, the 52-year old MIT professor’s invention packs 600 cells into a case the size of an airplane carry-on bag. His technology has transformed the batteries used in many cordless power tools. So why are Chiang and his company, A123 Systems, having trouble moving to full-scale commercial production and creating thousands of new American jobs with his better mousetrap?
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Despite the promise of Chiang’s batteries, many on Wall Street and in Silicon Valley were incredulous when he and other leaders at A123 asked for capital to build factories in America — Asia, yes, but Michigan, why would you want to?

Even more daunting, nearly all of the world’s battery manufacturing industry is in Asia, where plants can be built faster and supplies and equipment are much easier to get than in the United States. These days, it’s hard to find Americans who even know how to build a battery factory.

That’s why A123 had to give in and build its first plants in China, where the company could move into production quickly to show auto industry customers that it could deliver on future contracts.

“Without question, we would rather have done it all in the U.S.,” said Chiang, who left Taiwan as a 6-year-old with his family, earned degrees at MIT and has been a materials science professor there since the mid-1980s. “I’m an American citizen. We’re an American company. It’s an American-born technology.”

Despite the obstacles, A123 and a few other advanced battery producers are building plants in Michigan and other states, thanks to massive government support that has offset Wall Street’s skepticism and should help domestic producers narrow cost disadvantages with Asian rivals.

A123 is getting $250 million in aid from the Obama administration’s stimulus program as well as tax incentives from Michigan. Its first U.S. plant opens in June in an abandoned brick building near Detroit that once made VHS tapes for Disney.
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A123 has five plants in China, coincidentally located in Chiang’s father’s hometown of Changzhou, about two hours’ drive west of Shanghai. Bart Riley, an A123 co-founder and chief technology officer, figured it took about nine months to get a Chinese factory up and running, one-third the time typical for the U.S.

The quicker launch helped A123 make a name for itself through Black & Decker, which in early 2006 began putting A123 batteries in its DeWalt power tools.

Since then, A123 has been supplying batteries and battery systems for New York City buses built by Daimler, among other customers, and the company has agreements to develop products for Chrysler, Navistar and American green-car maker Fisker Automotive.
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By the end of next year, A123 expects to have two plants in Michigan employing 400 people, with plans to go up to 2,000 workers able to produce about 30,000 battery systems a year. The company’s sales reached $91 million last year, and it has about 1,700 employees, two-thirds in Asia.

The success of science and engineering university based research is still a huge advantage to the USA. Though other countries have seen the value in this and have invested in building their own capacity. The economic value of such is increased many fold by manufacturing the innovations created in your country.

Related: Manufacturing and the Economy – Economic Strength Through Technology Leadership – Rhode Island Manufacturing – Big Failed Three, Meet the Successful Eight – Toyota in the US Economy

Toyota Stops Lines – Lots of Lines

Posted on January 26, 2010  Comments (3)

The practice of stopping (either the machine automatically detecting a problem and stopping or a person stopping) the line when a problem is detected is part of Jidoka. Jidoka is also highlighting and making problems visible. Jidoka and Just in Time are the two pillars of the Toyota Production System. Today Toyota practiced Jidoka on a large scale: Toyota Halts Sales of Eight Models After Recall

Toyota Motor, still struggling to resolve a problem with accelerator pedals, said Tuesday it would temporarily stop selling and building eight models in the American market, including the popular Camry and Corolla sedans
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“This action is necessary until a remedy is finalized,” Robert S. Carter, a Toyota group vice president, said in a statement. “We’re making every effort to address this situation for our customers as quickly as possible.”

Toyota said it would immediately stop selling the Camry, Corolla and Avalon sedans, Matrix wagon, RAV4 crossover, Tundra pickup, and Highlander and Sequoia sport utility vehicles. It will also stop building those models the week of Feb. 1. All of the vehicles are assembled in the United States or Canada, at a total of five plants.

The models affected accounted for more than a million sales in 2009, 57 percent of Toyota’s American total for the year.
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The most recent recalls follow what Toyota insisted was a companywide effort to improve quality that was started by Katsuaki Watanabe, who served as its president before he was replaced last year by Akio Toyoda, grandson of the company’s founder.

My guess is there are quite a few people in Toyota that are getting a frustrated that they continue to have problems that they have been unable to successfully address. This strikes is as the kind of action initiated near the top of the organization chart to remind the organization that problems must be addressed immediately. It is not ok to continue business as usually when problems have not been addressed in the Toyota Production System. Toyota is capable of failing to live up to the principles of lean manufacturing. But they also seem to understand this risk and continue to strive to improve. To succeed though they need to improve results – intentions alone are not enough.

Related: Cease Mass Inspection for Quality – Recalls at Toyota and Sony – Reacting to Product Problems – Workplace Management by Taiichi Ohno

The Biggest Manufacturing Countries in 2008 with Historical Data

Posted on December 7, 2009  Comments (4)

Once again the USA was the leading country in manufacturing for 2008. And once again China grew their manufacturing output amazingly. In a change with recent trends Japan grew output significantly. Of course, the 2009 data is going to show the impact of a very severe worldwide recession.

Chart showing percent of output by top manufacturing countries from 1990 to 2008Chart showing the percentage output of top manufacturing countries from 1990-2008 by Curious Cat Management Blog, Creative Commons Attribution.

The first chart shows the USA’s share of the manufacturing output, of the countries that manufactured over $185 billion in 2008, at 28.1% in 1990, 27.7% in 1995, 32% in 2000, 28% in 2005, 28% in 2006, 26% in 2007 and 24% in 2008. China’s share has grown from 4% in 1990, 6% in 1995, 10% in 2000, 13% in 2005, 14% in 2006, 16% in 2007 to 18% in 2008. Japan’s share has fallen from 22% in 1990 to 14% in 2008. The USA has about 4.5% of the world population, China about 20%. See Curious Cat Investment blog post” Data on the Largest Manufacturing Countries in 2008.

Even with just this data, it is obvious the belief in a decades long steep decline in USA manufacturing is not in evidence. And, in fact the USA’s output has grown substantially over this period. It has just grown more slowly than that of China (as has every other country), and so while output in the USA has grown the percentage with China has shrunk. The percentage of manufacturing output by the USA (excluding output from China) was 29.3% in 1990 and 29.6% in 2008. The second chart shows manufacturing output over time.

charts showing the top manufacturing countries output from 1990-2008Chart showing the output of the top manufacturing countries from 1990-2008 by Curious Cat Management Blog, Creative Commons Attribution.

The 2008 China data is not provided for manufacturing alone (the latest UN Data, for global manufacturing, in billions of current USA dollars). The percentage of manufacturing (to manufacturing, mining and utilities) was 78% for 2005-2007 (I used 78% of the manufacturing, mining and utilities figure provided in the 2008 data). There is a good chance this overstates China manufacturing output in 2008 (due to very high commodity prices in 2008).

Hopefully these charts provide some evidence of what is really going on with global manufacturing and counteracts the hype, to some extent. Global economic data is not perfect. These figures are an attempt to capture the economic reality in the world but they are not a perfect proxy. This data is shown in 2008 USA dollars which is good in the sense that it shows all countries in the same light and we can compare the 1995 USA figure to 2005 without worrying about inflation. However foreign exchange fluctuations over time can show a country, for example, having a decline in manufacturing output in some year when in fact the output increased (just the decline against the USA dollar that year results in the data showing a decrease – which is accurate when measured in terms of USA dollars).

If the dollar declines substantially between when the 2008 data was calculated and the 2009 data is calculated that will give result in the data showing a substantial increase in those countries that had a currency strengthen against the USA dollar. At this time the Chinese Renminbi has not strengthened while most other currencies have – the Chinese government is retaining a peg to a specific exchange rate.

Korea (1.8% in 1990, 3% in 2008), Mexico (1.7% to 2.6%) and India (1.4% to 2.5%) were the only countries to increase their percentage of manufacturing output (other than China, of course, which grew from 3.9% to 18.5%).

Related: posts on manufacturing – Global Manufacturing Data 2007 – Global Manufacturing Employment Data – 1979 to 2007 – Top 10 Manufacturing Countries 2006 – Top 10 Manufacturing Countries 2005 – lean manufacturing resources

How ‘Buy American’ Can Hurt U.S. Firms

Posted on September 16, 2009  Comments (2)

How ‘Buy American’ Can Hurt U.S. Firms

Canadian communities angered by perceived American chauvinism have started a Buy Canadian campaign to exclude U.S. bidders from municipal contracts. “If that sticks, well, there goes 25% of my business,” said Mr. Pokorsky. “To me, Ontario may as well be Indiana.”

Halton Hills, a town of 50,000 people about 25 miles west of Toronto, is one of about a dozen Canadian communities forging ahead with plans to amend their procurement policies to freeze out American companies. “We won’t be taking any products from any country that is discriminating against us,” said Mayor Rick Bonnette.
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Aquarius gets a lot of its parts from abroad, particularly from Canada. Such integration became even tighter after the North American Free Trade Agreement in 1994 joined the U.S., Canada and Mexico in a free flow of goods and services.

Trojan Technologies Inc. of Ontario, North America’s dominant maker of ultraviolet disinfection equipment for treating sewage, is a key supplier to Aquarius and other companies. Because of the Buy American provisions, Trojan has had to shift production to a plant in Valencia, Calif., a move that has resulted in delays and additional costs being passed on to customers, said Trojan executive Christian Williamson.

The challenges of trying to legislate market choices such as what products to buy are difficult. It is understandable to want to direct stimulus funds to improving the economy today in the USA. Creating legislation that can cope with interactions and unintended consequences inherent in such attempts is not easy.

Related: China and the Sugar Industry Tax Consumers – New Look American Manufacturing – Russell Ackoff Webcast on Systems Thinking – Why Congress Won’t Investigate Wall Street

Akio Toyoda’s Message Shows Real Leadership

Posted on July 26, 2009  Comments (8)

Speech by Akio Toyoda

Since the birth of Toyota, the company’s philosophy has always been to “contribute to society.”
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“Contributing to society” at Toyota means two things. First, it means, “to manufacture automobiles that meet the needs of society and enrich people’s lives.” And second, “to take root in the communities we serve by creating jobs, earning profits and paying taxes, thereby enriching the local economies where we operate.”
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Toyota has overcome many challenges during its seven decades of business. What has made this possible is the way we make our cars under our “customer first” and “genchi genbutsu” principles
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Rather than asking, “How many cars will we sell?” or, “How much money will we make by selling these cars?” we need to ask ourselves, “What kind of cars will make people happy?” as well as, “What pricing will attract them in each region?” Then we must make those cars.
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Through these processes, I would like to make Toyota’s product development and product lineup more region-focused. We will change our policy from achieving “a full lineup everywhere” to “a lineup necessary to meet the needs of each region”. We will also launch new vehicles that anticipate consumer needs and are exciting to drive.
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At the press conference in January, I talked about my desire to become “a president who is closest to the frontlines, or gemba.” I believe that the essence of management lies in the gemba, and Toyota employees play a vital role there.

Once again Toyota shows they are the type of management I want to invest in. In my last post I discussed another: Jeff Bezos at Amazon. Google management is another management system I am glad to invest in. Toyota, Amazon and Google are 3 of my 12 stocks for 10 year portfolio.

Toyota continues to show they are an exceptional company that doesn’t waver due to short term pressures. They know the management system they have in place is excellent. They always try to improve. And they react to evidence that shows they have room to improve. They then access the situation and move forward.

via: Toyoda on Toyota: A New Regime, A New Future

Related: New Toyota CEO’s Views (2005) – Interview with Toyota President (2006) – Deming Companies – “2007 has been a difficult year for Toyota” – No Excessive Senior Executive Pay at Toyota – Webcast on the Toyota Development Process

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Penske to Buy Saturn from GM

Posted on June 7, 2009  Comments (1)

Penske to Buy Saturn from GM

“When Saturn launched in the 1980s, it was the new, new thing, with the best dealer service and no-haggle pricing that put customers at ease,” said independent marketing consultant Dennis Keene. “But in recent years, it has just been another GM division, operating the same as Chevy or Pontiac, with nothing to differentiate it and a marketing message that keeps changing, so that people haven’t been able to get a handle on what the brand is supposed to be.”
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First off, he won’t own any manufacturing plants. Saturn will continue to buy today’s vehicles from GM for at least two years. Penske will talk to other auto manufacturers in Europe and Asia about supplying new products after that. “We are going to be a sales, service, and marketing company, not an OEM [original equipment manufacturer],” he said. Eventually, Penske explained, he wants at least some Saturn vehicles to once again be manufactured in the U.S., though that may not be the case in the short run after the agreement with GM runs out.

I thought Saturn was the worst management failure at GM, among many (NUMMI, and GM’s Failure to Manage Effectively, for example). They really did some great things early on with rethinking the system of manufacturing and selling cars. But GM failed to take care of the innovative division. I hoped that Saturn would gain a new, better, management that build Saturn toward the potential it has. Contracting out manufacturing however, is a horrible idea, I believe. Unfortunately I think this ends the hope for a great Saturn.

Saturn still have the potential to do ok, given how bad the dealership experience is for most other companies. The dealer experience, even for Toyota and Lexus is still not at all congruous with the customer focus principles of lean (for example, motivating sales people to make as bad a deal for customers as they can – paying them more the more they get for the dealership at the expense of the customer). And other car companies have quite a bit to learn from the sales practices of Saturn and Car Max.

Related: Big Failed Three, Meet the Successful Eight – Honda has Never had Layoffs and has been Profitable Every Year – People: Team Members or Costs – Invest in New Management Methods Not a Failing Company, 1986

Toyota Posts Loss of $6.9 Billion in Last Quarter

Posted on May 8, 2009  Comments (1)

Toyota Posts Loss of $6.9 Billion in Last Quarter

For January-March, Toyota booked a $6.9 billion loss, in line with consensus estimates, and cut its annual dividend nearly 30 percent — the first cut since at least 1994, when it changed its reporting period.
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Toyota President Katsuaki Watanabe was more downbeat, stopping short of predicting when sales would pick up in major markets, or when the company would return to profitability as it remains saddled with excess capacity. “Of course the external environment doesn’t help, but we were lacking in the scope and speed of dealing with various problems and issues, and for that I am sorry,” he told a news conference.

For the year to next March, the maker of the Prius hybrid forecast an operating loss of 850 billion yen, more than double the average forecast in a survey of 20 analysts by Thomson Reuters. It sees an annual net loss of 550 billion yen based on the dollar and euro averaging 95 yen and 125 yen.

The bleak forecasts prompted ratings agency Standard & Poor’s to downgrade Toyota’s long-term debt ratings to AA from AA+, with a negative outlook.
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To return to profit, Toyota must sell more cars or cut costs further, Watanabe said. But he predicted the U.S. market would be around 10 million vehicles industrywide at best this year, down from more than 13 million in 2008.
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Toyota is bleeding overhead costs, with about a third of its global assembly lines working on single shifts. It will slash capital spending by more than a third this year to 830 billion yen as it puts expansion projects on hold, but it said it was not thinking of closing any production lines for good.

In my opinion these negative results are a sign of Toyota’s strength not weakness. The credit crisis and economic downturn has resulted in a poor economic environment. Toyota has managed to sustain the blow and hold firm to their principles and likely will come out of this downturn stronger as a company (mainly re-enforcing the importance of planning for bad economic conditions and not getting too excited about growth potential versus risks of growing too fast) and in a better position compared to their competitors. I continue to be an owner of Toyota stock and happily so.

Related: Idle Workers Busy at Toyota – Financial Market Meltdown (Oct 2008) – “2007 has been a difficult year for Toyota” – New Toyota CEO’s Views (2005) – Jim Press, Toyota N. American President, Moves to Chrysler

NUMMI, and GM’s Failure to Manage Effectively

Posted on February 25, 2009  Comments (2)

Gipsie Ranney recently sent me an article on her thoughts on NUMMI and the current problems with the Big Three car makers to post to the Curious Cat Management Improvement Library. NUMMI is the plant that Toyota and General Motors run together as a joint venture. The article is excellent.

The answer to a question asked by someone else on the tour was stunning to me. The person asked what kind of computerized inventory system they had at NUMMI. The leader of the tour at the time – a materials management person – responded, “we don’t have one; the Japanese say that computerized inventory systems lie.”
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The most remarkable insight I gained at NUMMI came as an answer to a question from a member of the touring group. The person asked what had been learned about the reasons that management/labor conflict had been reduced so much. The tour guide answered, “The answer we get from members of the labor force is that the Japanese do what they say they will do.” This was the same labor force that had held the record for most grievances filed per year in an assembly plant in the U.S.
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The Big Three are responsible for managing their organizations wisely. I think that will take more than money. It will take a different culture and a different mind.

I agree. The problem is that management fails to manage well and has been failing to do so for decades. They have improved over the last few decades but not nearly fast or consistently enough. Gipsie worked closely with Dr. Deming and serves on the W. Edwards Deming Institute Board of Trustees.

Related: Could Toyota Fix GM (2005) – At Ford, Quality Was Our Motto in the 1980s – Big Failed Three, Meet the Successful Eight – Why Fix the Escalator? – Invest in New Management Methods Not a Failing Company (AMC) by William Hunter, 1986 – Ford and Managing the Supplier Relationship – No Excessive Senior Executive Pay at Toyota

Big Failed Three, Meet the Successful Eight

Posted on December 15, 2008  Comments (1)

Big Three, Meet the “Little Eight”

The 1,300-acre plant, in which Toyota has invested $5.3 billion, produces a car roughly every minute. Georgetown’s population has doubled. In fields where farmers once grew tobacco and raised cattle, McMansions, apartment complexes, and condominiums have sprouted. A 150,000-square-foot upscale retail center is rising near the Toyota plant, the better to serve its 7,000 employees.
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In San Antonio, the Toyota Tundra plant lay idle for three months this fall, though Toyota hasn’t laid off anyone. Instead, according to Richard Perez, president and CEO of the Greater San Antonio Chamber of Commerce, Toyota offered the city “a whole bunch of folks who need to get busy.” (San Antonio put them to work on beautification projects.) Of course, Toyota has resources to act in a more paternalistic manner – in part because the parent companies aren’t saddled with the burdens of providing health care and retirement for workers in home markets.

This is not behaving in a paternalistic manner, this is behaving in an honorable manner with the other long term stakeholders that have a shared interest in the long term success of the company. When managers and executives do their jobs the company will succeed in good times and have a plan for bad times and will deal effectively with obvious long term issues. Health care costs, pensions costs, and bad labor-management relations have been obvious critical issues to solve for GM, Ford and Chrysler for decades. The pathetic job those 3 have done with those, and other issues (they still don’t understand how to work with suppliers, how to stop the obsessive focus on quarterly profits, how to demand honorable behavior [not looting] from senior executives…), lead to their current situation.

The poor economy leads the the situation you now see with Toyota and Honda: profits being cut, having to put in place plans to retain employees while they are not needed to produce output today, etc.. You don’t see companies needing billions to survive a few months unless they were incredibly poorly lead. And those leading them were paid many times more than those that led Toyota and Honda. They have had decades to act responsibly. They have failed. And there failure will be felt by those that enabled them to take huge pay packages that were not warranted. They should be ashamed.
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Family Business Gives $6.6 million in Bonuses to Workers

Posted on November 29, 2008  Comments (2)

The PEER Bearing Company (a manufacturer of bearings based in Illinois) was bought out by a Swedish company this year. The family that had owned the company gave surprise bonuses of $6.6 million to the 230 employees of the company (an average of over $28,000).

family thanks employees with surprise bonuses

Family members signed two thank-you cards to each employee, one in Spanish and one in English, expressing gratitude for “the loyalty and hard work of our employees over the years.” “They treated us like extended family,” said Maria Dima, who works at the company along with her husband, Valentin. “We won the lottery.”

On the day the checks were distributed, Valentin Dima watched as co-workers broke down in tears over their bonus checks. He drove home first, then opened his envelope: $33,000. His wife received a check for a smaller amount, and the two Romanian immigrants have since taken a Caribbean cruise to celebrate.
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The new owners intend to operate the company based 40 miles north of Chicago as a wholly owned subsidiary. Workers have been told that most will keep their jobs.

A small bit of good news for these troubling times. It is nice to see true respect for people being practiced. The family also created the Spungen Family Foundation, 2 years ago.

Related: Tilting at Ludicrous CEO Pay 2008 – Focus on Customers and Employees – People are Our Most Important Asset – Manufacturing Continuous to Increase in the USA

Invest in New Management Methods Not a Failing Company, 1986

Posted on November 22, 2008  Comments (0)

Invest in New Management Methods Not a Failing Company by William Hunter, 1986

I predict American Motors will stop making cars in Wisconsin in the near future, whether or not the state’s money is used for a temporary propping-up operation.

These competitors are beginning to understand how essential it is to take a long-term view of their businesses. Toyota, for example, took its top 40 managers on a two-day retreat to ponder what their corporation will look like in the 21st century. They are studying totally new methods of management [20 years later large portions of these "new" methods are still ignored by many - John]. These methods take continuous quality improvement as a central, guiding principle.
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Investing in American Motors now, in any form, is a mistake. If Wisconsin is to become a trend-setter in economic development, we need some long-term thinking in forming wise, creative policies.
It is difficult, I know, for legislators and other elected officials to take a long-term view when the tangible reward is re-election and elections come around quite frequently.
Our founding fathers are remembered for their long-term vision. We need to change the way our democracy works so that long-term visions is an integral part of all important discussions on economic development on the local, state and national level.

Don’t reward shortsightedness by James Cook

In 1985 I assumed the role of plant manager of one of the world’s foremost automotive tool manufacturers in a small northern Iowa town. It was then that I was introduced to W. Edwards Deming. At the time, the company had a greater market share than any of its individual domestic or foreign competitors, but ominous and encroaching signs from abroad began to threaten its pre-eminence in the automotive aftermarket. So steps had to be taken to arrest this incursion that could mean the end of its reign.

It was then, as I began my tenure at the company, that we began with Deming’s concept of Statistical Process Control, later changed to Quality Control, and the practice of Toyota’s kanban cell manufacturing techniques that would enhance the already high-quality standards that had defined the company for decades.
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If we had listened, if we had followed him, if we had incorporated his thinking not only in the automobile industry but in government, in the ubiquitous economy collapsing around us and in our private lives, we would now be far better for it.

Related: At Ford, Quality Was Our Motto in the 1980s – Ford’s Wrong Turn – Could Toyota Fix GM (2005) – Ford and Managing the Supplier Relationship – No Excessive Senior Executive Pay at Toyota – Creating Jobs

Ford’s Camaçari Plant in Brazil

Posted on November 18, 2008  Comments (3)

photo of Fords' Camacari plant in Brazil

Brazil’s Camaçari plant is model for the future

This state-of-the-art manufacturing complex in the northeastern Brazilian state of Bahia is not only the centerpiece of Ford’s Brazilian turnaround plan, it is also one of the most advanced automobile plants in the world. It is more automated than many of Ford’s U.S. factories, and leaner and more flexible than any other Ford facility. It can produce five different vehicle platforms at the same time and on the same line.
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At Camaçari, more than two dozen suppliers operate right inside the Ford complex, in many cases producing components alongside Ford’s main production line. Having those supplier operations on-site allows Ford to take the concept of just-in-time manufacturing to a whole new level. Inventories are kept to a bare minimum, or dispensed with entirely. Components such as dashboard assemblies flow directly into the main Ford assembly line at the precise point and time they are needed.
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Unlike many U.S. auto plants, where workers’ responsibilities are strictly limited to specific job classifications, workers like Silva dos Santos are encouraged to learn as many different skills as possible.

Here is an interesting video on the plant. It is sad how poor management at GM, Ford and Chrysler has created such a bad situation for those working at those companies, their suppliers, the communities that support their production… GM and Ford had the advice they needed to succeed from Deming in the 1980′s but they chose to focus on the short term, large executive payments, accounting gimmicks instead of continual improvement…

They each have improved over the years, but the standard is not just improving but doing so effectively and enough and they failed at that. The UAW shares some responsibility for failing to successfully lead their workers to a promising future but management is much more responsible for the failure in my opinion (the video and article try to say Ford wants to be innovative in the USA but the UAW won’t let them). It is management’s jobs to focus the organization on cooperation and success for all stakeholders. When management is more concerned with getting themselves huge payoffs (from the pockets of the other stakeholders) and then try to blame one of those other stakeholders for fighting management is disingenuous. Executive’s contempt for other stakeholders leads to the other stakeholders feeling that they should be just as greedy as management.

Related: Ford’s Wrong Turn – Ford and Managing the Supplier Relationship – Global Manufacturing Data 2007 – Toyota’s New Texas Plant – Womack Podcast on GM – VW Phaeton Manufacturing plant
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Global Manufacturing Data 2007

Posted on October 30, 2008  Comments (1)

The updated data from the United Nations on manufacturing output by country clearly shows the USA remains by far the largest manufacturer in the world. UN Data, in billions of current US dollars:

Country 1990 1995 2000 2005 2006 2007
USA 1,041 1,289 1,543 1,663 1,700 1,831
China 143 299 484 734 891 1,106
Japan 804 1,209 1.034 954 934 926
Germany 438 517 392 566 595 670
Russian Federation 211 104 73 222 281 362
Italy 240 226 206 289 299 345
United Kingdom 207 219 228 269 303 342
France 224 259 190 249 248 296
Korea 65 129 134 200 220 241
Canada 92 100 129 177 195 218

See manufacturing data for more countries.

The USA’s share of the manufacturing output of the countries that manufactured over $200 billion in 2007 (the 12 countries on the top of the chart above) in 1990 was 28%, 1995 28%, 2000 33%, 2005 30%, 2006 28%, 2007 27%. China’s share has grown from 4% in 1990, 1995 7%, 2000 11%, 2005 13%, 2006 15%, 2007 16%.

Total manufacturing output in the USA was up 76% in 2007 from the 1990 level. Japan, the second largest manufacturer in 1990, and third today, has increased output 15% (the lowest of the top 12, France is next lowest at 32%) while China is up an amazing 673% (Korea is next at an increase of 271%).
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Idle Workers Busy at Toyota

Posted on October 12, 2008  Comments (2)

Idle Workers Busy at Toyota

Instead of sending the workers home, as the Detroit makers often do, Toyota is keeping them at the plants, though. The employees spend their days in training sessions designed to sharpen their job skills and find better ways to assemble vehicles.
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At its Princeton plant, by contrast, Toyota is using the down time to hone its workers’ quality-control and productivity skills. The company has pledged never to lay off any of its full-time employees, who are nonunion.

Jim Lentz, president of Toyota Motor Sales, the company’s U.S. sales unit, said the company believes keeping employees on the payroll and using the time to improve their capabilities is the best move in the long run. “It would have been crazy for us to lose people for 90 days and [then] to rehire and retrain people and hope that we have a smooth ramp-up coming back in,” Mr. Lentz said.

In Princeton, senior plant manager Norm Bafunno said he can already see the benefits of the training. Mr. Bafunno cites a Teflon ring designed by an assembly worker during the down time that helps prevent paint damage when employees install an electrical switch on the edge of a vehicle’s door.
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Mr. Mason, a 40-year-old former firefighter, added: “One of the major things that everyone is grateful for is that they thought enough of us to keep us here.”

Toyota continues to show intelligence, long term thinking, respect for people… in their management decisions. I worry they may capitulate and make explanations about how the economy forced them to abandon their principles. I hope they prove that cynical fear in me to be wrong, in their case.

Related: Bad Management Results in Layoffs – Toyota Management Not Close to Being Duplicated – Toyota’s Commitment to Customers – People are Our Most Important Asset – Jim Press, Toyota N. American President, Moves to Chrysler