THE DEMISE OF DETRIOT'S BIG THREE

Our knowledge store and the beliefs that drive our behavior are learned in many different ways. Most of us acquire a significant portion of our trove of wisdom from the school of hard knocks, i.e. from our successes and our failures. Most would also agree that the failures are often more instructive than the successes.

We can also learn vicariously from the successes and failures of others, although the process seems less effective than personal experience. Still, it would be foolish to pass on the opportunity to at least try to recognize and avoid the failures that have brought a giant industry to its knees.

As such, the following insights serve one clear purpose: to heighten your sense of urgency for beginning, revitalizing or continuing the understanding and application of Lean principles in your company. The need to embed Lean practices into the very DNA of your organization is absolutely critical in the current economic environment.

WHAT HAPPENED TO DETROIT?
The automotive crisis, regardless of the outcome, can be instructive if we understand what brought the industry to this point. Whether or not the Big Three are recipients of a taxpayer bailout is not the real issue. What is more important is that we learn something from their mistakes.

The December 15 issue of Time magazine does an admirable job of characterizing the problem (see "Is This Detroit's Last Winter?"). The seeds of failure were unwittingly sown by Henry Ford, Alfred P. Sloan and other captains of the early automotive industry who established a benevolent but rigid socio-industrial world where employees were paid well, had a "job for life" and a guaranteed pension. In return, they were to dedicate their life to the company and do as they were told.

The model worked well in the early growth stages of the industry and during the post-WWII years when demand outstripped capacity and global competition was non-existent. Automotive companies could afford to placate union demands and still turn a tidy profit.

Then came the gas crisis of the 1970s. With shortages and rising fuel prices, American car buyers quickly developed a keen interest in small, fuel efficient cars. Detroit had no answer for the Datsuns, Toyotas, Hondas, Volkswagens and other imports that boasted superior gas mileage and rapidly improving levels of product quality. In less than a decade, 30 percent of the U.S. car market was lost to foreign competitors.

Faced for the first time with formidable competition, Detroit came forth with a spate of smaller cars that did little to alleviate the problem. Ford Fiesta, Chevrolet Chevette, and the Chrysler K-Cars were typical of the brands meant to compete with the imports. But the American car buyer quickly learned that Detroit's offering was no match for the quality, reliability and fuel efficiency of the European and Japanese vehicles. Detroit's market share continued to slip.

What followed was a frenzied series of firings, hirings, mergers, acquisitions and product strategies that simply diverted attention from the real issues of cost and quality that plagued the industry. The ill-fated Daimler-Chrysler merger, Ford and GM's massive diversification sprees, and an on-going insistence on proliferating endless models and product features have absorbed time and cash that would have been much better spent on perfecting a few good cars (see sidebar.)

What if the U.S. auto manufacturers could identify their top areas of strength (a few of their most popular models), then focus a Lean/world-class manufacturing effort on perfecting those models? Go back to the simple model of Henry Ford's Model A … and that's it. Get at least one thing right, rather than 25 models done miserably.

You can't be all things to all people. Misguided efforts to do so are helping to kill the Big Three. An article in USA Today cited one model of a GM vehicle has over 80 variations of a rearview mirror. A comparable Honda model has three. Who needs 80 choices of how they look out the back window?

Add to this festering dilemma relatively high labor costs, a huge legacy pension obligation resulting from the Henry Ford/Alfred P. Sloan model, and years of capitulation to UAW demands, and one begins to see why the industry is before Congress with hat in hand.

A LEARNING DISABILITY
According to John McDuffie, a manufacturing expert at the University of Pennsylvania's Wharton School of Business, "of all Detroit's failures – the failure to master small cars, failure to cut costs, failure to get tough with the UAW, failure to improve fuel efficiency – the failure to learn … is perhaps the worst sin."

Lean manufacturing principles rooted in the Toyota Production System have been commonly known since the early 1980s. The GM/Toyota joint venture at New United Motor Manufacturing, Inc. (NUMMI) in Fremont, California was established in 1984. A model of Lean manufacturing excellence, the plant has been open to scrutiny for years.

Countless executives from the industry have visited this facility – and apparently dismissed its success and the underlying concepts that made it possible.

The absolute requirement for employee participation in decision-making and problem-solving at every level is the major barrier. Again, the rigid, almost militaristic Ford/Sloan organizational model simply does not provide for the level of trust and confidence between management and labor that is needed to drive a truly Lean environment. The idea just never "took."

In fairness, we must acknowledge the industry's success in responding to the demand for SUVs, minivans and other specialty vehicles. In addition, engine and drive train reliability and quality of fit and finish are nearly equal to Japanese brands. But it is clearly too little, too late. The competition is moving forward on the refinement of cars that are already best-of-class while Detroit is on the brink of disaster.

WHEN WILL WE LEARN?
Is it just us, or does it seem that too many products sold in the U.S. are "Made in China"? The "China" phenomena, along with other evidence, suggests that the automotive industry is not the only one that suffers from a learning disability.

We have now had 30 years to learn from Toyota and other world-class companies on how to build, sell, purchase, schedule, manufacture and deliver products at world-class levels, but the majority of the companies we visit stubbornly refuse to acknowledge there is a better way. Instead, they take the stance that "it was good enough for Dad and Granddad … its good enough for me!"

With this attitude, how long will it be before the majority of manufacturing companies find themselves in the current automotive predicament? How many bailouts can we taxpayers afford?

Today, many manufacturers compete in a global "me too" marketplace where foreign competitors have not only rebuilt their manufacturing capabilities, but have done so using Lean techniques and other world-class improvement tools. Our competitors may have the additional advantage of paying significantly lower wages, providing little or no benefits, and being unconcerned with the long-term cost of unsafe working conditions or environmental concerns – all of which contribute to an unfair and unlevel playing field.

But this does not excuse us from fighting on.

In order to compete responsibly, we cannot lower our standards regarding worker safety, diminish our concern for the environment, or hope to retain skilled team members without rewarding them financially. Perhaps we have to do something completely different.

"CATAPULT THE COW"
Remember the Monty Python movie where the inhabitants of a castle catapult a cow toward an invading military force?

Most people do not realize that this image is based on an actual event that happened in 1334, when Margartea Maultasch of Tyrol and her army encircled the castle of Hochosterwitz in Carinthia. Because of the steep terrain, a traditional storming of the castle was out of the question. Instead, they decided to starve out the inhabitants. The situation inside the castle was desperate, supplies were scarce and the people were soon down to their last two bags of corn and one skinny cow.

Thinking in a completely different direction, the commander of the castle took desperate action. He slaughtered the cow and filled it with the corn, ordering his troops to catapult the dead cow over the wall toward the enemy. The invading hordes interpreted this as a clear message that starving them out was useless. Obviously they had food to waste. The invaders picked up and moved on.

Lean can make the difference. Our quest for the "completely different" direction begins with the question, "What can we do for our customers that our competitors (foreign or domestic) cannot or are not doing?"

Answering this question creatively will allow us to 1) focus on our improvement efforts and 2) apply Lean tools to develop capabilities that cannot be easily matched by competitors. Of course, our Lean tool applications will be mixed and matched with product and service offerings that are effectively targeted to customer needs.

Underpinning this new direction will be an organization that is poised to learn and adapt – where the contention between management and worker is eliminated and commitment to the customer rules supreme.

CONCLUSION
The final volume of Will and Ariel Durant's History of Civilization is entitled "The Lessons of History." In the final pages, the authors suggest that our history is a great heritage, a gift that grows richer with the passing of time. "The heritage rises, and man rises in proportion as he receives it."

Our recent economic history, including the struggles of the U.S. automotive industry and the American manufacturing community at large, can be useful if we learn from it. We ignore the lessons that this history provides at our own peril. The time for procrastination is over. Lean and its contribution to "Catapulting the Cow" is an idea whose time has come.

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David Dixon is the executive vice president of Technical Change Associates, Inc. and a registered professional engineer with more than 35 years of experience in lean manufacturing, Six Sigma and other improvement initiatives. For more information, call 801-621-8980 or visit www.technicalchange.com.

Gary Conner is the author of the bestselling book Lean for the Small Shop and is a Lean Sensei who has worked with hundreds of Kaizen improvement teams during his 20-year career. He is the author of four books and many articles on continuous improvement. Contact Gary at [email protected].