7 June 2007

Plant efficiency leader in North America: Toyota

Japan’s Toyota Motor Corp. had the most efficient North American manufacturing plants in 2006, according to an annual benchmark survey.

But as quality advances and more-flexible labor agreements drive improvements, the gap in productivity among the six major North American automakers continues to narrow, according to the Harbour Report.

Last year, Honda Motor Co. Ltd. showed the biggest improvement of 2.7% in combined assembly, stamping and powertrain operations, the report said.

In overall productivity, General Motors Corp., Honda, DaimlerChrysler AG’s Chrysler Group, and Ford Motor Co. showed improvement in 2006.

“General Motors essentially caught Toyota in vehicle assembly productivity,” said Ron Harbour, president of Harbour Consulting. “Considering that they will be building vehicles in 2007 with dramatically fewer hourly employees in the U.S., GM, Ford, and Chrysler likely will reduce their hours per vehicle significantly.”

Harbour Consulting measures productivity at North American plants, calculating the labor hours needed to make vehicles.

Lower production time equated to a cost advantage of about $200 to $300 for Toyota over Ford, which trailed all of the surveyed automakers, Harbour said.

Japan’s Toyota led in 2006 by producing a vehicle in 29.93 labor hours, on average, followed by Honda, which took 31.63 labor hours.

Productivity improved for each of the Detroit-based automakers over 2005, but they still trailed Toyota and Honda.

GM trimmed total production hours per vehicle by 2.5% in 2006 to 32.36 hours. Chrysler improved 2.4% in 2006 to 32.90 hours across its assembly, stamping, and powertrain plants. Ford productivity improved 1.9%, but it placed last at 35.10 labor hours.

All three Detroit automakers are in the midst of shutting plants and cutting jobs in North America as they restructure operations. On a combined basis, they are closing more than two dozen plants and cutting over 80,000 jobs in North America.

Toyota and Honda each earned an average pretax margin of more than $1,200 on vehicles sold in North America. In contrast, Chrysler lost $1,072 per vehicle, while GM lost $1,436, and Ford lost $5,234 per vehicle in 2006.

The losses reflected a variety of factors, including the large difference in health care and pension costs, as well as rebates and low-interest-rate financing, the report said.

For related information, go to www.isa.org/productivity.