The Big Three isn`t what it used to be. This year, Honda probably will sell more passenger cars in the United States than Chrysler Corp.
This also could be the year that Japanese imports and transplants overtake stumbling General Motors Corp. in total U.S. sales. If not this year, then next.
Japan is on the verge of becoming the dominant player in the $700 billion U.S. auto industry. Detroit is running out of time and running scared.
In the 1950s, U.S. manufacturers controlled 80 percent of the world`s car market. Industry analysts are forecasting that by 2000, Japanese automakers will reap 40 percent of global auto sales and Detroit`s share could tumble to 28 percent from 35 percent today.
The Wall Street Journal recently proclaimed this turn of events ”one of history`s great transfers of industrial wealth and power.”
The consequences loom large. It is hardly a metaphor to say the auto industry is the engine that drives the American Dream. For more than half a century, the high profits and high wages generated by auto manufacturing opened the middle class to millions of blue-collar workers. Even today, about 14 percent of all jobs in the U.S. derive from the auto industry.
Last year, when many economists were predicting a recession, they blamed the sluggish domestic auto industry, the only industry large enough to single- handedly trip the U.S. economy.
Thus, it is hardly surprising that Chrysler Chairman Lee Iacocca, the industry`s most visible spokesman, has hit the road on a six-city tour that is part pep talk, part wakeup call to American manufacturers, government officials and consumers.
”Japan today is wrapped in a Teflon kimono, especially when it comes to cars, and maybe it`s time to start peeling back the kimono a little bit,” he told a Washington audience.
Iacocca wants consumers to recognize that American manufacturers have made considerable progress in closing the quality gap in the last several years.
He also wants the government to do more to protect American interests, arguing that it makes no sense to allow the Japanese to come in and build a state-of-the-art manufacturing infrastructure that further hastens the decline of the U.S. infrastructure.
But it was industry demands for import quotas that forced the Japanese to transplant their factories to the U.S. Domestic automakers assumed this would level the playing field. Instead, GM and Chrysler found they were closing car plants as quickly as the Japanese were opening them.
The 1980s have not been a total loss for Detroit, though it has gotten trounced on its home court. If anything, this close encounter with the competition taught Detroit the secret of Japan`s success.
”Traditionally, Detroit always thought the Japanese had this docile, compliant work force-workers willing to tie themselves to their machine, eat a bowl of rice for lunch and go home happy,” said Maryann Keller, an industry analyst and author of ”Rude Awakening” (Morrow), a new book that examines GM`s troubles.
”There was a lot of envy in Detroit. They thought this was the secret of the Japanese success without any understanding of the true role of the factory worker in the whole process,” she said.
But when Honda, Nissan, Toyota and Mazda began making cars here, in some cases with union labor and with no perceptible decline in quality or productivity, Detroit had to take a harder look.
The answer wasn`t more robots or superior technology. The truth was that the Japanese had developed a better system for making cars.
”The difference is entirely organizational. Using the same tools, they`ve reduced the time and effort it takes to make something,” said James Womack, research director of the International Motor Vehicle Program at the Massachusetts Institute of Technology.
For more than half a century, Detroit`s basic theory for making cars has remained unchanged. Henry Ford invented and perfected the system in the 1920s, borrowing heavily from the time and motion studies of nineteenth century engineer Frederick Winslow Taylor that had come into fashion under the label
”scientific management.”
The Ford system paid workers well but held them in low esteem. The worker was seen as little more than a machine. The idea was to break down each step of the assembly process to its simplest form so that even the dullest person could perform it easily.
It was monotonous, but it worked. Huge economies of scale were achieved. Detroit sat on its laurels.
The Japanese, meanwhile, took this model and moved it in a different direction.
To have any hope of competing with the U.S., Toyota`s pioneering Taiichi Ohno and others realized they would have to squeeze the most out of scarce resources. Accordingly, work was reorganized to maximize the human
contribution. Japanese engineers believed that human intelligence ”gave wisdom to the machine.” Even the dullest worker had something to contribute. To Detroit`s auto barons, this sounded a bit flighty.
”If it`s not invented here, how good can it be? That was the attitude in Detroit for a long time,” said David Cole, director of the University of Michigan`s Office for the Study of Automotive Transportation.
”But the system the Japanese use is hardly Japanese. It`s a reasonably optimum combination of process, people management and technology borrowed from all over the world,” said Cole.
And it is a system that travels well. One need go no farther than Marysville, Ohio, where Honda of America Manufacturing Inc., makes the Civic and Accord, to see carmaking in its most refined state.
Japanese society may be rigidly hierarchical, but that mind-set ends at the factory gate. At Marysville, there are no executive parking spaces, executive dining rooms or executive barber shops-frills cherished by Detroit`s brass. Honda President Hiroyuki Yoshino doesn`t even have a private office.
Everyone, from Yoshino to the plant maintenance workers, wears the same white uniform. The practical effect, says plant manager Bob Simcox, is to eliminate artificial barriers to communication.
Production workers are organized into teams of 12 or 15, with each member encouraged to learn as many jobs as possible. Unlike Detroit, where stories abound of workers who spent 10 or 15 years tightening the same bolt, Honda workers rotate through a variety of jobs. Some rotate every two hours; some every six months.
Japanese carmakers grant production workers far more autonomy and responsibility than their Big Three counterparts, especially on questions of quality control. Honda workers have authority to stop the line if they spot a defect. Until very recently, that would have been unthinkable in Detroit.
”We try to push the decision-making process to the lowest level possible,” said plant spokesman Roger Lambert. ”We`d rather have people on the line making $100 decisions instead of waiting (for a supervisor) to make a $100,000 decision.”
Honda and other Japanese manufacturers also try to build quality into the product from the outset by designing cars that are easy to assemble. Engineers consult production workers-still a rare occurrence in Detroit.
Another competitive advantage lies in the remarkably close relationship Japanese companies have with their parts suppliers.
Unlike Detroit, where 70 percent of a car`s parts will be made in-house, Japanese automakers have greatly reduced labor costs by purchasing 70 to 80 percent of their parts from outside suppliers. Toyota, Japan`s No. 1 automaker, produces cars on the same scale as GM, but with one fifth the work force.
Suppliers are expected to meet exacting quality standards. Honda has
”feelmasters” who will reject apparently flawless steering wheels simply because they don`t feel right.
Traditionally, Detroit has relied on huge and expensive parts inventories to keep its assembly lines running smoothly. Chances are, though, that if one component is bad, so is the whole batch. This means getting stuck with a month`s supply of bad dashboards or seat covers, which usually are installed anyway.
The Japanese, by contrast, have refined a tightly choreographed ”just-in-time” inventory system with their suppliers to better control quality and reduce inventories to about one-tenth the size of their Detroit competitors`.
Some Honda suppliers make deliveries to the Marysville factory every half hour. Windshields are made by a supplier 18 miles away on the day they will be installed in the car. If a defect is noticed, a telephone call usually can correct the problem immediately.
In the last few years, the Big Three have begun piecemeal experiments with some of these Japanese models. Teamwork and employee involvement in decision-making a GM have entered the plant floor jargon, quality standards have been elevated and inventories trimmed. Ford, in particular, has made significant strides.
But most industry experts agree that Detroit`s efforts have been too little and, perhaps, too late. If Detroit is to regain its ascendency, they say, it will have to re-invent itself along Japanese lines-and fast.
”In American culture, just about the nastiest thing you can say is that you copied from somebody,” said M.I.T.`s. Womack. ”But the Japanese got where they are today by being brilliant copiers, and that`s what we`re going to have to do, too.”
Monday: Big Three take a lesson from Japan in auto production.
