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Big 3 improve factory efficiency

From detnews| June 01,2007

Years ago, Detroit's automakers took up to 16 labor hours longer than their Asian rivals to build a vehicle in North America.

That difference is being whittled down to minutes, with the efficiency gap between domestic and Japanese automakers shrinking last year to its smallest ever, according to a closely watched study of labor productivity being released today.

While no domestic automaker managed to topple Nissan Motor Co., Toyota Motor Corp. and Honda Motor Co. from the top of the annual Harbour Report, each of Detroit's Big Three posted improvements, according to several people familiar with the report.

Of the domestics, General Motors Corp. improved most from 2005 to 2006, followed by the Chrysler Group and Ford Motor Co. Honda posted the biggest improvement overall, while Toyota and Nissan slipped.

Troy-based Harbour Consulting, which publishes the annual report, will release specific data today on how the companies fared.

The report on automotive factory performance is widely used by automakers as a competitive benchmarking tool.

The most vital figure is the average number of labor hours needed to build a car or truck as it travels through an automaker's stamping, engine and assembly plants.

In that category, the ranking of overall productivity is expected to be similar to last year, when Nissan, Toyota and Honda were at the top, followed by GM, Chrysler and Ford, which ranked last for the second consecutive year.

"We're trending in the right direction. We've made some improvements. But we're certainly not satisfied with where we stand," Ford spokeswoman Anne Marie Gattari said. "We expect to see significant improvement as a result of our Way Forward actions next year."

Domestic automakers have made steady gains in efficiency as they've cut jobs, idled plants and negotiated new operating agreements with the United Auto Workers union. Ford has struck such deals with more than three dozen of its union locals. GM is pushing for agreements at many of its plants as well, dangling new products in front of workers desperate to keep their factories open.

"The GM team has worked very hard to improve productivity over the last 10 years," GM spokesman Dan Flores said. "We anticipate continued improvement."@@page@@

Improvements boost Big 3

Foreign carmakers, meanwhile, have seen their average productivity either stay roughly the same or increase slightly as they build larger vehicles that generally require more labor to produce.

Domestic automakers still required more total labor hours per vehicle than their foreign rivals, though the gap in 2006 is expected to be even narrower than in 2005, when GM on average spent 40 minutes more to build a vehicle than Honda, its closest rival.

A number of factors lead to the difference.

Plants owned by foreign automakers tend to be newer and built to accommodate more flexible manufacturing processes, making them efficient, said Rebecca Lindland, a Global Insight analyst in Lexington, Mass. Other factors not related to productivity, such as new product launches, can also add to the time it takes to build a vehicle.

Improvements by Detroit's automakers "is a sign that they're paying a lot of attention to making improvements and becoming more flexible," she said.

From 2004 to 2005, Chrysler improved the most among U.S. carmakers, with a 6.0 percent gain. GM improved productivity by 3.3 percent and Ford by 3.2 percent, despite production volume declines of 8 percent at GM and 10 percent at Ford.

The data also ranks the most efficient plants in a number of categories. Of vehicle assembly plants, a Ford factory in Atlanta was the most productive in 2005. That plant is now closed.

The report ranks efficiency in terms of labor hours per vehicle. The figure is derived by adding up all hours worked for salary and hourly pay, overtime, downtime and paid lunches, and dividing that by the total number of vehicles produced.

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