Manufacturing Excellence: Bailing Out Auto

January 3, 2009
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The most recent government assistance given to financial institutions has created a perception that the U.S. government has unlimited amounts of money to help U.S. corporations clean up their messes. Most of the people I have spoken with feel that the $700 billion is to help “plug the black hole” that has been created by corporations trying to earn huge profits.

We have seen what happens when businesses try to make money at any cost-milking the present and sacrificing the future.

What happened to the methods taught in the best business schools in the country? The proof is in the pudding that management education, in its current form, is lacking.

Since the financial bailout bill was passed in Washington D.C., an interesting thing happened. Suddenly, executives from the Big Three automakers realized that maybe they, too, could get some money from the government.

I learned recently in a conference that the top three U.S. automakers already have wasted about $500 billion in recent years attempting a turnaround. We can see the result.

What would an additional $25 billion do, I wonder? I believe simply giving money to high-flying executives is not a solution. Instead, the government should take over the automakers for three years, and then hire the best staff in the world to retool the firms.

The funny thing is that the Big Three have been retooling their firms since the mid-80s, when they started facing real competition.

Today, the comapanies still face the same problem of catching up with that competition and customers perceive the quality of their cars as subpar compared with the competition. But the quality has nothing to do with the labor cost-it is just an excuse.

In a recent training at one of these automakers, I learned that it is not the manufacturing itself that has led to this mess, but the management continually cutting costs. Lean operations are not the solution, as lean has been equated with layoffs and a means to cut costs. Ironically, the company that gave birth to the lean concepts, Toyota is actually growing and hiring. The strategy of merely cutting costs is a failure every time.

So, what should the Big Three auto companies do? The union and corporate leadership should team up to retool the organizations. Retooling must require sacrifice, but with clear strategy for profitable growth. The growth must be planned by designing innovative cars that can be reproduced easily without quality problems in a reduced concept-to-market product development cycle. They must listen to their customers regarding features and service.

The companies must mandate design engineers to produce manufacturing friendly, optimized designs rather than quick and dirty designs that cannot be manufactured easily.

The road to retooling is unclear; however, as long as we keep talking about cutting costs, it is not going to work.

At a presentation by Toyota at the Zagreb Economic Forum, the presenter said that Toyota had reengineered its design process more than 15 years ago, focusing on new technology.

Similarly, the U.S. automakers need to create a new mindset to strive for perfection in everything-not just in manufacturing. We are seeking bailout package without aim. A service-oriented economy cannot survive without creating and building best-in-class cars first.

Money will not bail out the auto industry; however, it may protract its bleeding by a few more months. It is the will of leadership to win the war against mediocrity that will turn it around. Bigger is not better. I would love to see the U.S. auto industry flourish again. I know it is not an easy task, but something different must be done.

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