Bankrupt in 2009, General Motors has a new problem; not being able to meet customer demand. GM’s VP of Manufacturing Diana Tremblay talks about increasing capacity, and analyst Ron Harbour explains how US carmakers can further improve their production strategies

Executives at General Motors recently faced a dilemma not seen since the recent downturn that caused vehicle sales to plummet and resulted in a series of plant closures. What was this problem? Consumer demand for the new Chevrolet Equinox crossover utility vehicle was outstripping production capacity in Ingersoll, Ontario. Further to this, interest in the GMC Terrain compact SUV, also assembled in Ingersoll, was beginning to build. With the economy making a fragile recovery, what was the best solution? Add capacity to the existing line or at another plant, add a new production line or go so far as to plan construction of an all-new plant?

Not surprisingly, money was a constraining factor, yet even without the associated financial concerns, any of these individual fixes would not deliver the number of vehicles required in a timeframe suitable to respond to customer demand. In order to quickly build more vehicles, the chosen solution was to combine capacity across two plants; the CAMI bodyshop in Ingersoll would supply carbodies, with paint and final assembly taking place at GM’s Oshawa (Ontario) facility. Of course, this would mean shuttling vehicle bodies the 130 miles (250km) from Ingersoll to Oshawa, but the timeframe was about right – in six to eight months, the capacity would come on stream.

“We didn’t anticipate the degree to which the market would positively respond,” says Diana Tremblay, GM Vice-President of Manufacturing and Labour, following her address at the 2010 Management Briefing Seminars (MBS), held in Traverse City, Michigan. Also speaking at the MBS event, outgoing GM CEO and Chairman Ed Whitacre noted that GM had recently faced worse problems than having customers waiting for vehicles. In his words, it was a good problem to have.

“When the shuttle is fully operational, three trucks carrying five bodies each will leave CAMI every hour, around the clock, for the two-and-a-half hour drive to Oshawa,” says Tremblay, who started in her current role in December 2009, later adding global plant responsibilities. Now based in Warren, Michigan, Tremblay was a former plant manager with GM Europe in Antwerp, Belgium. With the shuttle operation starting in early August, Tremblay explains that GM expects the strategy to increase annual output of Equinox and Terrain models by up to 80,000 units. It was, though, a difficult decision. Delivering carbodies to Oshawa is not like driving them across town. “We looked at a variety of options, everything from starting up a plant to increasing overtime,” Tremblay says. “We felt adding a plant or expanding capacity at an (existing) plant would be too costly and take too long to capitalize on market demand. Since CAMI was already running three shifts, overtime wasn’t an option, they were already on maximum overtime,” she adds.

By electing to increase capacity in the CAMI bodyshop and ship BIWs to Oshawa for paint and assembly, GM found a comparatively quick way to increase production. Like other manufacturers, GM has put new plant construction at the bottom of its wish list. The last greenfield plant the carmaker funded in the United States was the Lansing Delta Township facility, which came online in 2006 and builds the Buick Enclave, GMC Acadia and Chevrolet Traverse.

“We have fewer facilities, but we have a good footprint within our plants,” explains Tremblay, referring to current plant efficiencies. “GM was able to continue to invest in product and our operations (in order to) be in a position to respond to the recovery.”

GM’s Global Manufacturing System (GMS) and flexible plant operations helps the carmaker to achieve additional hours-per-vehicle savings and share best practise through its global plant network. “We used the GMS as an enabler to obtain our cost targets,” Tremblay says. Currently the carmaker is well-placed in such quality reports as the J.D. Power survey and Oliver Wyman’s Harbour Report, a barometer of plant quality. In addition to these tools, GM also relies on dealer and consumer feedback to measure internal quality at plants and products, including the Global Customer Audit and a Service Warranty Data audit.

New models and plant makeovers
General Motors will soon start production of the Chevrolet Volt at its refurbished Hamtramck, MI, facility, with the car available to US customers in November. The Volt will be built on the same line producing the Buick Lucerne and Cadillac DTS, although it is a very different model. Diana Tremblay says that the next-generation Chevrolet Malibu will be manufactured in the same location, highlighting the plant’s flexibility.

An offsite plant in Brownstown, MI, is assembling batteries delivered from Korean-based LG Chem into packs for the Volt. The units contain four battery pack cells, with each completed unit weighing about 300kg (625lbs). “The biggest difference between the Volt and (its competitor) the Nissan Leaf is the number of miles you can go stretch,” says Tremblay. “With a (petrol) gener you don’t run out of charge,” she adds, referrin to the electric vehicle phenomenon of ‘range anxiety’.

The Volt can recharge its battery pack using the on-board generator, extending its potential range to several hundred miles. For its part, GM has been reluctant to provide a firm range figure before EPA estimates are delivered. Government tax credits of up to $7,500 also are available to EV buyers.

Plants that might have been closed for good are being brought back into service in order to supply new vehicles. At GM’s Orion Assembly, located in Lake Orion, Michigan, the winding up of Pontiac production looked like the end of the road for the facility, but it is now undergoing an extensive makeover, with company insiders saying that it is likely to produce a new small car, possibly the next-generation Aveo. Tremblay, though, would not confirm any related details. As the future of GM plants is looking brighter, Tremblay points out that supplier relations also are also on the upswing. “They (supplier companies) like the changes we’re making, the transparency of our information and data. We’re forming more collaborative relationships with our suppliers,” she says.

Plant analysis
Industry analyst Ron Harbour, partner at Oliver Wyman consultancy in Troy, Michigan, offers an overview of the market. “There’s still significant overcapacity in the industry, particularly in North America and Western Europe,” he says. “The busiest plants are at 93% utilisation,” he continues, “but that’s rare these days.” Harbour conducted 45 plant visits in various locations around the world in 2009, tracking and monitoring plant efficiency and vehicle quality. The plant studies, now undertaken by Oliver Wyman, are closely monitored by participating automakers. “It costs around $1 billion to build a new assembly plant,” Harbour notes. “You can’t a $1bn plant and keep running one shift or shifts and still be profitable.” He continues: bility is the key differentiator. Without out mpanies won’t succeed in moving forward. ants) won’t survive without flexible systems.”

Harbour has observed that there are fundamental changes happening in global automotive operations. In North America, with improved UAW co-operation, the region is learning how to compete with other low-cost manufacturing areas. Centralized plants also are changing, as the new economy does not allow continued construction investment. “Customers don’t know and don’t care where their vehicles are built,” says Harbour. “They just want good quality and value. Manufacturers are no longer sure the total cost decisions were right with centralized systems,” he says.

Assembly plant trends

Across North America, there has been a fundamental shift in how assembly plants are operated, with a trend towards fewer facilities and workers and more products built on fewer lines.
- According to Oliver Wyman’s Ron Harbour, further trends in North American automotive manufacturing are:
- A reduction in the number of new facilities
- Reduced capital investment at plants
- A leaner, smaller workforce
- Assembly lines with fewer work stations
- An increase in the production of multiple models on a single line
- Fewer high speed production lines
- Technology-driven production systems
- The increase of ‘generic’ capacity in order to produce any model at any time

Organizations are also is being redefined, says Harbour, as companies move to become more vertically integrated. Site location preference is also changing, as North American carmakers move away from the north and look to start production in southern states. Harbour points out that GM now has only 16 of 30 plants in what would be considered northern locations, marking a paradigm shift away from the region. Other carmakers, including Volkswagen, Honda and Hyundai have also selected southern locations for their new plants and investments, despite pressure from the UAW. With regards to this, Harbour notes, “UAW contracts with entry-level wages can be very competitive.”

Harbour further points out that the most important ingredient for production success is company management and its people. Further to this, the ‘push’ system of production is also being left behind in favour of a more customer-based focus, with orders for specific products driving production. Yet while customers might not care where their car is manufactured, Harbour says the same is not true for individual areas. “Almost every country or region demands you build where you sell.”

Nissan looks to lean production
Like the Chevrolet Volt, Nissan is preparing to introduce its own new alternative-powertrain vehicle, the all-electric Leaf, which is scheduled to enter production at the company’s plant in Smyrna, Tennessee. Considered to be America’s largest automotive factory, the facility is spread over 5.2m square feet. Operating more like a small town than a production plant, the cafeteria serves 4,500 lunches every day.

Mark Swenson, Vice-President of Nissan North America – Manufacturing Engineering and Vehicle Production, says the plant will start production of the Leaf in 2012. Until then, the car’s mother plant in Oppama, Japan, will supply vehicles sold in the US. When Smyrna does start production, the model will be built on the same line that currently assembles Nissan’s Altima and Maxima models.

Susan Brennan, Vice-President of Manufacturing at Nissan Smyrna, says line technicians will carry out off-line assembly for component kits, where normally they would be delivered by AGV to the stations on the final assembly line. A further difference is that unlike the Chevrolet Volt, the Leaf doesn’t have a fuel tank, so it will not stop at that particular station. With regards to battery installation, Brennan says that production of the Altima hybrid, built on the same line (which now includes a battery check), has helped with organizing and implementing build processes for the Leaf.

The Nissan Production Way (NPW) is the formal name of the production system used in Nissan plants and throughout the company, says Swenson. The NPW provides the theory, philosophy and standards in operating plants, essentially a global production blueprint. The NPW strategy has been in place as long as Swenson can remember, and he has worked at Nissan for almost 22 years. “The NPW strategy is fully-utilized in every plant and system in the world where we have flexible operations. It’s a never-ending journey that sets the strategic intent for Nissan, including Japan’s Oppama plant,” he says.

Nissan’s Flexible Manufacturing System covers bodyshop and final assembly processes, while the company’s Integrated Manufacturing System operates in all global facilities. The system serves to integrate all manufacturing units, including Infiniti, Nissan’s luxury car division.

As part of the NPW strategy, every Nissan plant has a deployment schedule. “These are global strategies that help the company adjust to changing market needs. The adjustment not only applies to production needs, but also to model mix,” Brennan says. “As automakers respond to sales, flexible manufacturing becomes even more important. Everything is done on a consumer-driven basis. Flexibility is the lifeblood of our organization. That means it’s easy to shift between models (and produce multiple models on several or single lines). As change has increased, we can be flexible with market demand.” If the market suddenly changes, Brennan insists that manufacturing will not be the reason the company loses sales.

Over the past six years, Nissan has made huge investments in its plant infrastructure; the carmaker spent $1.4bn for the Leaf build alone. Like other carmakers in the region, Nissan is implementing strategies aimed at a successful return from the recent North American market downturn. As such, further investments on the same scale are not likely to be made again in the near future.

Toyota turns to technology
Toyota Motor Corporation is also fighting to regain market share, losses related to both the market downturn and the recall of nearly six million cars and trucks between 2009- 2010 to investigate incidents of ‘unintended acceleration’. To address the concerns raised by the recalls, Toyota has also appointed a new US quality chief, Steve St. Angelo, to monitor plant activities related to product quality. Norm Bafunno, the first non-Japanese president of Toyota Motor Manufacturing Indiana, says the company is focused on local plant autonomy and regional decision-making, with the goal of reducing bureaucracy and improving programme implementation.

Toyota now has 13 US plants digitally linked to share best practices. A support centre in Kentucky connects the plants, the system used for such things as video conferencing and monitoring production. “Plants are linked by regular audits of key performance indicators, making it easy to spot what is going well and where improvements are needed,” says Bafunno.

Domestic brands are quality winners
Of the domestic brands, Ford has achieved the highest quality ratings in comparison to transplant carmakers. The Dearborn-headquartered company recently took top honours for its new Taurus and other mid-range cars in this year’s J.D. Power Initial Quality Survey. High IQS scores also bode well for plant quality. Yet while Ford was the standout, all domestics have taken positive steps in narrowing the quality gap between themselves and transplant brands, also noted in the J.D. Power survey.

Ford was the top brand in this year’s study, which measured a total of 228 potential problems during the first three months of ownership. Including Volvo, Ford had 12 models in the top three of their respective segments. Due to the recall crisis, Toyota fell from sixth place last year to 21st. This decline has helped GM, whch now has 10 models in the top vehicle rankings.