Executives at three transplant OEM production sites in the United States discuss how their respective operations are developing and what challenges had to be overcome in order to achieve success in manufacturing
In 1966, Nissan was the first transplant carmaker to set up production facilities in North America. Since then, Nissan Mexicana has been joined by virtually every other Japanese and European carmaker, as OEM manufacturers have created shorter, cheaper routes into the lucrative North American markets.
In the short term at least, the first plants to start production in the United States remained under the tight supervision of their respective headquarters, but over the following decades, this rigid control has given way to more autonomous management and plants that are foreign only in name. Such is the case at the Mercedes-Benz plant in Tuscaloosa, Alabama, which has actively tried to assimilate the local culture. “This is an American operation,” says Markus Schaefer, CEO and President, Mercedes-Benz US International (MBUSI). “The first couple of years, we had a German CEO, Andreas Renschler, but most of the time the CEO has been American. Maybe it worked to have a German here in the beginning, but now Germans make up about 1% of the workforce. The plant, the workforce, is American. That is what we want, this is our idea. We don’t want a German company here.”
In fact, Schaefer says that one of the few German elements that remains as part of overall plant operations is the methodology behind how vehicles are manufactured at MBUSI. “We build cars that are engineered in Germany, and we train people to Mercedes standards. Our quality standards and our specification are country-specific, in that they are delivered from Mercedes in Germany, but these same guidelines are implemented worldwide.”
It is widely accepted that the unsuccessful 1998 merger between Chrysler and Daimler, the latter being Mercedes’ parent company, failed due to a refusal by both companies to respect each other’s culture differences. While it’s impossible to quantify the influence the failed merger had on operations at MBUSI, currently the only Mercedes-Benz plant operating in North America, it is clear that apart from the Germaninstituted methodology with regards to vehicle production, the plant is looking to avoid any potential culture clashes by putting in place an American-style management system.
The same can be said of the Nissan’s first and largest plant in the United States, located in Smyrna, Tennessee, although this was more a case of management evolution rather than a specific strategy implemented from the start of operations.
“When this company started, it was 100% designed to be managed from Japan,” says Brian Sullivan, Director of Manufacturing Engineering and Maintenance. “But we’ve started to develop our own identity, at a grassroots level, our own culture. Since then, we’ve matured to be more independent, even more so since the 2000s, when we became more global.”
The event that took the plant into the ‘global’ sphere was the formation of the Nissan-Renault Alliance, which Sullivan says has had a major influence on the way that operations at Smyrna are conducted. “Prior to 1999, we were managed through Japan. We only took control after the Alliance was formed. As a result of that, we do govern ourselves.” This, he continues, is down to how the management structure is arranged. “[The company is] split into global regions.
The Americas covers the US, Canada, Mexico and down to Brazil, and the regional management committee has a chair on the executive board at Nissan in Japan. Day-to-day operations are driven by the regional committee.”
As transplant companies, Mercedes-Benz and Nissan have individually chosen to follow much the same management path, which includes creating strong relationships with both local workers and suppliers, as Sullivan points out. “We work very closely with our steel suppliers. If we have a new requirement, the steel vendors work with us to develop that new product. We haven’t run into a problem where we can’t get a specific steel from the local supply base, we can even get super high-strength steels in the 980Mpa range from our supplier in the US.”
Sourcing steel for production isn’t a problem at MBUSI either, due in large part to ThyssenKrupp opening a new $5 billion steel production plant in Calvert, Alabama. “This is one of the biggest steel plants in the US - it’s the biggest I’ve ever seen!” says Markus Schaefer. “We have been partners with them since the first day the plant started up.” With that in mind, it’s surprising that Mercedes still has to import steel from Europe. “We have very narrow specifications and we need specialist steels. To be honest, the demand from automotive manufacturing is not that great, so not every steel producer in the US can supply what we need. We import steel, but I would like to source locally, which is part of my discussion with ThyssenKrupp and others here, to focus on special steels.”
Steel is also an issue at one of the newest car plants in the United States, the Volkswagen plant in Chattanooga, Tennessee, but as Lothar Grensemann, General Manager, Paint Department explains, it’s a case of getting steel work completed in preparation for inbound equipment. “You can see, there’s a lot of steel in the factory. All this work was done on-site by a contractor, everything we could do using US suppliers has been done, but all the work had be completed to the supplier’s exact specification or the equipment wouldn’t fit!”
The equipment in question is a unique pairing of products from paintshop specialists Eisenmann and Durr, respectively bringing together the E-shuttle and EcoDryScrubber systems. “Each of these elements has been produced by Eisenmann or Durr, pre-manufactured and then packaged as modules for shipping. All the robotics have been tested, checked, and then shipped.”
Although the paintshop technology is from well-known suppliers, Grensemann says that managing construction of the installation gave him some sleepless nights. “I thought, my goodness, we’re going with a new technology in a country where you only have three other people that know this stuff and everybody else must be trained. But it all went much smoother than I expected.” He adds that the same paintshop layout will be used at all new Volkswagen paintshop installations. “This is a benchmark site, it is the setup we will carry forward for future Volkswagen plants, such as the one being built in China.”
Benchmarking is also a fundamental part of driving process improvement at Nissan Smyrna, the different global regions and individual plants benchmarking performance against each other. Brian Sullivan: “We benchmark all the time, for some operations it’s on a daily basis! It’s good, it drives performance in every area, and we’re very transparent with that information.” He confirms that best practise is shared across the company, which is made that much easier due to global equipment standardisation. “It’s like a funnel, at the top everyone is doing everything differently, but by the time you get to the bottom everyone is doing everything the best way. This is what we gain from benchmarking.”
Instead of benchmarking based on individual installations or processes, Markus Schaefer says that performance at his plant can be measured on employee attendance. “In Europe, you talk about 5% absenteeism. Here, we talk about 0.6%.
The work ethic here is extremely good.” This could be due in large part to motivational tools, such as profit sharing based on the performance of the plant and Daimler as a whole, while there is also a bonus scheme: “If you reach your targets, safety, quality, delivery, attendance, you can earn a bonus. It’s based on team performance and company performance.”
This, says Schaefer, is different to Mercedes plants in Europe, as is the decision not to use time banks, which accrue overtime hours worked as additional holiday. “We have one philosophy here. Everyone comes to work every day.” He says that in Germany, time banks and comp time require plants to have a crew available to cover people not at work. “I don’t have background groups here. In Europe, 30% of the workforce might not be at the plant. We don’t have people sitting at home.”
This, though, is a system based on local familiarity rather than design, as time banking is all but unheard of in the US.
Essentially, American workers expect to have to come to work every day, and where possible, would prefer to take any remuneration in cash rather than in days off. Employee expectations aside, Schaefer is undeniably proud of the people that work at MBUSI. “We run at extremely high speeds here, with very high utilization, but this is matched by the people, who work extremely hard, they are very dedicated.” With regards to training, he says that the situation has come full circle. “Before we started operations, hundreds of people went to Sindelfingen (Mercedes-Benz headquarters, located near Stuttgart, Germany). That still happens on a regular basis, especially in preparation for the new cars. All the pilot cars, relative to our plant, are first built by our people in Germany.”
While there, experienced employees from MBUSI also take part in the vehicle design and development programme, helping to improve vehicle construction in terms of overall manufacturability. “In the past, we came later to the process, the product was delivered and we had to build it. Now, our line workers and engineers are there when the final design is signed off, their input is considered invaluable. This has paid off in hours-per-vehicle, we’ve really made drastic cuts in that area.”
Although Volkswagen has only recently started production in the US - the first examples of the new North Americaonly version of the Passat having only rolled off the line in May this year - Lothar Grensemann has still had time to be impressed with the quality of labour available in the Chattanooga area. “We need people that can do spot repair and rework, and they must be very adept. The people we hired, they learned the skills very quickly, to paint and rework cars in specific areas. They’re from all different backgrounds, we have people coming out of road construction, a teacher, lots of areas.”
With the scaling back of operations at the GM plant in Spring Hill, Tennessee, located about 100 miles away in Nashville, did any workers migrate to Volkswagen? “We did try to hire production workers and we did get some of them, but not as many as you would think. We have people here from virtually every brand. Seventy-five per cent of our workforce comes from Chattanooga. Our specialists come from a wider catchment area, but we did try to hire locally.” The Chattanooga plant is predominantly staffed by Americans, and this pattern extends over to the paintshop. While he is still planning to hire additional workers, Grensemann says that of the almost 400 people now employed in the paint department, only four are from Germany. “We have been through different phases, but less than 1% of the people here are from Germany. More is not necessary, we have everything here in the US. I am surprised by the skills, the passion people have for the plant. We teach them and train them, and now they are there, painting the cars.”
Automotive production in Germany is invariably overseen by ‘meisters’, managers that have extensive training and experience in their particular field of expertise; skills which are then shared with line workers in an effort to both manage the process and gain quality improvements. Is that the underlying setup behind staffing at Volkswagen Chattanooga - do you call them meisters? Grensemann: “We have meisters, but we refer to them as supervisors. One of our first activities here was to interview the engineers and potential supervisors and we had a lot of interest, they brought a lot of experience.”
In the paintshop he says there are currently eight supervisors, three for each shift and two to manage maintenance. According to Grensemann, 75% of these positions were filled very quickly, but it took a little longer to find candidates for the remaining spots. “As you fill positions, it gets more difficult to find a perfect fit.” But now the team leaders have been in place for a few years, recruiting can be done based on this history.
Markus Schaefer offers his own take on the system of leadership: “Our meisters run the business. [At Mercedes- Benz] they have had three years of provisional training, followed by a further four years before becoming a meister.
They are very hands-on, they are master craftsmen.” Like Volkswagen, Mercedes in Alabama has a similar supervisor set up, although the additional 14 years of production, in combination with support from Mercedes headquarters in Germany, has developed a deeper pool of talent from which to draw. Indeed, before taking charge at MBUSI, Shaefer was in charge of a then new CKD plant in Cairo, Egypt, which also meant training new hires. “We are very good at training people unfamiliar with car production. Over the years, we have developed training programmes in Sindelfingen and we have local vocational training centres.” With similar training facilities in place at Tuscaloosa, supervisors are continually being fed into the system to take control of various production areas, and Schaefer is happy with the results. “Fifteen years ago, we were apprentices and we needed a lot of help, we had a lot of trainers here when we launched our first product. We’ve just launched the new M-Class and we had just three trainers here [from Germany].
We have grown up, and now we are helping others around the world, in South Africa and in China.”
In fact, Schaefer says that with regards to training, the only drawback is advancing technology. “We start to train people here to become a meister, and it takes many years, but I always have to say ‘we’re not finished’. Technology is a moving target - It would be great if it would stay still, but it doesn’t and we must keep up.” In essence, training never stops as the new technology results in ever more complex build processes.
While some processes at each plant are operating over three shifts, such as stamping and plastics production at Nissan Smyrna, most are set up over two shifts. These two-shift operations use what is referred to as a ‘decoupled’ system which is not commonly used in European plants. Essentially, the decoupled system leaves a period of two or three hours between the end of the first and start of the second shift which can be used for process maintenance, or in the case of assembly, for flexible overtime in which to build additional vehicles.
Markus Schaefer: “Decoupled for us means that we work from 6am to 3pm, and from 6pm to 3am. I can work until 3, 4 or 5pm, it gives us tremendous flexibility.” Pointing out that this might prove to be a better fit with the ‘no Saturday work’ expectations of American employees, he says that he does sometimes call for weekend work, but it’s not very common.
“It’s better to have daily flexibility. I can decide at noon, let’s do a couple more cars, and we’ll be done at four.” Volkswagen’s Lothar Grensemann also uses the decoupled shift model, largely to allow for paintshop maintenance. After each shift, there is a two-hour break which is dedicated to maintenance if there is no overtime work - as the paintshop is never completely shut down and must be manned, he also carries out maintenance over the weekend.
Earlier this year, Mercedes-Benz announced that it would invest a further $2 billion at the MBUSI plant. With very few details released about how the cash would be spent, can Markus Schaefer offer some clues as to where the money will be directed? “The money will support new products, so it includes tooling for all new products, not only at this facility.” Essentially, a large portion of the investment has been used to put the new M-Class into production, while also making preparations for production of the next-generation C-Class saloon - which includes the addition of a new $100m paintshop line. As the plant doesn’t include a stamping facility, parts are produced off-site by Gestamp and Magna Cosma, the latter having just installed a new AIDA press line, but Shaefer sees that as making best use of available resources. “We have a big tooling department in Sindelfingen, so we do all the simulations in our own tooling department and deliver the specifications. I own all the tools and we have influence over our own tools. We can move them, if ever there’s a situation.”
Yet the question remains, why produce a mid-size saloon such as the C-Class at a plant that is set up to build SUVs?
The answer relates back to the recent downturn. “As an SUV manufacturer we were hit pretty hard. We were prepared, but not to the extent we needed. It really was a disaster. A lot of people still want big engines and big cars, but adding the C-Class will help us, it will give us a buffer.”
People from MBUSI are playing a role in developing the new model in Germany. “With the C-Class, we’re now involved in the very early stages of prototypes, looking at the product, materials; our people are side by side with people at Sindelfingen. I was just [in Germany] and we saw rapid prototyping of parts, and our people were being consulted by the development engineer - it was great!”
While there is such a clear and defined link back to headquarters, it is doubtful the MBUSI plant will ever act as a fully-independent entity. Nissan is currently in much the same situation, with model development still carried out in Japan, but as Brian Sullivan explains, that might change in the future. “Japan controls equipment and processes, while regional committees control operations, but we’re at a point where even that’s changing. Now, when we launch a new vehicle, we send a lot of the team to Japan to learn the architecture. Ten years from now, I wouldn’t be surprised if we’re doing all of that in the US. We have a technical center in Detroit, so we have the design know-how and experience. We have manufacturing and process engineering here, so we’re much more capable of doing the early development that we’ve ever been before.”
Does that mean in a decade we might see models developed from the ground up for the US market? “I think it’s very possible,” he replies. We have a good process and we can move parts to any plant, we have that flexibility. We’ll have standards that are maintained out of Japan, but I think that we’ll see more of the physical side of development done within the Americas.”
Three or four decades ago, it must have been a singularly lonely experience setting up a new manufacturing facility for a transplant carmaker in the United States. But as technology has progressed, particularly in terms of communications, plants have never had greater access to their headquarters and sister facilities, which allows - amongst other elements - leadership and technical expertise to be shared across the manufacturing network.
With products such as the Mercedes M-Class, Nissan Rogue (and Leaf EV) and the all-new Passat, these three carmakers are building the right vehicles in the right place, which while not guaranteeing success, makes achieving it that much easier. That said, this is no place to sit still, as a final comment from Markus Schaefer makes clear: “I would say that [building cars] will get more challenging over the next couple of years due to the technology. The processes and the cars themselves are changing so much, especially if you’re a premium manufacturer. I would say in the next couple of years, we will see tremendous changes in the way we build cars.”