The structure that served it so well for so many years eventually blinded GM to the business environment it had to operate in, writes Ivan Deveson.
HAVING started as a GM Holden manufacturing cadet — being awarded General Motors scholarships to Kettering and Stanford universities and living and working in five countries over 30 years — I, like many, am saddened by the speculation of possible GM bankruptcy, the closure of nine plants in North America, and the retrenchment of 30,000 employees.
There are many factors behind this great company losing half its US market share, reporting billions of dollars of losses and watching its market capitalisation crash to $US12 billion ($A16 billion), compared with Google at $US112 billion.
I want to outline a few of those factors as lessons for Australia, where our manufacturing sector is under siege, having fallen from 30 per cent of gross domestic product to about 12 per cent in recent years.
An excess of vertical integration, where GM made many of the components it used, made the company blind to advances in competitive pricing and technology. Outsourcing was resisted for too long, with make-versus-buy comparisons constantly clouded by investments in bricks and mortar.
Australian companies need to constantly compare their costs, quality and intellectual property against global competition.
The traditional management/labour bargaining rounds of the 1950s through to the 1980s resulted in excessively high wages and benefits that rendered GM plants in the US uncompetitive with imports and with vehicles manufactured in "greenfield" US plants.
So-called hard-earned conditions of employment can be a burden in the ever-changing global economy, particularly if they threaten business viability.
Success breeds complacency — and some arrogance. When I visited Japan in the mid-1970s and saw the just-in-time and quick-die-change processes, I struggled to convince many of my Detroit colleagues that an economic tsunami was coming. Beating budget and being better than last year are irrelevant if you do not meet or beat world's best practice.
We understand this in sport, but have a lot to learn in trade and commerce.
It took the US too long to establish a policy of encouraging foreign importers to build greenfields plants in the US.
In the late 1970s, Japanese imports flooded the market. Baseball bats were used to beat up Toyotas in car parks as Americans lost their jobs.
A 1.8 million vehicle "voluntary restraint" was negotiated and, later, a GM/Toyota joint venture was formed in California where the Japanese taught the Americans lean manufacturing.
Today, the Japanese, Koreans and Europeans have about 20 best practice greenfield plants in the US. Toyota's American operations employ about 200,000 Americans directly and indirectly.
Australian authorities should be considering a similar concept as the Chinese and Indian automotive economic miracles unfold before our eyes.
A variety of pressures caused GM to be so slow to act on its own production overcapacity, resulting in incentives to artificially stimulate sales.
Alfred Sloan created an organisational structure in the 1920s that gave US consumers the opportunity to move up-market from a Chevrolet, through a Pontiac, Buick and Oldsmobile, to the ultimate Cadillac. It served the company well and was one of the keys to global leadership for 71 years.
More recently, this structure created dysfunctional internal competition and duplication and prevented GM from developing the "quick-to-market" design capability that might have helped it cope with growing competition. The global economy demands optimum teamwork, streamlined bureaucracy and flexible organisational structures.
China produced 5 million vehicles last year — they will reach 10 million by around 2010. They had 4 million university graduates in 2004, 350,000 engineering graduates and already have more people studying English than the US, Canada and Britain combined. They are developing global capability.
Australia is breeding more internationalists and we now have 1 million Australians working overseas. But we have a way to go.
We should hope GM president Rick Wagoner, his team, the leaders of the United Auto Workers union, dealers, suppliers and governments can find a way to rebuild the mighty GM.
It needs a co-operative approach, not an adversarial one. Thousands of Australians have benefited from GM, including this kid from Coburg.
Ivan Deveson is chairman of the Committee for the Economic Development of Australia and a veteran of more than 30 years with GM.
MILPITAS, Calif.--(BUSINESS WIRE)--Dec. 22, 2005--Solectron Corporation (NYSE:SLR), a leading provider of electronics manufacturing and integrated supply chain services, today announced it signed an agreement with the THALES Group to provide manufacturing services. This new global relationship encompasses products across THALES' defense, aerospace and commercial markets and will enable the company to achieve greater competitiveness by leveraging Solectron's manufacturing, supply chain and design capabilities.
THALES is a world leading electronics and systems group serving aerospace, defense, security and services markets with industrial operations in nearly 30 countries.
Solectron will utilize its proprietary Solectron Production System(TM) (SPS), which combines Lean operating principles with quality-oriented Six Sigma statistical analyses to boost efficiency and remove supply chain complexity. As a result, Solectron will help THALES better react to changing end-market demands, improve product yield and quality, reduce inventory and improve turns.
Solectron also will provide THALES with collaborative design services. Solectron engineers will support the THALES design teams to ensure products are designed for cost-effective manufacturing, performance and reliability while safeguarding THALES' competitive intellectual property.
"We are thrilled to partner with a global leader in aerospace and defense," said Doug Britt, executive vice president, Sales and Account Management, Solectron. "By bringing a combined local and global business model to THALES, Solectron was able to address solving business needs in-region as well as low-cost centers around the world for the best total solution across all business units."
By Neil Versel, contributing editor
Intermountain Health Care in Salt Lake City is building the next generation of electronic medical record by taking lessons from quality-improvement programs in other industries.
Over the next four years, Intermountain will embed coding into encounter notes, but first, clinicians need a working problem list, says Brent James, M.D., executive director of Intermountain's Institute for Health Care Delivery Research and a member of the Institute of Medicine's Committee on Quality of Health Care in America.
The health system will do so by building its documentation system around tasks in the work processes of its clinicians and administrative staff. "Another name for the task list is an order set," James explains. And order sets are a foundation for computerized physician order entry.
At the heart of decision-support systems at Intermountain's flagship LDS Hospital is a protocol, specifically a knowledge engine, says James, who has a master's in statistics, in addition to his medical degree. "Knowledge management took off to the point that it became an indispensable part of IT," he says. "Protocols are the bread and butter of quality improvement."
According to James, "We think we've got a system that will eliminate all chart abstraction."
That is a strategy right out of the playbook of aluminum manufacturing giant Alcoa, identifies every work process in advance of deploying a new IT system. "IT was aligned to processes," James explains. "It's critical, but ultimately it's only a tool," he says of IT in healthcare.
James has had several meetings met with former Alcoa chairman and former U.S. Treasury Secretary Paul O'Neill, who now heads a business coalition on healthcare improvement in the Pittsburgh area. Intermountain also is learning from the Six Sigma quality-improvement efforts at General Electric and lean manufacturing techniques from Motorola.
"Six Sigma is a form of QI," says James, who sat down for an exclusive interview at last week's National Forum on Quality Improvement in Health Care, the 17th annual conference of the Cambridge, Mass.-based Institute for Healthcarhttp://www.ihi.org/e Improvement.
In automating quality, Intermountain also has begun to examine Toyota Motor Co., often viewed as the gold standard in manufacturing quality because the Japanese automaker manages its knowledge processes, James says.
Intermountain has added bar codes to hospital supplies to automate the supply chain, allowing the hospital system to implement a bedrock principle of lean management, namely just-in-time delivery.
Also, the hospital can predict staffing needs by looking at the patient list, so Intermountain can schedule only the nursing and support workforce it needs in each department rather than having to guess, James says.
A Rewarding Journey
Industry Week
Each step makes life better for our business and for the communities we call home.
By John M. Barth, chairman and CEO, Johnson Controls Inc.
Dec. 16, 2005 -- Sustainable manufacturing is a journey. It's also a cause that touches every corner of a business. The beauty is that a sustainable approach -- social benefit, environmental responsibility and economic performance -- creates a cycle of improvement. Progress in one area almost inevitably enhances the others.
Johnson Controls Inc. has traveled far since our founding in 1885. This year, as we complete our third corporate sustainability report using the Global Reporting Initiative, we see both how far we have come and how much road still lies ahead. Here are some lessons we have learned on the way about sustainable manufacturing:
John M. Barth, chairman and CEO, Johnson Controls Inc.
Start with values. We formalized our values in 1985 but have lived by them for more than 120 years. These values -- integrity, customer satisfaction, employee diversity and involvement, improvement and innovation, safety and the environment -- are the cornerstones that ground and support our sustainable manufacturing efforts. They apply across the company at more than 500 locations in more than 50 countries.
Build systems. As surely as we can design quality into production processes, so too can we design in sustainability. Our Corporate Health, Environmental and Safety System tracks regulatory compliance, waste, and work-related injuries so that we can spot trends and improve.
Our systems approach also looks at reducing environmental impact through the lifecycle of products. We analyze raw materials to eliminate hazardous substances from products, follow Design for Environment principles, monitor waste to find opportunities for reduction and recycle aggressively.
Additionally, through the collection and monitoring of utility bills, we help customers accurately and cost-effectively track greenhouse gas emissions. This holds promise for sharply improving the way multinational corporations collect data on these emissions.
Act globally. We must collaborate across borders and throughout the extended organization, which includes the supply chain. We expect suppliers not just to deliver our quality requirements but also to mirror our ethical and social and environmental standards. For example, contracts require suppliers to earn international environmental and safety certifications.
Foster diversity. Diversity makes our business and our communities stronger. In six years, Johnson Controls has more than quadrupled purchases from diverse vendors. In 2003 we joined the Billion Dollar Roundtable of companies that annually spend more than $1 billion with minority- and women-owned businesses. In turn, we encourage and help our suppliers to buy from diverse firms.
Aim high. Automotive battery recycling in the United States today approaches the ideal. Johnson Controls helped build a reverse distribution collection infrastructure and worked with other industries, retailers and consumers to promote battery recycling. The recycling rate for battery lead now exceeds 93%, far higher than for any other commodity. Our own battery plants reclaim 99.99% of lead for reuse -- and even recycle the plastic battery cases.
Improve continuously. Disciplines such as Six Sigma and lean manufacturing enhance product quality and drive out waste. Our own Best Business Practices initiative helps us translate improvements at one plant to other similar plants worldwide. Case in point: Our North American automotive seating plants adopted more efficient fabric cutting methods from seating plants in Europe -- saving $4 million annually and eliminating many thousands of pounds of fabric scrap.
Learn from the best. It is our privilege to learn from other top companies and excellent corporate citizens. Many are our customers. Others are associates in groups such as the Global Environmental Management Initiative, the Business Roundtable's Climate RESOLVE and the U.S. EPA Climate Leaders.
Sustainable manufacturing is a journey that never ends: Each step ahead reveals new ways to improve. But it's rewarding to see each step make life a little better for our business and for the communities we call home.
UltraCell Opens Fuel Cell Production Facility
Fuel Cell Today
07 December 2005
Provider: Power Electronics Technology
UltraCell has opened a new manufacturing and corporate office facility that will enable the micro fuel cell company to convert from prototype manufacturing to volume production. The new site, located at Tri-Valley Technology Park, 399 Lindbergh Ave., Livermore, Calif., will use the latest in lean manufacturing practices.
"Our new facility is designed around the production line for UltraCell´s XX25 product. It incorporates unique features such as a clean room for fuel cell assembly, and a specially designed automated facility for fuel processor and stack testing. The facility also incorporates features to support automated production and lean manufacturing principles such as 5S and Six-Sigma, enabling us to deliver high quality at affordable cost," said James Kaschmitter, UltraCell CEO. "The move validates our commercial plans to bring UltraCell´s revolutionary reformed methanol fuel cell technology to the marketplace, as scheduled, in 2006."
According to Kaschmitter, UltraCell´s new headquarters will focus on enhancing quality, efficiency and delivery, while reducing costs through minimizing nonvalue-added activities in design, production, supply chain management and customer service.
Introduced as a prototype in August 2005, UltraCell´s new fuel cell power source for portable electronic devices has more than twice the energy density of lithium batteries when used for longer missions, but weighs just 40 oz in a unit about the size of a paperback novel. For more on the company´s technology, see "Micro Fuel Cell Developer Announces Technology Breakthrough and Defense Contract," PETech Times, Aug. 24, 2005, available online at powerelectronics.com/news/technology-breakthrough-contract/index.html.
City finds strength in manufacturing
JSOnlineBy JOHN TORINUS
Special to the Journal Sentinel
Posted: Dec. 10, 2005
Hartford - From the vantage point of Werner X. Wolpert's office in the Innovation Center, the manufacturing sector looks pretty darned good.
Wolpert, who has been the director of the Hartford Area Development Corp. for 13 years, believes Wisconsin should never retreat from its position as a strong manufacturing state, despite some premature obituaries to the contrary.
He would like to see the Bush administration take a much tougher stance on trade relations with China, but he takes satisfaction that manufacturers, large and small, in the Hartford area are figuring out strategies to cope with the competition from Asia. So much so that manufacturing is a growth sector for Hartford.
Total manufacturing jobs in Hartford increased to 4,933 in 2004 from 4,573 in 2000. That's 60% of the area's jobs and almost double the 1993 total.
The total number of companies in the manufacturing game in his sphere of influence is 53, with nine employing more than 100 people.
Hartford has three industrial parks and only a limited amount of land left. The biggest coup came in 1989, when Wolpert and city fathers landed the Quad/Graphics printing plant for the Dodge Industrial Park. Its initial employment was about 200. Quad now employs more than 1,100.
That's one piece of growth. Another has come from the entrepreneurship of three brothers in the Wendorff family, who now own four manufacturing companies - three in the Hartford area and Capitol Stampings in Milwaukee.
A tour of their Steel Craft Corp. and Snow-Way International demonstrates the Wendorff formula for growing in the face of tough competition from abroad. They employ absolutely cutting-edge technology, including computer-driven laser cutters that do almost impossibly intricate cuts in various mechanical parts.
The Wendorffs also rely on innovation. Snow-Way markets a variable "down pressure" system to accommodate for unevenness in rolled surfaces. That hydraulic product is among a dozen other patents displayed in its lobby.
Another strategy of the Wendorffs is to do whatever a customer needs, not just the fabrication of parts. Often, Steel Craft and their Hartford Finishing, which features an automated paint line, will get an order for parts and then will turn it into a project to build the whole apparatus.
That propels them from a parts maker, a target for Chinese competitors, to a contract manufacturer offering design, engineering, components, sourcing, testing and assembly. That's an array of value-added products and services that are a harder target.
The four Wendorff companies also pursue operating excellence through lean and Six Sigma disciplines.
Taking the high road
In short, this traditional metal-bending business is now a knowledge-based business, and it's competitive with any company anywhere. Result: It's exporting its plows to China. And it's cutting a deal with a partner there to penetrate that market further.
Another result: Sales are now around $100 million, and the three Hartford plants employ more than 450 workers.
Three smaller Hartford companies also use a high-road approach in their shops at the Innovation Center. Regall Machining Services has three Regall brothers as its work force and two modern CNC machines. It stresses quality and service and turns down business.
ArchiSpec LLC has two employees, a state-of-the-art woodworking machine and just shipped a custom door to a Silicon Valley mogul for $520,000.
Key Logo, Inc., run by entrepreneur Sally Schoedel, buys the best embroidery machines for sewing logos into textiles. She employs 38, occupies about 20,000 square feet and may buy the other half of the Innovation Center for expansion.
So while Wisconsin manufacturing employment has fallen to 500,600 from its peak of 594,800 in 1999, Hartford proves it is far from gone.
Actually, manufacturing production is up, thanks to a 7% annual productivity increase from 2000 to 2004. The sector was $47 billion in 2004, up from $43 billion in 2000.
As Hartford demonstrates, cutting-edge technology, run by highly skilled workers, along with cutting-edge business models, can carry the day.
