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GM leaves Nummi, the hot potato is in Toyota’s hands

DETROIT — General Motors said Monday that it was pulling out of its joint venture with Toyota, a longstanding partnership between two of the auto industry’s biggest rivals that exposed G.M. to more efficient Japanese manufacturing techniques and produced Toyota’s first American-made vehicles.

Roger B. Smith, right, former G.M. chairman, with Eiji Toyoda, the former chairman of Toyota, at the Nummi plant in 1985.

The joint venture, known as New United Motor Manufacturing Inc., or Nummi, has built more than six million vehicles at a plant in Fremont, Calif., since 1984. The plant builds two Toyota models, the Corolla sedan and Tacoma pickup truck, and a small crossover vehicle for G.M., the Pontiac Vibe.

G.M. is eliminating the Pontiac brand next year and plans to discontinue the Vibe in August. It said Monday that it was unable to reach an agreement with Toyota “on a future product plant that made sense for all parties” and that its stake in the Nummi plant would not be part of the company after emerging from bankruptcy later this summer.

“It’s the end of a remarkable educational experiment,” said James P. Womack, the chairman of the Lean Enterprise Institute, an organization in Cambridge, Mass., that promotes efficiency in manufacturing and commerce.

“The product was never the point at this plant,” Mr. Womack said. “It was a way for Toyota to figure out how to apply its system in the United States and for G.M. to try to figure out how Toyota was doing the things it was doing.”

G.M.’s withdrawal from the venture, which is half owned by each of the companies, creates an uncertain future for the Fremont plant, which has more than 4,700 employees in five million square feet of assembly space. It is the last auto plant operating in California and Toyota’s only plant represented by the United Automobile Workers.

Toyota said in a statement that it was sorry G.M. was pulling out and that it had not decided what to do with the plant.

“We will consider alternatives by taking into account various factors, including the current distressed market conditions, our overall North American manufacturing capacity, and the viability of the facility as a stand-alone operation without G.M. production,” the statement said.

Nummi has been running well below capacity for some time. Now, analysts say the deep industry downturn, coupled with G.M.’s decision to cut its ties, gives Toyota an opportunity to shut the plant. However, Toyota executives are sensitive to the American political climate, and the company could choose to keep the plant open in some fashion rather than risk the heat of shutting it down and eliminating jobs held by U.A.W. members.

Toyota recently denied reports that it might build its hybrid sedan, the Prius, at Nummi.

Both of the vehicles that Toyota builds in Fremont are also assembled elsewhere: the Corolla in Canada and the Tacoma in Mexico. (By producing the small Tacoma in California, Toyota avoids a tariff that the United States imposes on imported compact pickup trucks.)

When Nummi was formed, Toyota was a comparatively small but rapidly growing player in the United States while G.M. had a firm grip on its title as the world’s largest automaker. Toyota unseated G.M. at the industry’s pinnacle last year, aided by what it learned from Nummi.

G.M., meanwhile, was a slow learner and only recently began successfully applying the techniques it gained from working with Toyota, Mr. Womack said. Now, Nummi has outlived its usefulness for G.M. and is far away from all of the company’s other manufacturing locations.

“They learned a great deal in theory but nothing in practice for about 15 years,” he said. “G.M. has learned what they could and they don’t need that capacity anymore.”

By NICK BUNKLEY
Micheline Maynard contributed reporting.

Read the full story at New York Times

 
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Posted by on June 30, 2009 in Lean Manufacturing, Toyota

 

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A Lean revenge against mass production from ”The Economist” point of view. Part III

“… Only in the 1970s, after the first oil shock, did faults start to become visible. The finned and chromed V8-powered monsters beloved of Americans were replaced by dumpy, front-wheel-drive boxes designed to meet new rules (known as CAFE standards) limiting the average fuel economy of carmakers fleets and to compete with Japanese imports. As well as being dull to look at, the new cars were less reliable than equivalent Japanese models.

By the early 1980s it had begun to dawn on GM that the Japanese could not only make better cars but also do so far more efficiently. A joint venture with Toyota to manufacture cars in California was an eye-opener. It convinced GM’s management that “lean” manufacturing was of the highest importance. Unfortunately, that meant still less attention being paid to the quality of the cars GM was turning out. Most were indistinguishable, badge-engineered non-entities. As the appeal of its products sank, so did the prices GM could ask. New ways had to be found to cut costs further, making the cars still less attractive to buyers….”

Briefing. The bankruptcy of General Motors. A giant falls. The Economist. June 6th-12th 2009. Pp 58-60. Ed. The Economist Newspaper Ltd.

 
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Posted by on June 8, 2009 in Lean Manufacturing

 

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A Lean revenge against mass production from ”The Economist” point of view. Part I

“…GM, Ford and Chrysler tried to improve: by 2006 they had almost caught up with Japanese standards of efficiency and even quality. But by then, GM’s share of American market had fallen go below a quarter. Rounds of closures and job cuts were difficult to negotiate with unions, and were always too little too late. Gradually the cars got better, but Americans had moved on. The younger generation of carbuyers stayed faithful to their Toyotas, Hondas or Mercedes assembled in the new cheaper factories below the Mason-Dixon line. GM and the other American firms were left with the older buyers who were, literally, dying out.

GM’s demise should not be read as a harbinger of doom for the car industry. All around the world people want wheels: a car tends to be the first big purchase a family makes once its income rises much above $5000 a year, in purchasing-power terms. At the same time as people in developing countries are getting richer, more efficient factories and better designs are making cars more affordable. That is why the IMF forecasts that the world will have nearly 3 billion cars in 2050…

… Yet although the long-term prospects for ales growth look excellent overall, the car industry has a problem: it needs to shrink dramatically. At present, there’s enough capacity globally to make 90m vehicles a year, but demand is little more than 60m in good economic times. Even as the big global manufacturers have been building new factories in emerging markets, governments in slow-growing rich-world markets have been bribing them to keep capacity open there.

Because the industry employs so many people and is a repository of high technology, governments are easily lured into the belief that car firms must be supported when times are tough. Hence Mr Obama’s $50 billion rescue of GM; and hence, too, the German government’s financial backing for the sale of Opel, GM’s European arm, to Magna, a Canadian parts maker backed by a Russian state-owned bank. German politicians have made it clear that they plan to keep German factories open even if others elsewhere in Europe have to close. At least the American rescue recognizes the need to remove capacity from the market: GM will, as a result of the deal, lose 14 factories, 29.000 workers and 2.400 dealers

It could still be a great business

For all its peculiarities, the car industry is no dinosaur-Toyota, for instance is a byword for manufacturing excellence. But the unevolved GM deserves extinction. Detroit employed so many people and figured so large in American culture that governments felt they had to protect it; but in doing so, they made it vulnerable to less-coddled competitors from abroad. By trying to keep their car industry big, America’s leaders ended up preventing it from becoming good. There is a lesson in that which all governments would do well to learn”

The decline and fall of General Motors. Detroitosaurus wrecks. The Economist. June 6th-12th 2009. Pp 10. Ed. The Economist Newspaper Ltd.

 
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Posted by on June 8, 2009 in Lean Manufacturing

 

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The Toyota Way is more than Tools and Techniques

So you set up your kanban system (Kanban is the Japanese word for “card”, “ticket”, or “sign” and is a tool for managing the flow and production of materials in a Toyota-style “pull” production system.) You put in the andon, which is a visual control device in a production area that alerts workers to defects, equipment abnormalities, or other problems using signals such as lights, audible alarms, etc. Finally with these devices your workplace looks like a Toyota plant. Yet, over time your workspace reverts to operating like it did before. You call in a Toyota Production System (TPS) expert who shakes her head disapprovingly. What is wrong

The real work of implementing Lean has just begun. Your workers do not understand the culture behind TPS. They are not contributing to the continuous improvement of the system or improving themselves. In the Toyota Way, it is the people who bring the system to life: working, communicating, resolving issues and growing together. From the first look at excellent companies in Japan practicing lean manufacturing, it was clear that the workers were active in making improvement suggestions. But the Toyota Way goes well beyond this; it encourages, supports and in fact demands employee involvement

The more I have studied TPS and the Toyota Way, the more I understand that it is a system designed to provide the tools for people, not less. It is a culture, even more than a set of efficiency and improvement techniques. You depend upon the workers to reduce inventory, identify hidden problems, and fix them. The workers have a sense of urgency, purpose and teamwork because if they don’t fix it there will be an inventory outage. On a daily basis, engineers, skilled workers, quality specialists, vendors, team leaders, and -most importantly- operators are involved in continuous problem solving and improvement, which over time trains everyone to become better problem solvers

One lean tool that facilitates this teamwork is called 5S (sort, stabilize, shine, standardize and sustain), which is a series of activities for eliminating wastes that contribute to errors, defects and injuries. In this improvement method, the fifth S, sustain, is arguably the hardest. It’s the one that keeps the first for S’s going by emphasizing the necessary education, training, and continuously improve operating procedures and the workplace environment. This effort requires a combination of committed management, proper training, and a culture that makes sustaining improvement a habitual behavior for the shop floor to management.

This chapter provides a synopsis of the 14 principles that constitute the Toyota Way. The principles are organized in four broad categories: 1) Long-Term Philosophy. 2) The Right Process Will Produce the Right Results. 3) Add Value to the Organization by Developing Your People, and 4) Continuously Solving Root Problems Drives Organizational Learning.

Summary of the 14 Toyota Way Principles

  1. Section I: Long-Term Philosophy.

    1. Principle 1: Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals.
  2. Section II: The Right Process Will Produce the Right Results.
    1. Principle 2: Create continuous process flow to bring problems to the surface.
    2. Principle 3: Use “pull” systems to avoid overproduction.
    3. Principle 4: Level out the workload (heijunka). (Work like the tortoise, not the hare).
    4. Principle 5: Build a culture of stopping to fix problems, to get quality right the first time.
    5. Principle 6: Standardized tasks are the foundation for continuous improvement and employee empowerment.
    6. Principle 7:Use visual control so no problems are hidden.
    7. Principle 8: Use only reliable, throughly tested technology that serves your people and processes.
  3. Section III: Add value to the Organization by Developing Your People and Partners
    1. Principle 9: Grow leaders who throughly understand the work, live the philosophy, and teach it to others.
    2. Principle 10: Develop exceptional people and teams who follow your company’s philosophy.
    3. Principle 11: Respect your extend network of partners and suppliers by challenging them and helping them improve.
  4. Section IV: Continuously Solving Root Problems Drives Organizational Learning
    1. Principle 12: Go and see for yourself to throughly understand the situation (genchi genbutsu).
    2. Principle 13: Make decisions slowly by consensus, thoroughly considering all options implement decisions rapidly.
    3. Principle 14: Become a learning organization thorough relentless reflection (hansei) and continuous improvement (kaizen).

“How does TPS apply to my business? We do not make high volume cars; we make low-volume, specialized products” or “We are a professional service organization, so TPS does not apply to us”. This line of thinking tells they are missing the point. Lean is not about imitating the tools used by Toyota in a particular manufacturing process. Lean is about developing principles that are right for your organization and diligently practicing them to achieve high performance that continues to add value to customers and society. This, of course, means being competitive and profitable. Toyota’s principles are a great starting point. And Toyota practices these principles far beyond its high-volume assembly lines.

This text has been extracted from Jeffrey K. Liker (2004) The Toyota Way; 14 management principles from the world’s greatest manufacturer.  Ed. Mc Graw-Hill  2004 Find it on Amazon

 
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Posted by on June 6, 2009 in Uncategorized

 

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