What constitutes the Holy Grail for some is just business as usual for others.
Workers assemble a Nissan Pathfinder Armada, one of five distinctly different vehicles that will come out of Nissan’s Canton, Miss., assembly plant.
The phrase “if you build it, they will buy it” (to paraphrase the movie line) certainly doesn’t apply to everyone in the North American auto industry. With 248 all-new model launches or major revisions coming to the market between 2003 and 2008, there will invariably be a few (likely more than a few) that will fall flat.
The North American light vehicle market remains fairly strong, fueled by U.S. sales in particular. The soft pricing environment, however, and influx of attractive, competitive vehicles have increasingly shifted control to the consumer.
Furthermore, there is a clear disparity in profitability between the major automakers in North America. While the Big 3 (GM, Ford, DaimlerChrysler) struggle with profitability as they endeavor to right-size capacity and cut manufacturing costs, Asian automakers such as Honda, Toyota and Nissan seem to be operating on a different manufacturing plane and are reaping the financial rewards.
Of course, well-received product offerings explain some of the successes; however, the trend of flexible manufacturing has arguably contributed to the achievements and is poised to further elevate those automakers that fully leverage the concept.
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| Workers assemble a Nissan Pathfinder Armada, one of five distinctly different vehicles that will come out of Nissan’s Canton, Miss., assembly plant. |
All was right with the world for Ford until the competition arrived. As a result of increased competition in the mid-size car segment (particularly from the Honda Accord and Toyota Camry) and a general movement away from cars and into light trucks, Ford is faced with declining demand for its products and significantly underutilized facilities.
While in a utopian world it would be convenient to produce one vehicle (or platform) in a facility, the auto industry does not operate in a utopian world. The industry is faced with ever changing consumer tastes coupled with a diverse array of competitors with compelling offerings. As a result, certain manufacturers have made significant progress in creating flexible manufacturing facilities enabling the production of a wide range of vehicles based upon diverse platforms. This allows an automaker to better match production with the prevailing consumer demand.
Nissan is poised to leverage this philosophy in 2004 as it adds production of the wellreceived Nissan Altima at its Canton, Miss. ,facility. The addition of the vehicle means the facility will produce a sedan (Altima), a minivan (Quest), a full-size pickup (Titan), and two full-size SUVs (Pathfinder Armada & QX56). A diverse cast indeed.
Furthermore, Honda has emerged as a benchmark player in the area of flexible manufacturing. The company has made various investments and plant infrastructure changes, which ensure its major North American production facilities can assemble nearly any vehicle sold in the market.
Not to be outdone, Toyota is overhauling its own facilities to improve flexibility. This flexibility will become even more apparent once the company’s San Antonio, Texas, facility comes online in early 2006.
The new facility will allow Toyota to increase production in the popular and profitable full-size pickup segment with an all-new Tundra and other variants such as the Sequoia and LX470 among other full-frame offerings. A natural extension of the ability to better meet consumer demand is improved capacity utilization. Therefore, it is not surprising that, as evidenced in the adjacent chart, the New Domestics (primarily the aforementioned Nissan, Honda, and Toyota) are expected to maintain fairly high capacity utilization levels even as additional capacity is added in North America.
Flexible manufacturing facilities have several key characteristics. First, the operation uses programmable robots. In order to manufacture a different vehicle, software is simply reprogrammed, thereby eliminating replacement tooling.
Of the Big 3, GM is perhaps making the most progress in converting its facilities to flexible manufacturing. The company is implementing a process called C-Flex, which uses programmable tools and robots.
GM’s mid-size SUV facilities (Oklahoma City, Okla., & Moraine, Ohio) utilize the process as well as the company’s new Lansing Grand River operation. The Lansing Grand River assembly plant is noteworthy because it has the ability to produce five different vehicles at a time.
In addition to programmable equipment, flexible vehicle operations employ standardized assembly procedures. The standardized procedures allow for flexibility in running diverse vehicle models through the assembly line. Often offline or outsourced subassembly streamlines general assembly procedures.
Finally, one-size-fits-all conveyors allow vehicles of varying sizes to move through the assembly facility. Honda made news recently when it announced that a simple tire change made to its Honda Element crossover vehicle necessitated modifications to the conveyor systems (among other things) at its East Liberty, Ohio, facility.
The tire change altered the entire vehicle body design and created a ripple effect in the vehicle’s manufacturability. In the end, Honda made the modifications and it now has the ability to produce virtually any of its sedan offerings at the East Liberty operation.
To be sure, for some automakers, manufacturing flexibility is not a regional issue, but instead a global one. Honda is a good example of such a manufacturer. The company has established a flexible manufacturing position from a global perspective, and as a result, it is better able to maximize capacity utilization globally.
For instance, variants based upon Honda’s CS platform are assembled at various locations around the world. The CS platform spawns diverse products including the Civic small car (in numerous bodystyles), the popular CR-V crossover utility and the new Element tall wagon, among other offerings.
With such global flexibility, Honda is able to base its production decisions on overall economic factors (such as vehicle line profitability, supplier capabilities, currency exchange, etc.) on a case-by-case basis rather than on the production capability of a particular facility. With the significant amount of new product competition coming to market during the next several years, there is little question that flexible manufacturing must play a critical role for automakers.
Indeed, virtually all manufacturers are seeking to leverage flexibility in their facilities; however, some are much more advanced in the process than others. The auto industry is evolving more and more into a survival of the fittest and flexibility will likely be one criteria that separates the survivors from those who are left behind.
Michael Wall is Manager of Forecast & Analysis, CSM Worldwide Inc. MikeWall@csmauto.com
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