Something is going on with a few lean companies in India that bears keeping an eye on. The greatest fear American manufacturers have – or at least they should have – is the combination of lean management and Indian labor rates, but there seems to be a hole in the equation somewhere. A Toyota plant in southern India has been on strike (technically it has moved from a strike to a lockout) for a week now. It was no gentlemanly difference of opinion either. It was a full blown, violent parting of the ways with employees barricading themselves into a power plant and threatening to blow the whole place up, and armies of Indian police having to restore order. What makes it even more interesting is that it nearly duplicates the situation at a Honda plant in India last summer. The information coming out is way too sketchy for anyone to put their finger on the problem, but either Toyota forgot their vaunted ‘respect for people’ principle, or it simply does not resonate with the younger Indian workers. In any event, lean manufacturing seems to be amiss in India.
Elsewhere in Asian news, Harley Davidson is opening its first dealership in China. No big deal about that – GM and Ford report good sales in China too. The difference is that Harley does not plan to make anything in China. In fact, other than an assembly plant in Brazil, Harley has been quite profitable manufacturing in places like Kansas City and Milwaukee. Their MAN (Materials As Needed) manufacturing system is HD lingo for lean manufacturing. So Lean manufacturing in the U.S. yielding very high quality and even higher profitability, and selling in the Chinese market, …hmmm… or GM manufacturing like it is still 1955, cranking out mediocre quality, building plants in China, and unprofitable. I wonder if there is a lesson in that somewhere?
On the subject of GM, Bob Lutz, GM Vice Chairman, gets my nomination for the most out of touch with reality manufacturing guy on the planet. GM’s performance caused him to lose his bonus and stock options, reducing his paycheck to a paltry $4.4 million last year – this for a key member of the team that took GM to the brink of insolvency. Responding to the suggestion that his paycheck ought to be trimmed a little more, Lutz said, "Here’s where people get this wrong: They say, ‘Why are executives paid so much? You have to ask: Why are professional athletes paid so much?" I dunno Bob, maybe because they are good at what they do? What gray haired, overweight executives at bankrupt companies have to do with professional athletes is something Bob didn’t explain. I hope he is not suggesting that he can rebound with Darko Milicic, who plays across town for the Detroit Pistons and makes the same $4 million plus change as Lutz. Lutz may be good – I’ve never seen him play – but Milicic is seven feet tall and I gotta believe he’d dominate Lutz in the paint. More important, Milicic’s team wins most of the time, while Lutz’s is a perennial loser.
When Babe Ruth asked for and got a higher salary than Herbert Hoover in 1930, he justified it by saying that he "had a better year than Hoover". The bench player on the worst professional sports team had a better year than any GM exec.
Lutz went on to say, "The capability of successfully trying to turn around an unsuccessful automobile company is a very rare and highly sought after skill set. And you do the shareholder no good whatsoever by reducing compensation to the point where everybody leaves." The problem is that Bob and the rest have not shown that they have that ‘very rare and highly sought after skill set’. What they have is a skill set that is very common and not much in demand – the demonstrated ability to turn one of the world’s greatest manufacturing concerns into a junk bond investment. Perhaps ‘reducing compensation to the point where everybody leaves’ is exactly what the person who suggested the pay cut had in mind. I am the most anti-union guy I know, but I’d join the UAW in a heartbeat if I had to work for Bob Lutz.
Finally, I thank God for the Fortune list of the 100 Best Companies to work for – they are a Who’s Who of lean manufacturing and they provide all the inspiration we need to keep the faith. And I thank God for the Dow Jones Industrials – they provide all of the inspiration I need to keep laughing and blogging.
Bill Taylor says
Harley-Davidson is a great lean success story. I would be very interested in hearing about other companies that, via lean, have been able to stay in the U.S. and Canada and out-produce (or even sell to) China and the other low wage countries. I know of New Balance and Joslyn, but not much about how they did it. I want to use data to help buck the “must go to Asia” trend at my company (a lemming-oriented Fortune 50) and others.
This is my favorite manufacturing blog!!!!
Andy Wagner says
Time out! Chrysler Bob Lutz? Ford of Europe Bob Lutz? Lutz HAS shown, in his early career, that he is capable of turning a productline around and saving an automotive company in trouble. He’s done it more than once, which makes him the closest the automotive world today has to a superstar. The question is, in his retirement, does he still have it?
I think he’s done a fairly good job of freeing GM from the boxy, boring appliances that it sold ten years ago–heck, five years ago, and creating a relatively attractive product line-up.
That said, GM’s greatest problems are not product, they are production, or manufacturing related. Lutz never has been a manufacturing guy and never will be. That wasn’t what he was hired to do. (He’s a power forward, not a center). Unfortunately, GM has failed to attract somebody with the ability to make the earthshaking culture change required to make them a lean manufacturer.
Bill Waddell says
Ah, the Detroit pipe dream – all we need is another Mustang, or a Caravan breakthrough, or whatever the next hot product will be, and the glory days of the 1960’s will come roaring back…and Bob Lutz is just the man to do it. Nothing wrong with management – we just need a hot product and America will forget all about this quality and cost nonsense.
You’re right, Andy. Lutz is not a manufacturing guy and never will be. The question is why GM puts another guy who knows next to nothing about manufacturing in the #2 spot. Because he is a product guy and not a manufacturing guy he should be let off the hook? Let’s go back to the sports analogy Lutz likes to use. Role players – people who cannot play the whole game – just specialists like kickers and punters, for example – don’t get the big money and they don’t get into the Hall of Fame. That is reserved for the people who play the whole game. I don’t think Lutz is a power forward – at best he is the free throw shooting specialist you bring in off the bench in a pinch.
GM cannot seem to get their arms around the fact that they are a manufacturing company, that is getting its butt kicked in manufacturing, and needs manufacturing competence to turn it around. Another Lutz product bandaid on their lousy manufacturing management scheme simply prolongs the agony of their death.
Either Lutz is Vice Chairman and he takes responsibility of GM’s across the board failure – or he is a role player who can do nothing but dream up new products, in which case he should take a demotion and a pay cut. In any event, he does not deserve the Vice Chairman’s title and paycheck, with a product engineer’s accountability.
At the end of the day, which company has he turned around and led to long term success? Ford? Chrysler? GM? How about “none of the above”?
Alex says
Bill,
What is your source for the commnet on Harley? I did a quick look and couldn’t find the press release.
Thanks
Bill Waddell says
Sorry for the intellectual laziness, folks. I have added the links so you can see all of my sources. By the way, where I usually find the greatest treasure trove of manufacturing news is Yahoo – just type in ‘manufacturing’, do a search and an amazing collection of weird, current stuff comes up that is often missed in other places.
Andy Wagner says
Bill, I agree completely. Lutz can solve GM’s image problem, but not their substance problem. I don’t think Wagoner even knows he has a substance problem.
Ford was in decent shape 15 years ago. Even Womack’s first book on lean compared them favorably to Toyota, but it was temporary and instead of continuously improving, they have sporatically gotten worse.
Chrysler, before the buy-out, was said to be the only company Toyota was scared of–once upon a time when they developed a supply-chain that involved working with your suppliers instead of beating on them. (I was a new design engineer at a Tier One when the SCORE program ended. Not a happy time).
N Kirithivasan says
This is regarding news from India – about the Toyota lockout. I am a believer of lean manufcturing and working in an Engg. corporation implementing Lean concepts.
I had visited the Toyota plant at Bangalore and was not impressed. We had so much hype before teh visit but seen so many lacunae which I dont want to list here. I personally had a feeling that Toyota – from the begiining – is not having the kind of attachment to the plant that they are normally associated with.
More than Toyota, it is the Suzuki plant which is located near Delhi brought about manufacturing revolution and culture to India and its auto manufacturers / vendors.
Toyota in India is jinxed. Very Sad.
N.Kirithivasan
PreferToRemainAnony says
I remember a speech by an executive director at GM to a group of GM fellows (students sponsored in graduate studies in engineering and management studies). While I can not remember the exact words, the general idea was…
“GM is a marketing and distribution company not a manufacturing or engineering company.”
If this is the attitude in the board room and executive suites it explains a lot of decisions over the years. It also explains how GM has gotten where it is today.
Viswanathan Ganapathy Rajendran says
I agree with Kirithivasan. I would like to reiterate that the lean concepts were brought in by the TVS group companies in South India, which caughtup very fast and spread allover India. Deming Award, Total Productive Maintenance (TPM), ISO9000 certification, QS 9000 certification, ISO14000 certification and ISO18000 certification. All of the above are more related toautomotive industry. TVS group companies are pioneers in Indian Automotive spares manufacturing. Hence The TVS group took initiatives to bring in all these concepts through their Japanese partners.
Theis need to be appreciated.