Detroit is raving about the recent news that GM has practically matched Toyota in terms of factory productivity.
General Motors Corp., once the symbol of big, slow corporate America, virtually matched Toyota Motor Corp., the icon of lean manufacturing, in North American assembly plant productivity last year for the first time since it has been measured, industry research group Harbour Consulting reported Thursday. Toyota logged 22.05 hours of plant labor per vehicle assembled, while GM reported 22.15 hours, a difference of one-tenth of an hour, or just 6 minutes per vehicle.
That is an impressive accomplishment. But as the saying goes, if you’re very good at making crap, you’re still making crap. No, GM cars aren’t crap, but they aren’t exactly Lexus. From the JD Powers report earlier this week,
General Motors took some lumps in this year’s survey. Its Cadillac and Chevrolet divisons slipped into the below-average category, leaving no GM brands ranked above average.
To be fair and balanced, Toyota slipped a bit and Ford improved. However when you continue to make cars with quality and designs that customers believe to be inferior to your competition, productivity can actually hurt you. Especially when traditional accountants insist on running factories full-bore to absorb overhead.
GM, Ford and Chrysler each stock roughly 40,000 vehicles on dealer lots for each point of market share — more than twice the level stocked by Toyota Motor Corp.
That’s a decent amount of underutilized cash sitting around in inventory depreciating in value and awaiting obsolescence. And that eats away at the real bottom line: profit.
The most important race is the one for profitability. Right now GM is losing that one. The Detroit Free Press featured an interesting graphic the week Toyota surpassed GM. It showed GM and Toyota pretty close in a number of areas: number of employees — Toyota 2.35 million; GM 2.26 million; 2006 vehicle sales — Toyota 8.8 million, GM 9.1 million; 2006 production — GM 9.2 million, Toyota 9.0 million. But where the road diverges is in profitability. GM lost $2 billion in 2006; Toyota is expected to earn $13 billion. GM’s market capitalization is $17.4 billion; Toyota’s is a whopping $233.5 billion.
GM needs to focus on profits and building vehicles people want to buy. Look at BMW and Honda (and Toyota). They aren’t focused on being No. 1 in global sales; they are focused on growth with profits, their brands and their images. That needs to be GM’s mantra. It’s the only way to earn back the No. 1 spot.
Profit is definitely not related to the useless metric of being number one in sales, but instead it’s building cars that people want. Cars with great designs, high quality, and appropriate cost. Productivity helps. Bashing suppliers into submission may help temporarily, but not long term. GM and Ford are making improvements in quality and design… but so is Toyota.
The bar continues to rise. To succeed improvement must accelerate past the norm. That’s a tough challenge.