Re: A Modern Parable

On Dec 12, 9:22 pm, Ron <r...@xxxxxxxxxxx> wrote:
On Fri, 12 Dec 2008 07:33:08 -0800 (PST), mg <mgkel...@xxxxxxxxx>
wrote:



On Dec 10, 6:26 pm, Ron <r...@xxxxxxxxxxx> wrote:
On Wed, 10 Dec 2008 15:22:46 +1100, **Rowland Croucher**

<rccroucher@contactemailonwebsite> wrote:

(This is close to the bone - not only American bones :-)

A  Modern Parable

A Japanese company ( Toyota ) and an American  company (Ford Motors)
decided to have a canoe race on the Missouri  River   Both teams
practiced long and hard to reach their peak  performance before the race.

On the big day, the Japanese won by a mile.

The Americans, very discouraged and depressed, decided to investigate
the reason for the crushing defeat.  A management team made up of senior
rxecutives was formed to investigate and recommend appropriate action..

Their conclusion was the Japanese had 8 people rowing and 1 person
steering, while the American team had 7 people steering and 2 people
rowing.

Feeling a deeper study was in order; American management hired a
consulting company and paid them a large amount of money for a second
opinion.

They advised, of course, that too many people were steering the boat,
while not enough people were rowing.

Not sure of how to utilize that information,  but wanting to prevent
another loss to the Japanese, the rowing team's  management structure
was totally reorganized to 4 steering supervisors,  2 area steering
superintendents and 1 assistant superintendent steering  manager.

They also implemented a new performance system that would give the 2
people rowing the boat greater incentive to work harder.  It was called
the 'Rowing Team Quality First Program,' with meetings, dinners and free
pens for the rowers.  There was discussion of getting new paddles,
canoes and other equipment, extra vacation days for practices and
bonuses.  The pension program was trimmed to 'equal the competition' and
some of the resultant savings were channeled into morale boosting
programs and teamwork posters.

The next year the Japanese won by two miles.

Humiliated, the American management laid-off one rower, halted
development of a new canoe, sold all the paddles, and canceled all
capital investments for new equipment.  The money saved was distributed
to the Senior Executives as bonuses.

The next year, try as he might, the lone designated rower was unable to
even finish the race (having no paddles,) so he was laid off for
unacceptable performance, all canoe equipment was sold and the next
year's racing team was out-sourced to India.

Sadly, the End.

Here's something else to think about: Ford has spent the last thirty
years moving all its factories out of the US , claiming they can't make
money paying American wages.

TOYOTA has spent the last thirty years building more than a dozen plants
inside the US. The last quarter's results:

TOYOTA makes 4 billion in profits while Ford racked up 9 billion in
losses.

Ford folks are still scratching their heads, and collecting bonuses....

No need to scratch 'any' heads.  Toyota plants are non-union and the
workers there voted it that way.  

Ron

I would guess the legacy costs are a bigger problem than the wages.
Toyota probably has close to zero legacy costs since their plants in
the US are relatively new.

I think the differences in actual wages has shrunk a lot over the
years and labor costs only account for 10% of the cost of a vehicle.
However, the union isn't the only problem. As a retired design
engineer who used to get email saying "excellence is the enemy of good
enough", I can tell you that some companies acquire a corporate
culture for low quality and that's obviously what has happened to
Detroit over the years. If they kept the same management and engineers
and started all over with new, non-union workers, I doubt if their
quality would improve much. Here's an article on auto worker pay:

"Toyota workers in Kentucky plant made more than UAW members last year
by John Neff on Jan 31st 2007 at 5:16PM

Last year was the first time that non-unionized workers at a foreign-
owned assembly plant made more than members of the United Auto Workers
union make on average in a year. The Detroit Free Press reveals in a
very interesting article that Toyota paid out bonuses of $6,000 to
$8,000 last year at its largest U.S. plant in Georgetown, KY. Combined
with the base pay made by a non-union worker at the plant, that
equates to $30/hour or $60,000/year based on a 2,000-hour work year.
That is more than the $27/hour or $54,000 a UAW member made on average
last year. Union workers, or course, hardly received any profit
sharing bonuses last year due to the poor overall performance of the
domestic automakers.

This isn't actually surprising, as a matter of fact it was bound to
happen. In many instances, Toyota and other large foreign automakers
operating assembly plants in the U.S. pay their workers near-UAW wages
in an effort to dissuade them from unionizing. In a year when Toyota's
sales have grown to record levels and the domestics are losing market
share fast, it was inevitable that Toyota's big bonuses would put the
pay of its assembly workers in the U.S. ahead of the UAW, which saw no
bonuses last year and likely won't for a few. The lack of overtime
hours was another hit to the UAW that dropped the pay for many of its
members. In time, as the domestics (if the domestics?) recover and the
big bonus checks are in the mail again, we expect the UAW's pay to
again top that of any non-union assembly workers in the U.S.

We recommend reading the whole article written by Jason Roberson from
the Free Press, as there's a lot of layers to dig through with this
story."

http://www.autoblog.com/2007/01/31/toyota-workers-in-us-made-more-tha...

I didn't mean to say that the current financial status of the auto
makers was all due to union wages.  It's true the legacy costs are the
bigger problem, but still, the legacy costs are part of the union
workers (past and present) burden on the auto company's profitability.
The bigger part of their problem is the quality and reliability of the
product as you pointed out.  But I believe that is tied to wages and
legacy costs.

My past experience with American made cars was good up till the late
70's and early 80's at which time I owned a series of what is politely
referred to as "dogs".  One car leaked fluids from every conceivable
seal in the engine and transmission.  Another had a carburetor that
ran so rich it filled the oil pan with gasoline.  The Carb couldn't be
adjusted, you had to buy a new one.  Went through three carbs before
giving up and selling the car.  Another had overheating problems that
couldn't be fixed.  That was the beginning of my association with
Toyota when I bought a used one from Enterprise car sales.  Since then
I have owned three Toyotas with no problems whatsoever.  It's true I
have to replace the timing belt every 60,000 miles, but Toyota tells
you that up front.  The cost is about $150.00 and that's a bargain if
it's all I spend for repairs during 200,000 miles of driving.

All this points to Detroit's problem of profitability... it costs them
too much in labor (including their subcontracted parts suppliers) to
make a competitively priced car.  Their answer is to "cut corners" to
save money elsewhere, resulting ultimately in cars that don't sell.

Ron

Labor is only about 10% of a cars cost. So, I personally don't think
that's an excuse for the lack of quality. From what I understand,
Detroit currently sells cars for about $2500 less than Japan for
equivalent models. If it were up to me, I believe I would try
something different and sell them for $1000 more and try to beat the
Japanese at their own game and put the extra $3500 into quality.
.

Relevant Pages

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