COVER

WHEN WEST MEETS EAST

JAPANESE CAR PLANTS ARE THRIVING

JOHN DALY April 15 1991
COVER

WHEN WEST MEETS EAST

JAPANESE CAR PLANTS ARE THRIVING

JOHN DALY April 15 1991

WHEN WEST MEETS EAST

COVER

JAPANESE CAR PLANTS ARE THRIVING

George Kryzaniwskyj says that he is still inspired, and somewhat intimidated, after a visit to Japan nearly three years ago. In April, 1988, he became one of the first employees hired at Toyota Motor Manufacturing Canada Inc.’s new car-assembly plant in Cambridge, Ont. A few weeks later, Toyota sent Kryzaniwskyj, a former production manager in a meter-manufacturing plant, to Japan for training. Now 34, Kryzaniwskyj recalls watching teams of uniformed workers assemble cars in a plant in Toyota City, 480 km southwest of Tokyo. “Boy, those people were moving fast,” he says. “There was nobody standing around, no ebb and flow. It was constant.” After four weeks in Japan, Kryzaniwskyj returned to become a team leader of a half-dozen employees in the Cambridge plant’s trim area. He says it is a

continuing challenge to adapt Japanese methods to work in Canada, adding: “In Japan, they have had 30 to 40 years to institute the Toyota system. We’re still in our infancy.”

Less than a decade after they first began manufacturing cars outside of Asia, Japan’s automakers now own or jointly operate 10 North American plants. Several of them are still experiencing growing pains—but already they have helped the Japanese capture large slices of market share from the Big Three domestic automakers. Since 1982, when Honda of America Manufacturing Inc. opened the first so-called transplant in Marysville, Ohio, Japanese manufacturers have increased their share of car sales in North America to 28 per cent from 22 per cent, while General Motors, Ford and Chrysler’s combined share has dropped to 65 per cent from 70 per cent.

Six of the transplants are wholly owned by the Japanese, including the Toyota plant in Cambridge and the Honda Canada Manufacturing plant in Alliston, Ont. Four others are jointly owned by Japanese and domestic automakers, including a car plant in Ingersoll, Ont., in which GM and Suzuki Motor Co. each have a 50-per-cent stake. In total, the transplants assembled 1.5 million of the 6.7 million cars built in North America last year.

Lean: By bringing their socalled lean-production systems to North America, the Japanese-owned factories are forcing Ford, Chrysler and General Motors, along with their unions and parts suppliers, to re-evaluate the production methods that they have used for more than half a £ century. The cornerstones of § the Japanese system—just| in-time parts delivery and oris ganizing assembly-line workI ers in teams—have put I pressure on North American “ parts manufacturers to conform to tighter delivery schedules, and on unions to relax their rules of work.

Big Three executives and union leaders are largely responsible for bringing the Japanese automakers to North America. Alarmed by the surge in sales of imported Japanese cars in the 1970s, they persuaded the U.S. and Canadian governments to limit Japanese car shipments. GM, Ford and Chrysler executives predicted that when the Japanese were required to pay union wages and adopt North American work practices, much of their competitive advantage would disappear. But none of the transplants is unionized, and the Japanese are making North Americans adapt to their work practices.

Some critics complain that Japan’s automakers enjoy an unfair advantage over their North American counterparts in Canada. Under the 1965 Auto Pact, the Big Three are required, in effect, to manufacture one car in Canada for each vehicle they sell in this country. In addition, the cars must contain 60 per cent local content, measured by dollar value. But Japanese manufacturers are not covered by the Auto Pact. Both Honda and Toyota say that the cars they build in Canada contain just over 50 per cent local content. About 80 per cent of them are shipped to the United States.

By adhering to their proven strategies, the Japanese automakers have managed to build cars as successfully in North America as they do in Japan. Almost all of their transplant factories are in rural areas, away from traditional manufacturing centres. “The joke in the industry,” says Stephen Van Houten, president of the Automotive Parts Manufacturers’ Association, “is that they go two concessions back from the

highway, where the union won’t find them.”

In Canada, Toyota’s Corolla sedan plant is located near Cambridge, 80 km west of Toronto, on what was once a sod farm. It employs 1,000 people and last year produced 60,000 cars. Honda built its plant on a former potato field near Alliston, 94 lop north of Toronto. The factory employs 1,400 workers and last year assembled 105,000 three-door Civics.

The Japanese have been equally careful in hiring workers. Deluged with hundreds of applications for every job opening, the transplants tend to hire men and women in their 20s with little or no auto industry experience—or past contact with unions. At both Honda’s and Toyota’s Canadian plants, recruits pass through a series of tests and interviews that can take up to 24 hours. Honda and Toyota managers, however, say that their employees are free to join a union any time they wish—and that they never interfere with that choice.

The stable, young workforces keep down health-care and pension costs. That, in turn, has allowed them to pay wages, about $18.75 per hour, and benefits comparable to those in unionized plants—and still maintain a cost advantage.

Inside the Toyota and Honda factories, the differences between the Japanese and North American production techniques are immediately apparent. Both companies hold voluntary callisthenics sessions at the beginning of shifts. On the line, team members can rotate jobs among themselves, instead of performing the same, highly specialized task repeatedly. But the choice is limited: workers in the spotwelding area, for instance, can switch only with other welders.

Quality: The guiding philosophy in the plants is kaizen, or continuous improvement. The companies expect all employees to think about new ways to improve quality and eliminate waste. Any employee at the Honda and Toyota plants has the right to stop the production line to correct a quality flaw, ensuring continual inspection rather than just a final inspection of finished cars at the end of the line.

Toyota and Honda executives also claim that their plants are more egalitarian than those operated by the Big Three. At the Toyota factory, there are only two employee classifications. Even the most senior executives at both locations wear the same uniforms as other employees and have no private offices, separate dining facilities or preferred parking. Ex-

ecutives say that the lack of formality improves communication. “Managers in North American plants only hear what happens on the floor,” says Honda Canada Manufacturing president Shinichi Kawai, who moved to Alliston in 1989 after supervising the construction of Honda’s plant in East Liberty, Ohio. “Here at Honda, the manager has to go to the problem.”

Union leaders, however, say that the Japanese achieve high productivity by stifling workers’ rights and participation in plant operations. They claim that without a formal contract and firm job classifications, managers are able to impose extra work requirements—and employees have no formal method of appeal.

But so far, workers in the non-unionized plants appear to have few complaints. At the Toyota factory, assembly-line employees said that they do not feel pressure from, or conflict with, management. They added that they have no plans to join the autoworkers union, which periodically hands out leaflets outside the plant parking lot. Said Beth Ann Cushing, 29, a member of a repair team: “Why should we pay union dues when we’re getting union benefits?”

Union organizers, however, say that their lack of success is predictable because of the job security that workers in the Japanese-owned

piants have enjoyed in their brief history. They add that the Japanese have yet to confront a major sales downturn in Canada. While overall car sales have declined sharply over the past two years, sales of most Japanese models have held steady or increased.

Some of the most pressing burdens in the Japanese production system fall on parts suppliers. In Japan, assembly plants are surrounded by dozens of small parts factories. Unlike North American carmakers, who have traditionally dealt with their suppliers in a detached buyer-seller relationship, the Japanese co-ordinate their plans closely with parts producers. And they expect suppliers to assemble and deliver parts to order within minutes.

North American parts suppliers have had difficulty meeting the stringent Japanese delivery and quality requirements. But many of them said that the Japanese have not given them a fair chance to win their business, preferring to buy from Japanese suppliers. “Originally, they said that they were dissatisfied with the quality,” says parts association president Van Houten. “Now, it’s because they don’t have a long-term relationship with Canadian suppliers. It’s like a kid trying to get his first job.” Discipline: For their part, Honda and Toyota executives say that their relationships with domestic parts suppliers are improving. And some parts manufacturers acknowledge that the discipline of just-in-time delivery is improving their industry. Rudy Klaming, senior manager of U.S.-owned Bellemar Parts Canada Inc. in Alliston, said that the Japanese requirements lead to greater efficiency. The company sup| plies seats as well as wheel and tire assemblies to Honda, and is linked by computer to the Honda plant. It can assemble and deliver parts within 90 minutes of an order. Said Klaming, who worked for firms that supply parts to the Big Three for two decades before joining Bellemar in 1988: “Every fall, with the new model year, we worked flat out and filled warehouses with unsold parts. Then, we had to lay off people in the spring. It was awfully wasteful.”

Indeed, while the Big Three manufacturers voice many complaints about the Japanese, they are also adopting some of their production methods in their own new plants. In the process, Honda and Toyota are discovering that imitation is the sincerest form of flattery.

JOHN DALY in Alliston and Cambridge