The Truth Shall Set You Free

For the past 23 years, Harbour and Associates has told U.S. automakers what they don't want to hear--that they're inefficient and uncompetitive. Here's why knowing the worst about yourself can be the best thing that ever happened to you.

They don't kick him out, lock horns, or have words--although Ron Harbour certainly gives them plenty of reasons. He reminds his hosts that of all the automotive stamping plants in the country, this one, General Motors' Flint Metal Center, in Flint, Michigan, has been among the least productive and most inefficient in recent years. He tells them that some people still consider Flint the "armpit of GM." He recalls that the last time he was here, following the infamous 1998 strike, workers and management barely acknowledged one another. In terms of lean manufacturing, he says, GM is in "sixth or seventh grade" compared with Toyota.

The Flint folks listen but don't flinch. Not the cigar-wielding head of manufacturing, in a black turtleneck, who is accompanying Harbour on a group tour of the plant. Not the 145-plus employees who have crammed into an auditorium to hear Harbour's assessment of the operation and the industry.

It's hard to believe that this is the same company that denied and dismissed similar criticism years earlier from Jim Harbour, Ron's father. But that's how far Harbour and Associates, and its renowned Harbour Report, has come since 1981, when former automotive executive Jim Harbour first tried to rouse a slumbering industry. For years, he was regarded as a pariah, and his brutal assessment of U.S. automakers was considered blasphemy.

Now GM--and the entire auto industry, for that matter--wants to hear what Harbour and Associates has to say. American auto-makers are in a fight for their lives; their Japanese rivals are more productive and more profitable, and Detroit's slice of the U.S. market continues to shrink. In an ever more competitive industry, U.S. automakers are desperate to cut costs and improve plant efficiency--the very things Harbour studies. And that has brought Harbour in from the cold, transforming the little firm from an anathema to a highly influential and respected critic.

The Harbour Report has become the definitive annual study on the state of the automotive industry in North America. It does for manufacturing efficiency what J.D. Power and Associates' ratings do for vehicle quality. As the gray paperback cover promises, the Harbour Report offers "manufacturing analysis company by company, plant by plant." Every summer, the study discloses the sort of nitty-gritty stats that companies ordinarily keep to themselves--the good, the bad, the truly embarrassing.

Last year, for instance, Harbour reported that Nissan's car factory in Smyrna, Tennessee, was the top assembly plant in North America in 2002. On average, its employees assembled a car in just 15.74 labor hours. That's nearly 20 hours less than it took workers at DaimlerChrysler's plant in Toluca, Mexico, which came in 33rd out of 37. Nissan made $2,069 in profit per car, more than any other company. GM managed just $701; DaimlerChrysler squeezed out $226; and Ford sucked everyone's tailpipe, losing $114 per vehicle. Overall, though, GM did make progress, narrowing its productivity gap with Japanese automakers.

The report goes on like this for 242 pages, with dozens of charts, graphs, and tables. It ranks plants by "hits per labor hour" (the number of times a press strikes a sheet of metal). It ranks them according to how long it takes workers to change a die. It chronicles which transmission plants use in-house pistons, oil pumps, and flywheels, as opposed to those purchased elsewhere.

The Harbour Report may not have the riveting plot of The Da Vinci Code, but for those who follow the automotive industry, it's required reading, well worth the $495 price tag. "It deals with information that is hard for people to get at," says David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan. Harbour and Associates, based in Troy, Michigan, just north of Detroit, has persuaded the automakers to share an unprecedented amount of data so they can ascertain where they rank compared to the competition. As far as the Harbours know, no other industry has anything quite like it--an unusually revealing and very public report card.

Newspapers across the country run the results. Wall Street analysts use them to gauge how the auto companies are doing. Economists use them to assess the health of the industry and its subsequent impact on the economy. The auto companies themselves cite the study publicly as evidence of progress while using it internally to identify shortcomings. The Harbour Report is "enormously influential," says Drew Winter, editor of the trade journal Ward's AutoWorld. "It's not that a plant gets shut down based on the report, but it is used to put underperforming plants on notice. In that way, it has saved a lot of plants."

Which is the whole point. As Ron Harbour, the company's 47-year-old president, likes to say, "We keep a finger of motivation in companies' backs."

I was part of the problem," says Jim Harbour, now 76 and retired from his company. For most of his 23 years at Chrysler, he thought what most people in the industry thought: American automakers were the best. But in the late 1970s, Jim, as Chrysler's director of corporate manufacturing engineering, studied the lean production line at Mitsubishi and began to think otherwise.

After taking early retirement in 1980, at the age of 52, Jim founded Harbour and Associates to do automotive consulting. While working for Toyota, he visited its Japanese plants and was bowled over by the high-quality, just-in-time manufacturing. He promptly wrote a 54-page study--the original Harbour Report--that described how American automakers had lost their competitive advantage in manufacturing. Japanese companies could make a car using far less labor and for $1,700 less. He presented his analysis to Ford, GM, and Chrysler. All scoffed at or ignored his recommendations. So Jim took his dramatic study to the media. The attention eventually helped land his data in a 1982 report by the U.S. secretary of transportation.

Many of the Big Three executives, particularly those at GM, he says, reacted as though he had betrayed the industry. "It was a war between us and them, and I was a big mouth," Jim says. "Most of the companies were in complete denial, even though internally there were people who knew how far behind they were."

Following his revelatory report, he focused on building his consulting firm. Laurie Harbour Felax, 35, the youngest of his eight children and now vice president of the company, suggested making the report an annual. She believed it could create a respected brand. But it needed better data. In the late 1980s and early 1990s, when the Harbours issued follow-ups to the original report, they relied on public information to make rough estimates about productivity. The reports ruffled feathers as before, but the numbers weren't beyond reproach; the companies routinely disputed the report's methodology and accuracy.

The turning point came when the Harbours persuaded the automakers to share their data. "They realized the report wasn't going to go away, so they might as well make sure what we said about them was right," Felax says. In the face of their eroding market share, the Big Three could no longer deny their failure to compete. To improve, they needed the intelligence Harbour could provide. "When we first started down this road, the report was like cold water in your face, because we thought we were pretty good," says Jim Glynn, a former plant manager at Flint Metal Center. "Then we looked at the data and realized, This isn't working."

And so Harbour and Associates became a trusted partner. Since 1993, the Harbour Report has appeared annually, and the company has met regularly with the automakers' top brass to negotiate which results will be made public and decide how best to compare plants that use different machinery and make different vehicles. Over the years, says Felax, the companies have continued to make more data available, although there are some exceptions. Last year, for instance, Nissan withheld stats on its plants in Mexico, so the Harbour Report excluded the company from its overall rankings.

Although the automakers would just as soon not disclose how long it takes them to make a car or change a stamping die, says Ron Harbour, they realize that the more they share, the more they learn--about themselves, the competition, the industry. They may already be aware of their flaws, but they need a benchmark to determine exactly how far ahead or behind their competitors are. That's why the automakers open up to Harbour, and why they tell the truth. "I don't know why you would want to report [fake] numbers," says Gary Cowger, president of GM North America. "That would be like lying to your doctor."

Felax was right about the Harbour Report feeding the consulting side of the business. With a print run of several thousand copies, the study "is not a cash cow," she says. But it does give Harbour and Associates high-profile credibility as manufacturing experts. (The majority of the firm's clients are automakers or their suppliers, but it has also worked for major pharmaceutical and furniture companies, identifying ways to improve efficiency and quality.) And yes, it can be awkward when an automotive client is unhappy with a poor showing in the report. Felax and her brother, who insist on not owning stock in automakers or automotive suppliers, remind clients that the firm merely publishes the data. It doesn't create them. "What we do is keep score," she says. "When you go to a [Detroit] Tigers game and they lose for the 50th time, you don't beat the crap out of the scoreboard, do you?"

A key part of the Harbours' re-search is the plant visit. The numbers provided by automakers are important, of course, but the Harbours knew that if they wanted to understand what was really happening inside automotive plants, they had to go behind the scenes and see them up close. And automakers--well, most--are eager to show off a much-improved plant or a recent launch, or to solicit feedback on problem factories. On average, the firm visits nearly 50 plants a year in North America and Europe. (Harbour launched a European report in 1997, but only automakers can order it.)

Flint is a typical visit. Plant officials give a couple of detailed PowerPoint presentations on the "new Flint," highlighting the new $50 million stamping presses and the new ways that workers prevent and correct errors. They conduct a two-and-a-half-hour tour of the plant floor. Harbour and Associates, which has 15 employees, sends four staffers. While Ron rubs elbows with the GM bigwigs, the rest of the team looks around and interviews line workers.

"You need to hear about the culture from them," says Tom Andrew, Harbour's manager of corporate communications, who writes the plant profiles. Like from the brawny guy with a mohawk, tattooed biceps, and a Harley T-shirt: "I've worked at four plants in two years," he says. "This place is a resort. They let us do what we need to do to get the job done." Andrew shoots Felax a did-you-hear-what-I-heard look. A stamping plant likened to a resort? That's a first.

If a plant claims to have improved sharply, the Harbour team tries to assess the changes. "Plants can fool you," says James Ricci, a senior manager at Harbour. "You can make something look clean and well-organized. That's why we ask people on the plant floor, 'How does this work? How often is this updated? Who does what?' If they don't know, you start understanding that it's management, not workers. People don't realize how much we're looking at when we go in."

While the plant tour moves on, Felax pauses to talk to a woman in a Rose Bowl sweatshirt who's carrying 38-pound metal cradles from one workstation to another. She tells Felax that her team rotates jobs now, so no one does the same work for eight hours straight. It's a big improvement. Soon, the team hopes to rearrange the workstations to eliminate the need for someone to lug the parts back and forth. Union workers trying to eliminate work? That's something else you don't hear every day, Felax says.

The new Flint seems real to Ron as well. "This is a very different place than the last time I was here," he tells a packed auditorium. "Unless you completely snowed me, the right processes are in place, and the numbers will improve significantly."

The workers pepper him with questions. What kind of car does he drive? A Chrysler (the crowd groans). What should Flint do to improve? There's no magic technique or equipment, says Ron, who has visited hundreds of plants over the past 10 years. Smart manufacturing grows out of a relentless plantwide focus on continuous improvement. "You're getting there," he tells them. "But don't stop now. You have a lot of work to do."

It's more of a pep talk than a finger in the back, but the GM workers respond with long, enthusiastic applause before heading back to stamp more car parts. How they ultimately respond, of course, will be chronicled for all to see in the next Harbour Report. Somebody has to keep score.

Sidebar: The Harbour Hallmarks

Harbour and Associates president Ron Harbour has visited hundreds of plants around the world. While the industries, products, and equipment vary, he says common principles guide the best manufacturers.

{ Focus on people. }

Anybody can buy the latest, greatest equipment, but manufacturing is not a purely mechanical system. It's the "people systems" that determine a plant's productivity. Without clear processes to change parts, clean machines, and report and fix problems, employees improvise, allowing inconsistency and inefficiency to leak in.

{ Ask the workers. }

Engineers don't have all the answers. Optimizing a complex manufacturing process requires the involvement of employees throughout the process. Time and again, Harbour has seen the teams that operate the equipment every day come up with creative solutions to problems.

{ Find out what works for you. }

It's tempting to copy what industry leaders are doing, but ultimately you must find the approach that works best with your employees, your equipment, and your products. Honda makes the same car model with the same features in a single batch. Toyota makes vehicles with different features, adapting to each one on the production line. Both approaches work.

{ Explain why productivity matters. }

The faster a plant can make a quality product (and no, speed and quality are not mutually exclusive), the less that product costs to produce. Those savings can be applied to new features (adding more leather upholstery, say). That's how you become more competitive, sell more products, increase profits, and ultimately improve job security.

Chuck Salter is a senior writer at Fast Company.

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