Japan Auto Makers in the Driver’s Seat

The four largest Japanese auto makers continue to earn about $1,000 or more per vehicle sold in this country, but the American Big Three saw their per-vehicle profit plunge from two years ago, a respected report on automotive productivity said Thursday.

DaimlerChrysler’s once-highflying Chrysler Group--which includes the Chrysler, Dodge, Jeep and now-discontinued Plymouth brands--lost $1,875 a vehicle in the first quarter of 2001, according to the annual Harbour Report. That compares with a profit of $1,497 a vehicle in 1999.

The stunning turnaround in profitability reflects Chrysler’s woes of the last year, as the group lost $1.2 billion in the second half of last year and took a $2.8-billion restructuring charge this year.

General Motors Corp. saw earnings per vehicle plummet 86%, from $1,224 in 1999 to $176 in the first quarter of this year, the report from Harbour & Associates said. Ford Motor Co. did better, making $999 a vehicle, but that’s still down 42% from $1,735 two years ago.

But it was the Japanese-based auto makers that served notice, continuing to squeeze hefty profits out of their vehicles as they move toward producing more moneymaking trucks in all categories: minivans and in particular larger pickups and sport-utility vehicles.

Honda Motor Co. was the top earner per vehicle at $1,573 for the fiscal year that ended March 31, followed by Nissan Motor Co., Mitsubishi Motors Corp. and Toyota Motor Corp. Their profits generally have increased or held steady in the last two years.

“So as the Japanese move into high-profit areas, those profits per vehicle could get even better” as the Americans struggle, said Ron Harbour, president of Harbour & Associates, in briefing reporters on his findings. “It’s scary.”

Harbour’s firm visits auto plants around the world to measure productivity. The annual report on North America is a respected barometer of who the most efficient auto makers are.

The dominance of the Japanese underscored their growing threat to the profits of the traditional Big Three, which continue to lose market share to imports.

Nissan, Honda and Toyota also had the most productive factories in North America, requiring fewer hours to assemble vehicles and engines and stamp parts than their U.S. competitors.

Nissan remained the top manufacturer for the seventh year in a row, reducing assembly hours per vehicle by 7.1% to 17.37 hours. Nissan was followed in efficiency by Honda, Toyota, a joint-venture GM-Toyota factory in Fremont in Northern California and Mitsubishi.

“As the Japanese migrate into big trucks and SUVs, we don’t see a degradation in their numbers,” Harbour said.

“This,” he said, pointing to the Japanese performance figures, “is where the competition is.”

Among the domestics, GM had some good news, having dramatically narrowed the gap in productivity with archrival Ford. GM improved productivity by 9.4% to 26.75 hours per vehicle, while Ford regressed 2.8% to 25.74 hours, still the best among the Big Three.

GM was the most improved multiple-plant manufacturer in assembly, stamping and powertrain operations, shaking off some of its reputation as a lumbering behemoth too big to become more nimble.

“For the past several years GM has been working very hard on implementing lean manufacturing systems and processes throughout its operations,” Harbour said. “It is evident that GM has made significant improvement in its manufacturing operations.”

The report was received enthusiastically at GM, which has been getting some good news recently amid its sliding U.S. market share.

“Today we’re celebrating,” said Gary Cowger, the auto maker’s vice president for manufacturing and labor relations. “But Ford and GM are grappling with the same question: how to close the gap with the Japanese.”

At Nissan’s U.S. plant in Smyrna, Tenn., all three vehicles under production led their segments in terms of fewest assembly hours: the Altima for mid-size cars, the Xterra for mid-size SUVs and the Frontier for compact pickups.

If the Big Three were as efficient as the Smyrna plant, they could shed 95,138 workers, the report said.

“The skill, experience and involvement of employees in our manufacturing processes play heavily into the consistently high levels of quality and productivity at Smyrna,” said Emil Hassan, Nissan’s senior vice president for North American manufacturing. “These rankings confirm what we’re doing is right.”