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September 20, 2013
Manual labor helps Chrysler boost capacity

From The Detroit News: Manual labor helps Chrysler boost capacity | The Detroit News

Chrysler Group LLC is getting creative when it comes to boosting capacity at its engine and transmission factories, adding more labor-intensive lines with less automation to increase flexibility and save money.

When it became clear in February that the company could not meet demand for its new four-cylinder Tigershark engine with the lines at its Dundee Engine Plant, Chrysler decided to add a line at its Trenton North Engine Plant. But unlike the highly automated line in Dundee, much of the work on the new line is being done by hand. For example, fasteners that are installed automatically at Dundee are being put in manually by workers at Trenton.

“We’re running our (powertrain) plants, literally all the time, at capacity-plus,” Brian Harlow, Chrysler’s head of North American powertrain manufacturing, told The Detroit News in an interview. “We needed to build a new line for assembly. We needed that in three to four months, which in our business is unheard of.”

Opting for a less automated line in Trenton allowed Chrysler to get it up and running much faster than would otherwise have been possible. Harlow said it also cost less than a more automated line and will be easier to reconfigure as the company’s needs change.

“We know we have other engine improvements to make to meet the CAFE and emission requirements that are coming,” he said.

Last year, the Obama administration established new standards that will increase fuel economy to the equivalent of 54.5 mpg for cars and light-duty trucks by the 2025 model year.

Regulators also are cracking down on greenhouse gas emissions.

Harlow said it will be easier and cheaper to accommodate those changes on a more manual production line.

“We’ve found over the course of time that our return on investment for some of this automation is very low because we turn around and change it to accommodate something that may not even be that major,” he said.

Analyst Jim Hall of 2953 Analytics LLP said Chrysler’s approach makes a lot of sense for a company with limited resources and skyrocketing demand for its cars and trucks. He said Chrysler, which emerged from bankruptcy in 2009 and is now run by Italy’s Fiat SpA, is trying to remake its entire lineup one vehicle at a time and is still trying to figure out the right mix of products.

“It’s not so much that they don’t have the money for more automation, but it’s money they cannot afford to waste. They need a return on the money they’re spending. They erred on the side of fiscal responsibility,” he said. “Chrysler before was just the opposite.”

And Hall added that Chrysler is prudent to avoid major investments in new powertrain lines with game-changing government regulations looming large on the horizon.

“The CAFE regulations could radically change the engines that they’re building,” he told The News. “If you know you’re going to have a lot of changes and you don’t know what all those changes are going to be, this strategy makes sense. As you get into more automated systems, there’s an upfront cost plus cost to modify them. You may find yourself spending a lot of money to make the change.”

Harlow said the more labor-intensive approach to engine assembly has been made possible by Fiat’s “World-Class Manufacturing” system, a variant of the vaunted Toyota Production System that has been credited with improving Chrysler’s quality and productivity.

“It has completely changed our behavior and what it means to build something,” Harlow said. “Although we’re certainly adding labor content to making (the engines), we’re also doing it in a way that is much more efficient than we would have in the past.”

Quality is actually improved by the more hands-on approach, he said. While people are more prone to make mistakes than machines, they also are able to catch those mistakes and correct them.

The United Auto Workers has been instrumental in getting the new line up, and Harlow says the union has been receptive to applying a similar approach elsewhere.

“We’re working together to efficiently use our capital and our people,” he said, adding that the company also plans to use a similar approach as it adds new engine lines in Mexico, Brazil and China. “We’re implementing it in some other places where it makes sense around the world.”

Harlow acknowledged that labor costs are relatively low in those countries, but said the overriding consideration there, too, are speed and flexibility.

“The flexibility, speed and cost long-term is better this way,” he said, adding that a similar approach could be applied to transmission assembly other aspects of vehicle production.
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