Automakers Need A Crash Course In Quality

Design Expert Says Detroit Must Address Product Reliability, Fail Rates To Compete Successfully

(CBS)  By product design expert Allise Wachs

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Seeing the leaders of the Big Three car makers begging Congress last week for a federal bailout was a sobering sight, and one that begged the question, "How did U.S. manufacturing get into this mess?"

Many Americans seem uninterested in digging into the real reasons for our industrial malaise, instead choosing to point a finger at some familiar bogeymen: unions, healthcare costs, offshoring, pensions, government regulations, and currency fluctuations.

While all of these have contributed to the massive job losses in our manufacturing sector, there are more fundamental reasons for our inability to compete successfully in the global marketplace.

The key to understanding the root causes of our failure lies in studying the success of Japan, a small, bombed-out nation with few natural resources 60 years ago that is now one of the great industrial powerhouses.

After World War II, Japan's infrastructure had been decimated and it had almost no natural resources to aid in the rebuilding effort. Yet, in a few decades it became the world's second largest economy when measured by gross domestic product.

This resurrection was made possible because Japanese companies learned four of the most important keys to manufacturing excellence:

1. Manufacture products as similar to each other as possible (minimize variation).
   
2. Design products so that they perform in realistic environments for a long period of time (high reliability).
   
3. Prevent and predict issues, rather than detect and react.
   
4. Educate employees in quantitative methods to accomplish the first 3 items.

Variation in product components (and how they fit together) largely explains why products fail at different times. For example, two of the same model washing machines may fail at drastically different times due to variation in their parts or construction. The impact of variation is often noticed by customers, and largely determines their loyalty and purchasing decisions.

While some manufacturers have been successful at reducing variation, others, such as American car makers, have not (despite highly touted "quality programs"). Combined, GM and Ford spent more than $8 billion in warranty costs last year. From 2003 to 2006, DaimlerChrysler spent an average of 4.5 percent of revenue on covering products under warranty, while GM spent roughly 3 percent. By comparison, Toyota spent only 1.25 percent of its revenue on warranty costs.

Then, there is safety recall data. From 2000 to 2006, GM had 1,014 safety-related recalls, Ford had 558, and Toyota had 131, despite the fact that Toyota sells more vehicles than Ford.

Perhaps the biggest reason for the decline of the U.S. automotive and electronics industry is what happens after warranty period ends. When the manufacturer pays for warranty repairs it's an inconvenience, but when consumers are forced to pay for costly repairs, they lose loyalty to the brand.

The consequences of product variability include huge losses within a manufacturing facility as well. Because products vary, many will not even be good enough to be sold. Those products are thrown away or re-worked. The loss in profits can be considerable, and the rate of "bad parts" being made internally is disturbingly high.

Executives argue that there is only a "perception problem" when it comes to the quality and reliability of American cars. However, the data strongly suggests otherwise. Executives should review statistics from the Consumer Product Safety Commission, the National Highway Traffic Safety Administration, the Federal Trade Commission, the National Transportation Safety Board, Consumer Reports, their own warranty databases, customer complaint data, and legal expenses.

To get the American auto makers back on track they must:

1. Use proper industrial quantitative methods to minimize variation in components and products.
   
2. Develop products with high long-term reliability, not just acceptable initial quality.
   
3. Prevent manufacturing problems through the use of proper quantitative methods.
   
4. Educate employees in necessary predictive methods for superior engineering.

The good news is that Japan has already shown that adherence to these rules can work. The bad news is that Japan is no longer an isolated competitor. Recent statistics indicate that Japanese product performance is now declining due to increasing variation in their products. Chinese and Indian manufacturers are the new threat.

If U.S. manufacturers don't get serious about quality and reliability soon, who will be the next CEOs seeking handouts from American taxpayers?

Allise Wachs is founder of Integral Concepts, a consulting company which provides solutions to complex product design and manufacturing challenges.

[boycottchina]

The writer fails to mention that small bombed out nation called Japan was COMPLETELY rebuilt by AMERICAN dollars!
And they were given stste of the art manufacturing plants after the rebuild.
When you buy a foreign made car you are spitting on American workers everywhere!
The US automakers provide jobs for MILLIONS of Americans in dozens of industries.
Companies like US Steel, Dupont, PPG, and Bayer, are just a FEW of the companies who employ millions of AMERICANS that make the various material that goes ito the production of an American automobile.
People who think they are saving a few dollars have sold out their own country for their OWN selfish gain.
This mentality has DESTROYED this nation!
When you buy foreign made goods, you are a TRAITOR to your fellow Americans and sooner or later will cut your OWN throat as a result!

[joe68sg1]

Another reason for the BIG 3 failing is fuel economy. They brag about models that get 30 mpg. That is nothing to brag about. My Civic gets 45 mpg and will out perform any BIG 3 car in its class. And, it will last 5 times as long. After that, the resale value is way above any BIG 3 car.
Most of the ads I see on TV are for big, muscle bound trucks and fancy looking SUVs. It''s a HEMI...WooHoo

That is not what we need now...we need fuel efficient cars that last.
Til the BIG 3 gets it, they are doomed and my tax money should not be used to bail them out and let them continue to make the wrong vehicles.

[wpc0101]

I HAVE BEEN A CONTRACT QUALITY ENGINEER/ANALYST FOR THE AUTOMOVIVE AND AEROSPACE INDUSTRIES FOR 25+ YEARS.
THE AUTOMOTIVE INDUSTRY HAS TOO MANY TIERS OF MANAGEMENT. WHEN AN INDIVIDUAL FEELS THAT THEIR BONUSES WILL BE THREATENED BY QUALITY ALL EFFORTS ARE FOR NOTHING AND WILL BE ROADBLOCKED. I COULD PROVE THAT I COULD HAVE SAVED A DELPHI LOCATION MILLIONS OF DOLLARS AND IMPROVED QUALITY AND THRUPUT. IT WAS BLOCKED BECAUSE IT WOULD HAVE HELD PEOPLE ACCOUNTABLE AND CUT OUT OVERTIME. UNIONS WERE ONCE NEEDED BUT NO LONGER. THE HAVE SUCKED THE LIFE OUT OF THIS COUNTRY WITH THEIR GREED.

[mmmmmmike1]

This is not correct. David Champion of Consumer Reports says (in the Best and Worst for 2009 edition available on newstands) "Nearly all Ford prodcuts are now average or better in reliability." This is for vehicles that have some significant time in service (103 years), not just "initial" quality. The exceptions to this high quality are in the areas where Toyota doesn''t have any vehicles - the V8 Explorer and the diesel F-250''s. The top most reliable family gas cars are (in order) Ford Fusion 4, Mercury Milan 4, Kia Optima, Fusion V6, Milan V6, Fusion V6 AWD, Milan V6 AWD, Hyundai Sonata 4, Honda Accord 4, Accord V6, Mazda6, then eight more cars until you find the top ranking reliable Toyota Camry 4 cyl. IN the list of 32 different cars - Consumer Reports readers rated the Fords at the top and the Camry at 19th for the 4 cyl and 26th for the V6. Why are the people in the US settling for poorer quality Toyota Camrys over the Ford Fusion and Milan?

[mikezembill]

The problem in this country are the lazy a-s-s people that draw wellfare cut there money off now. And then hear them b-i-t-c-h about the people that work and pay taxes so they can sit on there a-s-s and do nothing.

[notopennshut]

Producing shoddy products, overpaying workers and executives is surely the path to self-destruction. For too long, everyone there have been overpaid, especially the executives,even though they have not deserved any of it. On top, they have many inferior products, requiring numerous recalls. Yet, those 3 were too arrogant to learn from the rest of the industry. Is it any wonder they are failing? It is time to wake up and smell the "exhaust fumes" for they have been way way behind for decades, but unwilling and unable to make the necessary changes in order to survive. Until then, not a penny more!

[mdmo1]

union my butt look at ceo

[nobody316-2009]

And the people of the union need to realize this before there workers will be out of a job on the street working at mcdonalds. then they can complain about there wages and health benefits.

[nobody316-2009]

The whole problem with the "big 3" is called the UNION! If they didnt have to pay people big benefits and big money to stand there and watch and hold a machine 8 hours a day. Vehicles would cost half of what they do now. which in return would sell more vehicles and the "big 3" wouldnt be in this predicament. So needless to say government needs to get rid of the union and government needs to dictate what people make an hour.

[skysoldier75]

@ incog-nito:

What an utterly retarded post; everything you said was pure baloney.

No wonder conservatism is on the wane...