Competitive Connection

April 30, 2007

A look at the competition
Toyota’s new challenge: Being No. 1
The auto industry has a new No. 1: Toyota. Now it faces the considerable challenges inherent in just being big. Toyota has had bigger manufacturing-quality recalls in the U.S., its engineering staffs are straining to keep pace with a growing array of vehicles and it has become a target for criticism by some environmental groups.

In the U.S., there are signs the Japanese automaker is becoming more cautious about the prospects for growth. The company is trying to achieve a 10 percent operating-profit margin globally in the medium to long term, an objective President Katsuaki Watanabe laid out last year.

Mr. Watanabe said he is concerned about rising manufacturing costs in the U.S. A main reason Toyota picked Tupelo, Miss., as a site for what will be an eighth North American assembly plant was the relatively lower wages the area offered.

Another concern, he added, is the relative inflexibility of assembly plants in North America. While some plants in Japan are capable of producing more than a half-dozen different models on the same line, most U.S. plants can produce a single model and its closely associated sister vehicles. "It's not an immediate risk, but we need to drive down cost and pump more flexibility into our plants here," Mr. Watanabe said. – Source: The Wall Street Journal, April 25, 2007
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A look at the competition
Ford cuts back on employee perks
A governing body comprised of five union members and five Ford representatives decided to slash a plethora of skill-enhancement programs used by workers, retirees and spouses.
"The reduction in hours worked, and particularly the decrease in overtime hours worked, has reduced revenue to the point where Joint Programs is in an unsustainable financial condition," the UAW-Ford National Programs Center said in a letter distributed to union officials, plant managers and plant human resource managers last month. "Unless significant program reductions are made immediately, the UAW-Ford National Programs will be in a deficit situation before the end of 2007."
Gone are services such as individual tutoring for college classes, computer software training, math enrichment sessions and English as a second language. General Educational Development classes, which allow students to earn the equivalent of a high-school diploma, also have been cut.  Educational and training programs tailored for retirees and personal finance courses have been temporarily suspended.–Source: The Detroit News, April 24, 2007
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Then and Now
Two types of workers
There are two kinds of employees working side by side in big companies: Those hired in a paternalistic era when pensions were common, who will get retirement payments for life. Those who signed on after such rich benefits disappeared, who will retire on what they can save and invest, with a little help from matching contributions from their employers.
About one-third of Fortune 100 companies still offer traditional pensions to new employees, according to consultant Watson Wyatt Worldwide. Less than 18 percent of active private-sector workers are covered by defined-benefit pensions, down from 35 percent in 1980, according to Employee Benefit Research Institute. –Source: Houston Chronicle, April 23, 2007
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A look at the competition
COAs at Ford
A decade ago, a non-UAW worker would not have been allowed to change a light bulb in a Ford plant. But with all three Detroit automakers closing plants and cutting thousands of jobs, the union has been forced to make tough choices to save plants and jobs and secure new work.

At the recommendation of top union executives, UAW leaders at the Ford Van Dyke plant agreed to adopt work rules last year under what's known as a "competitive operating agreement." Ford is negotiating such operating agreements at other plants as well. Thirty-eight of the 47 plants in the United States and Canada have new competitive operating agreements.
The deals generally unwind costly work rules, reduce overtime and, crucially, allow the company to outsource certain jobs to lower-paid workers. UAW workers' wages -- which average $26 dollars an hour -- are not affected by the agreements.
"It's something we fought for years," said Jim Stoufer, president of UAW Local 249, which represents workers at Ford's Kansas City Assembly Plant, which makes Ford F-150 pickups and Escape SUVs. "But the leaders aren't stupid. We understand it's not business as usual."
Stoufer said about 80 percent of Local 249's workers approved a competitive operating deal.–Source: The Detroit News, April 21, 2007
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A look at the competition
How Toyota views problems
Toyota's CEO Katsuaki Watanabe stresses the need for swift reporting of defects to prevent hidden problems from growing into bigger issues.

"At Toyota, we have a practice of disclosing problems quickly and with the highest priority," he said. "The faster we disclose a problem, the quicker we can address them. By doing this, we hope to prevent them from becoming bigger problems." --Source: Detroit News and Free Press, April 20, 2007
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Then and Now
``Twenty years ago, the conservative buy was the Oldsmobile Cutlass; 10 years ago, it was the (Ford) Taurus,'' said Ted Lucki, dealer in Riverhead, NY. ``Now it's the Toyota Camry. '' –Source, Bloomberg, April 19, 2007