Friday, December 19, 2008

Ford's State-of-the-Art Factory in Brazil: A Model for the Big 3's Survival. But The UAW Hates It.

DETROIT NEWS--This state-of-the-art manufacturing complex in northeast Brazil is one of the most advanced automobile plants in the world. It is more automated than many of Ford's U.S. factories, and leaner and more flexible than any other Ford facility. It can produce five different vehicle platforms at the same time and on the same line.

At Camaçari, more than two dozen suppliers operate right inside the Ford complex, in many cases producing components alongside Ford's main production line. Having those supplier operations on-site allows Ford to take the concept of just-in-time manufacturing to a whole new level. Inventories are kept to a bare minimum, or dispensed with entirely. Components such as dashboard assemblies flow directly into the main Ford assembly line at the precise point and time they are needed.

"South America is kind of the global sandbox for a lot of automakers to try out new methods," said Michael Robinet, vice president of global vehicle forecasts for CSM Worldwide. "Ford was able to think out of the box, and it's paying off for them."

Unlike many U.S. auto plants, where workers' responsibilities are strictly limited to specific job classifications, workers are encouraged to learn as many different skills as possible.

Watch a
fascinating video here of Ford's Camaçari plant.

So who could possibly object to having the most advanced, leanest, most flexible, state-of-the-art Ford facilities like the Camaçari plant built here in the U.S., especially if it could help Ford and GM survive and become more profitable?

Ford sources said it is the sort of plant the company wants in the United States, were it not for the United Auto Workers, which has historically opposed such extensive supplier integration on the factory floor.

MP: It's not just above-market UAW wages and benefits, along with overly generous lifetime pensions and health care coverage that have all contributed to pushing the Big Three to the brink of bankruptcy. It's also the outdated work rules, multiple job classifications, and union inflexibility and resistance to greater efficiency that have crippled the Big Three (see the 22 pound, 2,215 page UAW-Ford contract here).

Isn't it sad that U.S. automakers like Ford have to go 5,000 miles away to "the global sandbox" Brazil to try out new production methods, instead of introducing cutting-edge, state-of-the-art technology here in the U.S.? Even if GM and Chrysler reduce wages and benefits to competitive levels as part of the $17.4 billion bailout, they still might not survive in the long run if they are prevented by the UAW from introducing lean, flexible, state-of-the-art technology inside the U.S., like Ford has been able to introduce outside of the U.S.

(A version of this post appeared on 5/11/08.)

16 Comments:

At 5/11/2008 10:42 AM, Blogger juandos said...

"amid the remants of the Atlantic rain forest"...

Hmmm,could the tree huggers & root kissers have an an objection?...:-)

 
At 5/11/2008 10:53 AM, Blogger Gregory said...

"South America is kind of the global sandbox for a lot of automakers to try out new methods,"
Then how the hell is Brazil poor? If factory owners are free to experiment and wages are low (I assume, given 25% unemployment) then every factory for export owner in the world would want to locate there.

So, please, what am I missing? Are wages artificially high in Brazil?

 
At 5/11/2008 4:31 PM, Anonymous Fred said...

Given a choice between jobs and prosperity, the Luddites will choose jobs. That is a false choice.

I watched some repair work at my neighbor's house. He got a new lateral, lucky guy.

Three guys showed up in the morning with an excavator and trenched out forty feet long by nine feet deep from his house to the street. They replaced the lateral and filled in the trench. They did all that in one day and I thought, "What a country."

The downside is that the Ditch Diggers Union failed to stop the adoption of excavators. A job like this would have kept ten men working for three or four days digging that trench by hand with shovels. All those good ditch digging jobs have been lost. Tragedy.

Even today, we see legions of unemployed ditch diggers standing around street corners leaning on their shovels, put out of work by technology. You say we don't see that? Oh, never mind. I guess they found other jobs and their kids found other careers.

Resistance to change is a sure way to stop things from getting better.

 
At 5/11/2008 4:54 PM, Anonymous Fred said...

I was in a GM/UAW plant in the '90s installing a large and expensive automated machine tool system about half a football field in size. Great fun. I'm the guy who made that elephant dance.

One of the first things I noticed about that factory was that the age range of everyone in the UAW was 45 to retirement which prompted the thought, "Where are their adult children working?"

I would hope those kids have found better jobs and careers. Certainly the opportunites exist.

 
At 5/11/2008 5:55 PM, Anonymous Anonymous said...

Gee, if I were to invest my money in a new manufacturing plant and I could do it mostly with robots, I do it in an instant, particularly if the wage rates and benefits of the local union would not allow me a reasonable profit (think GM). No sick days, no lemon products, no strikes, no outrageous confiscation of my property rights. Only the government could stop me.

 
At 5/11/2008 7:26 PM, Blogger David said...

The old Ford River Rouge plant also had many "supplier activities" under the same roof as final assembly..the people doing these activities were, however, Ford employees rather than employees of suppliers. It's generally considered that the Rouge carried vertical integration too far and wound up being inefficient and rigid.

The primary theoretical advantage of having the supplier activities managed & executed by non-Ford people is that the dashboard assembly function (for example) is subject to a market test rather than being only an internal cost center. Also, dashboard expertise can be allocated across multiple competitive manufacturers.

In the U.S., there are of course wage differentials between the major manufacturers and the suppleirs...don't know if that's also true in Brazil.

 
At 5/11/2008 8:06 PM, Anonymous Ian Random said...

A common mistake people have with developing countries like Brazil is that they are too poor to have a huge bureaucracy. It takes like 40 days to open a warehouse in the US versus 411 days to open it in Brazil. Even the OECD figures are low, Peru claims 72 days to start a business yet a prof said it was more than 2 years. These make for some fierce barriers to entry.


Compares Business Conditions:
http://www.doingbusiness.org/ExploreEconomies/?economyid=28

 
At 5/11/2008 10:18 PM, Anonymous Fred said...

"These make for some fierce barriers to entry."

...to protect the indsutry and jobs they have from the future they might have.

 
At 5/12/2008 4:37 PM, Blogger OBloodyHell said...

> ...then every factory for export owner in the world would want to locate there.

One thing to recognize is that the governments of most SA nations are always in a state of continual financial crisis. This lend to a matter of concern over long-term stability -- building a plant such as the one in question costs enough money that it is probably a half-decade or more before they show real profit, which is more than enough time for a new government to sweep in and nationalize (read: steal) the whole thing...

Look it up for yourself -- IIRC, and last I heard, only one of the SA nations wasn't in hock up to its neck to the IMF.

They look like good investment locations, but the history of juntas, "revolucciones" (sp? LOL), etc., etc., has made business sensibly wary of these places. Look at Argentina.

Africa has similar problems.

Rule of Law... It's not just a job, it's NOT an adventure.
;o)


.

 
At 12/20/2008 1:11 PM, Anonymous Anonymous said...

It's amazing how the UAW has managed to cling to it's foothold amidst all of the financial problems that the auto makers have been having. Workers in the GM plants are getting paid the equivalent of $45 to sweep floors and do basic manufacturing work. These same jobs in non-union shops will pay $18-24 per hour. Of course the union employees want the union to stay around because they know that they get paid twice what they are worth. Unfortunately, though, the ridiculous compensation required by the UAW is going to cause most of these workers to lose their jobs. Would you rather take a pay cut from $45 to $25 per hour, or get laid off and be making $0? Simple concept that many people are choosing to ignore, hoping for a government bailout that is both impractical and useless. The $17 billion that was allotted will be dried up before we know it and the auto makers will be back in the same situation.

 
At 12/20/2008 4:09 PM, Anonymous Anonymous said...

In reply to Ian Random's message...

And yet India, which basically sits at the same ranking as Brazil (125 versus India's 122) doesn't seem to have a problem attracting businesses? Must be more at play than prohibitive government bureaucracy creating barriers to entry...

 
At 12/20/2008 6:31 PM, Anonymous Anonymous said...

well said about the absurd nature of protectionist UAW thugs.

 
At 12/20/2008 8:38 PM, Blogger Colin said...

India would attract a lot more investment if it didn't have such onerous government regulation. Wal-Mart for example is just drooling to jump into the country but faces huge obstacles in the forms of laws designed to thwart competition with mom and pop shops.

It is also no coincidence that some of India's most thriving sectors such as Bollywood and software/IT are those that are least subject to government regulation.

India's boom has occurred despite government intervention and regulation, and in large part because of efforts over the last 20 years to reduce such barriers.

 
At 12/20/2008 8:48 PM, Blogger @sethstorm said...


the absurd nature of protectionist UAW thugs.

Perhaps the transplants should wise up and start making cars that would do one thing - drive a wedge between those who are loyal to Detroit metal(for its affordability in large engines) and those who are loyal to the union(for those who have sought ironclad security).

Of course, you could just use the union issue to kill all parts of the Big Three. It's what the transplants are paying folks like Sanford to do.


Hmmm,could the tree huggers & root kissers have an an objection?...:-)

I'd think that some of them would be glad to see the Big Three die, but not care about how. It wouldn't matter if they were struck by natural disaster or man-made.

For some reason, tree-hugger to me is defined in a car's transfer of energy to a tree at high speed more than the environmental beliefs of the driver.

 
At 12/21/2008 9:06 AM, Anonymous btenney said...

Even Toyota and Honda will eventually abandon the US. As long as Brazil and other Countries remain Politically stable their is no good reason to invest in US manufacturing facilities.
Michigan and probably Illinois future lies in Subsistence Farming. I was heartened to read recently that the more enterprising Michiganders were planting Vegetable Gardens on many of Detroits vacant lots.
This type of Enterprise will allow some to learn the necessary skills to Emigrate to California and reclaim American Jobs from the We- Me-- Illegal Immigrants that stole them from the Okies and Texans.

 
At 12/21/2008 10:05 AM, Blogger Scott Monty said...

It's much more than the simplified "the UAW doesn't want it" analysis you've given. The construction of that plant in Brazil was an amazing feat of many stakeholders working together - a confluence of events that is unlikely to occur in this country. Political agreements, cost structure, the value of the real at the time, land contracts, and much much more.

Scott Monty
Global Digital Communications
Ford Motor Company

 

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