One of the most remarkable sights on the highways this winter are the big new Ford LTDs and Chevy Caprices, more than 18 feet long with powerful V-8s under their hoods. These are beautiful cars. The Caprice, in particular, is stylistically extreme, looking as though it had been conjured up by a Rolls-Royce designer on barbiturates.
Has Detroit missed the wave again? Consumer Reports thinks so. "A couple of decades ago, gas guzzling behemoths accounted for the bulk of Detroit's production. Then, two major oil crises and the attendant long gas lines caught the domestic industry flat-footed. As the Japanese automakers moved in with small, fuel-efficient cars, the behemoths languished in dealers' lots, and the U.S. auto industry shrank. History may be about to repeat itself."
It may not be as bad as all that. In the circumstances of the Third Oil Shock, it makes sense to look back at the recent history of auto manufacturing. That's exactly what an unusual team of Massachusetts Institute of Technology researchers has spent five years doing. The team was sponsored by the industry, with broad international corporate cooperation, and led by a political scientist, a civil engineer and a European research chief. The news isn't very good. Ford is doing pretty well, report the authors of "The Machine That Changed the World" (Rawson Associates, $22.50), but General Motors is adapting poorly, as are Renault, Fiat and Volkswagen.
The real problem is that many companies haven't yet figured out that the advances in manufacturing methods made in Japan during the 1950s were as fundamental to the organization of work as were the discoveries made by Henry Ford at the turn of the century.
Ford's discoveries included the magic of long production runs, high wages for assembly-line work and P.T. Barnum-style marketing tactics. They were later modified by GM's Alfred Sloan to include a broad range of low-cost, high-margin bells and whistles. But they have been surpassed now as sources of competitive advantage by the worker autonomy, flexible production techniques and close customer relationships that are characteristic of Toyota, according to James P. Womack, Daniel T. Jones and Daniel Roos, the authors the report.
They call the new mode "lean production," in contrast to the old-style mass production, acknowledging debts to other MIT researchers -- notably Michael Piore and Charles Sabel, theorists of "The Second Industrial Divide," -- and to Japanese auto industry historian Michael Cusumano. They have also released their study several months ahead of another ambitious worldwide look at the auto industry -- a study led by Harvard Business School's Kim Clark that provides similar conclusions.
And they sum up the difference between lean and mass production in one dazzling statistic. Toyota produces 4 million vehicles a year with only 37,000 employees, while GM makes 8 million vehicles annually and needs 850,000 employees. And Toyota produces better cars. Guess whose company is the more profitable and the more likely to survive into the 21st century?
The basic story of the global auto industry is a classic case of leapfrog, according to "The Machine That Changed the World." Amid the devastation of post-World War II Japan, Toyota was the country cousin of the Japanese car industry, located in insular Nagoya instead of sophisticated Tokyo. Its workers were mostly former farm hands; its family managers were outsiders even in Japan, determined to find some way to compete directly with Detroit.
The result was a decade of relentless experimentation and innovation at a time when the Japanese government-directed industry took one false step after another. Only Honda, another maverick, met with similar fundamental success and showed how to challenge Detroit's dominance of the auto world.
"Honda and Toyota are the best things that ever happened to Japan," says Womack, the study's principal author. "They were making fundamental discoveries about better ways of manufacturing -- of making anything, even services -- at a time when General Motors and Ford were trapped in an unbreakable collusion in ideas... . If Ford had moved to Los Angeles in 1946, maybe things would have been different. But they didn't, and so it was the Japanese who invented lean production."
Just what is lean production? Womack, Jones and Roos say the key idea is to integrate manufacturing and selling operations into a nearly seamless web, whose various parts reinforce the whole structure. They identify five distinct spheres in which integration takes place:
In running the factory, Japanese manufacturers attach great importance to getting it right the first time. U.S. automakers devote something like a quarter of their work force and one-fifth of their floor space to correcting mistakes.
In designing the car, lean production stresses a continual feedback process that allows Japanese engineers to bring products to market in half the time of their American counterparts.
In coordinating the chain that supplies the 10,000-odd parts to build a car, U.S. companies rely on many different suppliers to make the same component, hoping competition will keep costs to a minimum. They are surprised when parts don't fit. In contrast, Japanese companies stress a close relationship with suppliers.
In dealing with customers, U.S. manufacturers still permit dealers to haggle with consumers in a "bazaar" selling system, which most customers despise. In Japan, car companies sell cars door to door in an effort to create long-term relationships. In truth, the Japanese sell cars here the same way the U.S. auto dealers do -- because they have to.
In managing their firms, Western companies rely on career paths that still are highly specialized and geographically narrow. They reward seniority without regard to problem-solving skills. Successful lean production companies move their managers around less frequently, but select such managers for their experience, which is typically deeper and broader than their Detroit peers.
Is this really serious stuff? Absolutely. The respected Financial Times of London last week named "The Machine That Changed the World" the best business book of 1990. The current cover of Automotive News features the authors. Others say the MIT project report may be the best book written about the auto industry since Peter Drucker and, before him, Alfred Sloan. To read it is to better understand the system.
David Warsh is a columnist for the Boston Globe.