Detroit Needs to Move out of WWII
The following was a response to Ryan Kreuger's comment on Minyanville, in which he wondered why it was going to take Detroit two years to retool a factory, when Honda can switch a factory from production of one model to another in a matter of days:
Just read your buzz and note that you are one of the few I’ve read in the financial press that has come close to addressing the core issue of what ails Detroit.
The US auto business, like many of our “old industry” derived much of their organizational structure and approach from the practices that were forced on them during WWII. During that conflict we learned the lesson of keeping things simple and uniform. That was the key to the previously unimaginable level of productivity we achieved during that conflict. By building purpose-specific factories to manufacture aircraft, tanks, trucks and guns whose designs rarely ever changed, we were able to build more of them more quickly and efficiently than anybody had before or has since.
There was no need to be flexible. Maximum production was the goal. We overwhelmed the capabilities of our enemies whose factories made changes (how many versions of Tiger tank did the Germans make???), whose products improved but became less and less maintainable due to differences between versions and whose workforces were necessarily more flexible and capable in many ways, but who were less focused.
The kind of operation that we ran here during the war works well when the customer’s goal is to build as many as possible as quickly and efficiently as possible, when there is no competitive supplier, when product improvements are deemed to be an unaffordable luxury even if the cost is in actual lives (a decision that was made with the Sherman tank, for example), and when the factory is always operating at 100% capacity because the customer has agreed to purchase everything you can produce. In the real world of business, those are unusual circumstances, but virtually all of US big industry and labor was reorganized around them during the WWII and early cold war years. Many of them have still never abandoned those principles.
There was no need for workers' skills to be varied or for ongoing training because they too could be far more efficient doing the exact same things thousands of times than by learning new skills regularly. We developed labor structures and rigid work rules to protect those “specialized” workers who were possibly the most efficient in the world at their specific tasks despite being some of the highest paid, yet who were clearly also the least capable of going out and finding a job doing anything else.
This overall focus on the benefit of maximum steady-state efficiency came to dominate the practices of the largest purchaser of goods and services – The US Government -- and thus has been injected relentlessly into the workings of every major government supplier. Ever seen the paperwork needed to become a government supplier? It’s all about doing all those things that worked so well at generating efficiencies when we were building an aircraft an hour (at Ford’s Willow Run plant that built B-24s) but that impose unbearable costs when the manufacturing needs to be flexible and adaptive to market changes. State and Federal rules, along with union agreements, further institutionalized those practices. To a large degree, remaining the only untouched industrial power emerging from WWII also left us as the only country in the world that was not free to start anew.
Because CNBC, in their infinite stupidity, are giving us more of him. Not sure who's sick or on vacation and why they can't fill in with somebody who has at least a shred of journalistic credibility, but we are getting Larry now for two hours a day in the morning, then another hour during his regular show in the afternoon.