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Revving
for profits
Ford’s Norfolk F-150 plant is one of its best.
But can technology and a top-selling truck bail out
the company?
Related
story:
All tuned up
by
Garry Kranz
Virginia
Business
August 2003
Squeezed
between whirring equipment and tangled wiring, Adrianna
Yonkers barely stands out. She’s working with metal
components at Ford Motor Co.’s Norfolk Assembly
Plant when a welding robot suddenly swings into action.
Looking like something out of Star Wars, its whirling
arms apply tack welds to the underbody of a half-built
pickup truck.
For
Yonkers, a 26-year plant veteran, the machinery is a
source of pride. It’s all part of the “smart”
gadgetry of a new flexible manufacturing system that
the local Ford plant uses. The automotive behemoth plans
to install the system in all its plants to shave $2
billion in production costs company-wide over 10 years.
Norfolk Assembly, which makes several versions of the
F-Series pickup, was chosen to roll out the new system
because it is Ford’s most efficient plant. “The
error-proofing (of the new system) is excellent,”
beams Yonkers. “You can’t misbuild. If you
have parts for a Super Cab model, they can’t go
on a Regular Cab model, and vice versa.”
The
Norfolk plant is the biggest piece of Virginia’s
burgeoning automotive industry. Since 1993, 117 auto
and parts makers have built or expanded facilities here,
from parts makers to leading specialty parts retailers
such as Roanoke’s Advance Auto Parts (page 16).
Total investment in Virginia by automotive companies
is more than $2.1 billion during the past decade, with
$627 million invested since 2001 alone. Underlining
Ford’s importance to the Old Dominion economy,
Gov. Mark R. Warner stood next to Chairman and CEO William
Clay Ford Jr., 46-year-old scion of the founder of the
Model T, at the Norfolk plant in June when the 2004
model of the F-150 was unveiled against laser lights
and blaring rock music.
As
Ford celebrates its 100th anniversary this year, the
Norfolk workers will need to be more efficient than
ever. The stakes couldn’t be higher for Ford, which
has lost $6.4 billion in the past two years — a
staggering slide for a company that made well over $21
billion in 1998. Ford badly needs to return to profitability,
and a retooled, souped-up F-150 anchors its comeback
strategy.
No
other vehicle means more to Ford. No plant is as critical
to its new look as Norfolk Assembly, which was picked
for the $375 million retooling of its manufacturing
system four years ago. And no factory makes as many
pickups: 210,000 were produced there in 2002, about
a quarter of the total sold that year worldwide. During
ceremonies unveiling the new model, Ford’s Detroit
executives practically pleaded with Norfolk employees
to come to the rescue. “Our future is in your hands,”
Ford, the fourth generation of his clan to lead the
automaker, told the plant’s 2,400 workers.
The
pressure is real. The F Series is Ford’s top moneymaker,
with about 811,000 F-150s, F-250s and F-350s sold in
2002. The F-150 model accounts for about 14 percent
of all revenue Ford gets from North America. Its huge
sales volume neutralizes the manufacturing costs of
almost every other vehicle Ford makes. Ford needs the
2004 truck to retain its market dominance; the F-150
and Chevrolet’s Silverado have been first and second,
respectively, in the pickup market for years. But foreign
competitors are gaining ground. “There are about
2 million pickups sold each year, and there are only
a few manufacturers. So it’s easy for Toyota or
Nissan to each steal 70,000 or 80,000 units,” says
Jeff Bronoski, an auto analyst with Troy, Mich.-based
J.D. Power and Associates.
Competition
might be a reason Ford is holding the line on prices
for its 2004 F-150. Last month Ford released a suggested
retail price range of $19,125 to $35,570 for the new
model, nearly the same as the 2003 truck. Though the
newer F-150 costs $1,000 more to build, Ford says it
can still deliver a higher profit margin per truck because
it expects to be able to sell the new model at lower
incentives.
The
new penny-pinching flexible manufacturing system is
supposed to help Ford’s profitability as well.
While such systems have been around for decades, Ford
says its version of the system costs less to build and
is easier to maintain.
The
new system is almost entirely automated. It has 10 interchangeable
work stations and standardized tooling, and workers
can build up to four different models on each of two
common platforms. Kawasaki-powered hydraulic and pneumatic
robots replace fixed welding equipment, which required
backbreaking human labor and cost a lot to maintain
and repair. The robots crawl along the 6.5-mile-long
assembly line, welding truck cabs.
New
production lines can be added, or existing lines expanded,
quickly and with minimal cost. Workers would simply
reprogram computer-driven equipment or change tooling
instead of building new work stations from the ground
up. Ford has not announced plans to do so, but it’s
possible that Norfolk workers soon could start building
cars, minivans and SUVs.
In
another area of the factory, cargo beds are being assembled.
Later, the cabs and cargo beds will be dropped onto
the barren metal frames, as the pickup begins to take
shape. Using advanced processes developed by Ford, workers
add the finishing touches: rustproofing, paint and trim
work.
Many
jobs remain highly repetitive, although line workers
break the monotony by acting as ad hoc quality-control
specialists. Eddie Elliott, a product specialist, spotted
flaws in the way doors were being aligned as truck bodies
moved along the assembly line. He suggested improvements,
which engineers took and assimilated into a new design.
“It makes you feel like you have a say in quality,
because we’re customers too,” says Elliott,
a 20-year veteran.
Using
standardized tooling to build several vehicles at once
has shaved capital-investment and engineering costs.
Output also is higher. “We’ve increased our
line speed to produce 2½ units more, to about
53 every hour, and we’re not at full capacity yet,”
says Steve Inglis, the plant’s area body manager.
The factory should operate at peak capacity soon, probably
within a month, and be able to make 250,000 new pickups
a year.
Ford
is making a huge investment in the technology. By the
end of the decade it hopes to convert 75 percent of
its body shop, trim and final-assembly plants to the
flexible system. The F-150 plant in Kansas City, Mo.,
will start making the 2004 model this summer. Next will
be plants in Dearborn, Mich., and Chicago. Ford has
to make up for lost time. Many of its main competitors,
including Honda, Toyota, and Nissan, have been using
flexible manufacturing for years.
Virginia
made an investment in Ford as well. It chipped in a
$3 million grant, made when Jim Gilmore was governor.
The Norfolk Industrial Development Authority provided
$8 million over 20 years, with the money indexed to
job creation. In fact, the plant expansion generated
200 new jobs for Hampton Roads. The huge expansion —
which nearly doubled the plant’s size to 650,000
square feet — is the first since 1974, when the
plant was converted to all-truck manufacturing. State
officials won’t say if the money was necessary
to keep Ford from relocating. But the Detroit-based
automaker almost certainly pondered it, especially since
Norfolk Assembly is located far from most of its key
suppliers.
Still,
the plant’s roots are deep here. It opened in 1925,
just 13 years after Henry Ford invented the moving assembly
line. Legend has it that Henry himself chose the site
because of its picturesque view of the Elizabeth River.
The story’s probably apocryphal, but there’s
little doubt that Ford envisioned big things for his
Tidewater facility. It began by assembling — what
else? — Model Ts, and was a major southern plant
for Ford Motor until World War II. That’s when
the federal government bought the plant from Ford, converting
it to a repair facility for landing craft. It also was
used to house soldiers stationed at nearby military
installations. Ford repurchased the property in 1946,
and over the years expanded it to include 109 acres
along the eastern branch of the river.
Nowadays,
however, historical trivia isn’t on the minds of
Norfolk workers. The future is more compelling for people
like John Kupetz, who works as a framer. Kupetz, 43,
joined Norfolk Assembly 15 years ago, after Volvo of
America closed the bus-manufacturing plant where he
worked in Chesapeake. Kupetz wants the new F-150 to
succeed so Ford doesn’t have to trim its payroll.
“If you have to work for somebody, Ford is a good
company to work for,” says Kupetz.
Ford
jobs have been coveted since the company established
the $5 workday in 1914. In Norfolk, a single opening
can trigger thousands of applicants. The average wage
of Norfolk Assembly’s work force is $22 an hour,
or about $880 a week, not including overtime. Other
manufacturing jobs in the Tidewater region pay about
$790 a week, according to the Hampton Roads District
Planning Commission. That equates to about $20 an hour.
Regional non-manufacturing jobs provide incomes of about
$590 a week. Plant employees note that every dollar
is hard earned. “I worked on the line for 18 years,
and I still feel it in my body. Your body definitely
pays a price,” says Rock Blount, a 33-year plant
veteran who now organizes training, orientation and
other functions.
While
labor relations have been generally peaceful —
which was a boost for the F-150 upgrade — there
has been some friction. Ford fired a top union official,
UAW Local 919 Chairman Edward T. Hay, earlier this year
for allegedly threatening a black plant supervisor and
using a racial epithet. Hay, who is white, appealed
Ford’s decision and was reinstated and continues
as union chairman. Plant employees are putting the episode
behind them. “It was blown way out of proportion,
and it had no effect on quality,” says Elliott,
who also is black. Additionally, the U.S. Department
of Labor invalidated election results that took place
in May 2002, saying some retirees were not notified
of the election. There also were accusations of ballot
tampering. New elections took place in May.
Norfolk
Assembly’s impact on Hampton Roads goes beyond
the higher-paying jobs it brings. Parts and supplier
companies continue to crop up in the region because
of Norfolk Assembly’s critical importance to Ford’s
corporate strategy. TDS Automotive, which provides subassembly,
sequencing and distribution parts, spawned 210 jobs
at a new $2.4 million facility in Chesapeake in 2002.
Another prize is Visteon Corp., which makes plastic
fuel-tank systems. Visteon, a former unit of Ford, invested
$17 million two years ago to build a Chesapeake facility
that produced another 45 jobs. Ford plans to increase
its Virginia presence with the building of a $13 million
regional parts distribution center in Frederick County
that’s expected to create 95 new jobs. The 250,000-square-foot
center is scheduled to open this fall.
Meanwhile,
Hampton Roads economic leaders want to capitalize on
Ford’s momentum in their area. “It’s
a catalyst for us to pursue vendors and suppliers that
need to be close to Ford, especially because of inventory
management and the new methods of production. It definitely
provides a new opportunity for us,” says Jones
Hooks, executive director of the Hampton Roads Economic
Development Alliance.
Meanwhile,
shareholders and stock analysts are watching Ford’s
flexible manufacturing ploy with intense interest. Merrill
Lynch analysts dedicated an entire commentary just to
the F-150 ploy in May. They noted that the launch of
the F-150 model of 2004 is “easily the most important
launch Ford has undertaken since the model’s last
re-do in 1996.” The effort should go smoothly,
the analysts note, but they believe the verdict’s
still out on what it might do to buoy Ford’s sagging
fortunes. In the past year, Ford’s stock has slumped
as low as $6.58 a share, down from a high of about $13
per share and way below the $30 ranges it enjoyed in
2000. They note the intense competition Ford faces from
Daimler-Chrysler, General Motors, Toyota and Nissan,
which is launching its first large pickup truck this
year. Likewise, they worry about the decentralized structure
Ford undertook in the late 1990s. The move reduced,
rather than expanded, the ability to share technology
and resources. “Given the F-150’s cost structure
and new competition that is just around the corner in
auto terms,” the analysts write, “Ford is
playing defense with this truck. Bottom line: it’s
hard to see much upside, but easy to see the downside.”
If
Norfolk workers turn out more truck for the buck, however,
it’s hoped consumers won’t mind paying more.
“We like having the reputation of being quality-conscious,”
Yonkers says. Such pride and commitment make Norfolk’s
assembly line hum like a well-tuned engine. That is
a promising — and crucial — development as
Ford tries to rev up sales.
Return
to Virginia Business - August 2003
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