Tag: GM

OM in the News: GM and Old Chevy Volt Batteries

Used Chevy Volt batteries are becoming backup power options for GM's IT administration building.
Used Chevy Volt batteries are becoming backup power options for GM’s IT administration building.

General Motors said it has begun utilizing used Chevy Volt batteries to help power one its buildings, reports ZDNet.com (June 16, 2015). Under the plan, GM will use first generation Volt batteries to power its IT administration building at its Milford Proving Grounds facility. The company has built out an enterprise data center there.

When Volt batteries expire for use in the car, there is about 80% of power storage left. As a result, GM is using the Volt batteries to complement a solar array and wind turbines. By repackaging the batteries in this way, GM has found a very effective, efficient use of batteries that does not require difficult and expensive recycling.

GM’s move highlights how secondary uses are emerging for electric vehicle batteries. Scrap Volt battery covers have already been used for things like buildings for animals and nesting areas. One of the more interesting moves is Tesla’s efforts to use its battery technology to power data centers and homes. Amazon Web Services has been testing out Tesla’s technology for its data centers. For GM, the five Volt batteries serve as a nice backup power supply and cut down on waste. The batteries can provide back-up power for up to four hours in an outage.

Classroom discussion questions:

1. What other uses could an operations manager find for these Volt batteries?

2. What are the advantages and disadvantages of electric vehicles?

OM in the News: GM Turns to Long-Term Supplier Contracts

An auto worker assembles an SUV chassis at the Arlington, Texas, GM plant
An auto worker assembles an SUV chassis at the Arlington, Texas, GM plant

General Motors’ purchasing chief said the nation’s largest auto maker aims to sign new parts contracts for two vehicle generations, or as long as a decade, to cut costs and gain access to advanced technologies. GM is gearing up for big investments in luxury cars, electric vehicles and other projects, and expects to sign hundreds of billions of dollars in new supply contracts over the next 2 years. By locking suppliers into longer-term contracts and looping into vehicle designs earlier in the process, the auto maker expects suppliers to share more innovations and better processes that help save money. “We want them to double down on us,” the purchasing head stated.

Recently, GM asked about 30 of the auto maker’s biggest parts makers to help relieve supply bottlenecks so the company can crank up production of its highly profitable pickup trucks and sport-utility vehicles. In some cases, GM promised to help suppliers cover additional costs to get the needed parts.

“The change is part of a technology arms race in the industry, with auto makers vying to be first with self-driving features for vehicles or propulsion technologies that reduce emissions,” writes The Wall Street Journal (April 15, 2015). GM’s CEO recently implemented a strategy aimed at improving relationships with suppliers; she believed that the auto maker was overly optimistic in its planning assumptions or too forceful in its cost-cutting mandates. The firm is attempting to undo decades of damage caused by poor relationships with suppliers that had curtailed its early access to new innovations.

Classroom discussion questions:

1. Describe GM’s prior relations with suppliers.

2. Why the change?

3. Research the history of the famous GM VP-Purchasing, Jose Lopez. (See Supply Chain Digest (July 7, 2009)

OM in the News: GM Discovers the Importance of Logistics

GM's stamping plant is now next to the existing Arlington TX assembly plant
GM’s stamping plant is now next to the existing Arlington TX assembly plant

For years, General Motors pounded out hoods, fenders and doors for its Tahoe and Yukon SUVs at plants in Ohio and Michigan and shipped them to its assembly plant in Arlington, Texas. Yesterday, reports The Wall Street Journal (Oct. 14, 2013), the auto maker officially opened a $200 million metal-stamping plant adjacent to the Arlington factory that reduces that travel to about 20 feet from machine to welder. Estimated savings: about $40 million a year in shipping costs.

The new plant, is part of a broader rethinking of logistics by GM CEO Dan Akerson to generate hundreds of million of dollars in new profit. “Any savings I can get by cutting my logistics bill goes right to my bottom line and makes us more competitive,” says Akerson.  GM now sees logistics as representing the biggest potential opportunity to squeeze new profit from operations.

Co-locating parts-making and auto assembly promise higher quality and greater profit. GM and other auto makers say they can no longer put up with parts that arrive scratched or dented and have to be repaired.  “Now, with the reset of labor costs, especially in the U.S., more efficiency in the plants and the importance of quality, we can finally evolve,” adds the CEO of GM’s largest parts supplier.

“The best way to describe logistics is waste,” says GM’s manufacturing chief. “It is moving productive materials from point A to point B. It has no value and guess what; it doesn’t mean anything to the customer. If you can squeeze that waste of the system then you can tactically improve your profit margins.” In addition to moving its own production, GM is encouraging parts makers to move or build new facilities closer to GM assembly plants.

Classroom discussion questions:
1. Why is logistics so important to auto makers?

2. What does “co-locating” mean?

Good OM Reading : Once Upon a Car

If you are looking for a fast-paced, riveting story of the near demise of the US auto industry, read Once Upon a Car: The Fall and Resurrection of  America’s Big Three Auto Makers. Author Bill Vlasic started following GM, Ford, and Chrysler in 2008, about a year before GM and Chrysler filed for bankruptcy.

 We attend a secret meeting between Rick Wagoner (GM’s CEO) and Bill Ford (the great grandson of Henry Ford), in which the GM team proposed a merger with Ford. Desperate to stave off bankruptcy and burning through more than $1 billion per month, GM needed Ford’s $30 billion bank account. Savings would be huge and synergy phenomenal. As GM’s vice-chairman Bob Lutz had argued, “It could be one  large, enormously powerful global auto company.You could shut one proving ground, one finance department, one tax department, a bunch of plants, get rid of a lot of engineering”.  But  Ford was angry with GM’s arrogance in wanting to be the senior partner and  would have none of it.

The overture, though, was also disturbing. If GM went bankrupt, a big part of the auto supply chain would go with it. And that would definitely hurt Ford.  (You may recall that some 15 years earlier, GM won a major lawsuit  against VW, only to realize that if destroyed VW, its own supply chain would be severely damaged. It settled for $100 million in cash and VW’s promise to buy a $1 billion in parts from GM per year).

To protect his flank, Ford courted the future president, Barack Obama, who was excited about Ford’s plans to create smaller, fuel-efficient cars. On the other hand, Wagoner’s outsized control of his board and his political maneuvering killed a potential partnership with Renault-Nissan. In the end, he was forced out by Obama as part of the $50 billion bailout. And as to Chrysler, we learn that it didn’t have a chance in the game. Daimler-Benz, its German owner, wanted to dump Chrysler for years and had long starved its R&D budget. UAW union head Ron Gettelfinger does not escape blame either. Outsized demands and the infamous union job bank did little to help his autoworkers.

OM in the News: Redesigning the Chevy Malibu

 While the US’s fuel economy requirements rose just 10 mpg in the past 30 years, they are now poised to rise 2 mpg on average each year over the next decade. And by 2025, new cars must average 54.5 mpg., twice today’s standard! Short of dramatic use of battery-power and hybrid vehicles, how can auto makers reach these lofty targets?  The answer, according to The Wall Street Journal (Aug.30,2011) is a whole bunch of seemingly small product redesign changes, the topic of Chapter 5.

Here is what GM has done to the 2013 Chevy Malibu, due in showrooms early next year, to create a car that will go 92 more miles on a tank of gas than the current model:

1. Round the front bumper, to reduce drag (.4 mpg).

2.  Angular rear tail lamp, to reduce airflow (.3 mpg).

3.  A compact, battery-operated, electric motor to provide more power during acceleration (5 mpg).

4.  No spare tire, but a portable air compressor to fix a flat, thus saving 128 lbs. of weight (.4 mpg).

5.  Aluminum, instead of steel in the hood and a rounded front corner (.4 mpg).

6. “Active shutters” behind the grille to allow air to cool the engine (.3 mpg).

7. Flattened underbody panels , to improve airflow under the car (.4 mpg).

The mpg race is indeed changing product design. The car’s redesign began 3 years ago and involved concentrating on details. “It takes looking at every single gram and kilogram and every part of the car”, says the Malibu’s engineering manager. The small changes Chevy is making add up to a 7.2 mpg improvement.

Discussion questions:

1. What are some other auto changes that can yield mileage improvements?

2. Ask students to each find a product and suggest ways to make it more efficient and ecologically friendly.

Good OM Reading: Car Guys vs. Bean Counters

If you are looking for a good  read at the beach this summer, pick up Bob Lutz’s new book , Car Guys vs. Bean Counters (Penguin Group, 2011). After holding top exec positions at BMW, Chrysler, and Ford (but never reaching the CEO spot) , Lutz joined GM at its depths, in 2001, convinced he knew exactly what a car company should look like. Despite Lutz’s strongly inflated view of himself (he compares his style to Jobs, Gates, and Branson), he has written the best book about the auto industry since Iacocca, in 1984.

Car Guys vs. Bean Counters contains some fascinating views of GM during the past decade that you might want to use in your OM class. For example, Lutz writes: “The operations portion of the automobile industry has been thoroughly optimized over many decades, doesn’t vary much from one automobile company to another, and can be manged with a focus on repetitive process. It is the ‘hard’ part of the business and requires little in the way of creativity, vision, or imagination. There is little or no competitive advantage to be gained by ‘trying harder’  in procurement, manufacturing, or wholesale”. I have to wonder if Toyota  and others would agree with this assessment.

What does separate the winners from the losers, according to Lusk, is the long-cycle product development process, which still takes GM about 3-1/2 years from initial idea to 1st off-the-line.  In the book, he notes how GM cut corners in some ways and wasted effort in others. He makes public for the 1st time the “hider” technique GM used on interiors, where plastic corners were rounded so customers would not notice misalignments.

My favorite story is about the Outside Speaker Effectiveness Analysis Group, which rated guest lecturers who came to speak at HQ. One well-known speaker received this letter after giving a talk at a GM conference: “The five ‘outside speakers’ average scores  ranged from 5.25 to 8.25. Your average was 7.35. Your standard deviation was 1.719 and ranked 2nd among the variances”.  Maybe more time on OM  could have saved GM from near-destruction.

OM in the News: How GM Survived the Japanese Supply Chain Break

Two months after Japan’s devastating  earthquake, Japanese automakers in the US are still struggling with significant supply disruptions. Toyota, for example, which gets 15% of its parts needed for North American factories from Japan, is operating at only 30% of capacity. 

G.M., which spends about 2% of its part’s budget in Japan, identified 118 products that created shortage problems at the start of the crisis. Yesterday’s New York Times (May 13, 2011) documents the dramatic story of how G.M. went through a “white knuckle time” when numerous plants came close to closing. The story ends with the company announcing it is winding down its disaster response operations–the crisis averted. But it did not appear to be anything short of  a catastrophe in early March.

 Four days after the earthquake, G.M. assembled 100’s of employees into a 24-hour-a-day team, in what it called “Project J”. The company idled 2 plants to conserve supplies and found as many alternative sources as possible . Coordinating efforts from 3 “crisis rooms” in Warren, Michigan, the Vice-Chairman realized that existing contingency plans prepared for “nothing on this kind of scale or scope”. Issues with 33 problematic parts did not even become known for 2 more weeks, when G.M. discovered disruptions from sub-suppliers it barely knew of.

One G.M. consultant added: “It’s not just the assembly plant that needs to run, it’s not just the direct supplier. I’ve got to understand every piece at a second tier, a third tier, and a fourth tier below that. We’ve never had to do that before”. With only sparse information available from many suppliers, G.M. sent over 40 employees to Japan to size up the situation–and to offer help getting vital plants reopened. The Japanese culture did not always welcome the offers from outsiders, but in the end, the company resolved all but 5 shortage problems.

Discussion questions:

1. Why is G.M. in much better shape with regard to parts than Toyota?

2. What major lesson did G.M. learn from the disaster?

Teaching Tip: Why Did the Chevy Steering Wheel Fall Off?

Imagine speeding along the roadway in your brand new 2011 Chevy Cruze, turning your car’s steering wheel, and the wheel breaks off from the steering column!  It’s an interesting story (in The Wall Street Journal, April 10,2011) that certainly ties in with our discussion of quality in Chapter 6. 

Of course, it’s every driver’s nightmare, but in particular to the person who it happened to a few weeks ago. As a result, GM is recalling 2,100 new cars and facing an unwelcome development while it rides high on the compact Cruz’s sales success.

According to the NHTSA (Nat’l Highway Transportation Safety Admin.), the wrong wheel was put in this particular car, then replaced later with the correct one. But the new wheel was not attached properly.

This raises some good issues to discuss in teaching quality in class. First, how did the wrong wheel end up on the assembly line? (JIT delivery gone awry?  What was the root cause of this defect?) 

 Second, why was it that a wrong wheel could fit on the column? (No poka-yoke system in place?)

 Third, was there no Andon call signal to alert supervisors that such a problem had popped up? (Could it have happened before and no one pointed it out?  Had it happened at a different plant? Is there a struggle to change from the old Detroit mentality that the line should never be stopped?)

Chevrolet says “it has changed the production process to make sure the machine used to attach the steering wheel can accommodate only the correct one”.  I like this story because it raises several teachable issues.